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Turbotax 2009

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Turbotax 2009

Turbotax 2009 2. Turbotax 2009   Simplified Employee Pensions (SEPs) Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Setting Up a SEPWhen not to use Form 5305-SEP. Turbotax 2009 How Much Can I Contribute?Contribution Limits Deducting ContributionsDeduction Limit for Contributions for Participants Deduction Limit for Self-Employed Individuals Carryover of Excess SEP Contributions When To Deduct Contributions Where To Deduct Contributions Salary Reduction Simplified Employee Pensions (SARSEPs)SARSEP ADP test. Turbotax 2009 Deferral percentage. Turbotax 2009 Employee compensation. Turbotax 2009 Compensation of self-employed individuals. Turbotax 2009 Choice not to treat deferrals as compensation. Turbotax 2009 Limit on Elective Deferrals Tax Treatment of Deferrals Distributions (Withdrawals) Additional TaxesEffects on employee. Turbotax 2009 Reporting and Disclosure Requirements Topics - This chapter discusses: Setting up a SEP How much can I contribute Deducting contributions Salary reduction simplified employee pensions (SARSEPs) Distributions (withdrawals) Additional taxes Reporting and disclosure requirements Useful Items - You may want to see: Publication 590 Individual Retirement Arrangements (IRAs) 3998 Choosing A Retirement Solution for Your Small Business 4285 SEP Checklist 4286 SARSEP Checklist 4333 SEP Retirement Plans for Small Businesses 4336 SARSEP for Small Businesses 4407 SARSEP—Key Issues and Assistance Forms (and Instructions) W-2 Wage and Tax Statement 1040 U. Turbotax 2009 S. Turbotax 2009 Individual Income Tax Return 5305-SEP Simplified Employee Pension—Individual Retirement Accounts Contribution Agreement 5305A-SEP Salary Reduction Simplified Employee Pension—Individual Retirement Accounts Contribution Agreement 8880 Credit for Qualified Retirement Savings Contributions 8881 Credit for Small Employer Pension Plan Startup Costs A SEP is a written plan that allows you to make contributions toward your own retirement and your employees' retirement without getting involved in a more complex qualified plan. Turbotax 2009 Under a SEP, you make contributions to a traditional individual retirement arrangement (called a SEP-IRA) set up by or for each eligible employee. Turbotax 2009 A SEP-IRA is owned and controlled by the employee, and you make contributions to the financial institution where the SEP-IRA is maintained. Turbotax 2009 SEP-IRAs are set up for, at a minimum, each eligible employee (defined below). Turbotax 2009 A SEP-IRA may have to be set up for a leased employee (defined in chapter 1), but does not need to be set up for excludable employees (defined later). Turbotax 2009 Eligible employee. Turbotax 2009   An eligible employee is an individual who meets all the following requirements. Turbotax 2009 Has reached age 21. Turbotax 2009 Has worked for you in at least 3 of the last 5 years. Turbotax 2009 Has received at least $550 in compensation from you in 2013. Turbotax 2009 This amount remains the same in 2014. Turbotax 2009    You can use less restrictive participation requirements than those listed, but not more restrictive ones. Turbotax 2009 Excludable employees. Turbotax 2009   The following employees can be excluded from coverage under a SEP. Turbotax 2009 Employees covered by a union agreement and whose retirement benefits were bargained for in good faith by the employees' union and you. Turbotax 2009 Nonresident alien employees who have received no U. Turbotax 2009 S. Turbotax 2009 source wages, salaries, or other personal services compensation from you. Turbotax 2009 For more information about nonresident aliens, see Publication 519, U. Turbotax 2009 S. Turbotax 2009 Tax Guide for Aliens. Turbotax 2009 Setting Up a SEP There are three basic steps in setting up a SEP. Turbotax 2009 You must execute a formal written agreement to provide benefits to all eligible employees. Turbotax 2009 You must give each eligible employee certain information about the SEP. Turbotax 2009 A SEP-IRA must be set up by or for each eligible employee. Turbotax 2009 Many financial institutions will help you set up a SEP. Turbotax 2009 Formal written agreement. Turbotax 2009   You must execute a formal written agreement to provide benefits to all eligible employees under a SEP. Turbotax 2009 You can satisfy the written agreement requirement by adopting an IRS model SEP using Form 5305-SEP. Turbotax 2009 However, see When not to use Form 5305-SEP, below. Turbotax 2009   If you adopt an IRS model SEP using Form 5305-SEP, no prior IRS approval or determination letter is required. Turbotax 2009 Keep the original form. Turbotax 2009 Do not file it with the IRS. Turbotax 2009 Also, using Form 5305-SEP will usually relieve you from filing annual retirement plan information returns with the IRS and the Department of Labor. Turbotax 2009 See the Form 5305-SEP instructions for details. Turbotax 2009 If you choose not to use Form 5305-SEP, you should seek professional advice in adopting a SEP. Turbotax 2009 When not to use Form 5305-SEP. Turbotax 2009   You cannot use Form 5305-SEP if any of the following apply. Turbotax 2009 You currently maintain any other qualified retirement plan other than another SEP. Turbotax 2009 You have any eligible employees for whom IRAs have not been set up. Turbotax 2009 You use the services of leased employees, who are not your common-law employees (as described in chapter 1). Turbotax 2009 You are a member of any of the following unless all eligible employees of all the members of these groups, trades, or businesses participate under the SEP. Turbotax 2009 An affiliated service group described in section 414(m). Turbotax 2009 A controlled group of corporations described in section 414(b). Turbotax 2009 Trades or businesses under common control described in section 414(c). Turbotax 2009 You do not pay the cost of the SEP contributions. Turbotax 2009 Information you must give to employees. Turbotax 2009   You must give each eligible employee a copy of Form 5305-SEP, its instructions, and the other information listed in the Form 5305-SEP instructions. Turbotax 2009 An IRS model SEP is not considered adopted until you give each employee this information. Turbotax 2009 Setting up the employee's SEP-IRA. Turbotax 2009   A SEP-IRA must be set up by or for each eligible employee. Turbotax 2009 SEP-IRAs can be set up with banks, insurance companies, or other qualified financial institutions. Turbotax 2009 You send SEP contributions to the financial institution where the SEP-IRA is maintained. Turbotax 2009 Deadline for setting up a SEP. Turbotax 2009   You can set up a SEP for any year as late as the due date (including extensions) of your income tax return for that year. Turbotax 2009 Credit for startup costs. Turbotax 2009   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SEP that first became effective in 2013. Turbotax 2009 For more information, see Credit for startup costs under Reminders, earlier. Turbotax 2009 How Much Can I Contribute? The SEP rules permit you to contribute a limited amount of money each year to each employee's SEP-IRA. Turbotax 2009 If you are self-employed, you can contribute to your own SEP-IRA. Turbotax 2009 Contributions must be in the form of money (cash, check, or money order). Turbotax 2009 You cannot contribute property. Turbotax 2009 However, participants may be able to transfer or roll over certain property from one retirement plan to another. Turbotax 2009 See Publication 590 for more information about rollovers. Turbotax 2009 You do not have to make contributions every year. Turbotax 2009 But if you make contributions, they must be based on a written allocation formula and must not discriminate in favor of highly compensated employees (defined in chapter 1). Turbotax 2009 When you contribute, you must contribute to the SEP-IRAs of all participants who actually performed personal services during the year for which the contributions are made, including employees who die or terminate employment before the contributions are made. Turbotax 2009 Contributions are deductible within limits, as discussed later, and generally are not taxable to the plan participants. Turbotax 2009 A SEP-IRA cannot be a Roth IRA. Turbotax 2009 Employer contributions to a SEP-IRA will not affect the amount an individual can contribute to a Roth or traditional IRA. Turbotax 2009 Unlike regular contributions to a traditional IRA, contributions under a SEP can be made to participants over age 70½. Turbotax 2009 If you are self-employed, you can also make contributions under the SEP for yourself even if you are over 70½. Turbotax 2009 Participants age 70½ or over must take required minimum distributions. Turbotax 2009 Time limit for making contributions. Turbotax 2009   To deduct contributions for a year, you must make the contributions by the due date (including extensions) of your tax return for the year. Turbotax 2009 Contribution Limits Contributions you make for 2013 to a common-law employee's SEP-IRA cannot exceed the lesser of 25% of the employee's compensation or $51,000. Turbotax 2009 Compensation generally does not include your contributions to the SEP. Turbotax 2009 The SEP plan document will specify how the employer contribution is determined and how it will be allocated to participants. Turbotax 2009 Example. Turbotax 2009 Your employee, Mary Plant, earned $21,000 for 2013. Turbotax 2009 The maximum contribution you can make to her SEP-IRA is $5,250 (25% x $21,000). Turbotax 2009 Contributions for yourself. Turbotax 2009   The annual limits on your contributions to a common-law employee's SEP-IRA also apply to contributions you make to your own SEP-IRA. Turbotax 2009 However, special rules apply when figuring your maximum deductible contribution. Turbotax 2009 See Deduction Limit for Self-Employed Individuals , later. Turbotax 2009 Annual compensation limit. Turbotax 2009   You cannot consider the part of an employee's compensation over $255,000 when figuring your contribution limit for that employee. Turbotax 2009 However, $51,000 is the maximum contribution for an eligible employee. Turbotax 2009 These limits are $260,000 and $52,000, respectively, in 2014. Turbotax 2009 Example. Turbotax 2009 Your employee, Susan Green, earned $210,000 for 2013. Turbotax 2009 Because of the maximum contribution limit for 2013, you can only contribute $51,000 to her SEP-IRA. Turbotax 2009 More than one plan. Turbotax 2009   If you contribute to a defined contribution plan (defined in chapter 4), annual additions to an account are limited to the lesser of $51,000 or 100% of the participant's compensation. Turbotax 2009 When you figure this limit, you must add your contributions to all defined contribution plans maintained by you. Turbotax 2009 Because a SEP is considered a defined contribution plan for this limit, your contributions to a SEP must be added to your contributions to other defined contribution plans you maintain. Turbotax 2009 Tax treatment of excess contributions. Turbotax 2009   Excess contributions are your contributions to an employee's SEP-IRA (or to your own SEP-IRA) for 2013 that exceed the lesser of the following amounts. Turbotax 2009 25% of the employee's compensation (or, for you, 20% of your net earnings from self-employment). Turbotax 2009 $51,000. Turbotax 2009 Excess contributions are included in the employee's income for the year and are treated as contributions by the employee to his or her SEP-IRA. Turbotax 2009 For more information on employee tax treatment of excess contributions, see chapter 1 in Publication 590. Turbotax 2009 Reporting on Form W-2. Turbotax 2009   Do not include SEP contributions on your employee's Form W-2 unless contributions were made under a salary reduction arrangement (discussed later). Turbotax 2009 Deducting Contributions Generally, you can deduct the contributions you make each year to each employee's SEP-IRA. Turbotax 2009 If you are self-employed, you can deduct the contributions you make each year to your own SEP-IRA. Turbotax 2009 Deduction Limit for Contributions for Participants The most you can deduct for your contributions to you or your employee's SEP-IRA is the lesser of the following amounts. Turbotax 2009 Your contributions (including any excess contributions carryover). Turbotax 2009 25% of the compensation (limited to $255,000 per participant) paid to the participants during 2013 from the business that has the plan, not to exceed $51,000 per participant. Turbotax 2009 In 2014, the amounts in (2) above are $260,000 and $52,000, respectively. Turbotax 2009 Deduction Limit for Self-Employed Individuals If you contribute to your own SEP-IRA, you must make a special computation to figure your maximum deduction for these contributions. Turbotax 2009 When figuring the deduction for contributions made to your own SEP-IRA, compensation is your net earnings from self-employment (defined in chapter 1), which takes into account both the following deductions. Turbotax 2009 The deduction for the deductible part of your self-employment tax. Turbotax 2009 The deduction for contributions to your own SEP-IRA. Turbotax 2009 The deduction for contributions to your own SEP-IRA and your net earnings depend on each other. Turbotax 2009 For this reason, you determine the deduction for contributions to your own SEP-IRA indirectly by reducing the contribution rate called for in your plan. Turbotax 2009 To do this, use the Rate Table for Self-Employed or the Rate Worksheet for Self-Employed, whichever is appropriate for your plan's contribution rate, in chapter 5. Turbotax 2009 Then figure your maximum deduction by using the Deduction