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

TurboTax Federal Free Edition - File Taxes Online

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

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


© 2012 - 2018 All rights reserved.

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

Taxes Hrblock

Www Irs Gov FreefileTaxact 2011 ReturnIrs Gov Free File Federal And State Taxes1040 Ez IrsI Need To File My 2012 Taxes For FreeE File State Income Tax2010 1040 Tax Forms1040ez Instructions1099 FormCan I File 2012 Taxes In 2014State Tax File FreeState Tax Filing FreeFree Irs State Tax FormsHow To Fill Out A 1040x Step By StepH&r Block LoginAarp Tax Aide LocationsFiling An Amended Return For 2012Free File 2012 Taxes OnlineHow Can I File My 2010 TaxesFree 1040ez InstructionsWhere Can I Get A State Tax FormAmmended Tax ReturnsFiling 1040x OnlineIrs 1040xH&r Block Free FileFree State Filing OnlyFile Extension For FreeFederal Tax Return 2012E File Tax ReturnTax Cut 2011 SoftwareFiling Income Tax ReturnHow To File Just State Taxes2011 Form 1040Free Tax FilingHow Much Does It Cost To Amend A Tax ReturnEfile Taxes Free1040ez 2012File My State Taxes Online FreeTurbo Tax 2011Can I Still E File My 2011 Taxes

