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Taxes free online Publication 929 - Main Content Table of Contents Part 1. Taxes free online Rules for All Dependents Filing RequirementsEarned Income Only Unearned Income Only Both Earned and Unearned Income Other Filing Requirements Should a Return Be Filed Even If Not Required? Responsibility for Child's ReturnThird party designee. Taxes free online Designated as representative. Taxes free online IRS notice. Taxes free online Standard DeductionStandard Deduction of Zero Dependent's Own Exemption Withholding From WagesExceptions. Taxes free online Part 2. Taxes free online Tax on Unearned Income of Certain ChildrenWhich Parent's Return To Use Parent's Election To Report Child's Interest and DividendsEffect of Making the Election Figuring Child's Income Figuring Additional Tax Tax for Certain Children Who Have Unearned IncomeProviding Parental Information (Form 8615, Lines A–C) Step 1. Taxes free online Figuring the Child's Net Unearned Income (Form 8615, Part I) Step 2. Taxes free online Figuring a Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) Step 3. Taxes free online Figuring the Child's Tax (Form 8615, Part III) Alternative Minimum Tax Illustrated Example Part 1. Taxes free online Rules for All Dependents This part of the publication discusses the filing requirements for dependents, who is responsible for a child's return, how to figure a dependent's standard deduction and exemption (if any), and whether a dependent can claim exemption from federal income tax withholding. Taxes free online Filing Requirements Whether a dependent has to file a return generally depends on the amount of the dependent's earned and unearned income and whether the dependent is married, is age 65 or older, or is blind. Taxes free online A dependent may have to file a return even if his or her income is less than the amount that would normally require a return. Taxes free online See Other Filing Requirements, later. Taxes free online The following sections apply to dependents with: Earned income only, Unearned income only, and Both earned and unearned income. Taxes free online  To find out whether a dependent must file, read the section that applies, or use Table 1. Taxes free online Earned Income Only A dependent whose gross income is only earned income must file a return if the gross income is more than the amount listed in the following table. Taxes free online Marital Status Amount Single   Under 65 and not blind $6,100 Either 65 or older or blind $7,600 65 or older and blind $9,100 Married*   Under 65 and not blind $6,100 Either 65 or older or blind $7,300 65 or older and blind $8,500 *If a dependent's spouse itemizes deductions on a separate return, the dependent must file a return if the dependent has $5 or more of gross income (earned and/or unearned). Taxes free online Example. Taxes free online William is 16. Taxes free online His mother claims an exemption for him on her income tax return. Taxes free online He worked part time on weekends during the school year and full time during the summer. Taxes free online He earned $7,000 in wages. Taxes free online He did not have any unearned income. Taxes free online He must file a tax return because he has earned income only and his gross income is more than $6,100. Taxes free online If he is blind, he does not have to file a return because his gross income is not more than $7,600. Taxes free online Unearned Income Only A dependent whose gross income is only unearned income must file a return if the gross income is more than the amount listed in the following table. Taxes free online Marital Status Amount Single   Under 65 and not blind $1,000 Either 65 or older or blind $2,500 65 or older and blind $4,000 Married*   Under 65 and not blind $1,000 Either 65 or older or blind $2,200 65 or older and blind $3,400 *If a dependent's spouse itemizes deductions on a separate return, the dependent must file a return if the dependent has $5 or more of gross income (earned and/or unearned). Taxes free online Example. Taxes free online Sarah is 18 and single. Taxes free online Her parents can claim an exemption for her on their income tax return. Taxes free online She received $1,970 of taxable interest and dividend income. Taxes free online She did not work during the year. Taxes free online She must file a tax return because she has unearned income only and her gross income is more than $1,000. Taxes free online If she is blind, she does not have to file a return because she has unearned income only and her gross income is not more than $2,500. Taxes free online Election to report child's unearned income on parent's return. Taxes free online   A parent of a child under age 19 (or under age 24 if a full-time student) may be able to elect to include the child's interest and dividend income on the parent's return. Taxes free online See Parent's Election To Report Child's Interest and Dividends in Part 2. Taxes free online If the parent makes this election, the child does not have to file a return. Taxes free online Both Earned and Unearned Income A dependent who has both earned and unearned income generally must file a return if the dependent's gross income is more than line 5 of the following worksheet. Taxes free online Filing Requirement Worksheet for Most Dependents 1. Taxes free online Enter dependent's earned income plus $350     2. Taxes free online Minimum amount   $1,000 3. Taxes free online Compare lines 1 and 2. Taxes free online Enter the larger amount     4. Taxes free online Maximum amount   6,100 5. Taxes free online Compare lines 3 and 4. Taxes free online Enter the smaller amount     6. Taxes free online Enter the dependent's gross income. Taxes free online If line 6 is more than line 5, the dependent must file an income tax return. Taxes free online If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 6 is $5 or more. Taxes free online       Table 1. Taxes free online 2013 Filing Requirements for Dependents If your parent (or someone else) can claim you as a dependent, use this table to see if you must file a return. Taxes free online   See the definitions of “dependent,”“earned income,”“unearned income,” and “gross income” in the Glossary. Taxes free online   Single dependents—Were you either age 65 or older or blind?     No. Taxes free online You must file a return if any of the following apply. Taxes free online       Your unearned income was over $1,000. Taxes free online Your earned income was over $6,100. Taxes free online Your gross income was more than the larger of—       $1,000, or Your earned income (up to $5,750) plus $350. Taxes free online         Yes. Taxes free online You must file a return if any of the following apply. Taxes free online     Your unearned income was over $2,500 ($4,000 if 65 or older and blind), Your earned income was over $7,600 ($9,100 if 65 or older and blind), Your gross income was more than the larger of—       $2,500 ($4,000 if 65 or older and blind), or Your earned income (up to $5,750) plus $1,850 ($3,350 if 65 or older and blind). Taxes free online       Married dependents—Were you either age 65 or older or blind?     No. Taxes free online You must file a return if any of the following apply. Taxes free online       Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. Taxes free online Your unearned income was over $1,000. Taxes free online Your earned income was over $6,100. Taxes free online Your gross income was more than the larger of—       $1,000, or Your earned income (up to $5,750) plus $350. Taxes free online       Yes. Taxes free online You must file a return if any of the following apply. Taxes free online       Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. Taxes free online Your unearned income was over $2,200 ($3,400 if 65 or older and blind), Your earned income was over $7,300 ($8,500 if 65 or older and blind), Your gross income was more than the larger of—       $2,200 ($3,400 if 65 or older and blind), or Your earned income (up to $5,750) plus $1,550 ($2,750 if 65 or older and blind). Taxes free online       Example 1. Taxes free online Joe is 20, single, not blind, and a full-time college student. Taxes free online He does not provide more than half of his own support, and his parents claim an exemption for him on their income tax return. Taxes free online He received $200 taxable interest income and earned $2,750 from a part-time job. Taxes free online He does not have to file a tax return because his gross income of $2,950 ($200 interest plus $2,750 in wages) is not more than $3,100, the amount on line 5 of his filled-in Filing Requirement Worksheet for Most Dependents (shown next). Taxes free online Filled-in Example 1 Filing Requirement Worksheet  for Most Dependents 1. Taxes free online Enter dependent's earned income plus $350   $ 3,100 2. Taxes free online Minimum amount   1,000 3. Taxes free online Compare lines 1 and 2. Taxes free online Enter the larger amount   3,100 4. Taxes free online Maximum amount   6,100 5. Taxes free online Compare lines 3 and 4. Taxes free online Enter the smaller amount   3,100 6. Taxes free online Enter the dependent's gross income. Taxes free online If line 6 is more than line 5, the dependent must file an income tax return. Taxes free online If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 6 is $5 or more. Taxes free online   $ 2,950   Example 2. Taxes free online The facts are the same as in Example 1 except that Joe had $600 taxable interest income. Taxes free online He must file a tax return because his gross income of $3,350 ($600 interest plus $2,750 wages) is more than $3,100, the amount on line 5 of his filled-in worksheet (shown next). Taxes free online Filled-in Example 2 Filing Requirement Worksheet for Most Dependents 1. Taxes free online Enter dependent's earned income plus $350   $ 3,100 2. Taxes free online Minimum amount   1,000 3. Taxes free online Compare lines 1 and 2. Taxes free online Enter the larger amount   3,100 4. Taxes free online Maximum amount   6,100 5. Taxes free online Compare lines 3 and 4. Taxes free online Enter the smaller amount   3,100 6. Taxes free online Enter the dependent's gross income. Taxes free online If line 6 is more than line 5, the dependent must file an income tax return. Taxes free online If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 6 is $5 or more. Taxes free online   $ 3,350   Age 65 or older or blind. Taxes free online A dependent who is age 65 or older or blind must file a return if his or her gross income is more than line 7 of the following worksheet. Taxes free online Filing Requirement Worksheet  for Dependents Who Are Age 65 or Older or Blind 1. Taxes free online Enter dependent's earned income plus $350     2. Taxes free online Minimum amount   $1,000 3. Taxes free online Compare lines 1 and 2. Taxes free online Enter the larger amount     4. Taxes free online Maximum amount   6,100 5. Taxes free online Compare lines 3 and 4. Taxes free online Enter the smaller amount     6. Taxes free online Enter the amount from the following table that applies to the dependent       Marital Status Amount     Single         Either 65 or older or blind $1,500       65 or older and blind $3,000     Married         Either 65 or older or blind $1,200       65 or older and blind $2,400   7. Taxes free online Add lines 5 and 6. Taxes free online Enter the total     8. Taxes free online Enter the dependent's gross income. Taxes free online If line 8 is more than line 7, the dependent must file an income tax return. Taxes free online If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 8 is $5 or more     Example 3. Taxes free online The facts are the same as in Example 2 except that Joe is also blind. Taxes free online He does not have to file a return because his gross income of $3,350 is not more than $4,600, the amount on line 7 of his filled-in Filing Requirement Worksheet for Dependents Who Are Age 65 or Older or Blind (shown next). Taxes free online   Filled-in Example 3 Filing Requirement Worksheet  for Dependents Who Are Age 65 or Older or Blind 1. Taxes free online Enter dependent's earned income plus $350   $3,100 2. Taxes free online Minimum amount   1,000 3. Taxes free online Compare lines 1 and 2. Taxes free online Enter the larger amount   3,100 4. Taxes free online Maximum amount   6,100 5. Taxes free online Compare lines 3 and 4. Taxes free online Enter the smaller amount   3,100 6. Taxes free online Enter the amount from the following table that applies to the dependent   1,500   Marital Status Amount     Single         Either 65 or older or blind $1,500       65 or older and blind $3,000     Married         Either 65 or older or blind $1,200       65 or older and blind $2,400   7. Taxes free online Add lines 5 and 6. Taxes free online Enter the total   4,600 8. Taxes free online Enter the dependent's gross income. Taxes free online If line 8 is more than line 7, the dependent must file an income tax return. Taxes free online If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 8 is $5 or more   $3,350 Other Filing Requirements Some dependents may have to file a tax return even if their income is less than the amount that would normally require them to file a return. Taxes free online A dependent must file a tax return if he or she owes any other taxes, such as: Social security and Medicare taxes on tips not reported to his or her employer or on wages received from an employer who did not withhold these taxes, Uncollected social security and Medicare or railroad retirement taxes on tips reported to his or her employer or on group-term life insurance, Alternative minimum tax, Additional tax on a health savings account from Form 8889, Part III, Recapture taxes, such as the tax from recapture of an education credit, or Additional tax on a qualified plan, including an individual retirement arrangement (IRA), or other tax-favored account. Taxes free online But if the dependent is filing a return only because of this tax, the dependent can file Form 5329 by itself. Taxes free online A dependent must also file a tax return if he or she: Had wages of $108. Taxes free online 28 or more from a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes, or Had net earnings from self-employment of at least $400. Taxes free online Spouse itemizes. Taxes free online   A dependent must file a return if the dependent's spouse itemizes deductions on a separate return and the dependent has $5 or more of gross income (earned and/or unearned). Taxes free online Should a Return Be Filed Even If Not Required? Even if a dependent does not meet any of the filing requirements discussed earlier, he or she should file a tax return if either of the following applies. Taxes free online Income tax was withheld from his or her income. Taxes free online He or she qualifies for the earned income credit, additional child tax credit, health coverage tax credit, or refundable American opportunity education credit. Taxes free online See the tax return instructions to find out who qualifies for these credits. Taxes free online  By filing a return, the dependent can get a refund. Taxes free online Responsibility for Child's Return Generally, a child is responsible for filing his or her own tax return and for paying any tax, penalties, or interest on that return. Taxes free online If a child cannot file his or her own return for any reason, such as age, the child's parent, guardian, or other legally responsible person must file it for the child. Taxes free online Signing the child's return. Taxes free online   If the child cannot sign his or her return, a parent or guardian must sign the child's name followed by the words “By (signature), parent (or guardian) for minor child. Taxes free online ” Authority of parent or guardian. Taxes free online   A parent or guardian who signs a return on a child's behalf can deal with the IRS on all matters connected with the return. Taxes free online   In general, a parent or guardian who does not sign the child's return can only provide information concerning the child's return and pay the child's tax. Taxes free online That parent or guardian is not entitled to receive information from the IRS or legally bind the child to a tax liability arising from the return. Taxes free online Third party designee. Taxes free online   A child's parent or guardian who does not sign the child's return may be authorized, as a third party designee, to discuss the processing of the return with the IRS as well as provide information concerning the return. Taxes free online The child or the person signing the return on the child's behalf must check the “Yes” box in the “Third Party Designee” area of the return and name the parent or guardian as the designee. Taxes free online   If designated, a parent or guardian can respond to certain IRS notices and receive information about the processing of the return and the status of a refund or payment. Taxes free online This designation does not authorize the parent or guardian to receive any refund check, bind the child to any tax liability, or otherwise represent the child before the IRS. Taxes free online See the return instructions for more information. Taxes free online Designated as representative. Taxes free online   A parent or guardian who does not sign the child's return may be designated as the child's representative by the child or the person signing the return on the child's behalf. Taxes free online Form 2848, Power of Attorney and Declaration of Representative, is used to designate a child's representative. Taxes free online See Publication 947, Practice Before the IRS and Power of Attorney, for more information. Taxes free online   If designated, a parent or guardian can receive information about the child's return but cannot legally bind the child to a tax liability unless authorized to do so by the law of the state in which the child lives. Taxes free online IRS notice. Taxes free online   If you or the child receives a notice from the IRS concerning the child's return or tax liability, you should immediately inform the IRS that the notice concerns a child. Taxes free online The notice will show who to contact. Taxes free online The IRS will try to resolve the matter with the parent(s) or guardian(s) of the child consistent with their authority. Taxes free online Child's earnings. Taxes free online   For federal income tax purposes, amounts a child earns by performing services are included in the gross income of the child and not the gross income of the parent. Taxes free online This is true even if, under state law, the parent has the right to the earnings and may actually have received them. Taxes free online If the child does not pay the tax due on this income, the parent may be liable for the tax. Taxes free online Child's expenses. Taxes free online   Deductions for payments that are made out of a child's earnings are the child's, even