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Turbotax Deluxe Federal E File State 2012

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Turbotax Deluxe Federal E File State 2012

Turbotax deluxe federal e file state 2012 1. Turbotax deluxe federal e file state 2012   Importance of Records Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Benefits of Recordkeeping Kinds of Records To Keep How Long To Keep Records Introduction A farmer, like other taxpayers, must keep records to prepare an accurate income tax return and determine the correct amount of tax. Turbotax deluxe federal e file state 2012 This chapter explains the benefits of keeping records, what kinds of records you must keep, and how long you must keep them for federal tax purposes. Turbotax deluxe federal e file state 2012 Tax records are not the only type of records you need to keep for your farming business. Turbotax deluxe federal e file state 2012 You should also keep records that measure your farm's financial performance. Turbotax deluxe federal e file state 2012 This publication only discusses tax records. Turbotax deluxe federal e file state 2012 The Farm Financial Standards Council has produced a publication that provides a detailed explanation of the recommendations of the Council for financial reporting and analysis. Turbotax deluxe federal e file state 2012 For information on recordkeeping, you can purchase and download Financial Guidelines for Agricultural Producers at www. Turbotax deluxe federal e file state 2012 ffsc. Turbotax deluxe federal e file state 2012 org. Turbotax deluxe federal e file state 2012 For more information, contact Countryside Marketing, Inc. Turbotax deluxe federal e file state 2012 in the following manner. Turbotax deluxe federal e file state 2012 Call 262-253-6902. Turbotax deluxe federal e file state 2012 Send a fax to 262-253-6903. Turbotax deluxe federal e file state 2012 Write to: Farm Financial Standards Council N78 W14573 Appleton Ave. Turbotax deluxe federal e file state 2012 , #287 Menomonee Falls, WI 53051. Turbotax deluxe federal e file state 2012 Topics - This chapter discusses: Benefits of recordkeeping Kinds of records to keep How long to keep records Useful Items - You may want to see: Publication 51 (Circular A), Agricultural Employer's Tax Guide 463 Travel, Entertainment, Gift, and Car Expenses See chapter 16 for information about getting publications. Turbotax deluxe federal e file state 2012 Benefits of Recordkeeping Everyone in business, including farmers, must keep appropriate records. Turbotax deluxe federal e file state 2012 Recordkeeping will help you do the following. Turbotax deluxe federal e file state 2012 Monitor the progress of your farming business. Turbotax deluxe federal e file state 2012   You need records to monitor the progress of your farming business. Turbotax deluxe federal e file state 2012 Records can show whether your business is improving, which items are selling, or what changes you need to make. Turbotax deluxe federal e file state 2012 Records can help you make better decisions that may increase the likelihood of business success. Turbotax deluxe federal e file state 2012 Prepare your financial statements. Turbotax deluxe federal e file state 2012   You need records to prepare accurate financial statements. Turbotax deluxe federal e file state 2012 These include income (profit and loss) statements and balance sheets. Turbotax deluxe federal e file state 2012 These statements can help you in dealing with your bank or creditors and help you to manage your farm business. Turbotax deluxe federal e file state 2012 Identify source of receipts. Turbotax deluxe federal e file state 2012   You will receive money or property from many sources. Turbotax deluxe federal e file state 2012 Your records can identify the source of your receipts. Turbotax deluxe federal e file state 2012 You need this information to separate farm from nonfarm receipts and taxable from nontaxable income. Turbotax deluxe federal e file state 2012 Keep track of deductible expenses. Turbotax deluxe federal e file state 2012   You may forget expenses when you prepare your tax return unless you record them when they occur. Turbotax deluxe federal e file state 2012 Prepare your tax returns. Turbotax deluxe federal e file state 2012   You need records to prepare your tax return. Turbotax deluxe federal e file state 2012 For example, your records must support the income, expenses, and credits you report. Turbotax deluxe federal e file state 2012 Generally, these are the same records you use to monitor your farming business and prepare your financial statements. Turbotax deluxe federal e file state 2012 Support items reported on tax returns. Turbotax deluxe federal e file state 2012   You must keep your business records available at all times for inspection by the IRS. Turbotax deluxe federal e file state 2012 If the IRS examines any of your tax returns, you may be asked to explain the items reported. Turbotax deluxe federal e file state 2012 A complete set of records will speed up the examination. Turbotax deluxe federal e file state 2012 Kinds of Records To Keep Except in a few cases, the law does not require any specific kind of records. Turbotax deluxe federal e file state 2012 You can choose any recordkeeping system suited to your farming business that clearly shows, for example, your income and expenses. Turbotax deluxe federal e file state 2012 You should set up your recordkeeping system using an accounting method that clearly shows your income for your tax year. Turbotax deluxe federal e file state 2012 See  chapter 2. Turbotax deluxe federal e file state 2012 If you are in more than one business, you should keep a complete and separate set of records for each business. Turbotax deluxe federal e file state 2012 A corporation should keep minutes of board of directors' meetings. Turbotax deluxe federal e file state 2012 Your recordkeeping system should include a summary of your business transactions. Turbotax deluxe federal e file state 2012 This summary is ordinarily made in accounting journals and ledgers. Turbotax deluxe federal e file state 2012 For example, they must show your gross income, as well as your deductions and credits. Turbotax deluxe federal e file state 2012 In addition, you must keep supporting documents. Turbotax deluxe federal e file state 2012 Purchases, sales, payroll, and other transactions you have in your business generate supporting documents such as invoices and receipts. Turbotax deluxe federal e file state 2012 These documents contain the information you need to record in your journals and ledgers. Turbotax deluxe federal e file state 2012 It is important to keep these documents because they support the entries in your journals and ledgers and on your tax return. Turbotax deluxe federal e file state 2012 Keep them in an orderly fashion and in a safe place. Turbotax deluxe federal e file state 2012 For instance, organize them by year and type of income or expense. Turbotax deluxe federal e file state 2012 Electronic records. Turbotax deluxe federal e file state 2012   All requirements that apply to hard copy books and records also apply to electronic storage systems that maintain tax books and records. Turbotax deluxe federal e file state 2012 When you replace hard copy books and records, you must maintain the electronic storage systems for as long as they are material to the administration of tax law. Turbotax deluxe federal e file state 2012 An electronic storage system is any system for preparing or keeping your records either by electronic imaging or by transfer to an electronic storage media. Turbotax deluxe federal e file state 2012 The electronic storage system must index, store, preserve, retrieve and reproduce the electronically stored books and records in legible format. Turbotax deluxe federal e file state 2012 All electronic storage systems must provide a complete and accurate record of your data that is accessible to the IRS. Turbotax deluxe federal e file state 2012 Electronic storage systems are also subject to the same controls and retention guidelines as those imposed on your original hard copy books and records. Turbotax deluxe federal e file state 2012 The original hard copy books and records may be destroyed provided that the electronic storage system has been tested to establish that the hard copy books and records are being reproduced in compliance with IRS requirements for an electronic storage system and procedures are established to ensure continued compliance with all applicable rules and regulations. Turbotax deluxe federal e file state 2012 You still have the responsibility of retaining any other books and records that are required to be retained. Turbotax deluxe federal e file state 2012 The IRS may test your electronic storage system, including the equipment used, indexing methodology, software and retrieval capabilities. Turbotax deluxe federal e file state 2012 This test is not considered an examination and the results must be shared with you. Turbotax deluxe federal e file state 2012 If your electronic storage system meets the requirements mentioned earlier, you will be in compliance. Turbotax deluxe