Taxes Hrblock

Taxes hrblock 6. Taxes hrblock   Basis of Assets Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Cost BasisReal Property Allocating the Basis Uniform Capitalization Rules Adjusted BasisIncreases to Basis Decreases to Basis Basis Other Than CostTaxable Exchanges Involuntary Conversions Nontaxable Exchanges Property Received as a Gift Property Transferred From a Spouse Inherited Property Property Distributed From a Partnership or Corporation Introduction Your basis is the amount of your investment in property for tax purposes. Taxes hrblock Use basis to figure the gain or loss on the sale, exchange, or other disposition of property. Taxes hrblock Also use basis to figure depreciation, amortization, depletion, and casualty losses. Taxes hrblock If you use property for both business or investment purposes and for personal purposes, you must allocate the basis based on the use. Taxes hrblock Only the basis allocated to the business or investment use of the property can be depreciated. Taxes hrblock Your original basis in property is adjusted (increased or decreased) by certain events. Taxes hrblock For example, if you make improvements to the property, increase your basis. Taxes hrblock If you take deductions for depreciation, or casualty losses, or claim certain credits, reduce your basis. Taxes hrblock Keep accurate records of all items that affect the basis of your assets. Taxes hrblock For information on keeping records, see chapter 1. Taxes hrblock Topics - This chapter discusses: Cost basis Adjusted basis Basis other than cost Useful Items - You may want to see: Publication 535 Business Expenses 544 Sales and Other Dispositions of Assets 551 Basis of Assets 946 How To Depreciate Property See chapter 16 for information about getting publications and forms. Taxes hrblock Cost Basis The basis of property you buy is usually its cost. Taxes hrblock Cost is the amount you pay in cash, debt obligations, other property, or services. Taxes hrblock Your cost includes amounts you pay for sales tax, freight, installation, and testing. Taxes hrblock The basis of real estate and business assets will include other items, discussed later. Taxes hrblock Basis generally does not include interest payments. Taxes hrblock However, see Carrying charges and Capitalized interest in chapter 4 of Publication 535. Taxes hrblock You also may have to capitalize (add to basis) certain other costs related to buying or producing property. Taxes hrblock Under the uniform capitalization rules, discussed later, you may have to capitalize direct costs and certain indirect costs of producing property. Taxes hrblock Loans with low or no interest. Taxes hrblock   If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price minus the amount considered to be unstated interest. Taxes hrblock You generally have unstated interest if your interest rate is less than the applicable federal rate. Taxes hrblock See the discussion of unstated interest in Publication 537, Installment Sales. Taxes hrblock Real Property Real property, also called real estate, is land and generally anything built on, growing on, or attached to land. Taxes hrblock If you buy real property, certain fees and other expenses you pay are part of your cost basis in the property. Taxes hrblock Some of these expenses are discussed next. Taxes hrblock Lump sum purchase. Taxes hrblock   If you buy improvements, such as buildings, and the land on which they stand for a lump sum, allocate your cost basis between the land and improvements. Taxes hrblock Allocate the cost basis according to the respective fair market values (FMVs) of the land and improvements at the time of purchase. Taxes hrblock Figure the basis of each asset by multiplying the lump sum by a fraction. Taxes hrblock The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. Taxes hrblock Fair market value (FMV). Taxes hrblock   FMV is the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. Taxes hrblock Sales of similar property on or about the same date may help in figuring the FMV of the property. Taxes hrblock If you are not certain of the FMV of the land and improvements, you can allocate the basis according to their assessed values for real estate tax purposes. Taxes hrblock Real estate taxes. Taxes hrblock   If you pay the real estate taxes the seller owed on real property you bought, and the seller did not reimburse you, treat those taxes as part of your basis. Taxes hrblock   If you reimburse the seller for taxes the seller paid for you, you generally can deduct that amount as a tax expense. Taxes hrblock Whether or not you reimburse the seller, do not include that amount in the basis of your property. Taxes hrblock Settlement costs. Taxes hrblock   Your basis includes the settlement fees and closing costs for buying the property. Taxes hrblock See Publication 551 for a detailed list of items you can and cannot include in basis. Taxes hrblock   Do not include fees and costs for getting a loan on the property. Taxes hrblock Also, do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Taxes hrblock Points. Taxes hrblock   If you pay points to get a loan (including a mortgage, second mortgage, or line-of-credit), do not add the points to the basis of the related property. Taxes hrblock You may be able to deduct the points currently or over the term of the loan. Taxes hrblock For more information about deducting points, see Points in chapter 4 of Publication 535. Taxes hrblock Assumption of a mortgage. Taxes hrblock   If you buy property and assume (or buy the property subject to) an existing mortgage, your basis includes the amount you pay for the property plus the amount you owe on the mortgage. Taxes hrblock Example. Taxes hrblock If you buy a farm for $100,000 cash and assume a mortgage of $400,000, your basis is $500,000. Taxes hrblock Constructing assets. Taxes hrblock   If you build property or have assets built for you, your expenses for this construction are part of your basis. Taxes hrblock Some of these expenses include the following costs: Land, Labor and materials, Architect's fees, Building permit charges, Payments to contractors, Payments for rental equipment, and Inspection fees. Taxes hrblock   In addition, if you use your own employees, farm materials, and equipment to build an asset, do not deduct the following expenses. Taxes hrblock You must capitalize them (include them in the asset's basis). Taxes hrblock Employee wages paid for the construction work, reduced by any employment credits allowed. Taxes hrblock Depreciation on equipment you own while it is used in the construction. Taxes hrblock Operating and maintenance costs for equipment used in the construction. Taxes hrblock The cost of business supplies and materials used in the construction. Taxes hrblock    Do not include the value of your own labor, or any other labor you did not pay for, in the basis of any property you construct. Taxes hrblock Allocating the Basis In some instances, the rules for determining basis apply to a group of assets acquired in the same transaction or to property that consists of separate items. Taxes hrblock To determine the basis of these assets or separate items, there must be an allocation of basis. Taxes hrblock Group of assets acquired. Taxes hrblock   If you buy multiple assets for a lump sum, allocate the amount you pay among the assets. Taxes hrblock Use this allocation to figure your basis for depreciation and gain or loss on a later disposition of any of these assets. Taxes hrblock You and the seller may agree in the sales contract to a specific allocation of the purchase price among the assets. Taxes hrblock If this allocation is based on the value of each asset and you and the seller have adverse tax interests, the allocation generally will be accepted. Taxes hrblock Farming business acquired. Taxes hrblock   If you buy a group of assets that makes up a farming business, there are special rules you must use to allocate the purchase price among the assets. Taxes hrblock Generally, reduce the purchase price by any cash received. Taxes hrblock Allocate the remaining purchase price to the other business assets received in proportion to (but not more than) their FMV and in a certain order. Taxes hrblock See Trade or Business Acquired under Allocating the Basis in Publication 551 for more information. Taxes hrblock Transplanted embryo. Taxes hrblock   If you buy a cow that is pregnant with a transplanted embryo, allocate to the basis of the cow the part of the purchase price equal to the FMV of the cow without the implant. Taxes hrblock Allocate the rest of the purchase price to the basis of the calf. Taxes hrblock Neither the cost allocated to the cow nor the cost allocated to the calf is deductible as a current business expense. Taxes hrblock Uniform Capitalization Rules Under the uniform capitalization rules, you must include certain direct and indirect costs in the basis of property you produce or in your inventory costs, rather than claim them as a current deduction. Taxes hrblock You recover these costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Taxes hrblock Generally, you are subject to the uniform capitalization rules if you do any of the following: Produce real or tangible personal property, or Acquire property for resale. Taxes hrblock However, this rule does not apply to personal property if your average annual gross receipts for the 3-tax-year period ending with the year preceding the current tax year are $10 million or less. Taxes hrblock You produce property if you construct, build, install, manufacture, develop, improve, or create the property. Taxes hrblock You are not subject to the uniform capitalization rules if the property is produced for personal use. Taxes hrblock In a farming business, you produce property if you raise or grow any agricultural or horticultural commodity, including plants and animals. Taxes hrblock Plants. Taxes hrblock   A plant produced in a farming business includes the following items: A fruit, nut, or other crop-bearing tree; An ornamental tree; A vine; A bush; Sod; and The crop or yield of a plant that will have more than one crop or yield. Taxes hrblock Animals. Taxes hrblock   An animal produced in a farming business includes any stock, poultry or other bird, and fish or other sea life. Taxes hrblock The direct and indirect costs of producing plants or animals include preparatory costs and preproductive period costs. Taxes hrblock Preparatory costs include the acquisition costs of the seed, seedling, plant, or animal. Taxes hrblock For plants, preproductive period costs include the costs of items such as irrigation, pruning, frost protection, spraying, and harvesting. Taxes hrblock For animals, preproductive period costs include the costs of items such as feed, maintaining pasture or pen areas, breeding, veterinary services, and bedding. Taxes hrblock Exceptions. Taxes hrblock   In a farming business, the uniform capitalization rules do not apply to: Any animal, Any plant with a preproductive period of 2 years or less, or Any costs of replanting certain plants lost or damaged due to casualty. Taxes hrblock   Exceptions (1) and (2) do not apply to a corporation, partnership, or tax shelter required to use an accrual method of accounting. Taxes hrblock See Accrual Method Required under Accounting Methods in chapter 2. Taxes hrblock   In addition, you can elect not to use the uniform capitalization rules for plants with a