if the payments are made by the parent. Taxes free online Example. Taxes free online You made payments on your child's behalf that are deductible as a business expense and a charitable contribution. Taxes free online You made the payments out of your child's earnings. Taxes free online These items can be deducted only on the child's return. Taxes free online Standard Deduction The standard deduction for an individual who can be claimed as a dependent on another person's tax return is generally limited to the larger of: $1,000, or The individual's earned income plus $350, but not more than the regular standard deduction (generally $6,100). Taxes free online However, the standard deduction may be higher for a dependent who: Is 65 or older, or Is blind. Taxes free online Certain dependents cannot claim any standard deduction. Taxes free online See Standard Deduction of Zero , later. Taxes free online Worksheet 1. Taxes free online   Use Worksheet 1 to figure the dependent's standard deduction. Taxes free online Worksheet 1. Taxes free online Standard Deduction Worksheet for Dependents Use this worksheet only if someone else can claim you (or your spouse, if filing jointly) as a dependent. Taxes free online If you were 65 or older and/or blind, check the correct number of boxes below. Taxes free online Put the total number of boxes checked in box c and go to line 1. Taxes free online a. Taxes free online You 65 or older   Blind   b. Taxes free online Your spouse, if claiming  spouse's exemption 65 or older   Blind   c. Taxes free online Total boxes checked         1. Taxes free online Enter your earned income (defined below) plus $350. Taxes free online If none, enter -0-. Taxes free online 1. Taxes free online     2. Taxes free online Minimum amount. Taxes free online   2. Taxes free online $1,000   3. Taxes free online Compare lines 1 and 2. Taxes free online Enter the larger of the two amounts here. Taxes free online 3. Taxes free online     4. Taxes free online Enter on line 4 the amount shown below for your filing status. Taxes free online       Single or Married filing separately—$6,100 Married filing jointly—$12,200 Head of household—$8,950 4. Taxes free online     5. Taxes free online Standard deduction. Taxes free online         a. Taxes free online Compare lines 3 and 4. Taxes free online Enter the smaller amount here. Taxes free online If under 65 and not blind, stop here. Taxes free online This is your standard deduction. Taxes free online Otherwise, go on to line 5b. Taxes free online 5a. Taxes free online     b. Taxes free online If 65 or older or blind, multiply $1,500 ($1,200 if married) by the number in box c above. Taxes free online Enter the result here. Taxes free online 5b. Taxes free online     c. Taxes free online Add lines 5a and 5b. Taxes free online This is your standard deduction for 2013. Taxes free online 5c. Taxes free online     Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. Taxes free online It also includes any amount received as a scholarship that you must include in income. Taxes free online   Example 1. Taxes free online Michael is single, age 15, and not blind. Taxes free online His parents can claim him as a dependent on their tax return. Taxes free online He has taxable interest income of $800 and wages of $150. Taxes free online He enters $500 (his earned income plus $350) on line 1 of Worksheet 1. Taxes free online On line 3, he enters $1,000, the larger of $500 or $1,000. Taxes free online Michael enters $6,100 on line 4. Taxes free online On line 5a, he enters $1,000, the smaller of $1,000 or $6,100. Taxes free online His standard deduction is $1,000. Taxes free online Example 2. Taxes free online Judy, a full-time student, is single, age 22, and not blind. Taxes free online Her parents can claim her as a dependent on their tax return. Taxes free online She has dividend income of $275 and wages of $2,500. Taxes free online She enters $2,850 (her earned income plus $350) on line 1 of Worksheet 1. Taxes free online On line 3, she enters $2,850, the larger of $2,850 or $1,000. Taxes free online She enters $6,100 on line 4. Taxes free online On line 5a, she enters $2,850 (the smaller of $2,850 or $6,100) as her standard deduction. Taxes free online Example 3. Taxes free online Amy, who is single, is claimed as a dependent on her parents' tax return. Taxes free online She is 18 years old and blind. Taxes free online She has taxable interest income of $1,000 and wages of $2,000. Taxes free online She enters $2,350 (her earned income plus $350) on line 1 of Worksheet 1. Taxes free online She enters $2,350 (the larger of $2,350 or $1,000) on line 3, $6,100 on line 4, and $2,350 (the smaller of $2,350 or $6,100) on line 5a. Taxes free online Because Amy is blind, she checks the box for blindness and enters “1” in box c at the top of Worksheet 1. Taxes free online She enters $1,500 (the number in box c times $1,500) on line 5b. Taxes free online Her standard deduction on line 5c is $3,850 ($2,350 + $1,500). Taxes free online Standard Deduction of Zero The standard deduction for the following dependents is zero. Taxes free online A married dependent filing a separate return whose spouse itemizes deductions. Taxes free online A dependent who files a return for a period of less than 12 months due to a change in his or her annual accounting period. Taxes free online A nonresident or dual-status alien dependent, unless the dependent is married to a U. Taxes free online S. Taxes free online citizen or resident alien at the end of the year and chooses to be treated as a U. Taxes free online S. Taxes free online resident for the year. Taxes free online See Publication 519, U. Taxes free online S. Taxes free online Tax Guide for Aliens, for information on making this choice. Taxes free online Example. Taxes free online Jennifer, who is a dependent of her parents, is entitled to file a joint return with her husband. Taxes free online However, her husband elects to file a separate return and itemize his deductions. Taxes free online Because he itemizes, Jennifer's standard deduction on her return is zero. Taxes free online She can, however, itemize any of her allowable deductions. Taxes free online Dependent's Own Exemption A person who can be claimed as a dependent on another taxpayer's return cannot claim his or her own exemption. Taxes free online This is true even if the other taxpayer does not actually claim the exemption. Taxes free online Example. Taxes free online James and Barbara can claim their child, Ben, as a dependent on their return. Taxes free online Ben is a college student who works during the summer and must file a tax return. Taxes free online Ben cannot claim his own exemption on his return. Taxes free online This is true even if James and Barbara do not claim him as a dependent on their return. Taxes free online Withholding From Wages Employers generally withhold federal income tax, social security tax, and Medicare tax from an employee's wages. Taxes free online If the employee claims exemption from withholding on Form W-4, the employer will not withhold federal income tax. Taxes free online The exemption from withholding does not apply to social security and Medicare taxes. Taxes free online Conditions for exemption from withholding. Taxes free online   An employee can claim exemption from withholding for 2014 only if he or she meets both of the following conditions. Taxes free online For 2013, the employee had a right to a refund of all federal income tax withheld because he or she had no tax liability. Taxes free online For 2014, the employee expects a refund of all federal income tax withheld because he or she expects to have no tax liability. Taxes free online Dependents. Taxes free online   An employee who is a dependent ordinarily cannot claim exemption from withholding if both of the following are true. Taxes free online The employee's gross income will be more than $1,000, the minimum standard deduction for 2014. Taxes free online The employee's unearned income will be more than $350. Taxes free online Exceptions. Taxes free online   An employee may be able to claim exemption from withholding even if the employee is a dependent, if the employee: Is age 65 or older, Is blind, or Will claim on his or her 2014 tax return: Adjustments to income, Tax credits, or Itemized deductions. Taxes free online The above exceptions do not apply to supplemental wages greater than $1,000,000. Taxes free online For more information, see Exemption From Withholding in chapter 1 of Publication 505. Taxes free online Example. Taxes free online Guy is 17 and a student. Taxes free online During the summer he works part time at a grocery store. Taxes free online He expects to earn about $1,200 this year. Taxes free online He also worked at the store last summer and received a refund of all his withheld income tax because he did not have a tax liability. Taxes free online The only other income he expects during the year is $375 interest on a savings account. Taxes free online He expects that his parents will be able to claim him as a dependent on their tax return. Taxes free online He is not blind and will not claim adjustments to income, itemized deductions, a higher standard deduction, or tax credits on his return. Taxes free online Guy cannot claim exemption from withholding when he fills out Form W-4 because his parents will be able to claim him as a dependent, his gross income will be more than $1,000 (the minimum standard deduction amount) and his unearned income will be more than $350. Taxes free online Claiming exemption from withholding. Taxes free online    To claim exemption from withholding, an employee must enter “Exempt” in the space provided on Form W-4, line 7. Taxes free online The employee must complete the rest of the form, as explained in the form instructions, and give it to his or her employer. Taxes free online Renewing an exemption from withholding. Taxes free online   An exemption from withholding is good for only one year. Taxes free online An employee must file a new Form W-4 by February 15 each year to continue the exemption. Taxes free online Part 2. Taxes free online Tax on Unearned Income of Certain Children The two rules that follow may affect the tax on the unearned income of certain children. Taxes free online If the child's interest and dividend income (including capital gain distributions) total less than $10,000, the child's parent may be able to choose to include that income on the parent's return rather than file a return for the child. Taxes free online (See Parent's Election To Report Child's Interest and Dividends , later. Taxes free online ) If the child's interest, dividends, and other unearned income total more than $2,000, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. Taxes free online (See Tax for Certain Children Who Have Unearned Income , later. Taxes free online ) For these rules, the term “child” includes a legally adopted child and a stepchild. Taxes free online These rules apply whether or not the child is a dependent. Taxes free online These rules do not apply if neither of the child's parents were living at the end of the year. Taxes free online Which Parent's Return To Use If a child's parents are married to each other and file a joint return, use the joint return to figure the tax on the child's unearned income. Taxes free online The tax rate and other return information from that return are used to figure the child's tax as explained later under Tax for Certain Children Who Have Unearned Income . Taxes free online Parents Who Do Not File a Joint Return For parents who do not file a joint return, the following discussions explain which parent's tax return must be used to figure the tax. Taxes free online Only the parent whose tax return is used can make the election described under Parent's Election To Report Child's Interest and Dividends . Taxes free online Parents are married. Taxes free online   If the child's parents file separate returns, use the return of the parent with the greater taxable income. Taxes free online Parents not living together. Taxes free online   If the child's parents are married to each other but not living together, and the parent with whom the child lives (the custodial parent) is considered unmarried, use the return of the custodial parent. Taxes free online If the custodial parent is not considered unmarried, use the return of the parent with the greater taxable income. Taxes free online   For an explanation of when a married person living apart from his or her spouse is considered unmarried, see Head of Household in Publication 501. Taxes free online Parents are divorced. Taxes free online   If the child's parents are divorced or legally separated, and the parent who had custody of the child for the greater part of the year (the custodial parent) has not remarried, use the return of the custodial parent. Taxes free online Custodial parent remarried. Taxes free online   If the custodial parent has remarried, the stepparent (rather than the noncustodial parent) is treated as the child's other parent. Taxes free online Therefore, if the custodial parent and the stepparent file a joint return, use that joint return. Taxes free online Do not use the return of the noncustodial parent. Taxes free online   If the custodial parent and the stepparent are married, but file separate returns, use the return of the one with the greater taxable income. Taxes free online If the custodial parent and the stepparent are married but not living together, the earlier discussion under Parents not living together applies. Taxes free online Parents never married. Taxes free online   If a child's parents have never been married to each other, but lived together all year, use the return of the parent with the greater taxable income. Taxes free online If the parents did not live together all year, the rules explained earlier under Parents are divorced apply. Taxes free online Widowed parent remarried. Taxes free online   If a widow or widower remarries, the new spouse is treated as the child's other parent. Taxes free online The rules explained earlier under Custodial parent remarried apply. Taxes free online Parent's Election To Report Child's Interest and Dividends You may be able to elect to include your child's interest and dividend income (including capital gain distributions) on your tax return. Taxes free online If you do, your child will not have to file a return. Taxes free online You can make this election only if all the following conditions are met. Taxes free online Your child was under age 19 (or under age 24 if a full-time student) at the end of the year. Taxes free online Your child had income only from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends). Taxes free online The child's gross income was less than $10,000. Taxes free online The child is required to file a return unless you make this election. Taxes free online The child does not file a joint return for the year. Taxes free online No estimated tax payment was made for the year, and no overpayment from the previous year (or from any amended return) was applied to this year under your child's name and social security number. Taxes free online No federal income tax was withheld from your child's income under the backup withholding rules. Taxes free online You are the parent whose return must be used when applying the special tax rules for children. Taxes free online (See Which Parent's Return To Use , earlier. Taxes free online ) These conditions are also shown in Figure 1. Taxes free online Certain January 1 birthdays. Taxes free online   A child born on January 1, 1995, is considered to be age 19 at the end of 2013. Taxes free online You cannot make this election for such a child unless the child was a full-time student. Taxes free online   A child born on January 1, 1990, is considered to be age 24 at the end of 2013. Taxes free online You cannot make this election for such a child. Taxes free online How to make the election. Taxes free online    Make the election by attaching Form 8814 to your Form 1040 or Form 1040NR. Taxes free online (If you make this election, you cannot file Form 1040A or Form 1040EZ. Taxes free online ) Attach a separate Form 8814 for each child for whom you make the election. Taxes free online You can make the election for one or more children and not for others. Taxes free online Effect of Making the Election The federal income tax on your child's income may be more if you make the Form 8814 election. Taxes free online Rate may be higher. Taxes free online   If your child received qualified dividends or capital gain distributions, you may pay up to $100 more tax if you make this election instead of filing a separate tax return for the child. Taxes free online This is because the tax rate on the child's income between $1,000 and $2,000 is 10% if you make this election. Taxes free online However, if you file a separate return for the child, the tax rate may be as low as 0% (zero percent) because of the preferential tax rates for qualified dividends and capital gain distributions. Taxes free online Deductions you cannot take. Taxes free online   By making the Form 8814 election, you cannot take any of the following deductions that the child would be entitled to on his or her return. Taxes free online The additional standard deduction if the child is blind. Taxes free online The deduction for a penalty on an early withdrawal of your child's savings. Taxes free online Itemized deductions (such as your child's investment expenses or charitable contributions). Taxes free online Figure 1. Taxes free online Can You Include Your Child's Income On Your Tax Return? Please click here for the text description of the image. Taxes free online Figure 1. Taxes free online Can You Include Your Child's Income On Your Tax Return? Deductible investment interest. Taxes free online   If you use Form 8814, your child's unearned income is considered your unearned income. Taxes free online To figure the limit on your deductible investment interest, add the child's unearned income to yours. Taxes free online However, if your child received qualified dividends, capital gain distributions, or Alaska Permanent Fund dividends, see chapter 3 of Publication 550 for information about how to figure the limit. Taxes free online Alternative minimum tax. Taxes free online    If your child received tax-exempt interest (or exempt-interest dividends paid by a regulated investment company) from certain private activity bonds, you must determine if that interest is a tax preference item for alternative minimum tax (AMT) purposes. Taxes free online If it is, you must include it with your own tax preference items when figuring your AMT. Taxes free online See Form 6251, Alternative Minimum Tax—Individuals, and its instructions for details. Taxes free online Reduced deductions or credits. Taxes