federal e file state 2012 If not, you may be subject to penalties for non-compliance, unless you continue to maintain your original hard copybooks and records in a manner that allows you and the IRS to determine your correct tax. Turbotax deluxe federal e file state 2012 For details on electronic storage system requirements, see Rev. Turbotax deluxe federal e file state 2012 Proc. Turbotax deluxe federal e file state 2012 97-22. Turbotax deluxe federal e file state 2012 You can find Rev. Turbotax deluxe federal e file state 2012 Proc. Turbotax deluxe federal e file state 2012 97-22 on page 9 of Internal Revenue Bulletin 1997-13 at  www. Turbotax deluxe federal e file state 2012 irs. Turbotax deluxe federal e file state 2012 gov/pub/irs-irbs/irb97-13. Turbotax deluxe federal e file state 2012 pdf. Turbotax deluxe federal e file state 2012 Travel, transportation, entertainment, and gift expenses. Turbotax deluxe federal e file state 2012   Specific recordkeeping rules apply to these expenses. Turbotax deluxe federal e file state 2012 For more information, see Publication 463. Turbotax deluxe federal e file state 2012 Employment taxes. Turbotax deluxe federal e file state 2012   There are specific employment tax records you must keep. Turbotax deluxe federal e file state 2012 For a list, see Publication 51 (Circular A). Turbotax deluxe federal e file state 2012 Excise taxes. Turbotax deluxe federal e file state 2012   See How To Claim a Credit or Refund in chapter 14 for the specific records you must keep to verify your claim for credit or refund of excise taxes on certain fuels. Turbotax deluxe federal e file state 2012 Assets. Turbotax deluxe federal e file state 2012   Assets are the property, such as machinery and equipment, you own and use in your business. Turbotax deluxe federal e file state 2012 You must keep records to verify certain information about your business assets. Turbotax deluxe federal e file state 2012 You need records to figure your annual depreciation deduction and the gain or (loss) when you sell the assets. Turbotax deluxe federal e file state 2012 Your records should show all the following. Turbotax deluxe federal e file state 2012 When and how you acquired the asset. Turbotax deluxe federal e file state 2012 Purchase price. Turbotax deluxe federal e file state 2012 Cost of any improvements. Turbotax deluxe federal e file state 2012 Section 179 deduction taken. Turbotax deluxe federal e file state 2012 Deductions taken for depreciation. Turbotax deluxe federal e file state 2012 Deductions taken for casualty losses, such as losses resulting from fires or storms. Turbotax deluxe federal e file state 2012 How you used the asset. Turbotax deluxe federal e file state 2012 When and how you disposed of the asset. Turbotax deluxe federal e file state 2012 Selling price. Turbotax deluxe federal e file state 2012 Expenses of sale. Turbotax deluxe federal e file state 2012   The following are examples of records that may show this information. Turbotax deluxe federal e file state 2012 Purchase and sales invoices. Turbotax deluxe federal e file state 2012 Real estate closing statements. Turbotax deluxe federal e file state 2012 Canceled checks. Turbotax deluxe federal e file state 2012 Bank statements. Turbotax deluxe federal e file state 2012 Financial account statements as proof of payment. Turbotax deluxe federal e file state 2012   If you do not have a canceled check, you may be able to prove payment with certain financial account statements prepared by financial institutions. Turbotax deluxe federal e file state 2012 These include account statements prepared for the financial institution by a third party. Turbotax deluxe federal e file state 2012 These account statements must be legible. Turbotax deluxe federal e file state 2012 The following table lists acceptable account statements. Turbotax deluxe federal e file state 2012 IF payment is by. Turbotax deluxe federal e file state 2012 . Turbotax deluxe federal e file state 2012 . Turbotax deluxe federal e file state 2012 THEN the statement must show the. Turbotax deluxe federal e file state 2012 . Turbotax deluxe federal e file state 2012 . Turbotax deluxe federal e file state 2012 Check Check number. Turbotax deluxe federal e file state 2012 Amount. Turbotax deluxe federal e file state 2012 Payee's name. Turbotax deluxe federal e file state 2012 Date the check amount was posted to the account by the financial institution. Turbotax deluxe federal e file state 2012 Electronic funds  transfer Amount transferred. Turbotax deluxe federal e file state 2012 Payee's name. Turbotax deluxe federal e file state 2012 Date the transfer was posted to the account by the financial institution. Turbotax deluxe federal e file state 2012 Credit card Amount charged. Turbotax deluxe federal e file state 2012 Payee's name. Turbotax deluxe federal e file state 2012 Transaction date. Turbotax deluxe federal e file state 2012    Proof of payment of an amount, by itself, does not establish you are entitled to a tax deduction. Turbotax deluxe federal e file state 2012 You should also keep other documents, such as credit card sales slips and invoices, to show that you also incurred the cost. Turbotax deluxe federal e file state 2012 Tax returns. Turbotax deluxe federal e file state 2012   Keep copies of your filed tax returns. Turbotax deluxe federal e file state 2012 They help in preparing future tax returns and making computations if you file an amended return. Turbotax deluxe federal e file state 2012 Keep copies of your information returns such as Form 1099, Schedule K-1, and Form W-2. Turbotax deluxe federal e file state 2012 How Long To Keep Records You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Turbotax deluxe federal e file state 2012 Keep records that support an item of income or a deduction appearing on a return until the period of limitations for the return runs out. Turbotax deluxe federal e file state 2012 A period of limitations is the period of time after which no legal action can be brought. Turbotax deluxe federal e file state 2012 Generally, that means you must keep your records for at least 3 years from when your tax return was due or filed or within 2 years of the date the tax was paid, whichever is later. Turbotax deluxe federal e file state 2012 However, certain records must be kept for a longer period of time, as discussed below. Turbotax deluxe federal e file state 2012 Employment taxes. Turbotax deluxe federal e file state 2012   If you have employees, you must keep all employment tax records for at least 4 years after the date the tax becomes due or is paid, whichever is later. Turbotax deluxe federal e file state 2012 Assets. Turbotax deluxe federal e file state 2012   Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition. Turbotax deluxe federal e file state 2012 You must keep these records to figure any depreciation, amortization, or depletion deduction and to figure your basis for computing gain or (loss) when you sell or otherwise dispose of the property. Turbotax deluxe federal e file state 2012   You may need to keep records relating to the basis of property longer than the period of limitation. Turbotax deluxe federal e file state 2012 Keep those records as long as they are important in figuring the basis of the original or replacement property. Turbotax deluxe federal e file state 2012 Generally, this means as long as you own the property and, after you dispose of it, for the period of limitations that applies to you. Turbotax deluxe federal e file state 2012 For example, if you received property in a nontaxable exchange, you must keep the records for the old property, as well as for the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition. Turbotax deluxe federal e file state 2012 For more information on basis, see chapter 6. Turbotax deluxe federal e file state 2012 Records for nontax purposes. Turbotax deluxe federal e file state 2012   When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes. Turbotax deluxe federal e file state 2012 For example, your insurance company or creditors may require you to keep them longer than the IRS does. 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The Turbotax Deluxe Federal E File State 2012