preproductive period of more than 2 years. Taxes hrblock If you make this election, special rules apply. Taxes hrblock This election cannot be made by a corporation, partnership, or tax shelter required to use an accrual method of accounting. Taxes hrblock This election also does not apply to any costs incurred for the planting, cultivation, maintenance, or development of any citrus or almond grove (or any part thereof) within the first 4 years the trees were planted. Taxes hrblock    If you elect not to use the uniform capitalization rules, you must use the alternative depreciation system for all property used in any of your farming businesses and placed in service in any tax year during which the election is in effect. Taxes hrblock See chapter 7, for additional information on depreciation. Taxes hrblock Example. Taxes hrblock You grow trees that have a preproductive period of more than 2 years. Taxes hrblock The trees produce an annual crop. Taxes hrblock You are an individual and the uniform capitalization rules apply to your farming business. Taxes hrblock You must capitalize the direct costs and an allocable part of indirect costs incurred due to the production of the trees. Taxes hrblock You are not required to capitalize the costs of producing the annual crop because its preproductive period is 2 years or less. Taxes hrblock Preproductive period of more than 2 years. Taxes hrblock   The preproductive period of plants grown in commercial quantities in the United States is based on their nationwide weighted average preproductive period. Taxes hrblock Plants producing the crops or yields shown in Table 6-1 have a nationwide weighted average preproductive period of more than 2 years. Taxes hrblock Other plants (not shown in Table 6-1) may also have a nationwide weighted average preproductive period of more than 2 years. Taxes hrblock More information. Taxes hrblock   For more information on the uniform capitalization rules that apply to property produced in a farming business, see Regulations section 1. Taxes hrblock 263A-4. Taxes hrblock Table 6-1. Taxes hrblock Plants With a Preproductive Period of More Than 2 Years Plants producing the following crops or yields have a nationwide weighted average preproductive period of more than 2 years. Taxes hrblock Almonds Apples Apricots Avocados Blueberries Cherries Chestnuts Coffee beans Currants Dates Figs Grapefruit Grapes Guavas Kiwifruit Kumquats Lemons Limes Macadamia nuts Mangoes Nectarines Olives Oranges Peaches Pears Pecans Persimmons Pistachio nuts Plums Pomegranates Prunes Tangelos Tangerines Tangors Walnuts Adjusted Basis Before figuring gain or loss on a sale, exchange, or other disposition of property or figuring allowable depreciation, depletion, or amortization, you must usually make certain adjustments to the cost basis or basis other than cost (discussed later) of the property. Taxes hrblock The adjustments to the original basis are increases or decreases to the cost basis or other basis which result in the adjusted basis of the property. Taxes hrblock Increases to Basis Increase the basis of any property by all items properly added to a capital account. Taxes hrblock These include the cost of any improvements having a useful life of more than 1 year. Taxes hrblock The following costs increase the basis of property. Taxes hrblock The cost of extending utility service lines to property. Taxes hrblock Legal fees, such as the cost of defending and perfecting title. Taxes hrblock Legal fees for seeking a decrease in an assessment levied against property to pay for local improvements. Taxes hrblock Assessments for items such as paving roads and building ditches that increase the value of the property assessed. Taxes hrblock Do not deduct these expenses as taxes. Taxes hrblock However, you can deduct as taxes amounts assessed for maintenance or repairs, or for meeting interest charges related to the improvements. Taxes hrblock If you make additions or improvements to business property, depreciate the basis of each addition or improvement as separate depreciable property using the rules that would apply to the original property if you had placed it in service at the same time you placed the addition or improvement in service. Taxes hrblock See chapter 7. Taxes hrblock Deducting vs. Taxes hrblock capitalizing costs. Taxes hrblock   Do not add to your basis costs you can deduct as current expenses. Taxes hrblock For example, amounts paid for incidental repairs or maintenance are deductible as business expenses and are not added to basis. Taxes hrblock However, you can elect either to deduct or to capitalize certain other costs. Taxes hrblock See chapter 7 in Publication 535. Taxes hrblock Decreases to Basis The following are some items that reduce the basis of property. Taxes hrblock Section 179 deduction. Taxes hrblock Deductions previously allowed or allowable for amortization, depreciation, and depletion. Taxes hrblock Alternative motor vehicle credit. Taxes hrblock See Form 8910. Taxes hrblock Alternative fuel vehicle refueling property credit. Taxes hrblock See Form 8911. Taxes hrblock Residential energy efficient property credits. Taxes hrblock See Form 5695. Taxes hrblock Investment credit (part or all) taken. Taxes hrblock Casualty and theft losses and insurance reimbursements. Taxes hrblock Payments you receive for granting an easement. Taxes hrblock Exclusion from income of subsidies for energy conservation measures. Taxes hrblock Certain canceled debt excluded from income. Taxes hrblock Rebates from a manufacturer or seller. Taxes hrblock Patronage dividends received from a cooperative association as a result of a purchase of property. Taxes hrblock See Patronage Dividends in chapter 3. Taxes hrblock Gas-guzzler tax. Taxes hrblock See Form 6197. Taxes hrblock Some of these items are discussed next. Taxes hrblock For a more detailed list of items that decrease basis, see section 1016 of the Internal Revenue Code and Publication 551. Taxes hrblock Depreciation and section 179 deduction. Taxes hrblock   The adjustments you must make to the basis of the property if you take the section 179 deduction or depreciate the property are explained next. Taxes hrblock For more information on these deductions, see chapter 7. Taxes hrblock Section 179 deduction. Taxes hrblock   If you take the section 179 expense deduction for all or part of the cost of qualifying business property, decrease the basis of the property by the deduction. Taxes hrblock Depreciation. Taxes hrblock   Decrease the basis of property by the depreciation you deducted or could have deducted on your tax returns under the method of depreciation you chose. Taxes hrblock If you took less depreciation than you could have under the method chosen, decrease the basis by the amount you could have taken under that method. Taxes hrblock If you did not take a depreciation deduction, reduce the basis by the full amount of the depreciation you could have taken. Taxes hrblock   If you deducted more depreciation than you should have, decrease your basis by the amount you should have deducted plus the part of the excess depreciation you deducted that actually reduced your tax liability for any year. Taxes hrblock   See chapter 7 for information on figuring the depreciation you should have claimed. Taxes hrblock   In decreasing your basis for depreciation, take into account the amount deducted on your tax returns as depreciation and any depreciation you must capitalize under the uniform capitalization rules. Taxes hrblock Casualty and theft losses. Taxes hrblock   If you have a casualty or theft loss, decrease the basis of the property by any insurance or other reimbursement. Taxes hrblock Also, decrease it by any deductible loss not covered by insurance. Taxes hrblock See chapter 11 for information about figuring your casualty or theft loss. Taxes hrblock   You must increase your basis in the property by the amount you spend on clean-up costs (such as debris removal) and repairs that restore the property to its pre-casualty condition. Taxes hrblock To make this determination, compare the repaired property to the property before the casualty. Taxes hrblock Easements. Taxes hrblock   The amount you receive for granting an easement is usually considered to be proceeds from the sale of an interest in the real property. Taxes hrblock It reduces the basis of the affected part of the property. Taxes hrblock If the amount received is more than the basis of the part of the property affected by the easement, reduce your basis in that part to zero and treat the excess as a recognized gain. Taxes hrblock See Easements and rights-of-way in chapter 3. Taxes hrblock Exclusion from income of subsidies for energy conservation measures. Taxes hrblock   You can exclude from gross income any subsidy you received from a public utility company for the purchase or installation of an energy conservation measure for a dwelling unit. Taxes hrblock Reduce the basis of the property by the excluded amount. Taxes hrblock Canceled debt excluded from income. Taxes hrblock   If a debt you owe is canceled or forgiven, other than as a gift or bequest, you generally must include the canceled amount in your gross income for tax purposes. Taxes hrblock A debt includes any indebtedness for which you are liable or which attaches to property you hold. Taxes hrblock   You can exclude your canceled debt from income if the debt is any of the following. Taxes hrblock Debt canceled in a bankruptcy case or when you are insolvent. Taxes hrblock Qualified farm debt. Taxes hrblock Qualified real property business debt (provided you are not a C corporation). Taxes hrblock Qualified principal residence indebtedness. Taxes hrblock Discharge of certain indebtedness of a qualified individual because of Midwestern disasters. Taxes hrblock If you exclude canceled debt described in (1) or (2), you may have to reduce the basis of your depreciable and nondepreciable property. Taxes hrblock If you exclude canceled debt described in (3), you must only reduce the basis of your depreciable property by the excluded amount. Taxes hrblock   For more information about canceled debt in a bankruptcy case, see Publication 908, Bankruptcy Tax Guide. Taxes hrblock For more information about insolvency and canceled debt that is qualified farm debt or qualified principal residence indebtedness, see chapter 3. Taxes hrblock For more information about qualified real property business debt, see Publication 334, Tax Guide for Small Business. Taxes hrblock For more information about canceled debt in Midwestern disaster areas, see Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas. Taxes hrblock Basis Other Than Cost There are times when you cannot use cost as basis. Taxes hrblock In these situations, the fair market value or the adjusted basis of property may be used. Taxes hrblock Examples are discussed next. Taxes hrblock Property changed from personal to business or rental use. Taxes hrblock   When you hold property for personal use and then change it to business use or use it to produce rent, you must figure its basis for depreciation. Taxes hrblock An example of changing property from personal to business use would be changing the use of your pickup truck that you originally purchased for your personal use to use in your farming business. Taxes hrblock   The basis for depreciation is the lesser of: The FMV of the property on the date of the change, or Your adjusted basis