free online   If you use Form 8814, your increased adjusted gross income may reduce certain deductions or credits on your return, including the following. Taxes free online Deduction for contributions to a traditional individual retirement arrangement (IRA). Taxes free online Deduction for student loan interest. Taxes free online Itemized deductions for medical expenses, casualty and theft losses, and certain miscellaneous expenses. Taxes free online Credit for child and dependent care expenses. Taxes free online Child tax credit. Taxes free online Education tax credits. Taxes free online Earned income credit. Taxes free online Penalty for underpayment of estimated tax. Taxes free online   If you make this election for 2013 and did not have enough tax withheld or pay enough estimated tax to cover the tax you owe, you may be subject to a penalty. Taxes free online If you plan to make this election for 2014, you may need to increase your federal income tax withholding or your estimated tax payments to avoid the penalty. Taxes free online Get Publication 505 for more information. Taxes free online Figuring Child's Income Use Form 8814, Part I, to figure your child's interest and dividend income to report on your return. Taxes free online Only the amount over $2,000 is added to your income. Taxes free online The amount over $2,000 is shown on Form 8814, line 6. Taxes free online Unless the child's income includes qualified dividends or capital gain distributions (discussed next), the same amount is shown on Form 8814, line 12. Taxes free online Include the amount from Form 8814, line 12, on Form 1040 or Form 1040NR, line 21. Taxes free online If you file more than one Form 8814, include the total amounts from line 12 of all your Forms 8814 on Form 1040 or Form 1040NR, line 21. Taxes free online On the dotted line next to line 21, enter “Form 8814” and the total of the Form 8814, line 12 amounts. Taxes free online Note. Taxes free online The tax on the first $2,000 is figured on Form 8814, Part II. Taxes free online See Figuring Additional Tax , later. Taxes free online Qualified dividends. Taxes free online   Enter on Form 8814, line 2a, any ordinary dividends your child received. Taxes free online This amount may include qualified dividends. Taxes free online Qualified dividends are those dividends reported on Form 1040, line 9b, or Form 1040NR, line 10b, and are eligible for lower tax rates that apply to a net capital gain. Taxes free online For detailed information about qualified dividends, see Publication 550. Taxes free online   If your child received qualified dividends, the amount of these dividends that is added to your income must be reported on Form 1040, lines 9a and 9b, or Form 1040NR, lines 10a and 10b. Taxes free online You do not include these dividends on Form 8814, line 12, or on line 21 of Form 1040 or Form 1040NR. Taxes free online   Enter the child's qualified dividends on Form 8814, line 2b. Taxes free online But do not include this amount on Form 1040, lines 9a and 9b, or Form 1040NR, lines 10a and 10b. Taxes free online Instead, include the amount from Form 8814, line 9, on Form 1040, lines 9a and 9b, or Form 1040NR, lines 10a and 10b. Taxes free online (The amount on Form 8814, line 9, may be less than the amount on Form 8814, line 2b, because lines 7 through 12 of the form divide the $2,000 base amount on Form 8814, line 5, between the child's qualified dividends, capital gain distributions, and other interest and dividend income, reducing each of those amounts. Taxes free online ) Capital gain distributions. Taxes free online   Enter on Form 8814, line 3, any capital gain distributions your child received. Taxes free online The amount of these distributions that is added to your income must be reported on Schedule D (Form 1040), line 13, or, if you are not required to file Schedule D, on Form 1040, line 13, or Form 1040NR, line 14. Taxes free online You do not include it on Form 8814, line 12, or on line 21 of Form 1040 or Form 1040NR. Taxes free online   Include the amount from Form 8814, line 10, on Schedule D, line 13; Form 1040, line 13; or Form 1040NR, line 14, whichever applies. Taxes free online (The amount on Form 8814, line 10, may be less than the amount on Form 8814, line 3, because lines 7 through 12 of the form divide the $2,000 base amount on Form 8814, line 5, between the child's qualified dividends, capital gain distributions, and other interest and dividend income, reducing each of those amounts. Taxes free online ) Collectibles (28% rate) gain. Taxes free online    If any of the child's capital gain distributions are reported on Form 1099-DIV as collectibles (28% rate) gain, you must determine how much to also include on line 4 of the 28% Rate Gain Worksheet, in the instructions for Schedule D, line 18. Taxes free online Multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. Taxes free online The numerator is the part of the child's total capital gain distribution that is collectibles (28% rate) gain. Taxes free online The denominator is the child's total capital gain distribution. Taxes free online Enter the result on line 4 of the 28% Rate Gain Worksheet. Taxes free online Unrecaptured section 1250 gain. Taxes free online   If any of the child's capital gain distributions are reported on Form 1099-DIV as unrecaptured section 1250 gain, you must determine how much to include on line 11 of the Unrecaptured Section 1250 Gain Worksheet in the instructions for Schedule D, line 19. Taxes free online Multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. Taxes free online The numerator is the part of the child's total capital gain distribution that is unrecaptured section 1250 gain. Taxes free online The denominator is the child's total capital gain distribution. Taxes free online Enter the result on the Unrecaptured Section 1250 Gain Worksheet, line 11. Taxes free online Section 1202 gain. Taxes free online   If any of the child's capital gain distributions are reported as section 1202 gain (gain on qualified small business stock) on Form 1099-DIV, part or all of that gain may be eligible for the section 1202 exclusion. Taxes free online (For information about the exclusion, see chapter 4 of Publication 550. Taxes free online ) To figure that part, multiply the child's capital gain distribution included on Schedule D, line 13, by a fraction. Taxes free online The numerator is the part of the child's total capital gain distribution that is section 1202 gain. Taxes free online The denominator is the child's total capital gain distribution. Taxes free online Your section 1202 exclusion is generally 50% of the result, but may be subject to a limit. Taxes free online In some cases, the exclusion is more than 50%. Taxes free online See the instructions for Schedule D for details and information on how to report the exclusion amount. Taxes free online Example. Taxes free online Fred is 6 years old. Taxes free online In 2013, he received dividend income of $2,100, which included $1,575 of ordinary dividends and a $525 capital gain distribution from a mutual fund. Taxes free online (None of the distributions were reported on Form 1099-DIV as unrecaptured section 1250 gain, section 1202 gain, or collectibles (28% rate) gain. Taxes free online ) All of the ordinary dividends are qualified dividends. Taxes free online He has no other income and is not subject to backup withholding. Taxes free online No estimated tax payments were made under his name and social security number. Taxes free online Fred's parents elect to include Fred's income on their tax return instead of filing a return for him. Taxes free online They figure the amount to report on Form 1040, lines 9a and 9b, the amount to report on their Schedule D, line 13, and the amount to report on Form 1040, line 21, as follows. Taxes free online They leave lines 1a and 1b of Form 8814 blank because Fred does not have any interest income. Taxes free online They enter his ordinary dividends of $1,575 on lines 2a and 2b because all of Fred's ordinary dividends are qualified dividends. Taxes free online They enter the amount of Fred's capital gain distributions, $525, on line 3. Taxes free online Next, they add the amounts on lines 1a, 2a, and 3 and enter the result, $2,100, on line 4. Taxes free online They subtract the base amount on line 5, $2,000, from the amount on line 4, $2,100, and enter the result, $100, on line 6. Taxes free online This is the total amount from Form 8814 to be reported on their return. Taxes free online Next, they figure how much of this amount is qualified dividends and how much is capital gain distributions. Taxes free online They divide the amount on line 2b, $1,575, by the amount on line 4, $2,100. Taxes free online They enter the result, . Taxes free online 75, on line 7. Taxes free online They divide the amount on line 3, $525, by the amount on line 4, $2,100. Taxes free online They enter the result, . Taxes free online 25, on line 8. Taxes free online They multiply the amount on line 6, $100, by the decimal on line 7, . Taxes free online 75, and enter the result, $75, on line 9. Taxes free online They multiply the amount on line 6, $100, by the decimal on line 8, . Taxes free online 25, and enter the result, $25, on line 10. Taxes free online They include the amount from line 9, $75, on lines 9a and 9b of their Form 1040 and enter “Form 8814 – $75” on the dotted lines next to lines 9a and 9b. Taxes free online They include the amount from line 10, $25, on line 13 of their Schedule D (Form 1040) and enter “Form 8814 – $25” on the dotted line next to Schedule D, line 13. Taxes free online They enter $100 ($75 + $25) on line 11 and -0- ($100 – $100) on line 12. Taxes free online Because the amount on line 12 is -0-, they do not include any amount from Form 8814 on their Form 1040, line 21. Taxes free online Figuring Additional Tax Use Form 8814, Part II, to figure the tax on the $2,000 of your child's interest and dividends that you do not include in your income. Taxes free online This tax is added to the tax figured on your income. Taxes free online This additional tax is the smaller of: 10% x (your child's gross income − $1,000), or $100. Taxes free online Include the amount from line 15 of all your Forms 8814 in the total on Form 1040, line 44, or Form 1040NR, line 42. Taxes free online Check box a on Form 1040, line 44, or Form 1040NR, line 42. Taxes free online Tax for Certain Children Who Have Unearned Income If a child's interest, dividends, and other unearned income total more than $2,000, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. Taxes free online If the parent does not or cannot choose to include the child's income on the parent's return, use Form 8615 to figure the child's tax. Taxes free online Attach the completed form to the child's Form 1040, Form 1040A, or Form 1040NR. Taxes free online When Form 8615 must be filed. Taxes free online   Form 8615 must be filed for a child if all of the following statements are true. Taxes free online The child's unearned income was more than $2,000. Taxes free online The child is required to file a return for 2013. Taxes free online The child either: Was under age 18 at the end of the year, Was age 18 at the end of the year and did not have earned income that was more than half of his or her support, or Was over age 18 and under age 24 at the end of the year, was a full-time student, and did not have earned income that was more than half of his or her support. Taxes free online At least one of the child's parents was alive at the end of 2013. Taxes free online The child does not file a joint return for 2013. Taxes free online These conditions are also shown in Figure 2. Taxes free online Certain January 1 birthdays. Taxes free online   Use the following chart to determine whether certain children with January 1 birthdays meet condition 3 under When Form 8615 must be filed. Taxes free online IF a child was born on. Taxes free online . Taxes free online . Taxes free online THEN, at the end of 2013, the child is considered to be. Taxes free online . Taxes free online . Taxes free online January 1, 1996 18* January 1, 1995 19** January 1, 1990 24*** *This child is not under age 18. Taxes free online The child meets condition 3 only if the child did not have earned income that was more than half of the child's support. Taxes free online  **This child meets condition 3 only if the child was a full-time student who did not have earned income that was more than half of the child's support. Taxes free online  ***Do not use Form 8615 for this child. Taxes free online Figure 2. Taxes free online Do You Have To Use Form 8615 To Figure Your Child's Tax? Please click here for the text description of the image. Taxes free online Figure 2. Taxes free online Do You Have To Use Form 8615 To Figure Your Child's Tax? Providing Parental Information (Form 8615, Lines A–C) On Form 8615, lines A and B, enter the parent's name and social security number. Taxes free online (If the parents filed a joint return, enter the name and social security number listed first on the joint return. Taxes free online ) On line C, check the box for the parent's filing status. Taxes free online See Which Parent's Return To Use, earlier, for information on which parent's return information must be used on Form 8615. Taxes free online Parent with different tax year. Taxes free online   If the parent and the child do not have the same tax year, complete Form 8615 using the information on the parent's return for the tax year that ends in the child's tax year. Taxes free online Example. Taxes free online Kimberly must use her mother's tax and taxable income to complete her Form 8615 for calendar year 2013 (January 1 – December 31). Taxes free online Kimberly's mother files her tax return on a fiscal year basis (July 1 – June 30). Taxes free online Kimberly must use the information on her mother's return for the tax year ending June 30, 2013, to complete her 2013 Form 8615. Taxes free online Parent's return information not known timely. Taxes free online   If the information needed from the parent's return is not known by the time the child's return is due (usually April 15), you can file the return using estimates. Taxes free online   You can use any reasonable estimate. Taxes free online This includes using information from last year's return. Taxes free online If you use an estimated amount on Form 8615, enter “Estimated” on the line next to the amount. Taxes free online   When you get the correct information, file an amended return on Form 1040X, Amended U. Taxes free online S. Taxes free online Individual Income Tax Return. Taxes free online Extension of time to file. Taxes free online   Instead of using estimates, you can get an automatic 6-month extension of time to file if, by the date your return is due, you file Form 4868, Application for Automatic Extension of Time To File U. Taxes free online S. Taxes free online Individual Income Tax Return. Taxes free online See the instructions for Form 4868 for details. Taxes free online    An extension of time to file is not an extension of time to pay. Taxes free online You must make an accurate estimate of the tax for 2013. Taxes free online If you do not pay the full amount due by the regular due date, the child will owe interest and may also be charged penalties. Taxes free online See Form 4868 and its instructions. Taxes free online Parent's return information not available. Taxes free online   If a child cannot get the required information about his or her parent's tax return, the child (or the child's legal representative) can request the necessary information from the Internal Revenue Service (IRS). Taxes free online How to request. Taxes free online   After the end of the tax year, send a signed, written request for the information to the Internal Revenue Service Center where the parent's return will be filed. Taxes free online (The IRS cannot process a request received before the end of the tax year. Taxes free online )    You should also consider getting an extension of time to file the child's return, because there may be a delay in getting the requested information. Taxes free online   The request must contain all of the following. Taxes free online A statement that you are making the request to comply with section 1(g) of the Internal Revenue Code and that you have tried to get the information from the parent. Taxes free online Proof of the child's age (for example, a copy of the child's birth certificate). Taxes free online Evidence the child has more than $2,000 of unearned income (for example, a copy of the child's prior year tax return or copies of Forms 1099 for the current year). Taxes free online The name, address, social security number (if known), and filing status (if known) of the parent whose information is to be shown on Form 8615. Taxes free online    A child's legal representative making the request should include a copy of his or her Power of Attorney, such as Form 2848, or proof of legal guardianship. Taxes free online Step 1. Taxes free online Figuring the Child's Net Unearned Income (Form 8615, Part I) The first step in figuring a child's tax using Form 8615 is to figure the child's net unearned income. Taxes free online To do that, use Form 8615, Part I. Taxes free online Line 1 (Unearned Income) If the child had no earned income, enter on this line the adjusted gross income shown on the child's return. Taxes free online Adjusted gross income is shown on Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37. Taxes free online Form 1040EZ and Form 1040NR-EZ cannot be used if Form 8615 must be filed. Taxes free online If the child had earned income, figure the amount to enter on Form 8615, line 1, by using the worksheet in the instructions for the form. Taxes free online However, use the following worksheet if: the child has excluded any foreign earned income, deducted a loss from self-employment, or has a net operating loss from another year. Taxes free online Alternate Worksheet for Form 8615, Line 1 A. Taxes free online Enter the amount from the child's Form 1040, line 22, or Form 1040NR, line 23   B. Taxes free online Enter the total of any net loss  from self-employment, any net operating loss deduction, any foreign earned income exclusion, and any foreign housing exclusion from the child's Form 1040 or Form 1040NR. Taxes free online Enter this total as a positive number (greater than zero)   C. Taxes free online Add line A and line B and  enter the total   D. Taxes free online Enter the child's earned income plus any amount from the child's Form 1040, line 30, or the child's Form 1040NR, line 30     Generally, the child's earned income is the total of the amounts reported on Form 1040, lines 7, 12, and 18 (if line 12 or 18 is a loss, use zero) or Form 1040NR, lines 8, 13, and 19 (if line 13 or 19 is a loss, use zero)   E. Taxes free online