Turbotax deluxe federal e file state 2012 Publication 517 - Main Content Table of Contents Social Security CoverageCoverage of Members of the Clergy Coverage of Religious Workers (Church Employees) U. Turbotax deluxe federal e file state 2012 S. Turbotax deluxe federal e file state 2012 Citizens and Resident and Nonresident Aliens Ministerial ServicesMinisters Members of Religious Orders Christian Science Practitioners and Readers Exemption From Self-Employment (SE) TaxMembers of the Clergy Members of Recognized Religious Sects Self-Employment Tax: Figuring Net EarningsRegular Method Nonfarm Optional Method Income Tax: Income and ExpensesIncome Items Expense Items Income Tax Withholding and Estimated Tax Filing Your Return Retirement Savings ArrangementsDeducting contributions to tax-sheltered annuity plans. Turbotax deluxe federal e file state 2012 Full-time student. Turbotax deluxe federal e file state 2012 Adjusted gross income. Turbotax deluxe federal e file state 2012 More information. Turbotax deluxe federal e file state 2012 Earned Income Credit Comprehensive ExampleForm W-2 From Church Form W-2 From College Schedule C-EZ (Form 1040) Form 2106-EZ Schedule A (Form 1040) Schedule SE (Form 1040) Form 1040 Attachment 1 Attachment 2 How To Get Tax HelpLow Income Taxpayer Clinics Social Security Coverage This section gives information about which system (SECA or FICA) is used to collect social security and Medicare taxes from members of the clergy (ministers, members of a religious order, and Christian Science practitioners and readers) and religious workers (church employees). Turbotax deluxe federal e file state 2012 Coverage of Members of the Clergy The services you perform in the exercise of your ministry, of the duties required by your religious order, or of your profession as a Christian Science practitioner or reader are covered by social security and Medicare under SECA. Turbotax deluxe federal e file state 2012 Your earnings for these ministerial services (defined later) are subject to self-employment (SE) tax unless one of the following applies. Turbotax deluxe federal e file state 2012 You are a member of a religious order who has taken a vow of poverty. Turbotax deluxe federal e file state 2012 You ask the Internal Revenue Service (IRS) for an exemption from SE tax for your services and the IRS approves your request. Turbotax deluxe federal e file state 2012 See Exemption From Self-Employment (SE) Tax , later. Turbotax deluxe federal e file state 2012 You are subject only to the social security laws of a foreign country under the provisions of a social security agreement between the United States and that country. Turbotax deluxe federal e file state 2012 For more information, see Bilateral Social Security (Totalization) Agreements in Publication 54. Turbotax deluxe federal e file state 2012 Your earnings that are not from ministerial services may be subject to social security tax under FICA or SECA according to the rules that apply to taxpayers in general. Turbotax deluxe federal e file state 2012 See Ministerial Services , later. Turbotax deluxe federal e file state 2012 Ministers If you are a minister of a church, your earnings for the services you perform in your capacity as a minister are subject to SE tax, even if you perform these services as an employee of that church. Turbotax deluxe federal e file state 2012 However, you can request that the IRS grant you an exemption, as discussed under Exemption From Self-Employment (SE) Tax , later. Turbotax deluxe federal e file state 2012 For the specific services covered, see Ministerial Services , later. Turbotax deluxe federal e file state 2012 Ministers defined. Turbotax deluxe federal e file state 2012   Ministers are individuals who are duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination. Turbotax deluxe federal e file state 2012 Ministers have the authority to conduct religious worship, perform sacerdotal functions, and administer ordinances or sacraments according to the prescribed tenets and practices of that church or denomination. Turbotax deluxe federal e file state 2012   If a church or denomination ordains some ministers and licenses or commissions others, anyone licensed or commissioned must be able to perform substantially all the religious functions of an ordained minister to be treated as a minister for social security purposes. Turbotax deluxe federal e file state 2012 Employment status for other tax purposes. Turbotax deluxe federal e file state 2012   Even though all of your income from performing ministerial services is subject to self-employment tax for social security tax purposes, you may be an employee for income tax or retirement plan purposes in performing those same services. Turbotax deluxe federal e file state 2012 For income tax or retirement plan purposes, your income earned as an employee will be considered wages. Turbotax deluxe federal e file state 2012 Common-law employee. Turbotax deluxe federal e file state 2012   Under common-law rules, you are considered either an employee or a self-employed person. Turbotax deluxe federal e file state 2012 Generally, you are an employee if you perform services for someone who has the legal right to control both what you do and how you do it, even if you have considerable discretion and freedom of action. Turbotax deluxe federal e file state 2012 For more information about the common-law rules, see Publication 15-A, Employer's Supplemental Tax Guide. Turbotax deluxe federal e file state 2012   If a congregation employs you and pays you a salary, you are generally a common-law employee and income from the exercise of your ministry is wages for income tax purposes. Turbotax deluxe federal e file state 2012 However, amounts received directly from members of the congregation, such as fees for performing marriages, baptisms, or other personal services, are not wages; such amounts are self-employment income for both income tax purposes and social security tax purposes. Turbotax deluxe federal e file state 2012 Example. Turbotax deluxe federal e file state 2012 A church hires and pays you a salary to perform ministerial services subject to its control. Turbotax deluxe federal e file state 2012 Under the common-law rules, you are an employee of the church while performing those services. Turbotax deluxe federal e file state 2012 Form SS-8. Turbotax deluxe federal e file state 2012   If you are not certain whether you are an employee or a self-employed person, you can get a determination from the IRS by filing Form SS-8. Turbotax deluxe federal e file state 2012 Members of Religious Orders If you are a member of a religious order who has not taken a vow of poverty, your earnings for ministerial services you perform as a member of the order are subject to SE tax. Turbotax deluxe federal e file state 2012 See Ministerial Services , later. Turbotax deluxe federal e file state 2012 However, you can request that the IRS grant you an exemption as discussed under Exemption From Self-Employment (SE) Tax , later. Turbotax deluxe federal e file state 2012 Vow of poverty. Turbotax deluxe federal e file state 2012   If you are a member of a religious order and have taken a vow of poverty, you are already exempt from paying SE tax on your earnings for ministerial services you perform as an agent of your church or its agencies. Turbotax deluxe federal e file state 2012 You do not need to request a separate exemption. Turbotax deluxe federal e file state 2012 For income tax purposes, the earnings are tax free to you. Turbotax deluxe federal e file state 2012 Your earnings are considered the income of the religious order. Turbotax deluxe federal e file state 2012 Services covered under FICA at the election of the order. Turbotax deluxe federal e file state 2012   However, even if you have taken a vow of poverty, the services you perform for your church or its agencies may be covered under social security. Turbotax deluxe federal e file state 2012 Your services are covered if your order, or an autonomous subdivision of the order, elects social security coverage for its current and future vow-of-poverty members. Turbotax deluxe federal e file state 2012   The order or subdivision elects coverage by filing Form SS-16. Turbotax deluxe federal e file state 2012 The election may cover certain vow-of-poverty members for a retroactive period of up to 20 calendar quarters before the quarter in which it files the certificate. Turbotax deluxe federal e file state 2012 If the election is made, the order or subdivision pays both the employer's and employee's share of the tax. Turbotax deluxe federal e file state 2012 You do not pay any of the FICA tax. Turbotax deluxe federal e file state 2012 Services performed outside the order. Turbotax deluxe federal e file state 2012   Even if you are a member of a religious order who has taken a vow of poverty and the order requires you to turn over amounts you earn, your earnings are subject to federal income tax and either SE tax or FICA tax (including estimated tax payments and/or withholding) if you: Are self-employed or an employee of an organization outside your religious community, and Perform work not required by, or done on behalf of, the order. Turbotax deluxe federal e file state 2012   In these cases, your income from self-employment or as an employee of that outside organization is taxable to you directly. Turbotax deluxe federal e file state 2012 You may, however, be able to take a charitable deduction for the amount you turn over to the order. Turbotax deluxe federal e file state 2012 See Publication 526, Charitable Contributions. Turbotax deluxe federal e file state 2012 Rulings. Turbotax deluxe federal e file state 2012   Organizations and individuals may request rulings from the IRS on whether they are religious orders, or members of a religious order, respectively, for FICA tax, SE tax, and federal income tax withholding purposes. Turbotax deluxe federal e file state 2012 To request a ruling, follow the procedures in Revenue Procedure 2014-1, 2014-1 I. Turbotax deluxe federal e file state 2012 R. Turbotax deluxe federal e file state 2012 B. Turbotax deluxe