on the date of the change. Taxes hrblock   If you later sell or dispose of this property, the basis you use will depend on whether you are figuring a gain or loss. Taxes hrblock The basis for figuring a gain is your adjusted basis in the property when you sell the property. Taxes hrblock Figure the basis for a loss starting with the smaller of your adjusted basis or the FMV of the property at the time of the change to business or rental use. Taxes hrblock Then make adjustments (increases and decreases) for the period after the change in the property's use, as discussed earlier under Adjusted Basis . Taxes hrblock Property received for services. Taxes hrblock   If you receive property for services, include the property's FMV in income. Taxes hrblock The amount you include in income becomes your basis. Taxes hrblock If the services were performed for a price agreed on beforehand, it will be accepted as the FMV of the property if there is no evidence to the contrary. Taxes hrblock Example. Taxes hrblock George Smith is an accountant and also operates a farming business. Taxes hrblock George agreed to do some accounting work for his neighbor in exchange for a dairy cow. Taxes hrblock The accounting work and the cow are each worth $1,500. Taxes hrblock George must include $1,500 in income for his accounting services. Taxes hrblock George's basis in the cow is $1,500. Taxes hrblock Taxable Exchanges A taxable exchange is one in which the gain is taxable, or the loss is deductible. Taxes hrblock A taxable gain or deductible loss also is known as a recognized gain or loss. Taxes hrblock A taxable exchange occurs when you receive cash or get property that is not similar or related in use to the property exchanged. Taxes hrblock If you receive property in exchange for other property in a taxable exchange, the basis of the property you receive is usually its FMV at the time of the exchange. Taxes hrblock Example. Taxes hrblock You trade a tract of farmland with an adjusted basis of $2,000 for a tractor that has an FMV of $6,000. Taxes hrblock You must report a taxable gain of $4,000 for the land. Taxes hrblock The tractor has a basis of $6,000. Taxes hrblock Involuntary Conversions If you receive property as a result of an involuntary conversion, such as a casualty, theft, or condemnation, figure the basis of the replacement property you receive using the basis of the converted property. Taxes hrblock Similar or related property. Taxes hrblock   If the replacement property is similar or related in service or use to the converted property, the replacement property's basis is the same as the old property's basis on the date of the conversion. Taxes hrblock However, make the following adjustments. Taxes hrblock Decrease the basis by the following amounts. Taxes hrblock Any loss you recognize on the involuntary conversion. Taxes hrblock Any money you receive that you do not spend on similar property. Taxes hrblock Increase the basis by the following amounts. Taxes hrblock Any gain you recognize on the involuntary conversion. Taxes hrblock Any cost of acquiring the replacement property. Taxes hrblock Money or property not similar or related. Taxes hrblock   If you receive money or property not similar or related in service or use to the converted property and you buy replacement property similar or related in service or use to the converted property, the basis of the replacement property is its cost decreased by the gain not recognized on the involuntary conversion. Taxes hrblock Allocating the basis. Taxes hrblock   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. Taxes hrblock Basis for depreciation. Taxes hrblock   Special rules apply in determining and depreciating the basis of MACRS property acquired in an involuntary conversion. Taxes hrblock For information, see Figuring the Deduction for Property Acquired in a Nontaxable Exchange under Figuring Depreciation Under MACRS in chapter 7. Taxes hrblock For more information about involuntary conversions, see chapter 11. Taxes hrblock Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. Taxes hrblock A nontaxable gain or loss also is known as an unrecognized gain or loss. Taxes hrblock If you receive property in a nontaxable exchange, its basis is usually the same as the basis of the property you transferred. Taxes hrblock Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. Taxes hrblock For an exchange to qualify as a like-kind exchange, you must hold for business or investment purposes both the property you transfer and the property you receive. Taxes hrblock There must also be an exchange of like-kind property. Taxes hrblock For more information, see Like-Kind Exchanges in  chapter 8. Taxes hrblock The basis of the property you receive generally is the same as the adjusted basis of the property you gave up. Taxes hrblock Example 1. Taxes hrblock You traded a truck you used in your farming business for a new smaller truck to use in farming. Taxes hrblock The adjusted basis of the old truck was $10,000. Taxes hrblock The FMV of the new truck is $30,000. Taxes hrblock Because this is a nontaxable exchange, you do not recognize any gain, and your basis in the new truck is $10,000, the same as the adjusted basis of the truck you traded. Taxes hrblock Example 2. Taxes hrblock You trade a field cultivator (adjusted basis of $8,000) for a planter (FMV of $9,000). Taxes hrblock You use both the field cultivator and the planter in your farming business. Taxes hrblock The basis of the planter you receive is $8,000, the same as the field cultivator traded Exchange expenses. Taxes hrblock   Exchange expenses generally are the closing costs that you pay. Taxes hrblock They include such items as brokerage commissions, attorney fees, and deed preparation fees. Taxes hrblock Add them to the basis of the like-kind property you receive. Taxes hrblock Property plus cash. Taxes hrblock   If you trade property in a like-kind exchange and also pay money, the basis of the property you receive is the adjusted basis of the property you gave up plus the money you paid. Taxes hrblock Example. Taxes hrblock You trade in a truck (adjusted basis of $3,000) for another truck (FMV of $7,500) and pay $4,000. Taxes hrblock Your basis in the new truck is $7,000 (the $3,000 adjusted basis of the old truck plus the $4,000 cash). Taxes hrblock Special rules for related persons. Taxes hrblock   If a like-kind exchange takes place directly or indirectly between related persons and either party disposes of the property within 2 years after the exchange, the exchange no longer qualifies for like-kind exchange treatment. Taxes hrblock Each person must report any gain or loss not recognized on the original exchange unless the loss is not deductible under the related party rules. Taxes hrblock Each person reports it on the tax return filed for the year in which the later disposition occurred. Taxes hrblock If this rule applies, the basis of the property received in the original exchange will be its FMV. Taxes hrblock For more information, see chapter 8. Taxes hrblock Exchange of business property. Taxes hrblock   Exchanging the property of one business for the property of another business generally is a multiple property exchange. Taxes hrblock For information on figuring basis, see Multiple Property Exchanges in chapter 1 of Publication 544. Taxes hrblock Basis for depreciation. Taxes hrblock   Special rules apply in determining and depreciating the basis of MACRS property acquired in a like-kind transaction. Taxes hrblock For information, see Figuring the Deduction for Property Acquired in a Nontaxable Exchange under Figuring Depreciation Under MACRS in chapter 7. Taxes hrblock Partially Nontaxable Exchanges A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like-kind property. Taxes hrblock The basis of the property you receive is the same as the adjusted basis of the property you gave up with the following adjustments. Taxes hrblock Decrease the basis by the following amounts. Taxes hrblock Any money you receive. Taxes hrblock Any loss you recognize on the exchange. Taxes hrblock Increase the basis by the following amounts. Taxes hrblock Any additional costs you incur. Taxes hrblock Any gain you recognize on the exchange. Taxes hrblock If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. Taxes hrblock Example 1. Taxes hrblock You trade farmland (basis of $100,000) for another tract of farmland (FMV of $110,000) and $30,000 cash. Taxes hrblock You realize a gain of $40,000. Taxes hrblock This is the FMV of the land received plus the cash minus the basis of the land you traded ($110,000 + $30,000 − $100,000). Taxes hrblock Include your gain in income (recognize gain) only to the extent of the cash received. Taxes hrblock Your basis in the land you received is figured as follows. Taxes hrblock Basis of land traded $100,000 Minus: Cash received (adjustment 1(a)) − 30,000   $70,000 Plus: Gain recognized (adjustment 2(b)) + 30,000 Basis of land received $100,000 Example 2. Taxes hrblock You trade a truck (adjusted basis of $22,750) for another truck (FMV of $20,000) and $10,000 cash. Taxes hrblock You realize a gain of $7,250. Taxes hrblock This is the FMV of the truck received plus the cash minus the adjusted basis of the truck you traded ($20,000 + $10,000 − $22,750). Taxes hrblock You include all the gain in your income (recognize gain) because the gain is less than the cash you received. Taxes hrblock Your basis in the truck you received is figured as follows. Taxes hrblock Adjusted basis of truck traded $22,750 Minus: Cash received (adjustment 1(a)) −10,000   $12,750 Plus: Gain recognized (adjustment 2(b)) + 7,250 Basis of truck received $20,000 Allocation of basis. Taxes hrblock   If you receive like-kind and unlike properties in the exchange, allocate the basis first to the unlike property, other than money, up to its FMV on the date of the exchange. Taxes hrblock The rest is the basis of the like-kind property. Taxes hrblock Example. Taxes hrblock You traded a tractor with an adjusted basis of $15,000 for another tractor that had an FMV of $12,500. Taxes hrblock You also received $1,000 cash and a truck that had an FMV of $3,000. Taxes hrblock The truck is unlike property. Taxes hrblock You realized a gain of $1,500. Taxes hrblock This is the FMV of the tractor received plus the FMV of the truck received plus the cash minus the adjusted basis of the tractor you traded ($12,500 + $3,000 + $1,000 − $15,000). Taxes hrblock You include in income (recognize) all $1,500 of the gain because it is less than the FMV of the unlike property plus the cash received. Taxes hrblock Your basis in the properties you received is figured as follows. Taxes hrblock Adjusted basis of old tractor $15,000 Minus: Cash received (adjustment 1(a)) − 1,000   $14,000 Plus: Gain recognized (adjustment 2(b)) + 1,500 Total basis of properties received $15,500 Allocate the total basis of $15,500 first to the unlike property—the truck ($3,000). Taxes hrblock This is the truck's FMV. Taxes hrblock The rest ($12,500) is the basis of the tractor. Taxes hrblock Sale and Purchase If you sell property and buy similar property in two mutually dependent transactions, you may have to treat the sale and purchase as a single nontaxable exchange. Taxes hrblock Example. Taxes hrblock You used a tractor on your farm for 3 years. Taxes hrblock Its adjusted basis is $22,000 and its FMV is $40,000. Taxes hrblock You are interested in a