Subtract line D from line C. Taxes free online Enter the result here and on Form 8615, line 1   Unearned income defined. Taxes free online   Unearned income is generally all income other than salaries, wages, and other amounts received as pay for work actually performed. Taxes free online It includes taxable interest, dividends, capital gains (including capital gain distributions), the taxable part of social security and pension payments, certain distributions from trusts, and unemployment compensation. Taxes free online Unearned income includes amounts produced by assets the child obtained with earned income (such as interest on a savings account into which the child deposited wages). Taxes free online Nontaxable income. Taxes free online   For this purpose, unearned income includes only amounts the child must include in gross income. Taxes free online Nontaxable unearned income, such as tax-exempt interest and the nontaxable part of social security and pension payments, is not included. Taxes free online Capital loss. Taxes free online   A child's capital losses are taken into account in figuring the child's unearned income. Taxes free online Capital losses are first applied against capital gains. Taxes free online If the capital losses are more than the capital gains, the difference (up to $3,000) is subtracted from the child's interest, dividends, and other unearned income. Taxes free online Any difference over $3,000 is carried to the next year. Taxes free online Income from property received as a gift. Taxes free online   A child's unearned income includes all income produced by property belonging to the child. Taxes free online This is true even if the property was transferred to the child, regardless of when the property was transferred or purchased or who transferred it. Taxes free online   A child's unearned income includes income produced by property given as a gift to the child. Taxes free online This includes gifts to the child from grandparents or any other person and gifts made under the Uniform Gift to Minors Act. Taxes free online Example. Taxes free online Amanda Black, age 13, received the following income. Taxes free online Dividends—$800 Wages—$2,100 Taxable interest—$1,200 Tax-exempt interest—$100 Capital gains—$300 Capital losses—($200) The dividends were qualified dividends on stock given to her by her grandparents. Taxes free online Amanda's unearned income is $2,100. Taxes free online This is the total of the dividends ($800), taxable interest ($1,200), and capital gains reduced by capital losses ($300 − $200 = $100). Taxes free online Her wages are earned (not unearned) income because they are received for work actually performed. Taxes free online Her tax-exempt interest is not included because it is nontaxable. Taxes free online Trust income. Taxes free online   If a child is the beneficiary of a trust, distributions of taxable interest, dividends, capital gains, and other unearned income from the trust are unearned income to the child. Taxes free online   However, taxable distributions from a qualified disability trust are considered earned income for the purposes of completing Form 8615. Taxes free online See the Form 8615 instructions for details. Taxes free online Adjustment to income. Taxes free online   In figuring the amount to enter on line 1, the child's unearned income is reduced by any penalty on the early withdrawal of savings. Taxes free online Line 2 (Deductions) If the child does not itemize deductions on Schedule A (Form 1040 or Form 1040NR), enter $2,000 on line 2. Taxes free online If the child itemizes deductions, enter on line 2 the larger of: $1,000 plus the portion of the child's itemized deductions on Schedule A (Form 1040), line 29 (or Schedule A (Form 1040NR), line 15), that are directly connected with the production of the unearned income entered on line 1, or $2,000. Taxes free online Directly connected. Taxes free online   Itemized deductions are directly connected with the production of unearned income if they are for expenses paid to produce or collect taxable income or to manage, conserve, or maintain property held for producing income. Taxes free online These expenses include custodian fees and service charges, service fees to collect taxable interest and dividends, and certain investment counsel fees. Taxes free online    These expenses are added to certain other miscellaneous itemized deductions on Schedule A (Form 1040). Taxes free online Only the amount greater than 2% of the child's adjusted gross income can be deducted. Taxes free online See Publication 529, Miscellaneous Deductions, for more information. Taxes free online Example 1. Taxes free online Roger, age 12, has unearned income of $8,000, no other income, no adjustments to income, and itemized deductions of $300 (net of the 2%-of-adjusted-gross-income limit) that are directly connected with his unearned income. Taxes free online His adjusted gross income is $8,000, which is entered on Form 1040, line 38, and on Form 8615, line 1. Taxes free online Roger enters $2,000 on line 2 because that is more than the total of $1,000 plus his directly-connected itemized deductions of $300. Taxes free online Example 2. Taxes free online Eleanor, age 8, has unearned income of $16,000 and an early withdrawal penalty of $100. Taxes free online She has no other income. Taxes free online She has itemized deductions of $1,050 (net of the 2%-of-adjusted-gross-income limit) that are directly connected with the production of her unearned income. Taxes free online Her adjusted gross income, entered on line 1, is $15,900 ($16,000 − $100). Taxes free online The amount on line 2 is $2,050. Taxes free online This is the larger of: $1,000 plus the $1,050 of directly connected itemized deductions, or $2,000. Taxes free online Line 3 Subtract line 2 from line 1 and enter the result on this line. Taxes free online If zero or less, do not complete the rest of the form. Taxes free online However, you must still attach Form 8615 to the child's tax return. Taxes free online Figure the tax on the child's taxable income in the normal manner. Taxes free online Line 4 (Child's Taxable Income) Enter on line 4 the child's taxable income from Form 1040, line 43; Form 1040A, line 27; or Form 1040NR, line 41. Taxes free online Child files Form 2555 or 2555-EZ. Taxes free online   If the child files Form 2555 or 2555-EZ to claim the foreign earned income exclusion, housing exclusion, or housing deduction, the Foreign Earned Income Tax Worksheet (in the Form 1040 instructions) is used to figure the child's tax. Taxes free online Enter the amount from line 3 of the Foreign Earned Income Tax Worksheet as the child's taxable income on Form 8615, line 4. Taxes free online Line 5 (Net Unearned Income) A child's net unearned income cannot be more than his or her taxable income. Taxes free online Enter on Form 8615, line 5, the smaller of line 3 or line 4. Taxes free online This is the child's net unearned income. Taxes free online If zero or less, do not complete the rest of the form. Taxes free online However, you must still attach Form 8615 to the child's tax return. Taxes free online Figure the tax on the child's taxable income in the normal manner. Taxes free online Step 2. Taxes free online Figuring a Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) The next step in completing Form 8615 is to figure a tentative tax on the child's net unearned income at the parent's tax rate. Taxes free online The tentative tax at the parent's tax rate is the difference between the tax on the parent's taxable income figured with the child's net unearned income (plus the net unearned income of any other child whose Form 8615 includes the tax return information of that parent) and the tax figured without it. Taxes free online When figuring the tentative tax at the parent's tax rate on Form 8615, do not refigure any of the exclusions, deductions, or credits on the parent's return because of the child's net unearned income. Taxes free online For example, do not refigure the medical expense deduction. Taxes free online Figure the tentative tax on Form 8615, lines 6 through 13. Taxes free online Line 6 (Parent's Taxable Income) Enter on line 6 the amount from the parent's Form 1040, line 43; Form 1040A, line 27; Form 1040EZ, line 6; Form 1040NR, line 41; or Form 1040NR-EZ, line 14. Taxes free online If the parent's taxable income is zero or less, enter zero on line 6. Taxes free online Parent files Form 2555 or 2555-EZ. Taxes free online   If the parent files Form 2555 or 2555-EZ to claim the foreign earned income exclusion, housing exclusion, or housing deduction, the Foreign Earned Income Tax Worksheet in the Form 1040 instructions is used to figure the parent's tax. Taxes free online Enter the amount from line 3 of the Foreign Earned Income Tax Worksheet as the parent's taxable income, on line 6 of Form 8615. Taxes free online Line 7 (Net Unearned Income of Other Children) If the tax return information of the parent is also used on any other child's Form 8615, enter on line 7 the total of the amounts from line 5 of all the other children's Forms 8615. Taxes free online Do not include the amount from line 5 of the Form 8615 being completed. Taxes free online (The term “other child” means any other child whose Form 8615 uses the tax information of the parent identified on Lines A and B of Form 8615. Taxes free online ) Example. Taxes free online Paul and Jane Persimmon have three children, Sharon, Jerry, and Mike, who must attach Form 8615 to their tax returns. Taxes free online The children's net unearned income amounts on line 5 of their Forms 8615 are: Sharon—$800 Jerry—$600 Mike—$1,000 Line 7 of Sharon's Form 8615 will show $1,600, the total of the amounts on line 5 of Jerry's and Mike's Forms 8615. Taxes free online Line 7 of Jerry's Form 8615 will show $1,800 ($800 + $1,000). Taxes free online Line 7 of Mike's Form 8615 will show $1,400 ($800 + $600). Taxes free online Other children's information not available. Taxes free online   If the net unearned income of the other children is not available when the return is due, either file the return using estimates or get an extension of time to file. Taxes free online Estimates and extensions are discussed earlier under Providing Parental Information (Form 8615, Lines A–C) . Taxes free online Line 8 (Parent's Taxable Income Plus Children's Net Unearned Income) Enter on this line the total of lines 5, 6, and 7. Taxes free online You must determine the amount of net capital gain and qualified dividends included on this line before completing Form 8615, line 9. Taxes free online Net capital gain. Taxes free online   Net capital gain is the smaller of the gain, if any, on Schedule D (Form 1040), line 15, or the gain, if any, on Schedule D, line 16. Taxes free online If Schedule D is not required, it is the amount on Form 1040, line 13; Form 1040A, line 10; or Form 1040NR, line 14. Taxes free online Qualified dividends. Taxes free online   Qualified dividends are those dividends reported on line 9b of Form 1040 or Form 1040A, or line 10b of Form 1040NR. Taxes free online Net capital gain and qualified dividends on line 8. Taxes free online   If neither the child, nor the parent, nor any other child has net capital gain, the net capital gain on line 8 is zero. Taxes free online   If neither the child, nor the parent, nor any other child has qualified dividends, the amount of qualified dividends on line 8 is zero. Taxes free online   If the child, parent, or any other child has net capital gain, figure the amount of net capital gain included on line 8 by adding together the net capital gain amounts included on lines 5, 6, and 7 of Form 8615. Taxes free online   If the child, parent, or any other child has qualified dividends, figure the amount of qualified dividends included on line 8 by adding together the qualified dividend amounts included on lines 5, 6, and 7. Taxes free online   Use the instructions for Form 8615, line 8, including the appropriate Line 5 Worksheet, to find these amounts. Taxes free online See the instructions for Form 8615 for more details. Taxes free online Note. Taxes free online The amount of any net capital gain or qualified dividends is not separately reported on line 8. Taxes free online It is  needed, however, when figuring the tax on line 9. Taxes free online Line 9 (Tax on Parent's Taxable Income Plus Children's Net Unearned Income) Figure the tax on the amount on line 8 using the Tax Table, the Tax Computation Worksheet, the Qualified Dividends and Capital Gain Tax Worksheet (in the Form 1040, 1040A, or 1040NR instructions), the Schedule D Tax Worksheet (in the Schedule D instructions), or Schedule J (Form 1040), as follows. Taxes free online If line 8 does not include any net capital gain or qualified dividends, use the Tax Table or Tax Computation Worksheet to figure this tax. Taxes free online But if Schedule J, Income Averaging for Farmers and Fishermen, is used to figure the tax on the parent's return, use it to figure this tax. Taxes free online If line 8 includes any net capital gain or qualified dividends, use the Qualified Dividends and Capital Gain Tax Worksheet to figure this tax. Taxes free online For details, see the instructions for Form 8615, line 9. Taxes free online However, if the child, parent, or any other child has 28% rate gain or unrecaptured section 1250 gain, use the Schedule D Tax Worksheet. Taxes free online But if Schedule J is used to figure the tax on the parent's return, use it to figure this tax. Taxes free online Child files Form 2555 or 2555-EZ. Taxes free online   If line 8 includes any net capital gain or qualified dividends and the child, or any other child filing Form 8615, also files Form 2555 or 2555-EZ, use Using the Schedule D Tax Worksheet for line 9 tax, next, to figure the line 9 tax. Taxes free online Using the Schedule D Tax Worksheet for line 9 tax. Taxes free online    Use the Schedule D Tax Worksheet (in the Schedule D instructions) to figure the line 9 tax on Form 8615 if the child, parent, or any other child has unrecaptured section 1250 gain or 28% rate gain. Taxes free online If you must use the Schedule D Tax Worksheet, first complete any Schedule D and any actual Schedule D Tax Worksheet required for the child, parent, or any other child. Taxes free online Then figure the line 9 tax using another Schedule D Tax Worksheet. Taxes free online (Do not attach this Schedule D Tax Worksheet to the child's return. Taxes free online )   Complete this Schedule D Tax Worksheet as follows. Taxes free online On line 1, enter the amount from Form 8615, line 8. Taxes free online On line 2, enter the qualified dividends included on Form 8615, line 8. Taxes free online (See the earlier discussion for line 8. Taxes free online ) On line 3, enter the total of the amounts, if any, on line 4g of all Forms 4952 filed by the child, parent, or any other child. Taxes free online On line 4, enter the total of the amounts, if any, on line 4e of all Forms 4952 filed by the child, parent, or any other child. Taxes free online If applicable, include instead the smaller amount entered on the dotted line next to line 4e. Taxes free online On lines 5 and 6, follow the worksheet instructions. Taxes free online On line 7, enter the net capital gain included on Form 8615, line 8. Taxes free online (See the earlier discussion for line 8. Taxes free online ) On lines 8 through 10, follow the worksheet instructions. Taxes free online On line 11, enter zero if neither the child, nor the parent, nor any other child has unrecaptured section 1250 gain (Schedule D, line 19) or 28% rate gain (Schedule D, line 18). Taxes free online Otherwise, enter the amount of unrecaptured section 1250 gain and 28% rate gain included in the net capital gain on line 8 of Form 8615. Taxes free online Figure these amounts as explained later under Figuring unrecaptured section 1250 gain (line 11) and Figuring 28% rate gain (line 11). Taxes free online If the Foreign Earned Income Tax Worksheet was used to figure the parent's tax or the tax of any child, go to step 10 below. Taxes free online Otherwise, skip steps 10, 11, and 12 below, and go to step 13. Taxes free online Determine whether there is a line 8 capital gain excess as follows. Taxes free online Add the amounts on line 2 of all Foreign Earned Income Tax Worksheets completed by the parent or any child for whom Form 8615 is filed. Taxes free online (But for each child do not add more than the excess, if any, of the amount on line 5 of the child's Form 8615 over the child's taxable income on Form 1040, line 43; Form 1040A, line 27; or Form 1040NR, line 41. Taxes free online ) Subtract (a) from the amount on line 1 of this Schedule D Tax Worksheet. Taxes free online Subtract (b) from the amount on line 10 of this Schedule D Tax Worksheet. Taxes free online If the result is more than zero, that amount is the line 8 capital gain excess. Taxes free online If the result is zero or less, there is no line 8 capital gain excess. Taxes free online If there is no line 8 capital gain excess, skip step 12 below and go to step 13. Taxes free online If there is a line 8 capital gain excess, complete a second Schedule D Tax Worksheet as instructed above and in step 13, but in its entirety and with the following additional modifications. Taxes free online (These modifications are to be made only for purposes of filling out this additional Schedule D Tax Worksheet. Taxes free online ) Reduce the amount you would otherwise enter on line 9 (but not below zero) by the line 8 capital gain excess. Taxes free online Reduce the amount you would otherwise enter on line 6 (but not below zero) by any of the line 8 capital gain excess not used in (a) above. Taxes free online If the child, parent, or any other child has 28% rate gain, reduce the amount you would otherwise enter on line 8 of Worksheet 1 for Line 11 of the Schedule D Tax Worksheet – 28% Rate Gain (Line 9 Tax), shown later, (but not below zero) by the line 8 capital gain excess, and refigure the amount on line 11 of this Schedule D Tax Worksheet. Taxes free online If the child, parent, or any other child has unrecaptured section 1250 gain, reduce the amount you would otherwise enter on line 8 of Worksheet 2 for Line 11 of the Schedule D Tax Worksheet – Unrecaptured Section 1250 Gain (Line 9 Tax) (but not below zero) by the line 8 capital gain excess not used in 12(c), and refigure the amount on line 11 of this Schedule D Tax Worksheet. Taxes free online Complete lines 12 through 45 following the worksheet instructions. Taxes free online Use the parent's filing status to complete lines 15, 42, and 44. Taxes free online Enter the amount from line 45 of this Schedule D Tax Worksheet on Form 8615, line 9, and check the box on that line
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Fuel Tax Credit Extensions Frequently Asked Questions