federal e file state 2012 1, available at www. Turbotax deluxe federal e file state 2012 irs. Turbotax deluxe federal e file state 2012 gov/irb/2014-1_IRB/ar05. Turbotax deluxe federal e file state 2012 html. Turbotax deluxe federal e file state 2012 Christian Science Practitioners and Readers Generally, your earnings from services you perform in your profession as a Christian Science practitioner or reader are subject to SE tax. Turbotax deluxe federal e file state 2012 However, you can request an exemption as discussed under Exemption From Self-Employment (SE) Tax , later. Turbotax deluxe federal e file state 2012 Practitioners. Turbotax deluxe federal e file state 2012   Christian Science practitioners are members in good standing of the Mother Church, The First Church of Christ, Scientist, in Boston, Massachusetts, who practice healing according to the teachings of Christian Science. Turbotax deluxe federal e file state 2012 State law specifically exempts Christian Science practitioners from licensing requirements. Turbotax deluxe federal e file state 2012   Some Christian Science practitioners also are Christian Science teachers or lecturers. Turbotax deluxe federal e file state 2012 Income from teaching or lecturing is considered the same as income from their work as practitioners. Turbotax deluxe federal e file state 2012 Readers. Turbotax deluxe federal e file state 2012   For tax purposes, Christian Science readers are considered the same as ordained, commissioned, or licensed ministers. Turbotax deluxe federal e file state 2012 Coverage of Religious Workers (Church Employees) If you are a religious worker (a church employee) and are not in one of the classes already discussed, your wages are generally subject to social security and Medicare tax under FICA, not SECA. Turbotax deluxe federal e file state 2012 Some exceptions are discussed next. Turbotax deluxe federal e file state 2012 Election by Church To Exclude Its Employees From FICA Coverage Churches and qualified church-controlled organizations (church organizations) that are opposed for religious reasons to the payment of social security and Medicare taxes can elect to exclude their employees from FICA coverage. Turbotax deluxe federal e file state 2012 If your employer makes this election, it does not pay the employer's portion of the FICA taxes or withhold from your pay your portion of the FICA taxes. Turbotax deluxe federal e file state 2012 Instead, your wages are subject to SECA and you must pay SE tax on your wages if they exceed $108. Turbotax deluxe federal e file state 2012 28 during the tax year. Turbotax deluxe federal e file state 2012 However, you can request an exemption from SE tax if you are a member of a recognized religious sect, as discussed below. Turbotax deluxe federal e file state 2012 Churches and church organizations make this election by filing two copies of Form 8274. Turbotax deluxe federal e file state 2012 For more information about making this election, see Form 8274. Turbotax deluxe federal e file state 2012 Election by Certain Church Employees Who Are Opposed to Social Security and Medicare You may be able to choose to be exempt from social security and Medicare taxes, including the SE tax, if you are a member of a recognized religious sect or division and work for a church (or church-controlled nonprofit division) that does not pay the employer's part of the social security tax on wages. Turbotax deluxe federal e file state 2012 This exemption does not apply to your service, if any, as a minister of a church or as a member of a religious order. Turbotax deluxe federal e file state 2012 Make this choice by filing Form 4029. Turbotax deluxe federal e file state 2012 See Requesting Exemption—Form 4029 , later, under Members of Recognized Religious Sects. Turbotax deluxe federal e file state 2012 U. Turbotax deluxe federal e file state 2012 S. Turbotax deluxe federal e file state 2012 Citizens and Resident and Nonresident Aliens To be covered under the SE tax provisions (SECA), individuals generally must be citizens or resident aliens of the United States. Turbotax deluxe federal e file state 2012 Nonresident aliens are not covered under SECA unless a social security agreement in effect between the United States and the foreign country determines that you are covered under the U. Turbotax deluxe federal e file state 2012 S. Turbotax deluxe federal e file state 2012 social security system. Turbotax deluxe federal e file state 2012 To determine your alien status, see Publication 519, U. Turbotax deluxe federal e file state 2012 S. Turbotax deluxe federal e file state 2012 Tax Guide for Aliens. Turbotax deluxe federal e file state 2012 Residents of Puerto Rico, the U. Turbotax deluxe federal e file state 2012 S. Turbotax deluxe federal e file state 2012 Virgin Islands, Guam, the CNMI, and American Samoa. Turbotax deluxe federal e file state 2012   If you are a resident of one of these U. Turbotax deluxe federal e file state 2012 S. Turbotax deluxe federal e file state 2012 possessions but not a U. Turbotax deluxe federal e file state 2012 S. Turbotax deluxe federal e file state 2012 citizen, for SE tax purposes you are treated the same as a citizen or resident alien of the United States. Turbotax deluxe federal e file state 2012 For information on figuring the tax, see Self-Employment Tax: Figuring Net Earnings , later. Turbotax deluxe federal e file state 2012 Ministerial Services Ministerial services, in general, are the services you perform in the exercise of your ministry, in the exercise of your duties as required by your religious order, or in the exercise of your profession as a Christian Science practitioner or reader. Turbotax deluxe federal e file state 2012 Income you receive for performing ministerial services is subject to SE tax unless you have an exemption as explained later. Turbotax deluxe federal e file state 2012 Even if you have an exemption, only the income you receive for performing ministerial services is exempt. Turbotax deluxe federal e file state 2012 The exemption does not apply to any other income. Turbotax deluxe federal e file state 2012 The following discussions provide more detailed information on ministerial services of ministers, members of a religious order, and Christian Science practitioners and readers. Turbotax deluxe federal e file state 2012 Ministers Most services you perform as a minister, priest, rabbi, etc. Turbotax deluxe federal e file state 2012 , are ministerial services. Turbotax deluxe federal e file state 2012 These services include: Performing sacerdotal functions, Conducting religious worship, and Controlling, conducting, and maintaining religious organizations (including the religious boards, societies, and other integral agencies of such organizations) that are under the authority of a religious body that is a church or denomination. Turbotax deluxe federal e file state 2012 You are considered to control, conduct, and maintain a religious organization if you direct, manage, or promote the organization's activities. Turbotax deluxe federal e file state 2012 A religious organization is under the authority of a religious body that is a church or denomination if it is organized for and dedicated to carrying out the principles of a faith according to the requirements governing the creation of institutions of the faith. Turbotax deluxe federal e file state 2012 Services for nonreligious organizations. Turbotax deluxe federal e file state 2012   Your services for a nonreligious organization are ministerial services if the services are assigned or designated by your church. Turbotax deluxe federal e file state 2012 Assigned or designated services qualify even if they do not involve performing sacerdotal functions or conducting religious worship. Turbotax deluxe federal e file state 2012   If your services are not assigned or designated by your church, they are ministerial services only if they involve performing sacerdotal functions or conducting religious worship. Turbotax deluxe federal e file state 2012 Services that are not part of your ministry. Turbotax deluxe federal e file state 2012   Income from services you perform as an employee that are not ministerial services is subject to social security and Medicare tax withholding under FICA (not SECA) under the rules that apply to employees in general. Turbotax deluxe federal e file state 2012 The following are not ministerial services. Turbotax deluxe federal e file state 2012 Services you perform for nonreligious organizations other than the services stated above. Turbotax deluxe federal e file state 2012 Services you perform as a duly ordained, commissioned, or licensed minister of a church as an employee of the United States, the District of Columbia, a foreign government, or any of their political subdivisions. Turbotax deluxe federal e file state 2012 These services are not ministerial services even if you are performing sacerdotal functions or conducting religious worship. Turbotax deluxe federal e file state 2012 (For example, if you perform services as a chaplain in the Armed Forces of the United States, those services are not ministerial services. Turbotax deluxe federal e file