Worksheet for Self-Employed in chapter 5. Turbotax 2009 Carryover of Excess SEP Contributions If you made SEP contributions that are more than the deduction limit (nondeductible contributions), you can carry over and deduct the difference in later years. Turbotax 2009 However, the carryover, when combined with the contribution for the later year, is subject to the deduction limit for that year. Turbotax 2009 If you also contributed to a defined benefit plan or defined contribution plan, see Carryover of Excess Contributions under Employer Deduction in chapter 4 for the carryover limit. Turbotax 2009 Excise tax. Turbotax 2009   If you made nondeductible (excess) contributions to a SEP, you may be subject to a 10% excise tax. Turbotax 2009 For information about the excise tax, see Excise Tax for Nondeductible (Excess) Contributions under Employer Deduction in chapter 4. Turbotax 2009 When To Deduct Contributions When you can deduct contributions made for a year depends on the tax year on which the SEP is maintained. Turbotax 2009 If the SEP is maintained on a calendar year basis, you deduct the yearly contributions on your tax return for the year within which the calendar year ends. Turbotax 2009 If you file your tax return and maintain the SEP using a fiscal year or short tax year, you deduct contributions made for a year on your tax return for that year. Turbotax 2009 Example. Turbotax 2009 You are a fiscal year taxpayer whose tax year ends June 30. Turbotax 2009 You maintain a SEP on a calendar year basis. Turbotax 2009 You deduct SEP contributions made for calendar year 2013 on your tax return for your tax year ending June 30, 2014. Turbotax 2009 Where To Deduct Contributions Deduct the contributions you make for your common-law employees on your tax return. Turbotax 2009 For example, sole proprietors deduct them on Schedule C (Form 1040) or Schedule F (Form 1040), Profit or Loss From Farming; partnerships deduct them on Form 1065, U. Turbotax 2009 S. Turbotax 2009 Return of Partnership Income; and corporations deduct them on Form 1120, U. Turbotax 2009 S. Turbotax 2009 Corporation Income Tax Return, or Form 1120S, U. Turbotax 2009 S. Turbotax 2009 Income Tax Return for an S Corporation. Turbotax 2009 Sole proprietors and partners deduct contributions for themselves on line 28 of Form 1040. Turbotax 2009 (If you are a partner, contributions for yourself are shown on the Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Turbotax 2009 , you receive from the partnership. Turbotax 2009 ) Remember that sole proprietors and partners can't deduct as a business expense contributions made to a SEP for themselves, only those made for their common-law employees. Turbotax 2009 Salary Reduction Simplified Employee Pensions (SARSEPs) A SARSEP is a SEP set up before 1997 that includes a salary reduction arrangement. Turbotax 2009 (See the Caution, next. Turbotax 2009 ) Under a SARSEP, your employees can choose to have you contribute part of their pay to their SEP-IRAs rather than receive it in cash. Turbotax 2009 This contribution is called an “elective deferral” because employees choose (elect) to set aside the money, and they defer the tax on the money until it is distributed to them. Turbotax 2009 You are not allowed to set up a SARSEP after 1996. Turbotax 2009 However, participants (including employees hired after 1996) in a SARSEP set up before 1997 can continue to have you contribute part of their pay to the plan. Turbotax 2009 If you are interested in setting up a retirement plan that includes a salary reduction arrangement, see chapter 3. Turbotax 2009 Who can have a SARSEP?   A SARSEP set up before 1997 is available to you and your eligible employees only if all the following requirements are met. Turbotax 2009 At least 50% of your employees eligible to participate choose to make elective deferrals. Turbotax 2009 You have 25 or fewer employees who were eligible to participate in the SEP at any time during the preceding year. Turbotax 2009 The elective deferrals of your highly compensated employees meet the SARSEP ADP test. Turbotax 2009 SARSEP ADP test. Turbotax 2009   Under the SARSEP ADP test, the amount deferred each year by each eligible highly compensated employee as a percentage of pay (the deferral percentage) cannot be more than 125% of the average deferral percentage (ADP) of all non-highly compensated employees eligible to participate. Turbotax 2009 A highly compensated employee is defined in chapter 1. Turbotax 2009 Deferral percentage. Turbotax 2009   The deferral percentage for an employee for a year is figured as follows. Turbotax 2009   The elective employer contributions (excluding certain catch-up contributions)  paid to the SEP for the employee for the year     The employee's compensation (limited to $255,000 in 2013)   The instructions for Form 5305A-SEP have a worksheet you can use to determine whether the elective deferrals of your highly compensated employees meet the SARSEP ADP test. Turbotax 2009 Employee compensation. Turbotax 2009   For figuring the deferral percentage, compensation is generally the amount you pay to the employee for the year. Turbotax 2009 Compensation includes the elective deferral and other amounts deferred in certain employee benefit plans. Turbotax 2009 See Compensation in chapter 1. Turbotax 2009 Elective deferrals under the SARSEP are included in figuring your employees' deferral percentage even though they are not included in the income of your employees for income tax purposes. Turbotax 2009 Compensation of self-employed individuals. Turbotax 2009   If you are self-employed, compensation is your net earnings from self-employment as defined in chapter 1. Turbotax 2009   Compensation does not include tax-free items (or deductions related to them) other than foreign earned income and housing cost amounts. Turbotax 2009 Choice not to treat deferrals as compensation. Turbotax 2009   You can choose not to treat elective deferrals (and other amounts deferred in certain employee benefit plans) for a year as compensation under your SARSEP. Turbotax 2009 Limit on Elective Deferrals The most a participant can choose to defer for calendar year 2013 is the lesser of the following amounts. Turbotax 2009 25% of the participant's compensation (limited to $255,000 of the participant's compensation). Turbotax 2009 $17,500. Turbotax 2009 The $17,500 limit applies to the total elective deferrals the employee makes for the year to a SEP and any of the following. Turbotax 2009 Cash or deferred arrangement (section 401(k) plan). Turbotax 2009 Salary reduction arrangement under a tax-sheltered annuity plan (section 403(b) plan). Turbotax 2009 SIMPLE IRA plan. Turbotax 2009 In 2014, the $255,000 limit increases to $260,000 and the $17,500 limit remains at $17,500. Turbotax 2009 Catch-up contributions. Turbotax 2009   A SARSEP can permit participants who are age 50 or over at the end of the calendar year to also make catch-up contributions. Turbotax 2009 The catch-up contribution limit for 2013 is $5,500 and remains at $5,500 for 2014. Turbotax 2009 Elective deferrals are not treated as catch-up contributions for 2013 until they exceed the elective deferral limit (the lesser of 25% of compensation or $17,500), the SARSEP ADP test limit discussed earlier, or the plan limit (if any). Turbotax 2009 However, the catch-up contribution a participant can make for a year cannot exceed the lesser of the following amounts. Turbotax 2009 The catch-up contribution limit. Turbotax 2009 The excess of the participant's compensation over the elective deferrals that are not catch-up contributions. Turbotax 2009   Catch-up contributions are not subject to the elective deferral limit (the lesser of 25% of compensation or $17,500 in 2013 and in 2014). Turbotax 2009 Overall limit on SEP contributions. Turbotax 2009   If you also make nonelective contributions to a SEP-IRA, the total of the nonelective and elective contributions to that SEP-IRA cannot exceed the lesser of 25% of the employee's compensation or $51,000 for 2013 ($52,000 for 2014). Turbotax 2009 The same rule applies to contributions you make to your own SEP-IRA. Turbotax 2009 See Contribution Limits , earlier. Turbotax 2009 Figuring the elective deferral. Turbotax 2009   For figuring the 25% limit on elective deferrals, compensation does not include SEP contributions, including elective deferrals or other amounts deferred in certain employee benefit plans. Turbotax 2009 Tax Treatment of Deferrals Elective deferrals that are not more than the limits discussed earlier under Limit on Elective Deferrals are excluded from your employees' wages subject to federal income tax in the year of deferral. Turbotax 2009 However, these deferrals are included in wages for social security, Medicare, and federal unemployment (FUTA) tax. Turbotax 2009 Excess deferrals. Turbotax 2009   For 2013, excess deferrals are the elective deferrals for the year that are more than the $17,500 limit discussed earlier. Turbotax 2009 For a participant who is eligible to make catch-up contributions, excess deferrals are the elective deferrals that are more than $23,000. Turbotax 2009 The treatment of excess deferrals made under a SARSEP is similar to the treatment of excess deferrals made under a qualified plan. Turbotax 2009 See Treatment of Excess Deferrals under Elective Deferrals (401(k) Plans) in chapter 4. Turbotax 2009 Excess SEP contributions. Turbotax 2009   Excess SEP contributions are elective deferrals of highly compensated employees that are more than the amount permitted under the SARSEP ADP test. Turbotax 2009 You must notify your highly compensated employees within 2½ months after the end of the plan year of their excess SEP contributions. Turbotax 2009 If you do not notify them within this time period, you must pay a 10% tax on the excess. Turbotax 2009 For an explanation of the notification requirements, see Rev. Turbotax 2009 Proc. Turbotax 2009 91-44, 1991-2 C. Turbotax 2009 B. Turbotax 2009 733. Turbotax 2009 If you adopted a SARSEP using Form 5305A-SEP, the notification requirements are explained in the instructions for that form. Turbotax 2009 Reporting on Form W-2. Turbotax 2009   Do not include elective deferrals in the “Wages, tips, other compensation” box of Form W-2. Turbotax 2009 You must, however, include them in the “Social security wages” and “Medicare wages and tips” boxes. Turbotax 2009 You must also include them in box 12. Turbotax 2009 Mark the “Retirement plan” checkbox in box 13. Turbotax 2009 For more information, see the Form W-2 instructions. Turbotax 2009 Distributions (Withdrawals) As an employer, you cannot prohibit distributions from a SEP-IRA. Turbotax 2009 Also, you cannot make your contributions on the condition that any part of them must be kept in the account after you have made your contributions to the employee's accounts. Turbotax 2009 Distributions are subject to IRA rules. Turbotax 2009 Generally, you or your employee must begin to receive distributions from a SEP-IRA by April 1 of the first year after the calendar year in which you or your employee reaches age 70½. Turbotax 2009 For more information about IRA rules, including the tax treatment of distributions, rollovers, required distributions, and income tax withholding, see Publication 590. Turbotax 2009 Additional Taxes The tax advantages of using SEP-IRAs for retirement savings can be offset by additional taxes that may be imposed for all the following actions. Turbotax 2009 Making excess contributions. Turbotax 2009 Making early withdrawals. Turbotax 2009 Not making required withdrawals. Turbotax 2009 For information about these taxes, see chapter 1 in Publication 590. Turbotax 2009 Also, a SEP-IRA may be disqualified, or an excise tax may apply, if the account is involved in a prohibited transaction, discussed next. Turbotax 2009 Prohibited transaction. Turbotax 2009   If an employee improperly uses his or her SEP-IRA, such as by borrowing money from it, the employee has engaged in a prohibited transaction. Turbotax 2009 In that case, the SEP-IRA will no longer qualify as an IRA. Turbotax 2009 For a list of prohibited transactions, see Prohibited Transactions in chapter 4. Turbotax 2009 Effects on employee. Turbotax 2009   If a SEP-IRA is disqualified because of a prohibited transaction, the assets in the account will be treated as having been distributed to the employee on the first day of the year in which the transaction occurred. Turbotax 2009 The employee must include in income the fair market value of the assets (on the first day of the year) that is more than any cost basis in the account. Turbotax 2009 Also, the employee may have to pay the additional tax for making early withdrawals. Turbotax 2009 Reporting and Disclosure Requirements If you set up a SEP using Form 5305-SEP, you must give your eligible employees certain information about the SEP when you set it up. Turbotax 2009 See Setting Up a SEP , earlier. Turbotax 2009 Also, you must give your eligible employees a statement each year showing any contributions to their SEP-IRAs. Turbotax 2009 You must also give them notice of any excess contributions. Turbotax 2009 For details about other information you must give them, see the instructions for Form 5305-SEP or Form 5305A-SEP (for a salary reduction SEP). Turbotax 2009 Even if you did not use Form 5305-SEP or Form 5305A-SEP to set up your SEP, you must give your employees information similar to that described above. Turbotax 2009 For more information, see the instructions for either Form 5305-SEP or Form 5305A-SEP. Turbotax 2009 Prev  Up  Next   Home   More Online Publications
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e-file for Large Business and International (LB&I)