new tractor, which sells for $60,000. Taxes hrblock Ordinarily, you would trade your old tractor for the new one and pay the dealer $20,000. Taxes hrblock Your basis for depreciating the new tractor would then be $42,000 ($20,000 + $22,000, the adjusted basis of your old tractor). Taxes hrblock However, you want a higher basis for depreciating the new tractor, so you agree to pay the dealer $60,000 for the new tractor if he will pay you $40,000 for your old tractor. Taxes hrblock Because the two transactions are dependent on each other, you are treated as having exchanged your old tractor for the new one and paid $20,000 ($60,000 − $40,000). Taxes hrblock Your basis for depreciating the new tractor is $42,000, the same as if you traded the old tractor. Taxes hrblock Property Received as a Gift To figure the basis of property you receive as a gift, you must know its adjusted basis (defined earlier) to the donor just before it was given to you. Taxes hrblock You also must know its FMV at the time it was given to you and any gift tax paid on it. Taxes hrblock FMV equal to or greater than donor's adjusted basis. Taxes hrblock   If the FMV of the property is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis when you received the gift. Taxes hrblock Increase your basis by all or part of any gift tax paid, depending on the date of the gift. Taxes hrblock   Also, for figuring gain or loss from a sale or other disposition of the property, or for figuring depreciation, depletion, or amortization deductions on business property, you must increase or decrease your basis (the donor's adjusted basis) by any required adjustments to basis while you held the property. Taxes hrblock See Adjusted Basis , earlier. Taxes hrblock   If you received a gift during the tax year, increase your basis in the gift (the donor's adjusted basis) by the part of the gift tax paid on it due to the net increase in value of the gift. Taxes hrblock Figure the increase by multiplying the gift tax paid by the following fraction. Taxes hrblock Net increase in value of the gift Amount of the gift   The net increase in value of the gift is the FMV of the gift minus the donor's adjusted basis. Taxes hrblock The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Taxes hrblock Example. Taxes hrblock In 2013, you received a gift of property from your mother that had an FMV of $50,000. Taxes hrblock Her adjusted basis was $20,000. Taxes hrblock The amount of the gift for gift tax purposes was $36,000 ($50,000 minus the $14,000 annual exclusion). Taxes hrblock She paid a gift tax of $7,320. Taxes hrblock Your basis, $26,076, is figured as follows. Taxes hrblock Fair market value $50,000 Minus: Adjusted basis −20,000 Net increase in value $30,000 Gift tax paid $7,320 Multiplied by ($30,000 ÷ $36,000) × . Taxes hrblock 83 Gift tax due to net increase in value $6,076 Adjusted basis of property to your mother +20,000 Your basis in the property $26,076 Note. Taxes hrblock If you received a gift before 1977, your basis in the gift (the donor's adjusted basis) includes any gift tax paid on it. Taxes hrblock However, your basis cannot exceed the FMV of the gift when it was given to you. Taxes hrblock FMV less than donor's adjusted basis. Taxes hrblock   If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property. Taxes hrblock Your basis for figuring gain is the donor's adjusted basis plus or minus any required adjustments to basis while you held the property. Taxes hrblock Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustments to basis while you held the property. Taxes hrblock (See Adjusted Basis , earlier. Taxes hrblock )   If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and get a gain, you have neither gain nor loss on the sale or other disposition of the property. Taxes hrblock Example. Taxes hrblock You received farmland as a gift from your parents when they retired from farming. Taxes hrblock At the time of the gift, the land had an FMV of $80,000. Taxes hrblock Your parents' adjusted basis was $100,000. Taxes hrblock After you received the land, no events occurred that would increase or decrease your basis. Taxes hrblock If you sell the land for $120,000, you will have a $20,000 gain because you must use the donor's adjusted basis at the time of the gift ($100,000) as your basis to figure a gain. Taxes hrblock If you sell the land for $70,000, you will have a $10,000 loss because you must use the FMV at the time of the gift ($80,000) as your basis to figure a loss. Taxes hrblock If the sales price is between $80,000 and $100,000, you have neither gain nor loss. Taxes hrblock For instance, if the sales price was $90,000 and you tried to figure a gain using the donor's adjusted basis ($100,000), you would get a $10,000 loss. Taxes hrblock If you then tried to figure a loss using the FMV ($80,000), you would get a $10,000 gain. Taxes hrblock Business property. Taxes hrblock   If you hold the gift as business property, your basis for figuring any depreciation, depletion, or amortization deductions is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you hold the property. Taxes hrblock Property Transferred From a Spouse The basis of property transferred to you or transferred in trust for your benefit by your spouse is the same as your spouse's adjusted basis. Taxes hrblock The same rule applies to a transfer by your former spouse if the transfer is incident to divorce. Taxes hrblock However, for property transferred in trust, adjust your basis for any gain recognized by your spouse or former spouse if the liabilities assumed plus the liabilities to which the property is subject are more than the adjusted basis of the property transferred. Taxes hrblock The transferor must give you the records needed to determine the adjusted basis and holding period of the property as of the date of the transfer. Taxes hrblock For more information, see Property Settlements in Publication 504, Divorced or Separated Individuals. Taxes hrblock Inherited Property Your basis in property you inherited from a decedent, who died before January 1, 2010, or after December 31, 2010, is generally one of the following: The FMV of the property at the date of the decedent's death. Taxes hrblock If a federal estate return is filed, you can use its appraised value. Taxes hrblock The FMV on the alternate valuation date, if the personal representative for the estate elects to use alternate valuation. Taxes hrblock For information on the alternate valuation, see the Instructions for Form 706. Taxes hrblock The decedent's adjusted basis in land to the extent of the value that is excluded from the decedent's taxable estate as a qualified conservation easement. Taxes hrblock If a federal estate tax return does not have to be filed, your basis in the inherited property is its appraised value at the date of death for state inheritance or transmission taxes. Taxes hrblock Special-use valuation method. Taxes hrblock   Under certain conditions, when a person dies, the executor or personal representative of that person's estate may elect to value qualified real property at other than its FMV. Taxes hrblock If so, the executor or personal representative values the qualified real property based on its use as a farm or other closely held business. Taxes hrblock If the executor or personal representative elects this method of valuation for estate tax purposes, this value is the basis of the property for the qualified heirs. Taxes hrblock The qualified heirs should be able to get the necessary value from the executor or personal representative of the estate. Taxes hrblock   If you are a qualified heir who received special-use valuation property, increase your basis by any gain recognized by the estate or trust because of post-death appreciation. Taxes hrblock Post-death appreciation is the property's FMV on the date of distribution minus the property's FMV either on the date of the individual's death or on the alternate valuation date. Taxes hrblock Figure all FMVs without regard to the special-use valuation. Taxes hrblock   You may be liable for an additional estate tax if, within 10 years after the death of the decedent, you transfer the property or the property stops being used as a farm. Taxes hrblock This tax does not apply if you dispose of the property in a like-kind exchange or in an involuntary conversion in which all of the proceeds are reinvested in qualified replacement property. Taxes hrblock The tax also does not apply if you transfer the property to a member of your family and certain requirements are met. Taxes hrblock   You can elect to increase your basis in special-use valuation property if it becomes subject to the additional estate tax. Taxes hrblock To increase your basis, you must make an irrevocable election and pay interest on the additional estate tax figured from the date 9 months after the decedent's death until the date of payment of the additional estate tax. Taxes hrblock If you meet these requirements, increase your basis in the property to its FMV on the date of the decedent's death or the alternate valuation date. Taxes hrblock The increase in your basis is considered to have occurred immediately before the event that resulted in the additional estate tax. Taxes hrblock   You make the election by filing, with Form 706-A, United States Additional Estate Tax Return, a statement that: Contains your (and the estate's) name, address, and taxpayer identification number; Identifies the election as an election under section 1016(c) of the Internal Revenue Code; Specifies the property for which you are making the election; and Provides any additional information required by the Form 706-A instructions. Taxes hrblock   For more information, see Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, Form 706-A, and the related instructions. Taxes hrblock Property inherited from a decedent who died in 2010. Taxes hrblock   If you inherited property from a decedent who died in 2010, different rules may apply. Taxes hrblock See Publication 4895, Tax Treatment of Property Acquired From a Decendent Dying in 2010, for details. Taxes hrblock Property Distributed From a Partnership or Corporation The following rules apply to determine a partner's basis and a shareholder's basis in property distributed respectively from a partnership to the partner with respect to the partner's interest in the partnership and from a corporation to the shareholder with respect to the shareholder's ownership of stock in the corporation. Taxes hrblock Partner's basis. Taxes hrblock   Unless there is a complete liquidation of a partner's interest, the basis of property (other than money) distributed by a partnership to the partner is its adjusted basis to the partnership immediately before the distribution. Taxes hrblock However, the basis of the property to the partner cannot be more than the adjusted basis of his or her interest in the partnership reduced by any money received in the same transaction. Taxes hrblock For more information, see Partner's Basis for Distributed Property in Publication 541, Partnerships. Taxes hrblock Shareholder's basis. Taxes hrblock   The basis of property distributed by a corporation to a shareholder is its fair market value. Taxes hrblock For more information about corporate distributions, see Distributions to Shareholders in Publication 542, Corporations. Taxes hrblock Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Understanding Your CP108 Notice