state 2012 ) Services you perform in a government-owned and operated hospital. Turbotax deluxe federal e file state 2012 (These services are considered performed by a government employee, not by a minister as part of the ministry. Turbotax deluxe federal e file state 2012 ) However, services that you perform at a church-related hospital or health and welfare institution, or a private nonprofit hospital, are considered to be part of the ministry and are considered ministerial services. Turbotax deluxe federal e file state 2012 Books or articles. Turbotax deluxe federal e file state 2012   Writing religious books or articles is considered to be in the exercise of your ministry and is considered a ministerial service. Turbotax deluxe federal e file state 2012   This rule also applies to members of religious orders and to Christian Science practitioners and readers. Turbotax deluxe federal e file state 2012 Members of Religious Orders Services you perform as a member of a religious order in the exercise of duties required by the order are ministerial services. Turbotax deluxe federal e file state 2012 The services are considered ministerial because you perform them as an agent of the order. Turbotax deluxe federal e file state 2012 For example, if the order directs you to perform services for another agency of the supervising church or an associated institution, you are considered to perform the services as an agent of the order. Turbotax deluxe federal e file state 2012 However, if the order directs you to work outside the order, this employment will not be considered a duty required by the order unless: Your services are the kind that are ordinarily performed by members of the order, and Your services are part of the duties that must be exercised for, or on behalf of, the religious order as its agent. Turbotax deluxe federal e file state 2012 Effect of employee status. Turbotax deluxe federal e file state 2012   Ordinarily, if your services are not considered directed or required of you by the order, you and the outside party for whom you work are considered employee and employer. Turbotax deluxe federal e file state 2012 In this case, your earnings from the services are taxed under the rules that apply to employees in general, not under the rules for services provided as agent for the order. Turbotax deluxe federal e file state 2012 This result is true even if you have taken a vow of poverty. Turbotax deluxe federal e file state 2012 Example. Turbotax deluxe federal e file state 2012 Pat Brown and Chris Green are members of a religious order and have taken vows of poverty. Turbotax deluxe federal e file state 2012 They renounce all claims to their earnings. Turbotax deluxe federal e file state 2012 The earnings belong to the order. Turbotax deluxe federal e file state 2012 Pat is a licensed attorney. Turbotax deluxe federal e file state 2012 The superiors of the order instructed her to get a job with a law firm. Turbotax deluxe federal e file state 2012 Pat joined a law firm as an employee and, as she requested, the firm made the salary payments directly to the order. Turbotax deluxe federal e file state 2012 Chris is a secretary. Turbotax deluxe federal e file state 2012 The superiors of the order instructed him to accept a job with the business office of the church that supervises the order. Turbotax deluxe federal e file state 2012 Chris took the job and gave all his earnings to the order. Turbotax deluxe federal e file state 2012 Pat's services are not duties required by the order. Turbotax deluxe federal e file state 2012 Her earnings are subject to social security and Medicare tax under FICA and to federal income tax. Turbotax deluxe federal e file state 2012 Chris' services are duties required by the order. Turbotax deluxe federal e file state 2012 He is acting as an agent of the order and not as an employee of a third party. Turbotax deluxe federal e file state 2012 He does not include the earnings in gross income, and they are not subject to income tax withholding or to social security and Medicare tax under FICA or SECA. Turbotax deluxe federal e file state 2012 Christian Science Practitioners and Readers Services you perform as a Christian Science practitioner or reader in the exercise of your profession are ministerial services. Turbotax deluxe federal e file state 2012 Amounts you receive for performing these services are generally subject to SE tax. Turbotax deluxe federal e file state 2012 You may request an exemption from SE tax, discussed next, which applies only to those services. Turbotax deluxe federal e file state 2012 Exemption From Self-Employment (SE) Tax You can request an exemption from SE tax if you are a member of the clergy (minister, member of a religious order, or Christian Science practitioner or reader) or a member of a recognized religious sect. Turbotax deluxe federal e file state 2012 Generally, members of religious orders who have taken a vow of poverty are already exempt from paying SE tax, as discussed earlier under Members of Religious Orders under Social Security Coverage. Turbotax deluxe federal e file state 2012 They do not have to request the exemption. Turbotax deluxe federal e file state 2012 Who cannot be exempt. Turbotax deluxe federal e file state 2012   You cannot be exempt from SE tax if you made one of the following elections to be covered under social security. Turbotax deluxe federal e file state 2012 These elections are irrevocable. Turbotax deluxe federal e file state 2012 You elected to be covered under social security by filing Form 2031, Revocation of Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders, and Christian Science Practitioners, for your 1986, 1987, 2000, or 2001 tax year. Turbotax deluxe federal e file state 2012 You elected before 1968 to be covered under social security for your ministerial services. Turbotax deluxe federal e file state 2012 Requesting exemption. Turbotax deluxe federal e file state 2012    Table 2, earlier, briefly summarizes the procedure for requesting exemption from the SE tax. Turbotax deluxe federal e file state 2012 More detailed explanations follow. Turbotax deluxe federal e file state 2012 If you are a minister, member of a religious order, or Christian Science practitioner, an approved exemption only applies to earnings you receive for ministerial services, discussed earlier. Turbotax deluxe federal e file state 2012 It does not apply to any other self-employment income. Turbotax deluxe federal e file state 2012 Table 2. Turbotax deluxe federal e file state 2012 The Self-Employment Tax Exemption Application and Approval Process   Who Can Apply Members of the Clergy Members of Recognized  Religious Sects How File Form 4361 File Form 4029 When File by the due date (including extensions) of your income tax return for the second tax year in which you had at least $400 of net earnings from self-employment (at least part from ministerial services) File anytime Approval If approved, you will receive an approved copy of Form 4361 If approved, you will receive an approved copy of Form 4029 Effective Date For all tax years after 1967 in which you have at least $400 of net earnings from self-employment For all tax years beginning with the first year you meet the eligibility requirements discussed later Members of the Clergy To claim the exemption from SE tax, you must meet all of the following conditions. Turbotax deluxe federal e file state 2012 You file Form 4361, described below under Requesting Exemption—Form 4361 . Turbotax deluxe federal e file state 2012 You are conscientiously opposed to public insurance because of your individual religious considerations (not because of your general conscience), or you are opposed because of the principles of your religious denomination. Turbotax deluxe federal e file state 2012 You file for other than economic reasons. Turbotax deluxe federal e file state 2012 You inform the ordaining, commissioning, or licensing body of your church or order that you are opposed to public insurance if you are a minister or a member of a religious order (other than a vow-of-poverty member). Turbotax deluxe federal e file state 2012 This requirement does not apply to Christian Science practitioners or readers. Turbotax deluxe federal e file state 2012 You establish that the organization that ordained, commissioned, or licensed you, or your religious order, is a tax-exempt religious organization. Turbotax deluxe federal e file state 2012 You establish that the organization is a church or a convention or association of churches. Turbotax deluxe federal e file state 2012 You did not make an election discussed earlier under Who cannot be exempt . Turbotax deluxe federal e file state 2012 You sign and return the statement the IRS mails to you to certify that you are requesting an exemption based on the grounds listed on the statement. Turbotax deluxe federal e file state 2012 Requesting Exemption—Form 4361 To request exemption from SE tax, file Form 4361 in triplicate (original and two copies) with the IRS. Turbotax deluxe federal e file state 2012 The IRS will return to you a copy of the Form 4361 that you filed indicating whether it has approved your exemption. Turbotax