What's New:

A QuickAlert outlining the exact timeframes to Send Submissions or retrieve federal/state Acknowledgements will be issued in early December and the times will be posted on the MeF Status Page.
    
Please monitor the MeF Status Page for any updates.  We apologize for any inconveniences and thank you for your cooperation.

 

2014 M3 M1 Changes: The IRS will be making changes to the Schedule M-3 filing requirement for taxpayers with assets between $10M-$50M for Forms 1120, 1120-C, 1120-F, 1120S, 1065 and 1065-B. These taxpayers will be permitted to file Schedule M-1 in place of the Schedule M-3 Parts II and III.  These changes will be effective for tax years ending on December 31, 2014, and later. No changes are currently planned to the Schedule M-3 requirements for Forms 1120-L, or 1120-PC, nor for Form 1120 taxpayers filing as a mixed group.

 

The Modernized e-File Status Page provides information about the availability of the MeF system for external use. For information about the most current MeF system status, please refer to the Modernized e-File (MeF) Status Page.


Table of Contents:

Introduction

Treasury Decision (T.D.) 9363 requires corporations that have assets of $10 million or more and file at least 250 returns annually to electronically file their Forms 1120 and 1120S for tax years ending on or after December 31, 2007. This requirement extends to foreign corporations filing Form 1120-F who have tax years ending on or after December 31, 2008, have assets of $10 million or more and who file at least 250 returns annually.

Although electronic filing is required of certain corporations, many corporations voluntarily file their returns electronically.

This web site provides an overview of electronic filing and more detailed information for those corporations required to e-file. There is information for taxpayers who prepare and transmit their own income tax returns as well as for taxpayers who rely upon third party tax professionals to prepare and transmit their tax returns.


Note: Documents accessed from this page that are in pdf format contain "(pdf)" at the end of the file name. If you can't view all the pages of any pdf document, download the most recent free version of Adobe Acrobat Reader


General Information about e-file for Large and Mid-Size Corporations

IRS e-services

Regulations on Required Corporate e-filing

Contact IRS for More Information

If you do not find the electronic filing information you need in the material provided on this web site, IRS provides e-mail addresses where interested parties can submit questions concerning e-file requirements.

  • Corporate taxpayers (Forms 1120, 1120S, 1120-F) may contact the e-help Desk at 1-866-255-0654.
  • Partnerships (Forms 1065, 1065-B) can find further e-file information for partnerships using the MeF platform on IRS.gov at Modernized e-File (MeF) for Partnerships  or they may contact the e-help Desk at 1-866-255-0654.
  • Tax-exempt organizations can find further e-file information on IRS.gov at e-file for Charities and Non-Profits.
  • Taxpayers with account or tax law questions may call 1-800-829-4933.
  • Tax practitioners with account or tax law questions may call 1-800-829-8374.
  • Software developers and vendors may contact the e-help Desk at 1-866-255-0654 with questions about e-filing.
Page Last Reviewed or Updated: 03-Feb-2014