American Taxpayer Relief Act of 2012 (Pub. L. 112-240)

The American Taxpayer Relief Act of 2012 (Pub. L. 112-240) retroactively extends certain fuel tax credits that expired on Dec. 31, 2011. The retroactively extended fuel tax credits are the biodiesel mixture credit, biodiesel credit, alternative fuel credit and alternative fuel mixture credit. These credits are now scheduled to expire on Dec. 31, 2013.

These Q&As tell taxpayers how to claim the credits for qualifying sales or uses during 2012. They also describe changes to the cellulosic biofuel credit for 2013. 

More information on qualification for the credits is on Form 720, Quarterly Federal Excise Tax Return; Form 720X, Amended Quarterly Federal Excise Tax Return; Form 4136, Credit for Federal Tax Paid on Fuels; Form 6478, Alcohol and Cellulosic Biofuel Fuels Credit; Form 8849, Claim for Refund of Excise Taxes; and Form 8864, Biodiesel and Renewable Diesel Fuels Credit.

Q1. How do I claim the biodiesel mixture (including renewable diesel mixture) credit for qualifying sales and uses during 2012? What is the deadline for filing a claim?

A1. Choose one of the following options to claim the credit:

OPTION 1: Follow the procedures in Notice 2013-26. These procedures allow all claims to be made on Form 8849 for all qualifying sales and uses in 2012. These claims must be made by July 1, 2013.

OPTION 2: If you do not make the claim by July 1, 2013, for sales and uses in 2012, follow the procedures below.

If you reported excise tax liability for gasoline, diesel fuel, or kerosene on Form 720 during any quarter of 2012, you must amend that Form 720 to claim a credit against those liabilities. The amount of this credit may not exceed the total amount of those liabilities.

    • To amend your Form 720, file Form 720X in accordance with the instructions to that form.
    • You may use a single Form 720X to amend multiple quarters, but state each quarter separately.
    • If your biodiesel mixture (including renewable diesel mixture) credit exceeds the amount that you claim on Form 720X, you may claim that excess as an income tax credit on your 2012 federal income tax return by attaching to the return Form 4136 in accordance with the instructions for that form.
    • Generally, you have three years from the due date of each Form 720 you filed during 2012 to claim the credit against your excise tax liability for a particular quarter. Generally, you have three years from the due date of your income tax return to claim the credit by attaching Form 4136 to an amended income tax return.

Q2. Do I need to submit Certificates for Biodiesel with my biodiesel mixture claims?