deluxe federal e file state 2012 If it is approved, keep the approved copy of Form 4361 in your permanent records. Turbotax deluxe federal e file state 2012 When to file. Turbotax deluxe federal e file state 2012   File Form 4361 by the date your income tax return is due, including extensions, for the second tax year in which both of the following are true. Turbotax deluxe federal e file state 2012 You have net earnings from self-employment of at least $400. Turbotax deluxe federal e file state 2012 Any part of those net earnings was from ministerial services you performed as a: Minister, Member of a religious order, or Christian Science practitioner or reader. Turbotax deluxe federal e file state 2012 The 2 years do not have to be consecutive tax years. Turbotax deluxe federal e file state 2012    The approval process can take some time, so you should file Form 4361 as soon as possible. Turbotax deluxe federal e file state 2012 Example 1. Turbotax deluxe federal e file state 2012 Rev. Turbotax deluxe federal e file state 2012 Lawrence Jaeger, a clergyman ordained in 2013, has net self-employment earnings as a minister of $450 in 2013 and $500 in 2014. Turbotax deluxe federal e file state 2012 He must file his application for exemption by the due date, including extensions, for his 2014 income tax return. Turbotax deluxe federal e file state 2012 However, if Rev. Turbotax deluxe federal e file state 2012 Jaeger does not receive IRS approval for an exemption by April 15, 2015, his SE tax for 2014 is due by that date. Turbotax deluxe federal e file state 2012 Example 2. Turbotax deluxe federal e file state 2012 Rev. Turbotax deluxe federal e file state 2012 Louise Wolfe has only $300 in net self-employment earnings as a minister in 2013, but earned more than $400 in 2012 and expects to earn more than $400 in 2014. Turbotax deluxe federal e file state 2012 She must file her application for exemption by the due date, including extensions, for her 2014 income tax return. Turbotax deluxe federal e file state 2012 However, if she does not receive IRS approval for an exemption by April 15, 2015, her SE tax for 2014 is due by that date. Turbotax deluxe federal e file state 2012 Example 3. Turbotax deluxe federal e file state 2012 In 2011, Rev. Turbotax deluxe federal e file state 2012 David Moss was ordained a minister and had $700 in net self-employment earnings as a minister. Turbotax deluxe federal e file state 2012 In 2012, he received $1,000 as a minister, but his related expenses were over $1,000. Turbotax deluxe federal e file state 2012 Therefore, he had no net self-employment earnings as a minister in 2012. Turbotax deluxe federal e file state 2012 Also in 2012, he opened a book store and had $8,000 in net self-employment earnings from the store. Turbotax deluxe federal e file state 2012 In 2013, he had net self-employment earnings of $1,500 as a minister and $10,000 net self-employment earnings from the store. Turbotax deluxe federal e file state 2012 Rev. Turbotax deluxe federal e file state 2012 Moss had net earnings from self-employment in 2011 and 2013 that were $400 or more each year, and part of the self-employment earnings in each of those years was for his services as a minister. Turbotax deluxe federal e file state 2012 Thus, he must file his application for exemption by the due date, including extensions, for his 2013 income tax return. Turbotax deluxe federal e file state 2012 Death of individual. Turbotax deluxe federal e file state 2012   The right to file an application for exemption ends with an individual's death. Turbotax deluxe federal e file state 2012 A surviving spouse, executor, or administrator cannot file an exemption application for a deceased clergy member. Turbotax deluxe federal e file state 2012 Effective date of exemption. Turbotax deluxe federal e file state 2012   An approved exemption is effective for all tax years after 1967 in which you have $400 or more of net earnings from self-employment and any part of those earnings is for services as a member of the clergy. Turbotax deluxe federal e file state 2012 Once the exemption is approved, it is irrevocable. Turbotax deluxe federal e file state 2012 Example. Turbotax deluxe federal e file state 2012 Rev. Turbotax deluxe federal e file state 2012 Trudy Austin, ordained in 2010, had $400 or more in net self-employment earnings as a minister in both 2010 and 2013. Turbotax deluxe federal e file state 2012 She files an application for exemption on February 20, 2014. Turbotax deluxe federal e file state 2012 If an exemption is granted, it is effective for 2010 and the following years. Turbotax deluxe federal e file state 2012 Refunds of SE tax. Turbotax deluxe federal e file state 2012   If, after receiving an approved Form 4361, you find that you overpaid SE tax, you can file a claim for refund on Form 1040X. Turbotax deluxe federal e file state 2012 Generally, for a refund, you must file Form 1040X within 3 years from the date you filed the return or within 2 years from the date you paid the tax, whichever is later. Turbotax deluxe federal e file state 2012 A return you filed, or tax you paid, before the due date is considered to have been filed or paid on the due date. Turbotax deluxe federal e file state 2012   If you file a claim after the 3-year period but within 2 years from the time you paid the tax, the credit or refund will not be more than the tax you paid within the 2 years immediately before you file the claim. Turbotax deluxe federal e file state 2012 Members of Recognized Religious Sects If you are a member of a recognized religious sect, or a division of a recognized religious sect, you can apply for an exemption from payment of social security and Medicare taxes on both your self-employment income and the wages you earn from an employer who also has an exemption. Turbotax deluxe federal e file state 2012 Exception. Turbotax deluxe federal e file state 2012   If you received social security benefits or payments, or anyone else received these benefits or payments based on your wages or self-employment income, you cannot apply. Turbotax deluxe federal e file state 2012 However, if you pay your benefits back, you may be considered for exemption. Turbotax deluxe federal e file state 2012 Contact your local Social Security Administration office to find out the amount you must pay back. Turbotax deluxe federal e file state 2012 Eligibility requirements. Turbotax deluxe federal e file state 2012   To claim this exemption from SE tax, all the following requirements must be met. Turbotax deluxe federal e file state 2012 You must file Form 4029, discussed later under Requesting Exemption—Form 4029 . Turbotax deluxe federal e file state 2012 As a follower of the established teachings of the sect or division, you must be conscientiously opposed to accepting benefits of any private or public insurance that makes payments for death, disability, old age, retirement, or medical care, or provides services for medical care. Turbotax deluxe federal e file state 2012 You must waive all rights to receive any social security payment or benefit and agree that no benefits or payments will be made to anyone else based on your wages and self-employment income. Turbotax deluxe federal e file state 2012 The Commissioner of Social Security must determine that: Your sect or division has the established teachings as described in (2) above, It is the practice, and has been for a substantial period of time, for members of the sect or division to provide for their dependent members in a manner that is reasonable in view of the members' general level of living, and The sect or division has existed at all times since December 31, 1950. Turbotax deluxe federal e file state 2012 Requesting Exemption—Form 4029 To request the exemption, file Form 4029 in triplicate (original and two copies) with the Social Security Administration at the address shown on the form. Turbotax deluxe federal e file state 2012 The sect or division must complete part of the form. Turbotax deluxe federal e file state 2012 The IRS will return to you a copy of the Form 4029 that you filed indicating whether it has approved your exemption. Turbotax deluxe federal e file state 2012 If it is approved, keep the approved copy of Form 4029 in your permanent records. Turbotax deluxe federal e file state 2012 When to file. Turbotax deluxe federal e file state 2012   You can file Form 4029 at any time. Turbotax deluxe federal e file state 2012   If you have an approved exemption from SE tax and for some reason that approved exemption ended, you must file a new Form 4029 if you subsequently meet the eligibility requirements, discussed earlier. Turbotax deluxe federal e file state 2012 See Effective date of exemption next for information on when the newly approved exemption would become effective. Turbotax deluxe federal e file state 2012    If you have a previously approved exemption from SE tax and you change membership to another recognized religious sect, without any change to your eligibility requirements, then you do not need to file a new Form 4029. Turbotax deluxe federal e file state 2012 Effective date of exemption. Turbotax deluxe federal e file state 