You are receiving this notice because you made a payment of $XXXXX on XXXXX, and we can’t determine the correct form or tax year to apply it to.


What you need to do

  • If the payment was applied correctly, then there is nothing you need to do.  There is no need to contact the IRS in these situations.
  • If the payment was not applied correctly, contact the IRS and advise them where the payment should be applied.  Contact us at the toll-free number on the top right corner of your notice or write us at the address on the notice.
  • Correct the copy of your tax return that you kept for your records.

You may want to


Answers to Common Questions

Q. What do I say when I call the IRS?

A. Mention that you received a CP 108 notice and you need to review your account with a customer service representative. Be sure to have a copy of your notice and your tax return before you call.

Q. What should I do if I disagree with the changes you made?

A. If you disagree, contact us at the toll-free number listed on the top right corner of your notice.

Q. What if I need to make another correction to my account?

A. You'll need to file an amended tax return.

Q. What if I have tried to get answers and after contacting IRS several times have not been successful?

A. Call Taxpayer Advocate at 1-877-777-4778 or for TTY/TDD 1-800-829-4059.

 


Tips for next year

If you paid electronically, ensure that you enter a valid tax period end date.  Review Appendix A of the EFTPS Payment Instruction Booklet to determine the proper tax form code.

In addition, review the instructions for determining the correct tax period end date (e.g., for quarterly returns, Forms 720, Forms 941, etc., March 31, June 30, September 30, December 31). Enter as the MM in the YYMM format as:

Quarter Format
1st quarter March 31 31-03
2nd quarter June 30 30-06
3rd quarter September 30-09
4th quarter December 31-12

 

 

 

Page Last Reviewed or Updated: 10-Feb-2014

Printable samples of this notice (PDF)

 

 