The Turbotax 2009

Turbotax 2009 Publication 525 - Main Content Table of Contents Employee CompensationBabysitting. Turbotax 2009 Miscellaneous Compensation Fringe Benefits Retirement Plan Contributions Stock Options Restricted Property Special Rules for Certain EmployeesClergy Members of Religious Orders Foreign Employer Military Volunteers Business and Investment IncomeRents From Personal Property Royalties Partnership Income S Corporation Income Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits Miscellaneous IncomeBartering Canceled Debts Host or Hostess Life Insurance Proceeds Recoveries Survivor Benefits Unemployment Benefits Welfare and Other Public Assistance Benefits Other Income RepaymentsMethod 1. Turbotax 2009 Method 2. Turbotax 2009 How To Get Tax HelpLow Income Taxpayer Clinics Employee Compensation In most cases, you must include in gross income everything you receive in payment for personal services. Turbotax 2009 In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options. Turbotax 2009 You should receive a Form W-2 from your employer or former employer showing the pay you received for your services. Turbotax 2009 Include all your pay on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ, even if you do not receive Form W-2, or you receive a Form W-2 that does not include all pay that should be included on the Form W-2. Turbotax 2009 If you performed services, other than as an independent contractor, and your employer did not withhold social security and Medicare taxes from your pay, you must file Form 8919, Uncollected Social Security and Medicare Tax on Wages, with your Form 1040. Turbotax 2009 These wages must be included on line 7 of Form 1040. Turbotax 2009 See Form 8919 for more information. Turbotax 2009 Childcare providers. Turbotax 2009   If you provide childcare, either in the child's home or in your home or other place of business, the pay you receive must be included in your income. Turbotax 2009 If you are not an employee, you are probably self-employed and must include payments for your services on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Turbotax 2009 You generally are not an employee unless you are subject to the will and control of the person who employs you as to what you are to do and how you are to do it. Turbotax 2009 Babysitting. Turbotax 2009   If you babysit for relatives or neighborhood children, whether on a regular basis or only periodically, the rules for childcare providers apply to you. Turbotax 2009 Bankruptcy. Turbotax 2009   If you filed for bankruptcy under Chapter 11 of the Bankruptcy Code, you must allocate your wages and withheld income tax. Turbotax 2009 Your W-2 will show your total wages and withheld income tax for the year. Turbotax 2009 On your tax return, you report the wages and withheld income tax for the period before you filed for bankruptcy. Turbotax 2009 Your bankruptcy estate reports the wages and withheld income tax for the period after you filed for bankruptcy. Turbotax 2009 If you receive other information returns (such as Form 1099-DIV, Dividends and Distributions, or 1099-INT, Interest Income) that report gross income to you, rather than to the bankruptcy estate, you must allocate that income. Turbotax 2009   The only exception is for purposes of figuring your self-employment tax, if you are self-employed. Turbotax 2009 For that purpose, you must take into account all your self-employment income for the year from services performed both before and after the beginning of the case. Turbotax 2009   You must file a statement with your income tax return stating you filed a Chapter 11 bankruptcy case. Turbotax 2009 The statement must show the allocation and describe the method used to make the allocation. Turbotax 2009 For a sample of this statement and other information, see Notice 2006-83, 2006-40 I. Turbotax 2009 R. Turbotax 2009 B. Turbotax 2009 596, available at www. Turbotax 2009 irs. Turbotax 2009 gov/irb/2006-40_IRB/ar12. Turbotax 2009 html. Turbotax 2009 Miscellaneous Compensation This section discusses many types of employee compensation. Turbotax 2009 The subjects are arranged in alphabetical order. Turbotax 2009 Advance commissions and other earnings. Turbotax 2009   If you receive advance commissions or other amounts for services to be performed in the future and you are a cash-method taxpayer, you must include these amounts in your income in the year you receive them. Turbotax 2009    If you repay unearned commissions or other amounts in the same year you receive them, reduce the amount included in your income by the repayment. Turbotax 2009 If you repay them in a later tax year, you can deduct the repayment as an itemized deduction on your Schedule A (Form 1040), Itemized Deductions, or you may be able to take a credit for that year. Turbotax 2009 See Repayments , later. Turbotax 2009 Allowances and reimbursements. Turbotax 2009    If you receive travel, transportation, or other business expense allowances or reimbursements from your employer, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. Turbotax 2009 If you are reimbursed for moving expenses, see Publication 521, Moving Expenses. Turbotax 2009 Back pay awards. Turbotax 2009   Include in income amounts you are awarded in a settlement or judgment for back pay. Turbotax 2009 These include payments made to you for damages, unpaid life insurance premiums, and unpaid health insurance premiums. Turbotax 2009 They should be reported to you by your employer on Form W-2. Turbotax 2009 Bonuses and awards. Turbotax 2009    Bonuses or awards you receive for outstanding work are included in your income and should be shown on your Form W-2. Turbotax 2009 These include prizes such as vacation trips for meeting sales goals. Turbotax 2009 If the prize or award you receive is goods or services, you must include the fair market value of the goods or services in your income. Turbotax 2009 However, if your employer merely promises to pay you a bonus or award at some future time, it is not taxable until you receive it or it is made available to you. Turbotax 2009 Employee achievement award. Turbotax 2009   If you receive tangible personal property (other than cash, a gift certificate, or an equivalent item) as an award for length of service or safety achievement, you generally can exclude its value from your income. Turbotax 2009 However, the amount you can exclude is limited to your employer's cost and cannot be more than $1,600 ($400 for awards that are not qualified plan awards) for all such awards you receive during the year. Turbotax 2009 Your employer can tell you whether your award is a qualified plan award. Turbotax 2009 Your employer must make the award as part of a meaningful presentation, under conditions and circumstances that do not create a significant likelihood of it being disguised pay. Turbotax 2009   However, the exclusion does not apply to the following awards. Turbotax 2009 A length-of-service award if you received it for less than 5 years of service or if you received another length-of-service award during the year or the previous 4 years. Turbotax 2009 A safety achievement award if you are a manager, administrator, clerical employee, or other professional employee or if more than 10% of eligible employees previously received safety achievement awards during the year. Turbotax 2009 Example. Turbotax 2009 Ben Green received three employee achievement awards during the year: a nonqualified plan award of a watch valued at $250, and two qualified plan awards of a stereo valued at $1,000 and a set of golf clubs valued at $500. Turbotax 2009 Assuming that the requirements for qualified plan awards are otherwise satisfied, each award by itself would be excluded from income. Turbotax 2009 However, because the $1,750 total value of the awards is more than $1,600, Ben must include $150 ($1,750 − $1,600) in his income. Turbotax 2009 Differential wage payments. Turbotax 2009   This is any payment made by an employer to an individual for any period during which the individual is, for a period of more than 30 days, an active duty member of the uniformed services and represents all or a portion of the wages the individual would have received from the employer for that period. Turbotax 2009 These payments are treated as wages and are subject to income tax withholding, but not FICA or FUTA taxes. Turbotax 2009 The payments are reported as wages on Form W-2. Turbotax 2009 Government cost-of-living allowances. Turbotax 2009   Most payments received by U. Turbotax 2009 S. Turbotax 2009 Government civilian employees for working abroad are taxable. Turbotax 2009 However, certain cost-of-living allowances are tax free. Turbotax 2009 Publication 516, U. Turbotax 2009 S. Turbotax 2009 Government Civilian Employees Stationed Abroad, explains the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. Turbotax 2009 Nonqualified deferred compensation plans. Turbotax 2009   Your employer will report to you the total amount of deferrals for the year under a nonqualified deferred compensation plan. Turbotax 2009 This amount is shown on Form W-2, box 12, using code Y. Turbotax 2009 This amount is not included in your income. Turbotax 2009   However, if at any time during the tax year, the plan fails to meet certain requirements, or is not operated under those requirements, all amounts deferred under the plan for the tax year and all preceding tax years are included in your income for the current year. Turbotax 2009 This amount is included in your wages shown on Form W-2, box 1. Turbotax 2009 It is also shown on Form W-2, box 12, using code Z. Turbotax 2009 Nonqualified deferred compensation plans of nonqualified entities. Turbotax 2009   In most cases, any compensation deferred under a nonqualified deferred compensation plan of a nonqualified entity is included in gross income when there is no substantial risk of forfeiture of the rights to such compensation. Turbotax 2009 For this purpose, a nonqualified entity is: A foreign corporation unless substantially all of its income is: Effectively connected with the conduct of a trade or business in the United States, or Subject to a comprehensive foreign income tax. Turbotax 2009 A partnership unless substantially all of its income is allocated to persons other than: Foreign persons for whom the income is not subject to a comprehensive foreign income tax, and Tax-exempt organizations. Turbotax 2009 Note received for services. Turbotax 2009   If your employer gives you a secured note as payment for your services, you must include the fair market value (usually the discount value) of the note in your income for the year you receive it. Turbotax 2009 When you later receive payments on the note, a proportionate part of each payment is the recovery of the fair market value that you previously included in your income. Turbotax 2009 Do not include that part again in your income. Turbotax 2009 Include the rest of the payment in your income in the year of payment. Turbotax 2009   If your employer gives you a nonnegotiable unsecured note as payment for your services, payments on the note that are credited toward the principal amount of the note are compensation income when you receive them. Turbotax 2009 Severance pay. Turbotax 2009   You must include in income amounts you receive as severance pay and any payment for the cancellation of your employment contract. Turbotax 2009 Accrued leave payment. Turbotax 2009   If you are a federal employee and receive a lump-sum payment for accrued annual leave when you retire or resign, this amount will be included as wages on your Form W-2. Turbotax 2009   If you resign from one agency and are reemployed by another agency, you may have to repay part of your lump-sum annual leave payment to the second agency. Turbotax 2009 You can reduce gross wages by the amount you repaid in the same tax year in which you received it. Turbotax 2009 Attach to your tax return a copy of the receipt or statement given to you by the agency you repaid to explain the difference between the wages on your return and the wages on your Forms W-2. Turbotax 2009 Outplacement services. Turbotax 2009   If you choose to accept a reduced amount of severance pay so that you can receive outplacement services (such as training in résumé writing and interview techniques), you must include the unreduced amount of the severance pay in income. Turbotax 2009    However, you can deduct the value of these outplacement services (up to the difference between the severance pay included in income and the amount actually received) as a miscellaneous deduction (subject to the 2%-of-adjusted-gross-income (AGI) limit) on Schedule A (Form 1040). Turbotax 2009 Sick pay. Turbotax 2009   Pay you receive from your employer while you are sick or injured is part of your salary or wages. Turbotax 2009 In addition, you must include in your income sick pay benefits received from any of the following payers. Turbotax 2009 A welfare fund. Turbotax 2009 A state sickness or disability fund. Turbotax 2009 An association of employers or employees. Turbotax 2009 An insurance company, if your employer paid for the plan. Turbotax 2009 However, if you paid the premiums on an accident or health insurance policy, the benefits you receive under the policy are not taxable. Turbotax 2009 For more information, see Other Sickness and Injury Benefits under Sickness and Injury Benefits, later. Turbotax 2009 Social security and Medicare taxes paid by employer. Turbotax 2009   If you and your employer have an agreement that your employer pays your social security and Medicare taxes without deducting them from your gross wages, you must report the amount of tax paid for you as taxable wages on your tax return. Turbotax 2009 The payment is also treated as wages for figuring your social security and Medicare taxes and your social security and Medicare benefits. Turbotax 2009 However, these payments are not treated as social security and Medicare wages if you are a household worker or a farm worker. Turbotax 2009 Stock appreciation rights. Turbotax 2009   Do not include a stock appreciation right granted by your employer in income until you exercise (use) the right. Turbotax 2009 When you use the right, you are entitled to a cash payment equal to the fair market value of the corporation's stock on the date of use minus the fair market value on the date the right was granted. Turbotax 2009 You include the cash