A2. Yes. See the instructions to Form 720, Form 8849, or Form 4136, as appropriate. If you did not receive certificates during 2012, the biodiesel producer may issue them to you now. However, the IRS cannot require biodiesel producers to issue a certificate.

Q3. How do I claim the biodiesel (including renewable diesel) credit for qualifying sales or uses during 2012? What is the deadline for filing a claim?

A3. You may claim the biodiesel (including renewable diesel) credit for qualifying sales or uses during 2012 as an income tax credit on your 2012 federal income tax return by attaching to the return Form 8864, in accordance with the instructions for that form. Generally, you have three years from the due date of your income tax return to claim the credit by attaching Form 8864 to an amended income tax return.

Q4. How do I claim the alternative fuel credit for qualifying sales or uses during 2012? What is the deadline for filing a claim?

A4. The term “alternative fuel” generally includes:

  • Liquefied petroleum gas.
  • P Series Fuels.
  • Compressed or liquefied natural gas.
  • Liquefied hydrogen.
  • Any liquid fuel which meets certain carbon recapture requirements and that is derived from coal (including peat) through the Fischer-Tropsch process.
  • Compressed or liquefied gas derived from biomass (as defined in section 45K(c)(3)).
  • Liquid fuel derived from biomass (as defined in section 45K(c)(3)).

Choose one of the following options to claim the credit:

OPTION 1: Follow the procedures in Notice 2013-26. These procedures allow all claims to be made on Form 8849 for all qualifying sales and uses in 2012. These claims must be made by July 1, 2013.

OPTION 2: If you do not make the claim by July 1, 2013, for sales and uses in 2012, follow the procedures below.

    • If you reported excise tax liability for alternative fuel on Form 720 during any quarter of 2012, you must amend that Form 720 to claim a credit against those liabilities. The amount of this credit may not exceed the total amount of those liabilities.
    • To amend your Form 720, file Form 720X in accordance with the instructions to that form.
    • You may use a single Form 720X to amend multiple quarters, but state each quarter separately.
    • If your alternative fuel credit exceeds the amount that you claim on Form 720X, you may claim the excess as an income tax credit on your 2012 federal income tax return by attaching to the return Form 4136 in accordance with the instructions for that form.
    • Generally, you have three years from the due date of each Form 720 you filed during 2012 to claim the credit against your excise tax liability for a particular quarter. Generally, you have three years from the due date of your income tax return to claim the credit by attaching Form 4136 to an amended income tax return.

Q5. How do I claim the alternative fuel mixture credit for qualifying sales or uses during 2012? What is the deadline for filing a claim?

A5. See below.

  • If you reported excise tax liability for gasoline, diesel fuel or kerosene on Form 720, during any quarter of 2012, you must amend that Form 720 to claim a credit against those liabilities. The amount of this credit may not exceed the amount of those liabilities.
  • To amend your Form 720, file Form 720X in accordance with the instructions to the form.
  • You may use a single Form 720X to amend multiple quarters, but state each quarter separately.
  • You may claim the alternative fuel mixture credit only up to the amount of your tax liabilities for gasoline, diesel fuel or kerosene.
  • You may not claim any excess alternative fuel mixture credit on your income tax return or receive a payment for that amount. 

Q6. Do I have to be registered by IRS to claim the biodiesel mixture credit (including renewable diesel mixture credit), biodiesel credit (including renewable diesel credit), alternative fuel credit or alternative fuel mixture credit?

A6. You must be registered by the IRS at the time you file your claims for the alternative fuel credit and the alternative fuel mixture credit.

If you are already registered with an AL (alternative fuel) or AM (alternative fuel mixture) activity letter, as appropriate, do not apply again for registration. 

However, if you are not already registered by the IRS with the appropriate activity letter, apply to the IRS for registration by filing Form 637, Application for Registration (For Certain Excise Tax Activities), in accordance with the instructions to Form 637. You are not registered with the IRS until you receive your letter of registration from the IRS.

Q7. How do I claim the cellulosic biofuel credit for qualifying sales or uses during 2012?

A7. You may claim the cellulosic biofuel credit for qualifying sales or uses during 2012 as an income tax credit on your 2012 federal income tax return by attaching Form 6478 to the return in accordance with the instructions for that form.

You must be registered by the IRS at the time you file your claim for the cellulosic biofuel credit.

If you are already registered with a CB (producers of cellulosic biofuel) activity letter, do not apply again for registration. However, if you are not already registered by the IRS with the CB activity letter, you may apply to the IRS for registration by filing Form 637, Application for Registration (For Certain Excise Tax Activities), in accordance with the instructions to Form 637. You are not registered with the IRS until you receive your letter of registration from the IRS.

Q8. What changes did the American Taxpayer Relief Act make to the cellulosic biofuel credit?

A8. Effective Jan. 3, 2013, the Act changed the designation of the credit to “second generation biofuel credit.” Also effective on Jan. 3, 2013, biofuels produced from algae, cyanobacteria, and lemna feedstocks are eligible for the credit. The second generation biofuel credit expires for fuel produced after Dec. 31, 2013.

Q9. If I am a second generation biofuel producer, do I need to be registered by the IRS to claim the credit?

A9. Yes, you must be registered by the IRS at the time you file your claims for second generation biofuel credit. Apply for activity letter “CB” using Form 637. If you are already registered by the IRS with a CB activity letter, do not apply again for registration.