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The Taxes Hrblock

Taxes hrblock 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 hrblock irs. Taxes hrblock gov/pub15. Taxes hrblock What's New Social security and Medicare tax for 2014. Taxes hrblock  The social security tax rate is 6. Taxes hrblock 2% each for the employee and employer, unchanged from 2013. Taxes hrblock The social security wage base limit is $117,000. Taxes hrblock The Medicare tax rate is 1. Taxes hrblock 45% each for the employee and employer, unchanged from 2013. Taxes hrblock There is no wage base limit for Medicare tax. Taxes hrblock 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 hrblock 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 hrblock 2014 withholdng tables. Taxes hrblock  This publication includes the 2014 Percentage Method Tables and Wage Bracket Tables for Income Tax Withholding. Taxes hrblock Withholding allowance. Taxes hrblock  The 2014 amount for one withholding allowance on an annual basis is $3,950. Taxes hrblock Voluntary withholding on dividends and other distributions by an Alaska Native Corporation (ANC). Taxes hrblock  A shareholder of an ANC may now request voluntary income tax withholding on dividends and other distributions paid by an ANC. Taxes hrblock A shareholder may request voluntary withholding by giving the ANC a completed Form W-4V, Voluntary Withholding Request. Taxes hrblock For more information see Notice 2013-77, 2013-50 I. Taxes hrblock R. Taxes hrblock B. Taxes hrblock 632, available at www. Taxes hrblock irs. Taxes hrblock gov/irb/2013-50_IRB/ar10. Taxes hrblock html. Taxes hrblock Change of responsible party. Taxes hrblock  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 hrblock Form 8822-B must be filed within 60 days of the change. Taxes hrblock 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 hrblock For a definition of “responsible party,” see the Form 8822-B instructions. Taxes hrblock Same-sex marriage. Taxes hrblock  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 hrblock For more information, see Revenue Ruling 2013-17, 2013-38 I. Taxes hrblock R. Taxes hrblock B. Taxes hrblock 201, available at www. Taxes hrblock irs. Taxes hrblock gov/irb/2013-38_IRB/ar07. Taxes hrblock html. Taxes hrblock 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 hrblock Notice 2013-61, 2013-44 I. Taxes hrblock R. Taxes hrblock B. Taxes hrblock 432, is available at www. Taxes hrblock irs. Taxes hrblock gov/irb/2013-44_IRB/ar10. Taxes hrblock html. Taxes hrblock Reminders Additional Medicare Tax withholding. Taxes hrblock  In addition to withholding Medicare tax at 1. Taxes hrblock 45%, you must withhold a 0. Taxes hrblock 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Taxes hrblock 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 hrblock Additional Medicare Tax is only imposed on the employee. Taxes hrblock There is no employer share of Additional Medicare Tax. Taxes hrblock 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 hrblock 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 hrblock For more information on Additional Medicare Tax, visit IRS. Taxes hrblock gov and enter “Additional Medicare Tax” in the search box. Taxes hrblock Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans. Taxes hrblock  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 hrblock 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 hrblock For more information, visit IRS. Taxes hrblock gov and enter “work opportunity tax credit” in the search box. Taxes hrblock Outsourcing payroll duties. Taxes hrblock  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 hrblock The employer remains responsible if the third party fails to perform any required action. Taxes hrblock 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 hrblock gov and enter “outsourcing payroll duties” in the search box for helpful information on this topic. Taxes hrblock COBRA premium assistance credit. Taxes hrblock  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 hrblock See COBRA premium assistance credit under Introduction. Taxes hrblock Federal tax deposits must be made by electronic funds transfer. Taxes hrblock  You must use electronic funds transfer to make all federal tax deposits. Taxes hrblock Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). Taxes hrblock 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 hrblock Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. Taxes hrblock EFTPS is a free service provided by the Department of Treasury. Taxes hrblock Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. Taxes hrblock For more information on making federal tax deposits, see How To Deposit in section 11. Taxes hrblock To get more information about EFTPS or to enroll in EFTPS, visit www. Taxes hrblock eftps. Taxes hrblock gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Taxes hrblock Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started. Taxes hrblock You must receive written notice from the IRS to file Form 944. Taxes hrblock  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 hrblock S. Taxes hrblock 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 hrblock You must receive written notice from the IRS to file Form 944 instead of Forms 941 before you may file this form. Taxes hrblock For more information on requesting to file Form 944, visit IRS. Taxes hrblock gov and enter “file employment taxes annually” in the search box. Taxes hrblock Employers can request to file Forms 941 instead of Form 944. Taxes hrblock  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 hrblock You must receive written notice from the IRS to file Forms 941 instead of Form 944 before you may file these forms. Taxes hrblock For more information on requesting to file Form 944, visit IRS. Taxes hrblock gov and enter “file employment taxes annually” in the search box. Taxes hrblock Aggregate Form 941 filers. Taxes hrblock  Agents must complete Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, when filing an aggregate Form 941. Taxes hrblock Aggregate Forms 941 may only be filed by agents approved by the IRS under section 3504 of the Internal Revenue Code. Taxes hrblock 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 hrblock Aggregate Form 940 filers. Taxes hrblock  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 hrblock 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 hrblock To request approval to act as an agent on behalf of home care service recipients, the agent files Form 2678 with the IRS. Taxes hrblock Electronic Filing and Payment  Now, more than ever before, businesses can enjoy the benefits of filing and paying their federal taxes electronically. Taxes hrblock 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 hrblock Spend less time and worry about taxes and more time running your business. Taxes hrblock Use e-file and the Electronic Federal Tax Payment System (EFTPS) to your benefit. Taxes hrblock For e-file, visit www. Taxes hrblock irs. Taxes hrblock gov/efile for additional information. Taxes hrblock For EFTPS, visit www. Taxes hrblock eftps. Taxes hrblock gov or call EFTPS Customer Service at 1-800-555-4477 or 1-800-733-4829 (TDD). Taxes hrblock For electronic filing of Forms W-2, Wage and Tax Statement, visit www. Taxes hrblock socialsecurity. Taxes hrblock gov/employer. Taxes hrblock If you are filing your tax return or paying your federal taxes electronically, a valid EIN is required. Taxes hrblock If a valid EIN is not provided, the return or payment will not be processed. Taxes hrblock This may result in penalties and delays in processing your return or payment. Taxes hrblock Electronic funds withdrawal (EFW). Taxes hrblock  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 hrblock However, do not use EFW to make federal tax deposits. Taxes hrblock For more information on paying your taxes using EFW, visit the IRS website at www. Taxes hrblock irs. Taxes hrblock gov/e-pay. Taxes hrblock A fee may be charged to file electronically. Taxes hrblock Credit or debit card payments. Taxes hrblock  For information on paying your taxes with a credit or debit card, visit the IRS website at www. Taxes hrblock irs. Taxes hrblock gov/e-pay. Taxes hrblock However, do not use credit or debit cards to make federal tax deposits. Taxes hrblock 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 hrblock For more information, see Publicación 17(SP), El Impuesto Federal sobre los Ingresos (Para Personas Físicas). Taxes hrblock 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 hrblock Hiring New Employees Eligibility for employment. Taxes hrblock  You must verify that each new employee is legally eligible to work in the United States. Taxes hrblock This includes completing the U. Taxes hrblock S. Taxes hrblock Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. Taxes hrblock You can get the form from USCIS offices or by calling 1-800-870-3676. Taxes hrblock Contact the USCIS at 1-800-375-5283, or visit the USCIS website at www. Taxes hrblock uscis. Taxes hrblock gov for more information. Taxes hrblock New hire reporting. Taxes hrblock  You are required to report any new employee to a designated state new hire registry. Taxes hrblock 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 hrblock Many states accept a copy of Form W-4 with employer information added. Taxes hrblock Visit the Office of Child Support Enforcement website at www. Taxes hrblock acf. Taxes hrblock hhs. Taxes hrblock gov/programs/cse/newhire for more information. Taxes hrblock W-4 request. Taxes hrblock  Ask each new employee to complete the 2014 Form W-4. Taxes hrblock See section 9. Taxes hrblock Name and social security number. Taxes hrblock  Record each new employee's name and number from his or her social security card. Taxes hrblock Any employee without a social security card should apply for one. Taxes hrblock See section 4. Taxes hrblock Paying Wages, Pensions, or Annuities Correcting Form 941 or Form 944. Taxes hrblock  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 hrblock Forms 941-X and 944-X are stand-alone forms, meaning taxpayers can file them when an error is discovered. Taxes hrblock 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 hrblock See section 13 for more information. Taxes hrblock Income tax withholding. Taxes hrblock  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 hrblock If you have nonresident alien employees, see Withholding income taxes on the wages of nonresident alien employees in section 9. Taxes hrblock 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 hrblock Do not withhold on direct rollovers from qualified plans or governmental section 457(b) plans. Taxes hrblock See section 9 and Publication 15-A, Employer's Supplemental Tax Guide. Taxes hrblock Publication 15-A includes information about withholding on pensions and annuities. Taxes hrblock Zero wage return. Taxes hrblock  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 hrblock The IRS encourages you to file your “Zero Wage” Forms 941 or 944 electronically using IRS e-file at www. Taxes hrblock irs. Taxes hrblock gov/efile. Taxes hrblock Employer Responsibilities Employer Responsibilities: The following list provides a brief summary of your basic responsibilities. Taxes hrblock Because the individual circumstances for each employer can vary greatly, responsibilities for withholding, depositing, and reporting employment taxes can differ. Taxes hrblock Each item in this list has a page reference to a more detailed discussion in this publication. Taxes hrblock   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 hrblock 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 hrblock 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 hrblock Generally, do not use Forms 1099 to report wages and other compensation you paid to employees; report these on Form W-2. Taxes hrblock 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 hrblock If you file 250 or more Forms 1099, you must file them electronically. Taxes hrblock If you file 250 or more Forms W-2, you must file them electronically. Taxes hrblock SSA will not accept Forms W-2 and W-3 filed on magnetic media. Taxes hrblock Information reporting customer service site. Taxes hrblock  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 hrblock 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 hrblock The center can also be reached by email at mccirp@irs. Taxes hrblock gov. Taxes hrblock Do not include tax identification numbers (TINs) or attachments in email correspondence because electronic mail is not secure. Taxes hrblock 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 hrblock Separate deposits are required for payroll (Form 941 or Form 944) and nonpayroll (Form 945) withholding. Taxes hrblock 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 hrblock Military retirement. Taxes hrblock Gambling winnings. Taxes hrblock Indian gaming profits. Taxes hrblock Certain government payments, such as unemployment compensation, social security, and Tier 1 railroad retirement benefits, subject to voluntary withholding. Taxes hrblock Payments subject to backup withholding. Taxes hrblock For details on depositing and reporting nonpayroll income tax withholding, see the Instructions for Form 945. Taxes hrblock 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 hrblock Distributions from nonqualified pension plans and deferred compensation plans. Taxes hrblock  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 hrblock 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 hrblock ; income tax withheld must be reported on Form 945. Taxes hrblock Backup withholding. Taxes hrblock  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 hrblock This withholding is referred to as “backup