payment in income in the year you use the right. Turbotax 2009 Fringe Benefits Fringe benefits received in connection with the performance of your services are included in your income as compensation unless you pay fair market value for them or they are specifically excluded by law. Turbotax 2009 Abstaining from the performance of services (for example, under a covenant not to compete) is treated as the performance of services for purposes of these rules. Turbotax 2009 See Valuation of Fringe Benefits , later in this discussion, for information on how to determine the amount to include in income. Turbotax 2009 Recipient of fringe benefit. Turbotax 2009   You are the recipient of a fringe benefit if you perform the services for which the fringe benefit is provided. Turbotax 2009 You are considered to be the recipient even if it is given to another person, such as a member of your family. Turbotax 2009 An example is a car your employer gives to your spouse for services you perform. Turbotax 2009 The car is considered to have been provided to you and not to your spouse. Turbotax 2009   You do not have to be an employee of the provider to be a recipient of a fringe benefit. Turbotax 2009 If you are a partner, director, or independent contractor, you also can be the recipient of a fringe benefit. Turbotax 2009 Provider of benefit. Turbotax 2009   Your employer or another person for whom you perform services is the provider of a fringe benefit regardless of whether that person actually provides the fringe benefit to you. Turbotax 2009 The provider can be a client or customer of an independent contractor. Turbotax 2009 Accounting period. Turbotax 2009   You must use the same accounting period your employer uses to report your taxable noncash fringe benefits. Turbotax 2009 Your employer has the option to report taxable noncash fringe benefits by using either of the following rules. Turbotax 2009 The general rule: benefits are reported for a full calendar year (January 1–December 31). Turbotax 2009 The special accounting period rule: benefits provided during the last 2 months of the calendar year (or any shorter period) are treated as paid during the following calendar year. Turbotax 2009 For example, each year your employer reports the value of benefits provided during the last 2 months of the prior year and the first 10 months of the current year. Turbotax 2009 Your employer does not have to use the same accounting period for each fringe benefit, but must use the same period for all employees who receive a particular benefit. Turbotax 2009   You must use the same accounting period that you use to report the benefit to claim an employee business deduction (for use of a car, for example). Turbotax 2009 Form W-2. Turbotax 2009   Your employer must include all taxable fringe benefits in box 1 of Form W-2 as wages, tips and other compensation and, if applicable, in boxes 3 and 5 as social security and Medicare wages. Turbotax 2009 Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement). Turbotax 2009 However, if your employer provided you with a vehicle and included 100% of its annual lease value in your income, the employer must separately report this value to you in box 14 (or on a separate statement). Turbotax 2009 Accident or Health Plan In most cases, the value of accident or health plan coverage provided to you by your employer is not included in your income. Turbotax 2009 Benefits you receive from the plan may be taxable, as explained, later, under Sickness and Injury Benefits . Turbotax 2009 For information on the items covered in this section, other than Long-term care coverage , see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. Turbotax 2009 Long-term care coverage. Turbotax 2009   Contributions by your employer to provide coverage for long-term care services generally are not included in your income. Turbotax 2009 However, contributions made through a flexible spending or similar arrangement (such as a cafeteria plan) must be included in your income. Turbotax 2009 This amount will be reported as wages in box 1 of your Form W-2. Turbotax 2009 Archer MSA contributions. Turbotax 2009    Contributions by your employer to your Archer MSA generally are not included in your income. Turbotax 2009 Their total will be reported in box 12 of Form W-2, with code R. Turbotax 2009 You must report this amount on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. Turbotax 2009 File the form with your return. Turbotax 2009 Health flexible spending arrangement (health FSA). Turbotax 2009   If your employer provides a health FSA that qualifies as an accident or health plan, the amount of your salary reduction, and reimbursements of your medical care expenses, in most cases, are not included in your income. Turbotax 2009   Health FSAs are subject to a $2,500 limit on salary reduction contributions for plan years beginning after 2012. Turbotax 2009 The $2,500 limit is subject to an inflation adjustment for plan years beginning after 2013. Turbotax 2009 For more information, see Notice 2012-40, 2012-26 I. Turbotax 2009 R. Turbotax 2009 B. Turbotax 2009 1046, available at www. Turbotax 2009 irs. Turbotax 2009 gov/irb/2012-26 IRB/ar09. Turbotax 2009 html. Turbotax 2009 Health reimbursement arrangement (HRA). Turbotax 2009   If your employer provides an HRA that qualifies as an accident or health plan, coverage and reimbursements of your medical care expenses generally are not included in your income. Turbotax 2009 Health savings accounts (HSA). Turbotax 2009   If you are an eligible individual, you and any other person, including your employer or a family member, can make contributions to your HSA. Turbotax 2009 Contributions, other than employer contributions, are deductible on your return whether or not you itemize deductions. Turbotax 2009 Contributions made by your employer are not included in your income. Turbotax 2009 Distributions from your HSA that are used to pay qualified medical expenses are not included in your income. Turbotax 2009 Distributions not used for qualified medical expenses are included in your income. Turbotax 2009 See Publication 969 for the requirements of an HSA. Turbotax 2009   Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. Turbotax 2009 The contributions are treated as a distribution of money and are not included in the partner's gross income. Turbotax 2009 Contributions by a partnership to a partner's HSA for services rendered are treated as guaranteed payments that are includible in the partner's gross income. Turbotax 2009 In both situations, the partner can deduct the contribution made to the partner's HSA. Turbotax 2009   Contributions by an S corporation to a 2% shareholder-employee's HSA for services rendered are treated as guaranteed payments and are includible in the shareholder-employee's gross income. Turbotax 2009 The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. Turbotax 2009 Qualified HSA funding distribution. Turbotax 2009   You can make a one-time distribution from your individual retirement account (IRA) to an HSA and you generally will not include any of the distribution in your income. Turbotax 2009 See Publication 590, Individual Retirement Arrangements (IRAs), for the requirements for these qualified HSA funding distributions. Turbotax 2009 Failure to maintain eligibility. Turbotax 2009   If your HSA received qualified HSA distributions from a health FSA or HRA (discussed earlier) or a qualified HSA funding distribution, you must be an eligible individual for HSA purposes for the period beginning with the month in which the qualified distribution was made and ending on the last day of the 12th month following that month. Turbotax 2009 If you fail to be an eligible individual during this period, other than because of death or disability, you must include the distribution in your income for the tax year in which you become ineligible. Turbotax 2009 This income is also subject to an additional 10% tax. Turbotax 2009 Adoption Assistance You may be able to exclude from your income amounts paid or expenses incurred by your employer for qualified adoption expenses in connection with your adoption of an eligible child. Turbotax 2009 See Instructions for Form 8839, Qualified Adoption Expenses, for more information. Turbotax 2009 Adoption benefits are reported by your employer in box 12 of Form W-2 with code T. Turbotax 2009 They also are included as social security and Medicare wages in boxes 3 and 5. Turbotax 2009 However, they are not included as wages in box 1. Turbotax 2009 To determine the taxable and nontaxable amounts, you must complete Part III of Form 8839. Turbotax 2009 File the form with your return. Turbotax 2009 Athletic Facilities If your employer provides you with the free or low-cost use of an employer-operated gym or other athletic club on your employer's premises, the value is not included in your compensation. Turbotax 2009 The gym must be used primarily by employees, their spouses, and their dependent children. Turbotax 2009 If your employer pays for a fitness program provided to you at an off-site resort hotel or athletic club, the value of the program is included in your compensation. Turbotax 2009 De Minimis (Minimal) Benefits If your employer provides you with a product or service and the cost of it is so small that it would be unreasonable for the employer to account for it, the value is not included in your income. Turbotax 2009 In most cases, the value of benefits such as discounts at company cafeterias, cab fares home when working overtime, and company picnics are not included in your income. Turbotax 2009 Also see Employee Discounts , later. Turbotax 2009 Holiday gifts. Turbotax 2009   If your employer gives you a turkey, ham, or other item of nominal value at Christmas or other holidays, do not include the value of the gift in your income. Turbotax 2009 However, if your employer gives you cash, a gift certificate, or a similar item that you can easily exchange for cash, you include the value of that gift as extra salary or wages regardless of the amount involved. Turbotax 2009 Dependent Care Benefits If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. Turbotax 2009 Dependent care benefits include: Amounts your employer pays directly to either you or your care provider for the care of your qualifying person while you work, and The fair market value of care in a daycare facility provided or sponsored by your employer. Turbotax 2009 The amount you can exclude is limited to the lesser of: The total amount of dependent care benefits you received during the year, The total amount of qualified expenses you incurred during the year, Your earned income, Your spouse's earned income, or $5,000 ($2,500 if married filing separately). Turbotax 2009 Your employer must show the total amount of dependent care benefits provided to you during the year under a qualified plan in box 10 of your Form W-2. Turbotax 2009 Your employer also will include any dependent care benefits over $5,000 in your wages shown in box 1 of your Form W-2. Turbotax 2009 To claim the exclusion, you must complete Part III of Form 2441, Child and Dependent Care Expenses. Turbotax 2009 See the Instructions for Form 2441 for more information. Turbotax 2009 Educational Assistance You can exclude from your income up to $5,250 of qualified employer-provided educational assistance. Turbotax 2009 For more information, see Publication 970. Turbotax 2009 Employee Discounts If your employer sells you property or services at a discount, you may be able to exclude the amount of the discount from your income. Turbotax 2009 The exclusion applies to discounts on property or services offered to customers in the ordinary course of the line of business in which you work. Turbotax 2009 However, it does not apply to discounts on real property or property commonly held for investment (such as stocks or bonds). Turbotax 2009 The exclusion is limited to the price charged nonemployee customers multiplied by the following percentage. Turbotax 2009 For a discount on property, your employer's gross profit percentage (gross profit divided by gross sales) on all property sold during the employer's previous tax year. Turbotax 2009 (Ask your employer for this percentage. Turbotax 2009 ) For a discount on services, 20%. Turbotax 2009 Financial Counseling Fees Financial counseling fees paid for you by your employer are included in your income and must be reported as part of wages. Turbotax 2009 If the fees are for tax or investment counseling, they can be deducted on Schedule A (Form 1040) as a miscellaneous deduction (subject to the 2%-of-AGI limit). Turbotax 2009 Qualified retirement planning services paid for you by your employer may be excluded from your income. Turbotax 2009 For more information, see Retirement Planning Services , later. Turbotax 2009 Group-Term Life Insurance In most cases, the cost of up to $50,000 of group-term life insurance coverage provided to you by your employer (or former employer) is not included in your income. Turbotax 2009 However, you must include in income the cost of employer-provided insurance that is more than the cost of $50,000 of coverage reduced by any amount you pay toward the purchase of the insurance. Turbotax 2009 For exceptions to this rule, see Entire cost excluded , and Entire cost taxed , later. Turbotax 2009 If your employer provided more than $50,000 of coverage, the amount included in your income is reported as part of your wages in box 1 of your Form W-2. Turbotax 2009 Also, it is shown separately in box 12 with code C. Turbotax 2009 Group-term life insurance. Turbotax 2009   This insurance is term life insurance protection (insurance for a fixed period of time) that: Provides a general death benefit, Is provided to a group of employees, Is provided under a policy carried by the employer, and Provides an amount of insurance to each employee based on a formula that prevents individual selection. Turbotax 2009 Permanent benefits. Turbotax 2009   If your group-term life insurance policy includes permanent benefits, such as a paid-up or cash surrender value, you must include in your income, as wages, the cost of the permanent benefits minus the amount you pay for them. Turbotax 2009 Your employer should be able to tell you the amount to include in your income. Turbotax 2009 Accidental death benefits. Turbotax 2009   Insurance that provides accidental or other death benefits