Related Item: IRS Forms and Publications

Page Last Reviewed or Updated: 07-Mar-2014

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Taxes free online Publication 15 - Introductory Material Table of Contents Future Developments What's New Reminders Electronic Filing and Payment Forms in Spanish Hiring New Employees Paying Wages, Pensions, or Annuities Information Returns Nonpayroll Income Tax Withholding Recordkeeping Change of Business Address or Responsible Party Private Delivery Services Telephone Help Ordering Employer Tax Forms and Publications Filing Addresses Dishonored Payments Photographs of Missing Children Calendar Introduction Future Developments For the latest information about developments related to Publication 15 (Circular E), such as legislation enacted after it was published, go to www. Taxes free online irs. Taxes free online gov/pub15. Taxes free online What's New Social security and Medicare tax for 2014. Taxes free online  The social security tax rate is 6. Taxes free online 2% each for the employee and employer, unchanged from 2013. Taxes free online The social security wage base limit is $117,000. Taxes free online The Medicare tax rate is 1. Taxes free online 45% each for the employee and employer, unchanged from 2013. Taxes free online There is no wage base limit for Medicare tax. Taxes free online Social security and Medicare taxes apply to the wages of household workers you pay $1,900 or more in cash or an equivalent form of compensation. Taxes free online Social security and Medicare taxes apply to election workers who are paid $1,600 or more in cash or an equivalent form of compensation. Taxes free online 2014 withholdng tables. Taxes free online  This publication includes the 2014 Percentage Method Tables and Wage Bracket Tables for Income Tax Withholding. Taxes free online Withholding allowance. Taxes free online  The 2014 amount for one withholding allowance on an annual basis is $3,950. Taxes free online Voluntary withholding on dividends and other distributions by an Alaska Native Corporation (ANC). Taxes free online  A shareholder of an ANC may now request voluntary income tax withholding on dividends and other distributions paid by an ANC. Taxes free online A shareholder may request voluntary withholding by giving the ANC a completed Form W-4V, Voluntary Withholding Request. Taxes free online For more information see Notice 2013-77, 2013-50 I. Taxes free online R. Taxes free online B. Taxes free online 632, available at www. Taxes free online irs. Taxes free online gov/irb/2013-50_IRB/ar10. Taxes free online html. Taxes free online Change of responsible party. Taxes free online  Beginning January 1, 2014, any entity with an employer identification number (EIN) must file Form 8822-B, Change of Address or Responsible Party — Business, to report the latest change to its responsible party. Taxes free online Form 8822-B must be filed within 60 days of the change. Taxes free online If the change in the identity of your responsible party occurred before 2014, and you have not previously notified the IRS of the change, file Form 8822-B before March 1, 2014, reporting only the most recent change. Taxes free online For a definition of “responsible party,” see the Form 8822-B instructions. Taxes free online Same-sex marriage. Taxes free online  For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. Taxes free online For more information, see Revenue Ruling 2013-17, 2013-38 I. Taxes free online R. Taxes free online B. Taxes free online 201, available at www. Taxes free online irs. Taxes free online gov/irb/2013-38_IRB/ar07. Taxes free online html. Taxes free online Notice 2013-61 provides special administrative procedures for employers to make claims for refunds or adjustments of overpayments of social security and Medicare taxes with respect to certain same-sex spouse benefits before expiration of the period of limitations. Taxes free online Notice 2013-61, 2013-44 I. Taxes free online R. Taxes free online B. Taxes free online 432, is available at www. Taxes free online irs. Taxes free online gov/irb/2013-44_IRB/ar10. Taxes free online html. Taxes free online Reminders Additional Medicare Tax withholding. Taxes free online  In addition to withholding Medicare tax at 1. Taxes free online 45%, you must withhold a 0. Taxes free online 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Taxes free online You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Taxes free online Additional Medicare Tax is only imposed on the employee. Taxes free online There is no employer share of Additional Medicare Tax. Taxes free online All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. Taxes free online For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments , in section 15. Taxes free online For more information on Additional Medicare Tax, visit IRS. Taxes free online gov and enter “Additional Medicare Tax” in the search box. Taxes free online Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans. Taxes free online  The work opportunity tax credit is available for eligible unemployed veterans who began work on or after November 22, 2011, and before January 1, 2014. Taxes free online Qualified tax-exempt organizations that hire eligible unemployed veterans can claim the work opportunity tax credit against their payroll tax liability using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. Taxes free online For more information, visit IRS. Taxes free online gov and enter “work opportunity tax credit” in the search box. Taxes free online Outsourcing payroll duties. Taxes free online  Employers are responsible to ensure that tax returns are filed and deposits and payments are made, even if the employer contracts with a third party to perform these acts. Taxes free online The employer remains responsible if the third party fails to perform any required action. Taxes free online If you choose to outsource any of your payroll and related tax duties (that is, withholding, reporting, and paying over social security, Medicare, FUTA, and income taxes) to a third-party payer such as a payroll service provider or reporting agent, visit IRS. Taxes free online gov and enter “outsourcing payroll duties” in the search box for helpful information on this topic. Taxes free online COBRA premium assistance credit. Taxes free online  The credit for COBRA premium assistance payments applies to premiums paid for employees involuntarily terminated between September 1, 2008, and May 31, 2010, and to premiums paid for up to 15 months. Taxes free online See COBRA premium assistance credit under Introduction. Taxes free online Federal tax deposits must be made by electronic funds transfer. Taxes free online  You must use electronic funds transfer to make all federal tax deposits. Taxes free online Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). Taxes free online If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Taxes free online Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. Taxes free online EFTPS is a free service provided by the Department of Treasury. Taxes free online Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. Taxes free online For more information on making federal tax deposits, see How To Deposit in section 11. Taxes free online To get more information about EFTPS or to enroll in EFTPS, visit www. Taxes free online eftps. Taxes free online gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Taxes free online Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started. Taxes free online You must receive written notice from the IRS to file Form 944. Taxes free online  If you have been filing Forms 941, Employer's QUARTERLY Federal Tax Return (or Forms 941-SS, Employer's QUARTERLY Federal Tax Return—American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U. Taxes free online S. Taxes free online Virgin Islands, or Formularios 941-PR, Planilla para la Declaración Federal TRIMESTRAL del Patrono), and believe your employment taxes for the calendar year will be $1,000 or less, and you would like to file Form 944, Employer's ANNUAL Federal Tax Return, instead of Forms 941, you must contact the IRS to request to file Form 944. Taxes free online You must receive written notice from the IRS to file Form 944 instead of Forms 941 before you may file this form. Taxes free online For more information on requesting to file Form 944, visit IRS. Taxes free online gov and enter “file employment taxes annually” in the search box. Taxes free online Employers can request to file Forms 941 instead of Form 944. Taxes free online  If you received notice from the IRS and have been filing Form 944 but would like to file Forms 941 instead, you must contact the IRS to request to file Forms 941. Taxes free online You must receive written notice from the IRS to file Forms 941 instead of Form 944 before you may file these forms. Taxes free online For more information on requesting to file Form 944, visit IRS. Taxes free online gov and enter “file employment taxes annually” in the search box. Taxes free online Aggregate Form 941 filers. Taxes free online  Agents must complete Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, when filing an aggregate Form 941. Taxes free online Aggregate Forms 941 may only be filed by agents approved by the IRS under section 3504 of the Internal Revenue Code. Taxes free online To request approval to act as an agent for an employer, the agent files Form 2678, Employer/Payer Appointment of Agent, with the IRS. Taxes free online Aggregate Form 940 filers. Taxes free online  Agents must complete Schedule R (Form 940), Allocation Schedule for Aggregate Form 940 Filers, when filing an aggregate Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. Taxes free online Aggregate Forms 940 can be filed by agents acting on behalf of home care service recipients who receive home care services through a program administered by a federal, state, or local government. Taxes free online To request approval to act as an agent on behalf of home care service recipients, the agent files Form 2678 with the IRS. Taxes free online Electronic Filing and Payment  Now, more than ever before, businesses can enjoy the benefits of filing and paying their federal taxes electronically. Taxes free online Whether you rely on a tax professional or handle your own taxes, the IRS offers you convenient programs to make filing and payment easier. Taxes free online Spend less time and worry about taxes and more time running your business. Taxes free online Use e-file and the Electronic Federal Tax Payment System (EFTPS) to your benefit. Taxes free online For e-file, visit www. Taxes free online irs. Taxes free online gov/efile for additional information. Taxes free online For EFTPS, visit www. Taxes free online eftps. Taxes free online gov or call EFTPS Customer Service at 1-800-555-4477 or 1-800-733-4829 (TDD). Taxes free online For electronic filing of Forms W-2, Wage and Tax Statement, visit www. Taxes free online socialsecurity. Taxes free online gov/employer. Taxes free online If you are filing your tax return or paying your federal taxes electronically, a valid EIN is required. Taxes free online If a valid EIN is not provided, the return or payment will not be processed. Taxes free online This may result in penalties and delays in processing your return or payment. Taxes free online Electronic funds withdrawal (EFW). Taxes free online  If you file Form 940, Form 941, Form 944, or Form 945 electronically, you can e-file and e-pay (electronic funds withdrawal) the balance due in a single step using tax preparation software or through a tax professional. Taxes free online However, do not use EFW to make federal tax deposits. Taxes free online For more information on paying your taxes using EFW, visit the IRS website at www. Taxes free online irs. Taxes free online gov/e-pay. Taxes free online A fee may be charged to file electronically. Taxes free online Credit or debit card payments. Taxes free online  For information on paying your taxes with a credit or debit card, visit the IRS website at www. Taxes free online irs. Taxes free online gov/e-pay. Taxes free online However, do not use credit or debit cards to make federal tax deposits. Taxes free online Forms in Spanish You can provide Formulario W-4(SP), Certificado de Exención de Retenciones del Empleado, in place of Form W-4, Employee's Withholding Allowance Certificate, to your Spanish-speaking employees. Taxes free online For more information, see Publicación 17(SP), El Impuesto Federal sobre los Ingresos (Para Personas Físicas). Taxes free online For nonemployees, Formulario W-9(SP), Solicitud y Certificación del Número de Identificación del Contribuyente, may be used in place of Form W-9, Request for Taxpayer Identification Number and Certification. Taxes free online Hiring New Employees Eligibility for employment. Taxes free online  You must verify that each new employee is legally eligible to work in the United States. Taxes free online This includes completing the U. Taxes free online S. Taxes free online Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. Taxes free online You can get the form from USCIS offices or by calling 1-800-870-3676. Taxes free online Contact the USCIS at 1-800-375-5283, or visit the USCIS website at www. Taxes free online uscis. Taxes free online gov for more information. Taxes free online New hire reporting. Taxes free online  You are required to report any new employee to a designated state new hire registry. Taxes free online A new employee is an employee who has not previously been employed by you or was previously employed by you but has been separated from such prior employment for at least 60 consecutive days. Taxes free online Many states accept a copy of Form W-4 with employer information added. Taxes free online Visit the Office of Child Support Enforcement website at www. Taxes free online acf. Taxes free online hhs. Taxes free online gov/programs/cse/newhire for more information. Taxes free online W-4 request. Taxes free online  Ask each new employee to complete the 2014 Form W-4. Taxes free online See section 9. Taxes free online Name and social security number. Taxes free online  Record each new employee's name and number from his or her social security card. Taxes free online Any employee without a social security card should apply for one. Taxes free online See section 4. Taxes free online Paying Wages, Pensions, or Annuities Correcting Form 941 or Form 944. Taxes free online  If you discover an error on a previously filed Form 941 or Form 944, make the correction using Form 941-X, Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund, or Form 944-X, Adjusted Employer's ANNUAL Federal Tax Return or Claim for Refund. Taxes free online Forms 941-X and 944-X are stand-alone forms, meaning taxpayers can file them when an error is discovered. Taxes free online Forms 941-X and 944-X are used by employers to claim refunds or abatements of employment taxes, rather than Form 843, Claim for Refund and Request for Abatement. Taxes free online See section 13 for more information. Taxes free online Income tax withholding. Taxes free online  Withhold federal income tax from each wage payment or supplemental unemployment compensation plan benefit payment according to the employee's Form W-4 and the correct withholding table. Taxes free online If you have nonresident alien employees, see Withholding income taxes on the wages of nonresident alien employees in section 9. Taxes free online Withhold from periodic pension and annuity payments as if the recipient is married claiming three withholding allowances, unless he or she has provided Form W-4P, Withholding Certificate for Pension or Annuity Payments, either electing no withholding or giving a different number of allowances, marital status, or an additional amount to be withheld. Taxes free online Do not withhold on direct rollovers from qualified plans or governmental section 457(b) plans. Taxes free online See section 9 and Publication 15-A, Employer's Supplemental Tax Guide. Taxes free online Publication 15-A includes information about withholding on pensions and annuities. Taxes free online Zero wage return. Taxes free online  If you have not filed a “final” Form 941 or Form 944, or are not a “seasonal” employer, you must continue to file a Form 941 or Form 944 even for periods during which you paid no wages. Taxes free online The IRS encourages you to file your “Zero Wage” Forms 941 or 944 electronically using IRS e-file at www. Taxes free online irs. Taxes free online gov/efile. Taxes free online Employer Responsibilities Employer Responsibilities: The following list provides a brief summary of your basic responsibilities. Taxes free online Because the individual circumstances for each employer can vary greatly, responsibilities for withholding, depositing, and reporting employment taxes can differ. Taxes free online Each item in this list has a page reference to a more detailed discussion in this publication. Taxes free online   New Employees: Page     Annually (By January 31 of the current year, Page □ Verify work eligibility of new employees 3     for the prior year):   □ Record employees' names and SSNs from     □ File Form 944 if required (pay tax with return if     social security cards 4     not required to deposit) 29 □ Ask employees for Form W-4 3     Annually (see Calendar for due dates):     Each Payday:     □ Remind employees to submit a new Form W-4   □ Withhold federal income tax based on each       if they need to change their withholding 20   employee's Form W-4 20   □ Ask for a new Form W-4 from employees   □ Withhold employee's share of social security       claiming exemption from income tax     and Medicare taxes 23     withholding 20 □ Deposit:     □ Reconcile Forms 941 (or Form 944) with Forms     • Withheld income tax       W-2 and W-3 31   • Withheld and employer social security taxes     □ Furnish each employee a Form W-2 7   • Withheld and employer Medicare taxes 24   □ File Copy A of Forms W-2 and the transmittal     Note:Due date of deposit generally depends       Form W-3 with the SSA 8   on your deposit schedule (monthly or semiweekly)     □ Furnish each other payee a Form 1099 (for example, Form 1099-MISC, Miscellaneous Income) 7   Quarterly (By April 30, July 31, October 31, and January 31):     □ File Forms 1099 and the transmittal Form   □ Deposit FUTA tax if undeposited amount       1096 8   is over $500 35   □ File Form 940 7 □ File Form 941 (pay tax with return if not     □ File Form 945 for any nonpayroll income tax     required to deposit) 29     withholding 8 Information Returns You may be required to file information returns to report certain types of payments made during the year. Taxes free online For example, you must file Form 1099-MISC, Miscellaneous Income, to report payments of $600 or more to persons not treated as employees (for example, independent contractors) for services performed for your trade or business. Taxes free online For details about filing Forms 1099 and for information about required electronic filing, see the General Instructions for Certain Information Returns for general information and the separate, specific instructions for each information return you file (for example, Instructions for Form 1099-MISC). Taxes free online Generally, do not use Forms 1099 to report wages and other compensation you paid to employees; report these on Form W-2. Taxes free online See the General Instructions for Forms W-2 and W-3 for details about filing Form W-2 and for information about required electronic filing. Taxes free online If you file 250 or more Forms 1099, you must file them electronically. Taxes free online If you file 250 or more Forms W-2, you must file them electronically. Taxes free online SSA will not accept Forms W-2 and W-3 filed on magnetic media. Taxes free online Information reporting customer service site. Taxes free online  The IRS operates the Enterprise Computing Center—Martinsburg, a centralized customer service site, to answer questions about reporting on Forms W-2, W-3, 1099, and other information returns. Taxes free online If you have questions related to reporting on information returns, call 1-866-455-7438 (toll free), 304-263-8700 (toll call), or 304-267-3367 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). Taxes free online The center can also be reached by email at mccirp@irs. Taxes free online gov. Taxes free online Do not include tax identification numbers (TINs) or attachments in email correspondence because electronic mail is not secure. Taxes free online Nonpayroll Income Tax Withholding Nonpayroll federal income tax withholding (reported on Forms 1099 and Form W-2G) must be reported on Form 945, Annual Return of Withheld Federal Income Tax. Taxes free online Separate deposits are required for payroll (Form 941 or Form 944) and nonpayroll (Form 945) withholding. Taxes free online Nonpayroll items include: Pensions (including distributions from tax-favored retirement plans, for example, section 401(k), section 403(b), and governmental section 457(b) plans) and annuities. Taxes