withholding. Taxes hrblock ” 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 hrblock In addition, transactions by brokers and barter exchanges and certain payments made by fishing boat operators are subject to backup withholding. Taxes hrblock 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 hrblock 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 hrblock 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 hrblock 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 hrblock For more information, see Publication 1281, Backup Withholding for Missing and Incorrect Name/TIN(s). Taxes hrblock Recordkeeping Keep all records of employment taxes for at least 4 years. Taxes hrblock These should be available for IRS review. Taxes hrblock Your records should include the following information. Taxes hrblock Your EIN. Taxes hrblock Amounts and dates of all wage, annuity, and pension payments. Taxes hrblock Amounts of tips reported to you by your employees. Taxes hrblock Records of allocated tips. Taxes hrblock The fair market value of in-kind wages paid. Taxes hrblock Names, addresses, social security numbers, and occupations of employees and recipients. Taxes hrblock Any employee copies of Forms W-2 and W-2c returned to you as undeliverable. Taxes hrblock Dates of employment for each employee. Taxes hrblock 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 hrblock Copies of employees' and recipients' income tax withholding allowance certificates (Forms W-4, W-4P, W-4(SP), W-4S, and W-4V). Taxes hrblock Copies of employees' Earned Income Credit Advance Payment Certificates (Forms W-5 and W-5(SP)). Taxes hrblock Dates and amounts of tax deposits you made and acknowledgment numbers for deposits made by EFTPS. Taxes hrblock Copies of returns filed and confirmation numbers. Taxes hrblock Records of fringe benefits and expense reimbursements provided to your employees, including substantiation. Taxes hrblock 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 hrblock Do not mail Form 8822-B with your employment tax return. Taxes hrblock Private Delivery Services You can use certain private delivery services designated by the IRS to mail tax returns and payments. Taxes hrblock The list includes only the following: DHL Express (DHL): DHL Same Day Service. Taxes hrblock Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First. Taxes hrblock United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. Taxes hrblock M. Taxes hrblock , UPS Worldwide Express Plus, and UPS Worldwide Express. Taxes hrblock For the IRS mailing address to use if you are using a private delivery service, go to IRS. Taxes hrblock gov and enter “private delivery service” in the search box. Taxes hrblock Your private delivery service can tell you how to get written proof of the mailing date. Taxes hrblock   Private delivery services cannot deliver items to P. Taxes hrblock O. Taxes hrblock boxes. Taxes hrblock You must use the U. Taxes hrblock S. Taxes hrblock Postal Service to mail any item to an IRS P. Taxes hrblock O. Taxes hrblock box address. Taxes hrblock Telephone Help Tax questions. Taxes hrblock   You can call the IRS Business and Specialty Tax Line with your employment tax questions at 1-800-829-4933. Taxes hrblock Help for people with disabilities. Taxes hrblock  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 hrblock You may also use this number for assistance with unresolved tax problems. Taxes hrblock Recorded tax information (TeleTax). Taxes hrblock  The IRS TeleTax service provides recorded tax information on topics that answer many individual and business federal tax questions. Taxes hrblock You can listen to up to three topics on each call you make. Taxes hrblock Touch-Tone service is available 24 hours a day, 7 days a week. Taxes hrblock TeleTax topics are also available on the IRS website at www. Taxes hrblock irs. Taxes hrblock gov/taxtopics. Taxes hrblock Most tax topics listed below are also available in Spanish. Taxes hrblock For a complete list of TeleTax topics in Spanish, visit the IRS website at www. Taxes hrblock irs. Taxes hrblock gov/Spanish/Índice-de-Temas-Tributarios-Año-2013. Taxes hrblock A list of employment tax topics is provided next. Taxes hrblock Select, by number, the topic you want to hear and call 1-800-829-4477. Taxes hrblock For the directory of all topics, select Topic 123. Taxes hrblock Teletax Topics Topic No. Taxes hrblock 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 hrblock Employee 763 The “Affordable Care Act” of 2010 Offers Employers New Tax Deductions and Credits Additional employment tax information. Taxes hrblock  Visit the IRS website at www. Taxes hrblock irs. Taxes hrblock gov/businesses and click on the Employment Taxes link under Businesses Topics. Taxes hrblock Ordering Employer Tax Forms and Publications You can order employer tax forms and publications and information returns online at www. Taxes hrblock irs. Taxes hrblock gov/businesses. Taxes hrblock To order 2013 and 2014 forms, click on the Online Ordering for Information Returns and Employer Returns link. Taxes hrblock You may also order employer tax forms and publications and information returns by calling 1-800-TAX-FORM (1-800-829-3676). Taxes hrblock 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 hrblock Visit the SSA's Employer W-2 Filing Instructions & Information website at www. Taxes hrblock socialsecurity. Taxes hrblock gov/employer to register for Business Services Online. Taxes hrblock 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 hrblock 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 hrblock Form W-3 will be created for you based on your Forms W-2. Taxes hrblock 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 hrblock There are separate filing addresses for these returns if you are a tax-exempt organization or government entity. Taxes hrblock See the separate instructions for Forms 940, 941, 943, 944, 945, or CT-1 for the filing addresses. Taxes hrblock Dishonored Payments Any form of payment that is dishonored and returned from a financial institution is subject to a penalty. Taxes hrblock The penalty is $25 or 2% of the payment, whichever is more. Taxes hrblock However, the penalty on dishonored payments of $24. Taxes hrblock 99 or less is an amount equal to the payment. Taxes hrblock For example, a dishonored payment of $18 is charged a penalty of $18. Taxes hrblock Photographs of Missing Children The IRS is a proud partner with the National Center for Missing and Exploited Children. Taxes hrblock Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Taxes hrblock 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 hrblock Calendar The following is a list of important dates. Taxes hrblock Also see Publication 509, Tax Calendars. Taxes hrblock   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 hrblock 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 hrblock However, a statewide legal holiday does not delay the due date of federal tax deposits. Taxes hrblock See Deposits on Business Days Only in section 11. Taxes hrblock 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 hrblock S. Taxes hrblock Postal Service on or before the due date, or sent by an IRS-designated private delivery service on or before the due date. Taxes hrblock See Private Delivery Services under Reminders for more information. Taxes hrblock Introduction This publication explains your tax responsibilities as an employer. Taxes hrblock It explains the requirements for withholding, depositing, reporting, paying, and correcting employment taxes. Taxes hrblock 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 hrblock This guide also has tax tables you need to figure the taxes to withhold from each employee for 2014. Taxes hrblock References to “income tax” in this guide apply only to “federal” income tax. Taxes hrblock Contact your state or local tax department to determine if their rules are different. Taxes hrblock Additional employment tax information is available in Publication 15-A. Taxes hrblock Publication 15-A includes specialized information supplementing the basic employment tax information provided in this publication. Taxes hrblock 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 hrblock Most employers must withhold (except FUTA), deposit, report, and pay the following employment taxes. Taxes hrblock Income tax. Taxes hrblock Social security tax. Taxes hrblock Medicare tax. Taxes hrblock FUTA tax. Taxes hrblock There are exceptions to these requirements. Taxes hrblock See section 15 for guidance. Taxes hrblock Railroad retirement taxes are explained in the Instructions for Form CT-1. Taxes hrblock Comments and suggestions. Taxes hrblock   We welcome your comments about this publication and your suggestions for future editions. Taxes hrblock   You can write to us at the following address: Internal Revenue Service Tax Forms & Publications Division 1111 Constitution Ave. Taxes hrblock NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Taxes hrblock Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Taxes hrblock   You can also send us comments from www. Taxes hrblock irs. Taxes hrblock gov/formspubs. Taxes hrblock Click on More Information and then click on Comment on Tax Forms and Publications. Taxes hrblock   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 hrblock Federal Government employers. Taxes hrblock   The information in this publication, including the rules for making federal tax deposits, applies to federal agencies. Taxes hrblock State and local government employers. Taxes hrblock   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 hrblock Most elected and appointed public officials of state or local governments are employees under common law rules. Taxes hrblock See chapter 3 of Publication 963, Federal-State Reference Guide. Taxes hrblock In addition, wages, with certain exceptions, are subject to social security and Medicare taxes. Taxes hrblock See section 15 for more information on the exceptions. Taxes hrblock   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 hrblock irs. Taxes hrblock gov/pub/irs-irbs/irb00-06. Taxes hrblock pdf. Taxes hrblock   You can get information on reporting and social security coverage from your local IRS office. Taxes hrblock If you have any questions about coverage under a section 218 (Social Security Act) agreement, contact the appropriate state official. Taxes hrblock To find your State Social Security Administrator, visit the National Conference of State Social Security Administrators website at www. Taxes hrblock ncsssa. Taxes hrblock org. Taxes hrblock Disregarded entities and qualified subchapter S subsidiaries (QSubs). Taxes hrblock   Eligible single-owner disregarded entities and QSubs are treated as separate entities for employment tax purposes. Taxes hrblock 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 hrblock See Regulations sections 1. Taxes hrblock 1361-4(a)(7) and 301. Taxes hrblock 7701-2(c)(2)(iv). Taxes hrblock COBRA premium assistance credit. Taxes hrblock   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 hrblock 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 hrblock Parallel requirements apply to these plans under the Employee Retirement Income Security Act of 1974 (ERISA). Taxes hrblock Under the Public Health Service Act, COBRA requirements apply also to health plans covering state or local government employees. Taxes hrblock Similar requirements apply under the Federal Employees Health Benefits Program and under some state laws. Taxes hrblock For the premium assistance (or subsidy) discussed below, these requirements are all referred to as COBRA requirements. Taxes hrblock   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 hrblock 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 hrblock   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 hrblock The assistance for the coverage can last up to 15 months. Taxes hrblock   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 hrblock For more information see Notice 2009-27, 2009-16 I. Taxes hrblock R. Taxes hrblock B. Taxes hrblock 838, available at www. Taxes hrblock irs. Taxes hrblock gov/irb/2009-16_irb/ar09. Taxes hrblock html. Taxes hrblock   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 hrblock   The 65% of the premium not paid by the assistance eligible individuals is reimbursed to the employer maintaining the group health plan. Taxes hrblock The reimbursement is made through a credit against the employer's employment tax liabilities. Taxes hrblock For information on how to claim the credit, see the Instructions for Form 941 or the Instructions for Form 944. Taxes hrblock The credit is treated as a deposit made on the first day of the return period (quarter or year). Taxes hrblock In the case of a multiemployer plan, the credit is claimed by the plan, rather than the employer. Taxes hrblock 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 hrblock   Anyone claiming the credit for COBRA premium assistance payments must maintain the following information to support their claim, including the following. Taxes hrblock Information on the receipt of the assistance eligible individuals' 35% share of the premium, including dates and amounts. Taxes hrblock 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 hrblock 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 hrblock 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 hrblock Proof of each assistance eligible individual's eligibility for COBRA coverage and the election of COBRA coverage. Taxes hrblock 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 hrblock   For more information, visit IRS. Taxes hrblock gov and enter “COBRA” in the search box. Taxes hrblock Prev  Up  Next   Home   More Online Publications