but does not provide general death benefits (travel insurance, for example) is not group-term life insurance. Turbotax 2009 Former employer. Turbotax 2009   If your former employer provided more than $50,000 of group-term life insurance coverage during the year, the amount included in your income is reported as wages in box 1 of Form W-2. Turbotax 2009 Also, it is shown separately in box 12 with code C. Turbotax 2009 Box 12 also will show the amount of uncollected social security and Medicare taxes on the excess coverage, with codes M and N. Turbotax 2009 You must pay these taxes with your income tax return. Turbotax 2009 Include them on line 60, Form 1040, and follow the instructions forline 60. Turbotax 2009 For more information, see the Instructions for Form 1040. Turbotax 2009 Two or more employers. Turbotax 2009   Your exclusion for employer-provided group-term life insurance coverage cannot exceed the cost of $50,000 of coverage, whether the insurance is provided by a single employer or multiple employers. Turbotax 2009 If two or more employers provide insurance coverage that totals more than $50,000, the amounts reported as wages on your Forms W-2 will not be correct. Turbotax 2009 You must figure how much to include in your income. Turbotax 2009 Reduce the amount you figure by any amount reported with code C in box 12 of your Forms W-2, add the result to the wages reported in box 1, and report the total on your return. Turbotax 2009 Figuring the taxable cost. Turbotax 2009    Use the following worksheet to figure the amount to include in your income. Turbotax 2009   If you pay any part of the cost of the insurance, your entire payment reduces, dollar for dollar, the amount you otherwise would include in your income. Turbotax 2009 However, you cannot reduce the amount to include in your income by: Payments for coverage in a different tax year, Payments for coverage through a cafeteria plan, unless the payments are after-tax contributions, or Payments for coverage not taxed to you because of the exceptions discussed later under Entire cost excluded . Turbotax 2009 Worksheet 1. Turbotax 2009 Figuring the Cost of Group-Term Life Insurance To Include in Income 1. Turbotax 2009 Enter the total amount of your insurance coverage from your employer(s) 1. Turbotax 2009   2. Turbotax 2009 Limit on exclusion for employer-provided group-term life insurance coverage 2. Turbotax 2009 50,000 3. Turbotax 2009 Subtract line 2 from line 1 3. Turbotax 2009   4. Turbotax 2009 Divide line 3 by $1,000. Turbotax 2009 Figure to the nearest tenth 4. Turbotax 2009   5. Turbotax 2009 Go to Table 1. Turbotax 2009 Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. Turbotax 2009   6. Turbotax 2009 Multiply line 4 by line 5 6. Turbotax 2009     7. Turbotax 2009 Enter the number of full months of coverage at this cost 7. Turbotax 2009   8. Turbotax 2009 Multiply line 6 by line 7 8. Turbotax 2009   9. Turbotax 2009 Enter the premiums you paid per month 9. Turbotax 2009       10. Turbotax 2009 Enter the number of months you paid the  premiums 10. Turbotax 2009       11. Turbotax 2009 Multiply line 9 by line 10. Turbotax 2009 11. Turbotax 2009   12. Turbotax 2009 Subtract line 11 from line 8. Turbotax 2009 Include this amount in your income as wages 12. Turbotax 2009   Table 1. Turbotax 2009 Cost of $1,000 of Group-Term Life Insurance for One Month   Age Cost     Under 25 $ . Turbotax 2009 05     25 through 29 . Turbotax 2009 06     30 through 34 . Turbotax 2009 08     35 through 39 . Turbotax 2009 09     40 through 44 . Turbotax 2009 10     45 through 49 . Turbotax 2009 15     50 through 54 . Turbotax 2009 23     55 through 59 . Turbotax 2009 43     60 through 64 . Turbotax 2009 66     65 through 69 1. Turbotax 2009 27     70 and older 2. Turbotax 2009 06   Example. Turbotax 2009 You are 51 years old and work for employers A and B. Turbotax 2009 Both employers provide group-term life insurance coverage for you for the entire year. Turbotax 2009 Your coverage is $35,000 with employer A and $45,000 with employer B. Turbotax 2009 You pay premiums of $4. Turbotax 2009 15 a month under the employer B group plan. Turbotax 2009 You figure the amount to include in your income as follows. Turbotax 2009   Worksheet 1. Turbotax 2009 Figuring the Cost of Group-Term Life Insurance To Include in Income—Illustrated 1. Turbotax 2009 Enter the total amount of your insurance coverage from your employer(s) 1. Turbotax 2009 80,000 2. Turbotax 2009 Limit on exclusion for employer-provided group-term life insurance coverage 2. Turbotax 2009 50,000 3. Turbotax 2009 Subtract line 2 from line 1 3. Turbotax 2009 30,000 4. Turbotax 2009 Divide line 3 by $1,000. Turbotax 2009 Figure to the nearest tenth 4. Turbotax 2009 30. Turbotax 2009 0 5. Turbotax 2009 Go to Table 1. Turbotax 2009 Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. Turbotax 2009 . Turbotax 2009 23 6. Turbotax 2009 Multiply line 4 by line 5 6. Turbotax 2009 6. Turbotax 2009 90 7. Turbotax 2009 Enter the number of full months of coverage at this cost. Turbotax 2009 7. Turbotax 2009 12 8. Turbotax 2009 Multiply line 6 by line 7 8. Turbotax 2009 82. Turbotax 2009 80 9. Turbotax 2009 Enter the premiums you paid per month 9. Turbotax 2009 4. Turbotax 2009 15     10. Turbotax 2009 Enter the number of months you paid the premiums 10. Turbotax 2009 12     11. Turbotax 2009 Multiply line 9 by line 10. Turbotax 2009 11. Turbotax 2009 49. Turbotax 2009 80 12. Turbotax 2009 Subtract line 11 from line 8. Turbotax 2009 Include this amount in your income as wages 12. Turbotax 2009 33. Turbotax 2009 00 The total amount to include in income for the cost of excess group-term life insurance is $33. Turbotax 2009 Neither employer provided over $50,000 insurance coverage, so the wages shown on your Forms W-2 do not include any part of that $33. Turbotax 2009 You must add it to the wages shown on your Forms W-2 and include the total on your return. Turbotax 2009 Entire cost excluded. Turbotax 2009   You are not taxed on the cost of group-term life insurance if any of the following circumstances apply. Turbotax 2009 You are permanently and totally disabled and have ended your employment. Turbotax 2009 Your employer is the beneficiary of the policy for the entire period the insurance is in force during the tax year. Turbotax 2009 A charitable organization to which contributions are deductible is the only beneficiary of the policy for the entire period the insurance is in force during the tax year. Turbotax 2009 (You are not entitled to a deduction for a charitable contribution for naming a charitable organization as the beneficiary of your policy. Turbotax 2009 ) The plan existed on January 1, 1984, and: You retired before January 2, 1984, and were covered by the plan when you retired, or You reached age 55 before January 2, 1984, and were employed by the employer or its predecessor in 1983. Turbotax 2009 Entire cost taxed. Turbotax 2009   You are taxed on the entire cost of group-term life insurance if either of the following circumstances apply. Turbotax 2009 The insurance is provided by your employer through a qualified employees' trust, such as a pension trust or a qualified annuity plan. Turbotax 2009 You are a key employee and your employer's plan discriminates in favor of key employees. Turbotax 2009 Meals and Lodging You do not include in your income the value of meals and lodging provided to you and your family by your employer at no charge if the following conditions are met. Turbotax 2009 The meals are: Furnished on the business premises of your employer, and Furnished for the convenience of your employer. Turbotax 2009 The lodging is: Furnished on the business premises of your employer, Furnished for the convenience of your employer, and A condition of your employment. Turbotax 2009 (You must accept it in order to be able to properly perform your duties. Turbotax 2009 ) You also do not include in your income the value of meals or meal money that qualifies as a de minimis fringe benefit. Turbotax 2009 See De Minimis (Minimal) Benefits , earlier. Turbotax 2009 Faculty lodging. Turbotax 2009   If you are an employee of an educational institution or an academic health center and you are provided with lodging that does not meet the three conditions given earlier, you still may not have to include the value of the lodging in income. Turbotax 2009 However, the lodging must be qualified campus lodging, and you must pay an adequate rent. Turbotax 2009 Academic health center. Turbotax 2009   This is an organization that meets the following conditions. Turbotax 2009 Its principal purpose or function is to provide medical or hospital care or medical education or research. Turbotax 2009 It receives payments for graduate medical education under the Social Security Act. Turbotax 2009 One of its principal purposes or functions is to provide and teach basic and clinical medical science and research using its own faculty. Turbotax 2009 Qualified campus lodging. Turbotax 2009   Qualified campus lodging is lodging furnished to you, your spouse, or one of your dependents by, or on behalf of, the institution or center for use as a home. Turbotax 2009 The lodging must be located on or near a campus of the educational institution or academic health center. Turbotax 2009 Adequate rent. Turbotax 2009   The amount of rent you pay for the year for qualified campus lodging is considered adequate if it is at least equal to the lesser of: 5% of the appraised value of the lodging, or The average of rentals paid by individuals (other than employees or students) for comparable lodging held for rent by the educational institution. Turbotax 2009 If the amount you pay is less than the lesser of these amounts, you must include the difference in your income. Turbotax 2009   The lodging must be appraised by an independent appraiser and the appraisal must be reviewed on an annual basis. Turbotax 2009 Example. Turbotax 2009 Carl Johnson, a sociology professor for State University, rents a home from the university that is qualified campus lodging. Turbotax 2009 The house is appraised at $200,000. Turbotax 2009 The average rent paid for comparable university lodging by persons other than employees or students is $14,000 a year. Turbotax 2009 Carl pays an annual rent of $11,000. Turbotax 2009 Carl does not include in his income any rental value because the rent he pays equals at least 5% of the appraised value of the house (5% × $200,000 = $10,000). Turbotax 2009 If Carl paid annual rent of only $8,000, he would have to include $2,000 in his income ($10,000 − $8,000). Turbotax 2009 Moving Expense Reimbursements In most cases, if your employer pays for your moving expenses (either directly or indirectly) and the expenses would have been deductible if you paid them yourself, the value is not included in your income. Turbotax 2009 See Publication 521 for more information. Turbotax 2009 No-Additional-Cost Services The value of services you receive from your employer for free, at cost, or for a reduced price is not included in your income if your employer: Offers the same service for sale to customers in the ordinary course of the line of business in which you work, and Does not have a substantial additional cost (including any sales income given up) to provide you with the service (regardless of what you paid for the service). Turbotax 2009 In most cases, no-additional-cost services are excess capacity services, such as airline, bus, or train tickets, hotel rooms, and telephone services. Turbotax 2009 Example. Turbotax 2009 You are employed as a flight attendant for a company that owns both an airline and a hotel chain. Turbotax 2009 Your employer allows you to take personal flights (if there is an unoccupied seat) and stay in any one of their hotels (if there is an unoccupied room) at no cost to you. Turbotax 2009 The value of the personal flight is not included in your income. Turbotax 2009 However, the value of the hotel room is included in your income because you do not work in the hotel business. Turbotax 2009 Retirement Planning Services If your employer has a qualified retirement plan, qualified retirement planning services provided to you (and your spouse) by your employer are not included in your income. Turbotax 2009 Qualified services include retirement planning advice, information about your employer's retirement plan, and information about how the plan may fit into your overall individual retirement income plan. Turbotax 2009 You cannot exclude the value of any tax preparation, accounting, legal, or brokerage services provided by your employer. Turbotax 2009 Also, see Financial Counseling Fees , earlier. Turbotax 2009 Transportation If your employer provides you with a qualified transportation fringe benefit, it can be excluded from your income, up to certain limits. Turbotax 2009 A qualified transportation fringe benefit is: Transportation in a commuter highway vehicle (such as a van) between your home and work place, A transit pass, Qualified parking, or Qualified bicycle commuting reimbursement. Turbotax 2009 Cash reimbursement by your employer for these expenses under a bona fide reimbursement arrangement is also excludable. Turbotax 2009 However, cash reimbursement for a transit pass is excludable only if a voucher or similar item that can be exchanged only for a transit pass is not readily available for direct distribution to you. Turbotax 2009 Exclusion limit. Turbotax 2009   The exclusion for commuter vehicle transportation and transit pass fringe benefits cannot be more than $245 a month. Turbotax 2009   The exclusion for the qualified parking fringe benefit cannot be more than $245 a month. Turbotax 2009   The exclusion for qualified bicycle commuting in a calendar year is $20 multiplied by the number of qualified bicycle commuting months that year. Turbotax 2009   If the benefits have a value that is more than these limits, the excess must be included in your income. Turbotax 2009 You are not entitled to these exclusions if the reimbursements are made under a compensation reduction agreement. Turbotax 2009 Commuter highway vehicle. Turbotax 2009   This is a highway vehicle that seats at least six adults (not including the driver). Turbotax 2009 At least 80% of the vehicle's mileage must reasonably be expected to be: For transporting employees between their homes and work place, and On trips during which employees occupy at least half of