free online Military retirement. Taxes free online Gambling winnings. Taxes free online Indian gaming profits. Taxes free online Certain government payments, such as unemployment compensation, social security, and Tier 1 railroad retirement benefits, subject to voluntary withholding. Taxes free online Payments subject to backup withholding. Taxes free online For details on depositing and reporting nonpayroll income tax withholding, see the Instructions for Form 945. Taxes free online All income tax withholding reported on Form W-2 must be reported on Form 941, Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, Form 944, or Schedule H (Form 1040), Household Employment Taxes. Taxes free online Distributions from nonqualified pension plans and deferred compensation plans. Taxes free online  Because distributions to participants from some nonqualified pension plans and deferred compensation plans (including section 457(b) plans of tax-exempt organizations) are treated as wages and are reported on Form W-2, income tax withheld must be reported on Form 941 or Form 944, not on Form 945. Taxes free online However, distributions from such plans to a beneficiary or estate of a deceased employee are not wages and are reported on Forms 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Taxes free online ; income tax withheld must be reported on Form 945. Taxes free online Backup withholding. Taxes free online  You generally must withhold 28% of certain taxable payments if the payee fails to furnish you with his or her correct taxpayer identification number (TIN). Taxes free online This withholding is referred to as “backup withholding. Taxes free online ” Payments subject to backup withholding include interest, dividends, patronage dividends, rents, royalties, commissions, nonemployee compensation, and certain other payments you make in the course of your trade or business. Taxes free online In addition, transactions by brokers and barter exchanges and certain payments made by fishing boat operators are subject to backup withholding. Taxes free online Backup withholding does not apply to wages, pensions, annuities, IRAs (including simplified employee pension (SEP) and SIMPLE retirement plans), section 404(k) distributions from an employee stock ownership plan (ESOP), medical savings accounts, health savings accounts, long-term-care benefits, or real estate transactions. Taxes free online You can use Form W-9 or Formulario W-9(SP) to request payees to furnish a TIN and to certify the number furnished is correct. Taxes free online You can also use Form W-9 or Formulario W-9(SP) to get certifications from payees that they are not subject to backup withholding or that they are exempt from backup withholding. Taxes free online The Instructions for the Requester of Form W-9 or Formulario W-9(SP) includes a list of types of payees who are exempt from backup withholding. Taxes free online For more information, see Publication 1281, Backup Withholding for Missing and Incorrect Name/TIN(s). Taxes free online Recordkeeping Keep all records of employment taxes for at least 4 years. Taxes free online These should be available for IRS review. Taxes free online Your records should include the following information. Taxes free online Your EIN. Taxes free online Amounts and dates of all wage, annuity, and pension payments. Taxes free online Amounts of tips reported to you by your employees. Taxes free online Records of allocated tips. Taxes free online The fair market value of in-kind wages paid. Taxes free online Names, addresses, social security numbers, and occupations of employees and recipients. Taxes free online Any employee copies of Forms W-2 and W-2c returned to you as undeliverable. Taxes free online Dates of employment for each employee. Taxes free online Periods for which employees and recipients were paid while absent due to sickness or injury and the amount and weekly rate of payments you or third party payors made to them. Taxes free online Copies of employees' and recipients' income tax withholding allowance certificates (Forms W-4, W-4P, W-4(SP), W-4S, and W-4V). Taxes free online Copies of employees' Earned Income Credit Advance Payment Certificates (Forms W-5 and W-5(SP)). Taxes free online Dates and amounts of tax deposits you made and acknowledgment numbers for deposits made by EFTPS. Taxes free online Copies of returns filed and confirmation numbers. Taxes free online Records of fringe benefits and expense reimbursements provided to your employees, including substantiation. Taxes free online Change of Business Address or Responsible Party To notify the IRS of a change in business address or responsible party, file Form 8822-B. Taxes free online Do not mail Form 8822-B with your employment tax return. Taxes free online Private Delivery Services You can use certain private delivery services designated by the IRS to mail tax returns and payments. Taxes free online The list includes only the following: DHL Express (DHL): DHL Same Day Service. Taxes free online Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First. Taxes free online United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. Taxes free online M. Taxes free online , UPS Worldwide Express Plus, and UPS Worldwide Express. Taxes free online For the IRS mailing address to use if you are using a private delivery service, go to IRS. Taxes free online gov and enter “private delivery service” in the search box. Taxes free online Your private delivery service can tell you how to get written proof of the mailing date. Taxes free online   Private delivery services cannot deliver items to P. Taxes free online O. Taxes free online boxes. Taxes free online You must use the U. Taxes free online S. Taxes free online Postal Service to mail any item to an IRS P. Taxes free online O. Taxes free online box address. Taxes free online Telephone Help Tax questions. Taxes free online   You can call the IRS Business and Specialty Tax Line with your employment tax questions at 1-800-829-4933. Taxes free online Help for people with disabilities. Taxes free online  You may call 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability) with any tax question or to order forms and publications. Taxes free online You may also use this number for assistance with unresolved tax problems. Taxes free online Recorded tax information (TeleTax). Taxes free online  The IRS TeleTax service provides recorded tax information on topics that answer many individual and business federal tax questions. Taxes free online You can listen to up to three topics on each call you make. Taxes free online Touch-Tone service is available 24 hours a day, 7 days a week. Taxes free online TeleTax topics are also available on the IRS website at www. Taxes free online irs. Taxes free online gov/taxtopics. Taxes free online Most tax topics listed below are also available in Spanish. Taxes free online For a complete list of TeleTax topics in Spanish, visit the IRS website at www. Taxes free online irs. Taxes free online gov/Spanish/Índice-de-Temas-Tributarios-Año-2013. Taxes free online A list of employment tax topics is provided next. Taxes free online Select, by number, the topic you want to hear and call 1-800-829-4477. Taxes free online For the directory of all topics, select Topic 123. Taxes free online Teletax Topics Topic No. Taxes free online Subject 751 Social Security and Medicare Withholding Rates 752 Form W-2—Where, When, and How to File 753 Form W-4—Employee's Withholding Allowance Certificate 755 Employer Identification Number (EIN)—How to Apply 756 Employment Taxes for Household Employees 757 Form 941 and Form 944—Deposit Requirements 758 Form 941—Employer's QUARTERLY Federal Tax Return and Form 944—Employer's ANNUAL Federal Tax Return 759 Form 940—Employer's Annual Federal Unemployment (FUTA) Tax Return—Filing and Deposit Requirements 760 Reporting and Deposit Requirements for Agricultural Employers 761 Tips—Withholding and Reporting 762 Independent Contractor vs. Taxes free online Employee 763 The “Affordable Care Act” of 2010 Offers Employers New Tax Deductions and Credits Additional employment tax information. Taxes free online  Visit the IRS website at www. Taxes free online irs. Taxes free online gov/businesses and click on the Employment Taxes link under Businesses Topics. Taxes free online Ordering Employer Tax Forms and Publications You can order employer tax forms and publications and information returns online at www. Taxes free online irs. Taxes free online gov/businesses. Taxes free online To order 2013 and 2014 forms, click on the Online Ordering for Information Returns and Employer Returns link. Taxes free online You may also order employer tax forms and publications and information returns by calling 1-800-TAX-FORM (1-800-829-3676). Taxes free online Instead of ordering paper Forms W-2 and W-3, consider filing them electronically using the Social Security Administration's (SSA) free e-file service. Taxes free online Visit the SSA's Employer W-2 Filing Instructions & Information website at www. Taxes free online socialsecurity. Taxes free online gov/employer to register for Business Services Online. Taxes free online You will be able to create Forms W-2 online and submit them to the SSA by typing your wage information into easy-to-use fill-in fields. Taxes free online In addition, you can print out completed copies of Forms W-2 to file with state or local governments, distribute to your employees, and keep for your records. Taxes free online Form W-3 will be created for you based on your Forms W-2. Taxes free online Filing Addresses Generally, your filing address for Forms 940, 941, 943, 944, 945, and CT-1 depends on the location of your residence or principal place of business and whether or not you are including a payment with your return. Taxes free online There are separate filing addresses for these returns if you are a tax-exempt organization or government entity. Taxes free online See the separate instructions for Forms 940, 941, 943, 944, 945, or CT-1 for the filing addresses. Taxes free online Dishonored Payments Any form of payment that is dishonored and returned from a financial institution is subject to a penalty. Taxes free online The penalty is $25 or 2% of the payment, whichever is more. Taxes free online However, the penalty on dishonored payments of $24. Taxes free online 99 or less is an amount equal to the payment. Taxes free online For example, a dishonored payment of $18 is charged a penalty of $18. Taxes free online Photographs of Missing Children The IRS is a proud partner with the National Center for Missing and Exploited Children. Taxes free online Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Taxes free online You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Taxes free online Calendar The following is a list of important dates. Taxes free online Also see Publication 509, Tax Calendars. Taxes free online   If any date shown below for filing a return, furnishing a form, or depositing taxes falls on a Saturday, Sunday, or legal holiday, use the next business day. Taxes free online A statewide legal holiday delays a filing due date only if the IRS office where you are required to file is located in that state. Taxes free online However, a statewide legal holiday does not delay the due date of federal tax deposits. Taxes free online See Deposits on Business Days Only in section 11. Taxes free online For any filing due date, you will meet the “file” or “furnish” requirement if the envelope containing the return or form is properly addressed, contains sufficient postage, and is postmarked by the U. Taxes free online S. Taxes free online Postal Service on or before the due date, or sent by an IRS-designated private delivery service on or before the due date. Taxes free online See Private Delivery Services under Reminders for more information. Taxes free online Introduction This publication explains your tax responsibilities as an employer. Taxes free online It explains the requirements for withholding, depositing, reporting, paying, and correcting employment taxes. Taxes free online It explains the forms you must give to your employees, those your employees must give to you, and those you must send to the IRS and SSA. Taxes free online This guide also has tax tables you need to figure the taxes to withhold from each employee for 2014. Taxes free online References to “income tax” in this guide apply only to “federal” income tax. Taxes free online Contact your state or local tax department to determine if their rules are different. Taxes free online Additional employment tax information is available in Publication 15-A. Taxes free online Publication 15-A includes specialized information supplementing the basic employment tax information provided in this publication. Taxes free online Publication 15-B, Employer's Tax Guide to Fringe Benefits, contains information about the employment tax treatment and valuation of various types of noncash compensation. Taxes free online Most employers must withhold (except FUTA), deposit, report, and pay the following employment taxes. Taxes free online Income tax. Taxes free online Social security tax. Taxes free online Medicare tax. Taxes free online FUTA tax. Taxes free online There are exceptions to these requirements. Taxes free online See section 15 for guidance. Taxes free online Railroad retirement taxes are explained in the Instructions for Form CT-1. Taxes free online Comments and suggestions. Taxes free online   We welcome your comments about this publication and your suggestions for future editions. Taxes free online   You can write to us at the following address: Internal Revenue Service Tax Forms & Publications Division 1111 Constitution Ave. Taxes free online NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Taxes free online Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Taxes free online   You can also send us comments from www. Taxes free online irs. Taxes free online gov/formspubs. Taxes free online Click on More Information and then click on Comment on Tax Forms and Publications. Taxes free online   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax forms, instructions, and publications. Taxes free online Federal Government employers. Taxes free online   The information in this publication, including the rules for making federal tax deposits, applies to federal agencies. Taxes free online State and local government employers. Taxes free online   Payments to employees for services in the employ of state and local government employers are generally subject to federal income tax withholding but not FUTA tax. Taxes free online Most elected and appointed public officials of state or local governments are employees under common law rules. Taxes free online See chapter 3 of Publication 963, Federal-State Reference Guide. Taxes free online In addition, wages, with certain exceptions, are subject to social security and Medicare taxes. Taxes free online See section 15 for more information on the exceptions. Taxes free online   If an election worker is employed in another capacity with the same government entity, see Revenue Ruling 2000-6 on page 512 of Internal Revenue Bulletin 2000-6 at www. Taxes free online irs. Taxes free online gov/pub/irs-irbs/irb00-06. Taxes free online pdf. Taxes free online   You can get information on reporting and social security coverage from your local IRS office. Taxes free online If you have any questions about coverage under a section 218 (Social Security Act) agreement, contact the appropriate state official. Taxes free online To find your State Social Security Administrator, visit the National Conference of State Social Security Administrators website at www. Taxes free online ncsssa. Taxes free online org. Taxes free online Disregarded entities and qualified subchapter S subsidiaries (QSubs). Taxes free online   Eligible single-owner disregarded entities and QSubs are treated as separate entities for employment tax purposes. Taxes free online Eligible single-member entities that have not elected to be taxed as corporations must report and pay employment taxes on wages paid to their employees using the entities' own names and EINs. Taxes free online See Regulations sections 1. Taxes free online 1361-4(a)(7) and 301. Taxes free online 7701-2(c)(2)(iv). Taxes free online COBRA premium assistance credit. Taxes free online   The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. Taxes free online COBRA generally covers multiemployer health plans and health plans maintained by private-sector employers (other than churches) with 20 or more full and part-time employees. Taxes free online Parallel requirements apply to these plans under the Employee Retirement Income Security Act of 1974 (ERISA). Taxes free online Under the Public Health Service Act, COBRA requirements apply also to health plans covering state or local government employees. Taxes free online Similar requirements apply under the Federal Employees Health Benefits Program and under some state laws. Taxes free online For the premium assistance (or subsidy) discussed below, these requirements are all referred to as COBRA requirements. Taxes free online   Under the American Recovery and Reinvestment Act of 2009 (ARRA), employers are allowed a credit against “payroll taxes” (referred to in this publication as “employment taxes”) for providing COBRA premium assistance to assistance eligible individuals. Taxes free online For periods of COBRA continuation coverage beginning after February 16, 2009, a group health plan must treat an assistance eligible individual as having paid the required COBRA continuation coverage premium if the individual elects COBRA coverage and pays 35% of the amount of the premium. Taxes free online   An assistance eligible individual is a qualified beneficiary of an employer's group health plan who is eligible for COBRA continuation coverage during the period beginning September 1, 2008, and ending May 31, 2010, due to the involuntarily termination from employment of a covered employee during the period and elects continuation COBRA coverage. Taxes free online The assistance for the coverage can last up to 15 months. Taxes free online   Employees terminated during the period beginning September 1, 2008, and ending May 31, 2010, who received a severance package that delayed the start of the COBRA continuation coverage, may still be eligible for premium assistance for COBRA continuation coverage. Taxes free online For more information see Notice 2009-27, 2009-16 I. Taxes free online R. Taxes free online B. Taxes free online 838, available at www. Taxes free online irs. Taxes free online gov/irb/2009-16_irb/ar09. Taxes free online html. Taxes free online   Administrators of the group health plans (or other entities) that provide or administer COBRA continuation coverage must provide notice to assistance eligible individuals of the COBRA premium assistance. Taxes free online   The 65% of the premium not paid by the assistance eligible individuals is reimbursed to the employer maintaining the group health plan. Taxes free online The reimbursement is made through a credit against the employer's employment tax liabilities. Taxes free online For information on how to claim the credit, see the Instructions for Form 941 or the Instructions for Form 944. Taxes free online The credit is treated as a deposit made on the first day of the return period (quarter or year). Taxes free online In the case of a multiemployer plan, the credit is claimed by the plan, rather than the employer. Taxes free online In the case of an insured plan subject to state law continuation coverage requirements, the credit is claimed by the insurance company, rather than the employer. Taxes free online   Anyone claiming the credit for COBRA premium assistance payments must maintain the following information to support their claim, including the following. Taxes free online Information on the receipt of the assistance eligible individuals' 35% share of the premium, including dates and amounts. Taxes free online In the case of an insurance plan, a copy of invoice or other supporting statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier required under COBRA. Taxes free online In the case of a self-insured plan, proof of the premium amount and proof of the coverage provided to the assistance eligible individuals. Taxes free online Attestation of involuntary termination, including the date of the involuntary termination for each covered employee whose involuntary termination is the basis for eligibility for the subsidy. Taxes free online Proof of each assistance eligible individual's eligibility for COBRA coverage and the election of COBRA coverage. Taxes free online A record of the SSNs of all covered employees, the amount of the subsidy reimbursed with respect to each covered employee, and whether the subsidy was for one individual or two or more individuals. Taxes free online   For more information, visit IRS. Taxes free online gov and enter “COBRA” in the search box. Taxes free online Prev  Up  Next   Home   More Online Publications