2012   An approved exemption from SE tax generally is effective for all tax years beginning with the first year you meet the eligibility requirements discussed earlier. Turbotax deluxe federal e file state 2012 (For example, if you meet the eligibility requirements in 2011, you file Form 4029 in 2012, and the IRS approves your exemption in 2013, your exemption is effective for tax year 2011 and all later years. Turbotax deluxe federal e file state 2012 )   The exemption will end if you fail to meet the eligibility requirements or if the Commissioner of Social Security determines that the sect or division fails to meet them. Turbotax deluxe federal e file state 2012 You must notify the IRS within 60 days if you are no longer a member of the religious group, or if you no longer follow the established teachings of this group. Turbotax deluxe federal e file state 2012 The exemption will end for the tax year where you or your sect/division first fails to meet the eligibility requirements. Turbotax deluxe federal e file state 2012 Refunds of SE tax paid. Turbotax deluxe federal e file state 2012    To get a refund of any SE tax you paid while the exemption was in effect, file Form 1040X. Turbotax deluxe federal e file state 2012 For information on filing this form, see Refunds of SE tax under Requesting Exemption—Form 4361, earlier. Turbotax deluxe federal e file state 2012 Exemption From FICA Taxes Generally, under FICA, the employer and the employee each pay half of the social security and Medicare tax. Turbotax deluxe federal e file state 2012 Both the employee and the employer, if they meet the eligibility requirements discussed earlier, can apply to be exempt from their share of FICA taxes on wages paid by the employer to the employee. Turbotax deluxe federal e file state 2012 A partnership in which each partner holds a religious exemption from social security and Medicare is an employer for this purpose. Turbotax deluxe federal e file state 2012 If the employer's application is approved, the exemption will apply only to FICA taxes on wages paid to employees who also received an approval of identical applications. Turbotax deluxe federal e file state 2012 Information for employers. Turbotax deluxe federal e file state 2012   If you have an approved Form 4029 and you have an employee who has an approved Form 4029, do not report wages you paid to the employee as social security and Medicare wages. Turbotax deluxe federal e file state 2012   If you have an employee who does not have an approved Form 4029, you must withhold the employee's share of social security and Medicare taxes and pay the employer's share. Turbotax deluxe federal e file state 2012 Form W-2. Turbotax deluxe federal e file state 2012   When preparing a Form W-2 for an employee with an approved Form 4029, enter “Form 4029” in box 14, “Other. Turbotax deluxe federal e file state 2012 ” Do not make any entries in boxes 3, 4, 5, or 6. Turbotax deluxe federal e file state 2012 Forms 941, 943, and 944. Turbotax deluxe federal e file state 2012   If both you and your employee have received approved Forms 4029, do not include these exempt wages on the following forms. Turbotax deluxe federal e file state 2012 Instead, follow the instructions given below. Turbotax deluxe federal e file state 2012 Form 941, Employer's QUARTERLY Federal Tax Return: check the box on line 4 and enter “Form 4029” in the empty space below the check box. Turbotax deluxe federal e file state 2012 Form 943, Employer's Annual Federal Tax Return for Agricultural Employees: enter “Form 4029” on the dotted line next to the lines 2 and 4 entry spaces. Turbotax deluxe federal e file state 2012 Form 944, Employer's ANNUAL Federal Tax Return: check the box on line 3 and enter “Form 4029” in the empty space below the check box. Turbotax deluxe federal e file state 2012 Effective date. Turbotax deluxe federal e file state 2012   An approved exemption from FICA becomes effective on the first day of the first calendar quarter after the quarter in which you file Form 4029. Turbotax deluxe federal e file state 2012 The exemption will end on the last day of the calendar quarter before the quarter in which the employer, employee, sect, or division fails to meet the requirements. Turbotax deluxe federal e file state 2012 Self-Employment Tax: Figuring Net Earnings There are two methods for figuring your net earnings from self-employment as a member of the clergy or a religious worker. Turbotax deluxe federal e file state 2012 Regular method. Turbotax deluxe federal e file state 2012 Nonfarm optional method. Turbotax deluxe federal e file state 2012 You may find Worksheets 1 through 4 helpful in figuring your net earnings from self-employment. Turbotax deluxe federal e file state 2012 Blank worksheets are in the back of this publication, after the Comprehensive Example. Turbotax deluxe federal e file state 2012 Regular Method Most people use the regular method. Turbotax deluxe federal e file state 2012 Under this method, figure your net earnings from self-employment by totaling your gross income for services you performed as a minister, a member of a religious order who has not taken a vow of poverty, or a Christian Science practitioner or reader. Turbotax deluxe federal e file state 2012 Then, subtract your allowable business deductions and multiply the difference by 92. Turbotax deluxe federal e file state 2012 35% (. Turbotax deluxe federal e file state 2012 9235). Turbotax deluxe federal e file state 2012 Use Schedule SE (Form 1040) to figure your net earnings and SE tax. Turbotax deluxe federal e file state 2012 If you are an employee of a church that elected to exclude you from FICA coverage, figure net earnings by multiplying your church wages shown on Form W-2 by 92. Turbotax deluxe federal e file state 2012 35% (. Turbotax deluxe federal e file state 2012 9235). Turbotax deluxe federal e file state 2012 Do not reduce your wages by any business deductions when making this computation. Turbotax deluxe federal e file state 2012 Use Schedule SE (Form 1040), Section B, to figure your net earnings and SE tax. Turbotax deluxe federal e file state 2012 If you have an approved exemption, or you are automatically exempt, do not include the income or deductions from ministerial services in figuring your net earnings from self-employment. Turbotax deluxe federal e file state 2012 Amounts included in gross income. Turbotax deluxe federal e file state 2012   To figure your net earnings from self-employment (on Schedule SE (Form 1040)), include in gross income: Salaries and fees for your ministerial services (discussed earlier), Offerings you receive for marriages, baptisms, funerals, masses, etc. Turbotax deluxe federal e file state 2012 , The value of meals and lodging provided to you, your spouse, and your dependents for your employer's convenience, The fair rental value of a parsonage provided to you (including the cost of utilities that are furnished) and the rental allowance (including an amount for payment of utilities) paid to you, and Any amount a church pays toward your income tax or SE tax, other than withholding the amount from your salary. Turbotax deluxe federal e file state 2012 This amount is also subject to income tax. Turbotax deluxe federal e file state 2012   For the income tax treatment of items (2) and (4), see Income Tax: Income and Expenses , later. Turbotax deluxe federal e file state 2012 Example. Turbotax deluxe federal e file state 2012 Pastor Roger Adams receives an annual salary of $39,000 as a full-time minister. Turbotax deluxe federal e file state 2012 The $39,000 includes $5,000 that is designated as a rental allowance to pay utilities. Turbotax deluxe federal e file state 2012 His church owns a parsonage that has a fair rental value of $12,000 per year. Turbotax deluxe federal e file state 2012 The church gives Pastor Adams the use of the parsonage. Turbotax deluxe federal e file state 2012 He is not exempt from SE tax. Turbotax deluxe federal e file state 2012 He must include $51,000 ($39,000 plus $12,000) when figuring his net earnings for SE tax purposes. Turbotax deluxe federal e file state 2012 The results would be the same if, instead of the use of the parsonage and receipt of the rental allowance for utilities, Pastor Adams had received an annual salary of $51,000 of which $17,000 ($5,000 plus $12,000) per year was designated as a rental allowance. Turbotax deluxe federal e file state 2012 Overseas duty. Turbotax deluxe federal e file state 2012   Your net earnings from self-employment are determined without any foreign earned income exclusion or the foreign housing exclusion or deduction if you are a U. Turbotax deluxe federal e file state 2012 S. Turbotax deluxe federal e file state 2012 citizen or resident alien serving abroad and living in a foreign country. Turbotax deluxe federal e file state 2012   For information on excluding foreign earned income or the foreign housing amount, see Publication 54. Turbotax deluxe federal e file state 2012 Example. Turbotax deluxe federal e file state 2012 Diane Jones was the minister of a U. Turbotax deluxe federal e file state 2012 S. Turbotax deluxe federal e file state 2012 church in