the vehicle's adult seating capacity (not including the driver). Turbotax 2009 Transit pass. Turbotax 2009   This is any pass, token, farecard, voucher, or similar item entitling a person to ride mass transit (whether public or private) free or at a reduced rate or to ride in a commuter highway vehicle operated by a person in the business of transporting persons for compensation. Turbotax 2009 Qualified parking. Turbotax 2009   This is parking provided to an employee at or near the employer's place of business. Turbotax 2009 It also includes parking provided on or near a location from which the employee commutes to work by mass transit, in a commuter highway vehicle, or by carpool. Turbotax 2009 It does not include parking at or near the employee's home. Turbotax 2009 Qualified bicycle commuting. Turbotax 2009   This is reimbursement based on the number of qualified bicycle commuting months for the year. Turbotax 2009 A qualified bicycle commuting month is any month you use the bicycle regularly for a substantial portion of the travel between your home and place of employment and you do not receive any of the other qualified transportation fringe benefits. Turbotax 2009 The reimbursement can be for expenses you incurred during the year for the purchase of a bicycle and bicycle improvements, repair, and storage. Turbotax 2009 Tuition Reduction You can exclude a qualified tuition reduction from your income. Turbotax 2009 This is the amount of a reduction in tuition: For education (below graduate level) furnished by an educational institution to an employee, former employee who retired or became disabled, or his or her spouse and dependent children. Turbotax 2009 For education furnished to a graduate student at an educational institution if the graduate student is engaged in teaching or research activities for that institution. Turbotax 2009 Representing payment for teaching, research, or other services if you receive the amount under the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance program. Turbotax 2009 For more information, see Publication 970. Turbotax 2009 Working Condition Benefits If your employer provides you with a product or service and the cost of it would have been allowable as a business or depreciation deduction if you paid for it yourself, the cost is not included in your income. Turbotax 2009 Example. Turbotax 2009 You work as an engineer and your employer provides you with a subscription to an engineering trade magazine. Turbotax 2009 The cost of the subscription is not included in your income because the cost would have been allowable to you as a business deduction if you had paid for the subscription yourself. Turbotax 2009 Valuation of Fringe Benefits If a fringe benefit is included in your income, the amount included is generally its value determined under the general valuation rule or under the special valuation rules. Turbotax 2009 For an exception, see Group-Term Life Insurance , earlier. Turbotax 2009 General valuation rule. Turbotax 2009   You must include in your income the amount by which the fair market value of the fringe benefit is more than the sum of: The amount, if any, you paid for the benefit, plus The amount, if any, specifically excluded from your income by law. Turbotax 2009 If you pay fair market value for a fringe benefit, no amount is included in your income. Turbotax 2009 Fair market value. Turbotax 2009   The fair market value of a fringe benefit is determined by all the facts and circumstances. Turbotax 2009 It is the amount you would have to pay a third party to buy or lease the benefit. Turbotax 2009 This is determined without regard to: Your perceived value of the benefit, or The amount your employer paid for the benefit. Turbotax 2009 Employer-provided vehicles. Turbotax 2009   If your employer provides a car (or other highway motor vehicle) to you, your personal use of the car is usually a taxable noncash fringe benefit. Turbotax 2009   Under the general valuation rules, the value of an employer-provided vehicle is the amount you would have to pay a third party to lease the same or a similar vehicle on the same or comparable terms in the same geographic area where you use the vehicle. Turbotax 2009 An example of a comparable lease term is the amount of time the vehicle is available for your use, such as a 1-year period. Turbotax 2009 The value cannot be determined by multiplying a cents-per-mile rate times the number of miles driven unless you prove the vehicle could have been leased on a cents-per-mile basis. Turbotax 2009 Flights on employer-provided aircraft. Turbotax 2009   Under the general valuation rules, if your flight on an employer-provided piloted aircraft is primarily personal and you control the use of the aircraft for the flight, the value is the amount it would cost to charter the flight from a third party. Turbotax 2009   If there is more than one employee on the flight, the cost to charter the aircraft must be divided among those employees. Turbotax 2009 The division must be based on all the facts, including which employee or employees control the use of the aircraft. Turbotax 2009 Special valuation rules. Turbotax 2009   You generally can use a special valuation rule for a fringe benefit only if your employer uses the rule. Turbotax 2009 If your employer uses a special valuation rule, you cannot use a different special rule to value that benefit. Turbotax 2009 You always can use the general valuation rule discussed earlier, based on facts and circumstances, even if your employer uses a special rule. Turbotax 2009   If you and your employer use a special valuation rule, you must include in your income the amount your employer determines under the special rule minus the sum of: Any amount you repaid your employer, plus Any amount specifically excluded from income by law. Turbotax 2009 The special valuation rules are the following. Turbotax 2009 The automobile lease rule. Turbotax 2009 The vehicle cents-per-mile rule. Turbotax 2009 The commuting rule. Turbotax 2009 The unsafe conditions commuting rule. Turbotax 2009 The employer-operated eating-facility rule. Turbotax 2009   For more information on these rules, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. Turbotax 2009    For information on the non-commercial flight and commercial flight valuation rules, see sections 1. Turbotax 2009 61-21(g) and 1. Turbotax 2009 61-21(h) of the regulations. Turbotax 2009 Retirement Plan Contributions Your employer's contributions to a qualified retirement plan for you are not included in income at the time contributed. Turbotax 2009 (Your employer can tell you whether your retirement plan is qualified. Turbotax 2009 ) However, the cost of life insurance coverage included in the plan may have to be included. Turbotax 2009 See Group-Term Life Insurance , earlier, under Fringe Benefits. Turbotax 2009 If your employer pays into a nonqualified plan for you, you generally must include the contributions in your income as wages for the tax year in which the contributions are made. Turbotax 2009 However, if your interest in the plan is not transferable or is subject to a substantial risk of forfeiture (you have a good chance of losing it) at the time of the contribution, you do not have to include the value of your interest in your income until it is transferable or is no longer subject to a substantial risk of forfeiture. Turbotax 2009 For information on distributions from retirement plans, see Publication 575 (or Publication 721, Tax Guide to U. Turbotax 2009 S. Turbotax 2009 Civil Service Retirement Benefits, if you are a federal employee or retiree). Turbotax 2009 Elective Deferrals If you are covered by certain kinds of retirement plans, you can choose to have part of your compensation contributed by your employer to a retirement fund, rather than have it paid to you. Turbotax 2009 The amount you set aside (called an elective deferral) is treated as an employer contribution to a qualified plan. Turbotax 2009 An elective deferral, other than a designated Roth contribution (discussed later), is not included in wages subject to income tax at the time contributed. Turbotax 2009 However, it is included in wages subject to social security and Medicare taxes. Turbotax 2009 Elective deferrals include elective contributions to the following retirement plans. Turbotax 2009 Cash or deferred arrangements (section 401(k) plans). Turbotax 2009 The Thrift Savings Plan for federal employees. Turbotax 2009 Salary reduction simplified employee pension plans (SARSEP). Turbotax 2009 Savings incentive match plans for employees (SIMPLE plans). Turbotax 2009 Tax-sheltered annuity plans (403(b) plans). Turbotax 2009 Section 501(c)(18)(D) plans. Turbotax 2009 (But see Reporting by employer , later. Turbotax 2009 ) Section 457 plans. Turbotax 2009 Qualified automatic contribution arrangements. Turbotax 2009   Under a qualified automatic contribution arrangement, your employer can treat you as having elected to have a part of your compensation contributed to a section 401(k) plan. Turbotax 2009 You are to receive written notice of your rights and obligations under the qualified automatic contribution arrangement. Turbotax 2009 The notice must explain: Your rights to elect not to have elective contributions made, or to have contributions made at a different percentage, and How contributions made will be invested in the absence of any investment decision by you. Turbotax 2009   You must be given a reasonable period of time after receipt of the notice and before the first elective contribution is made to make an election with respect to the contributions. Turbotax 2009 Overall limit on deferrals. Turbotax 2009   For 2013, in most cases, you should not have deferred more than a total of $17,500 of contributions to the plans listed in (1) through (3), earlier. Turbotax 2009 The specific plan limits for the plans listed in (4) through (7), earlier, are discussed later. Turbotax 2009 Amounts deferred under specific plan limits are part of the overall limit on deferrals. Turbotax 2009   Your employer or plan administrator should apply the proper annual limit when figuring your plan contributions. Turbotax 2009 However, you are responsible for monitoring the total you defer to ensure that the deferrals are not more than the overall limit. Turbotax 2009 Catch-up contributions. Turbotax 2009   You may be allowed catch-up contributions (additional elective deferrals) if you are age 50 or older by the end of your tax year. Turbotax 2009 For more information about catch-up contributions to 403(b) plans, see chapter 6 of Publication 571, Tax Sheltered Annuity Plans. Turbotax 2009   For more information about additional elective deferrals to: SEPs (SARSEPs), see Salary Reduction Simplified Employee Pension in chapter 2 of Publication 560, Retirement Plans for Small Business. Turbotax 2009 SIMPLE plans, see How Much Can Be Contributed on Your Behalf? in chapter 3 of Publication 590. Turbotax 2009 Section 457 plans, see Limit for deferrals under section 457 plans , later. Turbotax 2009 Limit for deferrals under SIMPLE plans. Turbotax 2009   If you are a participant in a SIMPLE plan, you generally should not have deferred more than $12,000 in 2013. Turbotax 2009 Amounts you defer under a SIMPLE plan count toward the overall limit ($17,500 for 2013) and may affect the amount you can defer under other elective deferral plans. Turbotax 2009 Limit for tax-sheltered annuities. Turbotax 2009   If you are a participant in a tax-sheltered annuity plan (403(b) plan), the limit on elective deferrals for 2013 generally is $17,500. Turbotax 2009 However, if you have at least 15 years of service with a public school system, a hospital, a home health service agency, a health and welfare service agency, a church, or a convention or association of churches (or associated organization), the limit on elective deferrals is increased by the least of the following amounts. Turbotax 2009 $3,000, $15,000, reduced by the sum of: The additional pre-tax elective deferrals made in earlier years because of this rule, plus The aggregate amount of designated Roth contributions permitted for prior tax years because of this rule, or $5,000 times the number of your years of service for the organization, minus the total elective deferrals made by your employer on your behalf for earlier years. Turbotax 2009   If you qualify for the 15-year rule, your elective deferrals under this limit can be as high as $20,500 for 2013. Turbotax 2009   For more information, see Publication 571. Turbotax 2009 Limit for deferral under section 501(c)(18) plans. Turbotax 2009   If you are a participant in a section 501(c)(18) plan (a trust created before June 25, 1959, funded only by employee contributions), you should have deferred no more than the lesser of $7,000 or 25% of your compensation. Turbotax 2009 Amounts you defer under a section 501(c)(18) plan count toward the overall limit ($17,500 in 2013) and may affect the amount you can defer under other elective deferral plans. Turbotax 2009 Limit for deferrals under section 457 plans. Turbotax 2009   If you are a participant in a section 457 plan (a deferred compensation plan for employees of state or local governments or tax-exempt organizations), you should have deferred no more than the lesser of your includible compensation or $17,500 in 2013. Turbotax 2009 However, if you are within 3 years of normal retirement age, you may be allowed an increased limit if the plan allows it. Turbotax 2009 See Increased limit , later. Turbotax 2009 Includible compensation. Turbotax 2009   This is the pay you received for the year from the employer who maintained the section 457 plan. Turbotax 2009 In most cases, it includes all the following payments. Turbotax 2009 Wages and salaries. Turbotax 2009 Fees for professional services. Turbotax 2009 The value of any employer-provided qualified transportation fringe benefit (defined under Transportation , earlier) that is not included in your income. Turbotax 2009 Other amounts received (cash or noncash) for personal services you performed, including, but not limited to, the following items. Turbotax 2009 Commissions and tips. Turbotax 2009 Fringe benefits. Turbotax 2009 Bonuses. Turbotax 2009 Employer contributions (elective deferrals) to: The section 457 plan. Turbotax 2009 Qualified cash or deferred arrangements (section 401(k) plans) that are not included in your income. Turbotax 2009 A salary reduction simplified employee pension (SARSEP). Turbotax 2009 A tax-sheltered annuity (section 403(b) plan). Turbotax 2009 A savings incentive match plan for employees (SIMPLE plan). Turbotax 2009 A section 125 cafeteria plan. Turbotax 2009   Instead of using the amounts listed earlier to determine your includible compensation, your employer can use any of the following amounts. Turbotax 2009 Your wages as defined for income tax withholding purposes. Turbotax 2009 Your wages as reported in box 1 of Form W-2. Turbotax 2009 Your wages that are subject to social security withholding (including elective deferrals). Turbotax 2009 Increased limit. Turbotax 2009   During any, or all, of the last 3 years ending before you reach normal retirement age under the plan, your plan may provide that your limit is the lesser of: Twice the annual limit ($35,000 for 2013), or The basic annual limit plus the amount of the basic limit not used in prior years (only allowed if not using age 50 or over catch-up contributions). Turbotax 2009 Catch-up contributions. Turbotax 2009   You generally can have additional elective deferrals made to your governmental section 457 plan if: You reached age 50 by the end of the year, and No other elective deferrals can be made for you to the plan for the year because of limits or restrictions. Turbotax 2009 If you qualify, your limit can be the lesser of your includible compensation or $17,500, plus $5,500. Turbotax 2009 However, if you are within 3 years of retirement age and your plan provides the increased limit, discussed earlier, that limit may be higher. Turbotax 2009 Designated Roth contributions. Turbotax 2009   Employers with section 401(k) and section 403(b) plans can create qualified Roth contribution programs so that you may elect to have part or all of your elective deferrals to the plan designated as after-tax Roth contributions. Turbotax 2009 Designated Roth contributions are treated as elective deferrals, except that they are included in income. Turbotax 2009 Your retirement plan must maintain separate accounts and recordkeeping for the designated Roth contributions. Turbotax 2009   Qualified distributions from a Roth plan are not included in income. Turbotax 2009 In most cases, a distribution made before the end of the 5-tax-year period beginning with the first tax year for which you made a designated Roth contribution to the plan is not a qualified distribution. Turbotax 2009 Reporting by employer. Turbotax 2009   Your employer generally should not include elective deferrals in your wages in box 1 of Form W-2. Turbotax 2009 Instead, your employer should mark the Retirement plan checkbox in box 13 and show the total amount deferred in box 12. Turbotax 2009 Section 501(c)(18)(D) contributions. Turbotax 2009   Wages shown in box 1 of your Form W-2 should not have been reduced for contributions you made to a section 501(c)(18)(D) retirement plan. Turbotax 2009 The amount you contributed should be identified with code “H” in box 12. Turbotax 2009 You may deduct the amount deferred subject to the limits that apply. Turbotax 2009 Include your deduction in the total on Form 1040, line 36. Turbotax 2009 Enter the amount and “501(c)(18)(D)” on the dotted line next to line 36. Turbotax 2009 Designated Roth contributions. Turbotax 2009    These contributions are elective deferrals but are included in your wages in box 1 of Form W-2. Turbotax 2009 Designated Roth contributions to a section 401(k) plan are reported using code AA in box 12, or, for section 403(b) plans, code BB in box 12. Turbotax 2009 Excess deferrals. Turbotax 2009   If your deferrals exceed the limit, you must notify your plan by the date required by the plan. Turbotax 2009 If the plan permits, the excess amount will be distributed to you. Turbotax 2009 If you participate in more than one plan, you can have the excess paid out of any of the plans that permit these distributions. Turbotax 2009 You must notify each plan by the date required by that plan of the amount to be paid from that particular plan. Turbotax 2009 The plan then must pay you the amount of the excess, along with any income earned on that amount, by April 15 of the following year. Turbotax 2009   You must include the excess deferral in your income for the year of the deferral unless you have an excess deferral of a designated Roth contribution. Turbotax 2009 File Form 1040 to add the excess deferral amount to your wages on line 7. Turbotax 2009 Do not use Form 1040A or Form 1040EZ to report excess deferral amounts. Turbotax 2009 Excess not distributed. Turbotax 2009   If you do not take out the excess amount, you cannot include it in the cost of the contract even though you included it in your income. Turbotax 2009 Therefore, you are taxed twice on the excess deferral left in the plan—once when you contribute it, and again when you receive it as a distribution. Turbotax 2009 Excess distributed to you. Turbotax 2009   If you take out the excess after the year of the deferral and you receive the corrective distribution by April 15 of the following year, do not include it in income again in the year you receive it. Turbotax 2009 If you receive it later, you must include it in income in both the year of the deferral and the year you receive it. Turbotax 2009 Any income on the excess deferral taken out is taxable in the tax year in which you take it out. Turbotax 2009 If you take out part of the excess deferral and the income on it, allocate the distribution proportionately between the excess deferral and the income. Turbotax 2009    You should receive a Form 1099-R for the year in which the excess deferral is distributed to you. Turbotax 2009 Use the following rules to report a corrective distribution shown on Form 1099-R for 2013. Turbotax 2009 If the distribution was for a 2013 excess deferral, your Form 1099-R should have the code “8” in box 7. Turbotax 2009 Add the excess deferral amount to your wages on your 2013 tax return. Turbotax 2009 If the distribution was for a 2013 excess deferral to a designated Roth account, your Form 1099-R should have code “B” in box 7. Turbotax 2009 Do not add this amount to your wages on your 2013 return. Turbotax 2009 If the distribution was for a 2012 excess deferral, your Form 1099-R should have the code “P” in box 7. Turbotax 2009 If you did not add the excess deferral amount to your wages on your 2012 tax return, you must file an amended return on Form 1040X, Amended U. Turbotax 2009 S. Turbotax 2009 Individual Income Tax Return. Turbotax 2009 If you did not receive the distribution by April 15, 2013, you also must add it to your wages on your 2013 tax return. Turbotax 2009 If the distribution was for the income earned on an excess deferral, your Form 1099-R should have the code “8” in box 7. Turbotax 2009 Add the income amount to your wages on your 2013 income tax return, regardless of when the excess deferral was made. Turbotax 2009 Report a loss on a corrective distribution of an excess deferral in the year the excess amount (reduced by the loss) is distributed to you. Turbotax 2009 Include the loss as a negative amount on Form 1040, line 21 and identify it as “Loss on Excess Deferral Distribution. Turbotax 2009 ”    Even though a corrective distribution of excess deferrals is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. Turbotax 2009 It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. Turbotax 2009 Excess Contributions If you are a highly compensated employee, the total of your elective deferrals and other contributions made for you for any year under a section 401(k) plan or SARSEP can be, as a percentage of pay, no more than 125% of the average deferral percentage (ADP) of all eligible non-highly compensated employees. Turbotax 2009 If the total contributed to the plan is more than the amount allowed under the ADP test, the excess contributions must be either distributed to you or recharacterized as after-tax employee contributions by treating them as distributed to you and then contributed by you to the plan. Turbotax 2009 You must include the excess contributions in your income as wages on Form 1040, line 7. Turbotax 2009 You cannot use Form 1040A or Form 1040EZ to report excess contribution amounts. Turbotax 2009 If you receive a corrective distribution of excess contributions (and allocable income), it is included in your income in the year of the distribution. Turbotax 2009 The allocable income is the amount of gain or loss through the end of the plan year for which the contribution was made that is allocable to the excess contributions. Turbotax 2009 You should receive a Form 1099-R for the year the excess contributions are distributed to you. Turbotax 2009 Add the distribution to your wages for that year. Turbotax 2009 Even though a corrective distribution of excess contributions is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. Turbotax 2009 It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. Turbotax 2009 Excess Annual Additions The amount contributed in 2013 to a defined contribution plan is generally limited to the lesser of 100% of your compensation or $51,000. Turbotax 2009 Under certain circumstances, contributions that exceed these limits (excess annual additions) may be corrected by a distribution of your elective deferrals or a return of your after-tax contributions and earnings from these contributions. Turbotax 2009 A corrective payment of excess annual additions consisting of elective deferrals or earnings from your after-tax contributions is fully taxable in the year paid. Turbotax 2009 A corrective payment consisting of your after-tax contributions is not taxable. Turbotax 2009 If you received a corrective payment of excess annual additions, you should receive a separate Form 1099-R for the year of the payment with the code “E” in box 7. Turbotax 2009 Report the total payment shown in box 1 of Form 1099-R on line 16a of Form 1040 or line 12a of Form 1040A. Turbotax 2009 Report the taxable amount shown in box 2a of Form 1099-R on line 16b of Form 1040 or line 12b of Form 1040A. Turbotax 2009 Even though a corrective distribution of excess annual additions is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. Turbotax 2009 It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. Turbotax 2009 Stock Options If you receive an option to buy or sell stock or other property as payment for your services, you may have income when you receive the option (the grant), when you exercise the option (use it to buy or sell the stock or other property), or when you sell or otherwise dispose of the option or property acquired through exercise of the option. Turbotax 2009 The timing, type, and amount of income inclusion depend on whether you receive a nonstatutory stock option or a statutory stock option. Turbotax 2009 Your employer can tell you which kind of option you hold. Turbotax 2009 Nonstatutory Stock Options Grant of option. Turbotax 2009   If you are granted a nonstatutory stock option, you may have income when you receive the option. Turbotax 2009 The amount of income to include and the time to include it depend on whether the fair market value of the option can be readily determined. Turbotax 2009 The fair market value of an option can be readily determined if it is actively traded on an established market. Turbotax 2009    The fair market value of an option that is not traded on an established market can be readily determined only if all of the following conditions exist. Turbotax 2009 You can transfer the option. Turbotax 2009 You can exercise the option immediately in full. Turbotax 2009 The option or the property subject to the option is not subject to any condition or restriction (other than a condition to secure payment of the purchase price) that has a significant effect on the fair market value of the option. Turbotax 2009 The fair market value of the option privilege can be readily determined. Turbotax 2009 The option privilege for an option to buy is the opportunity to benefit during the option's exercise period from any increase in the value of property subject to the option without risking any capital. Turbotax 2009 For example, if during the exercise period the fair market value of stock subject to an option is greater than the option's exercise price, a profit may be realized by exercising the option and immediately selling the stock at its higher value. Turbotax 2009 The option privilege for an option to sell is the opportunity to benefit during the exercise period from a decrease in the value of the property subject to the option. Turbotax 2009 If you or a member of your family is an officer, director, or more-than-10% owner of an expatriated corporation, you may owe an excise tax on the value of nonstatutory options and other stock-based compensation from that corporation. Turbotax 2009 For more information on the excise tax, see Internal Revenue Code section 4985. Turbotax 2009 Option with readily determinable value. Turbotax 2009   If you receive a nonstatutory stock option that has a readily determinable fair market value at the time it is granted to you, the option is treated like other property received as compensation. Turbotax 2009 See Restricted Property , later, for rules on how much income to include and when to include it. Turbotax 2009 However, the rule described in that discussion for choosing to include the value of property in your income for the year of the transfer does not apply to a nonstatutory option. Turbotax 2009 Option without readily determinable value. Turbotax 2009   If the fair market value of the option is not readily determinable at the time it is granted to you (even if it is determined later), you do not have income until you exercise or transfer the option. Turbotax 2009    Exercise or transfer of option. Turbotax 2009   When you exercise a nonstatutory stock option, the amount to include in your income depends on whether the option had a readily determinable value. Turbotax 2009 Option with readily determinable value. Turbotax 2009   When you exercise a nonstatutory stock option that had a readily determinable value at the time the option was granted, you do not have to include any amount in income. Turbotax 2009 Option without readily determinable value. Turbotax 2009   When you exercise a nonstatutory stock option that did not have a readily determinable value at the time the option was granted, the restricted prope