Mexico. Turbotax deluxe federal e file state 2012 She earned $35,000 in that position and was able to exclude it all for income tax purposes under the foreign earned income exclusion. Turbotax deluxe federal e file state 2012 The United States does not have a social security agreement with Mexico, so Mrs. Turbotax deluxe federal e file state 2012 Jones is subject to U. Turbotax deluxe federal e file state 2012 S. Turbotax deluxe federal e file state 2012 SE tax and must include $35,000 when figuring net earnings from self-employment. Turbotax deluxe federal e file state 2012 Specified U. Turbotax deluxe federal e file state 2012 S. Turbotax deluxe federal e file state 2012 possessions. Turbotax deluxe federal e file state 2012    The exclusion from gross income for amounts derived from American Samoa or Puerto Rico does not apply in computing net earnings from self-employment. Turbotax deluxe federal e file state 2012 Also see Residents of Puerto Rico, the U. Turbotax deluxe federal e file state 2012 S. Turbotax deluxe federal e file state 2012 Virgin Islands, Guam, the CNMI, and American Samoa , earlier, under U. Turbotax deluxe federal e file state 2012 S. Turbotax deluxe federal e file state 2012 Citizens and Resident and Nonresident Aliens. Turbotax deluxe federal e file state 2012 Amounts not included in gross income. Turbotax deluxe federal e file state 2012   Do not include the following amounts in gross income when figuring your net earnings from self-employment. Turbotax deluxe federal e file state 2012 Offerings that others made to the church. Turbotax deluxe federal e file state 2012 Contributions by your church to a tax-sheltered annuity plan set up for you, including any salary reduction contributions (elective deferrals) that are not included in your gross income. Turbotax deluxe federal e file state 2012 Pension payments or retirement allowances you receive for your past ministerial services. Turbotax deluxe federal e file state 2012 The rental value of a parsonage or a parsonage allowance provided to you after you retire. Turbotax deluxe federal e file state 2012 Allowable deductions. Turbotax deluxe federal e file state 2012   When figuring your net earnings from self-employment, deduct all your expenses related to your ministerial services performed as a self-employed person. Turbotax deluxe federal e file state 2012 These are ministerial expenses you incurred while working other than as a common-law employee of the church. Turbotax deluxe federal e file state 2012 They include expenses incurred in performing marriages and baptisms, and in delivering speeches. Turbotax deluxe federal e file state 2012 Deduct these expenses on Schedule C or C-EZ (Form 1040), and carry the net amount to line 2 of Schedule SE (Form 1040), Section A or B. Turbotax deluxe federal e file state 2012   Wages earned as a common-law employee (explained earlier) of a church are generally subject to self-employment tax unless an exemption is requested, as discussed earlier under Exemption From Self-Employment (SE) Tax . Turbotax deluxe federal e file state 2012 Subtract any allowable expenses (including unreimbursed employee business expenses) from those wages, include the net amount on line 2 of Schedule SE (Form 1040), Section A or B, and attach an explanation. Turbotax deluxe federal e file state 2012 Do not complete Schedule C or C-EZ (Form 1040). Turbotax deluxe federal e file state 2012 However, for income tax purposes, the expenses are allowed only as an itemized deduction on Schedule A (Form 1040) to the extent they exceed 2% of adjusted gross income. Turbotax deluxe federal e file state 2012 Employee reimbursement arrangements. Turbotax deluxe federal e file state 2012   If you received an advance, allowance, or reimbursement for your employee expenses, how you report this amount and your employee expenses depends on whether your employer reimbursed you under an accountable plan or a nonaccountable plan. Turbotax deluxe federal e file state 2012 Ask your employer if you are not sure if it reimburses you using an accountable or a nonaccountable plan. Turbotax deluxe federal e file state 2012 Accountable plans. Turbotax deluxe federal e file state 2012   To be an accountable plan, your employer's reimbursement arrangement must include all three of the following rules. Turbotax deluxe federal e file state 2012 Your expenses must have a business connection—that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. Turbotax deluxe federal e file state 2012 You must adequately account to your employer for these expenses within a reasonable period of time. Turbotax deluxe federal e file state 2012 You must return any excess reimbursement or allowance within a reasonable period of time. Turbotax deluxe federal e file state 2012   The reimbursement is not reported on your Form W-2. Turbotax deluxe federal e file state 2012 Generally, if your expenses equal your reimbursement, you have no deduction. Turbotax deluxe federal e file state 2012 If your expenses are more than your reimbursement, you can deduct your excess expenses for SE tax and income tax purposes. Turbotax deluxe federal e file state 2012 Nonaccountable plan. Turbotax deluxe federal e file state 2012   A nonaccountable plan is a reimbursement arrangement that does not meet all three of the rules listed under Accountable plans above. Turbotax deluxe federal e file state 2012 In addition, even if your employer has an accountable plan, the following payments will be treated as being paid under a nonaccountable plan. Turbotax deluxe federal e file state 2012 Excess reimbursements you fail to return to your employer. Turbotax deluxe federal e file state 2012 Reimbursement of nondeductible expenses related to your employer's business. Turbotax deluxe federal e file state 2012   Your employer will combine any reimbursement paid to you under a nonaccountable plan with your wages, salary, or other compensation and report the combined total in box 1 of your Form W-2. Turbotax deluxe federal e file state 2012 Since reimbursements under a nonaccountable plan are included in your gross income, you can deduct your related expenses (for SE tax and income tax purposes) regardless of whether they are more than, less than, or equal to your reimbursement. Turbotax deluxe federal e file state 2012   For more information on accountable and nonaccountable plans, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. Turbotax deluxe federal e file state 2012 Married Couple Missionary Team If both spouses are duly ordained, commissioned, or licensed ministers of a church and have an agreement that each will perform specific services for which they are paid jointly or separately, they must divide the self-employment income according to the agreement. Turbotax deluxe federal e file state 2012 If the agreement is with one spouse only and the other spouse is not paid for any specific duties, amounts received for their services are included only in the self-employment income of the spouse having the agreement. Turbotax deluxe federal e file state 2012 Earnings Subject to SE Tax For 2013, the maximum net earnings from self-employment subject to social security (old age, survivors, and disability insurance) tax is $113,700 minus any wages and tips you earned that were subject to social security tax. Turbotax deluxe federal e file state 2012 The tax rate for the social security part is 12. Turbotax deluxe federal e file state 2012 4%. Turbotax deluxe federal e file state 2012 In addition, all of your net earnings are subject to the Medicare (hospital insurance) part of the SE tax. Turbotax deluxe federal e file state 2012 This tax rate is 2. Turbotax deluxe federal e file state 2012 9%. Turbotax deluxe federal e file state 2012 The combined self-employment tax rate is 15. Turbotax deluxe federal e file state 2012 3%. Turbotax deluxe federal e file state 2012 Additional Medicare Tax. Turbotax deluxe federal e file state 2012   Beginning in 2013, a 0. Turbotax deluxe federal e file state 2012 9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 for any other filing status. Turbotax deluxe federal e file state 2012 Medicare wages and self-employment income are combined to determine if income exceeds the threshold. Turbotax deluxe federal e file state 2012 A self-employment loss is not considered for purposes of this tax. Turbotax deluxe federal e file state 2012 RRTA compensation is separately compared to the threshold. Turbotax deluxe federal e file state 2012 For more information, see Form 8959, Additional Medicare Tax, and its separate instructions. Turbotax deluxe federal e file state 2012 Nonfarm Optional Method You may be able to use the nonfarm optional method for figuring your net earnings from self-employment. Turbotax deluxe federal e file state 2012 In general, the nonfarm optional method is intended to permit continued coverage for social security and Medicare purposes when your income for the tax year is low. Turbotax deluxe federal e file state 2012 You may use the nonfarm optional method if you meet all the following tests. Turbotax deluxe federal e file state 2012 You are self-employed on a regular basis. Turbotax deluxe federal e file state 2012 You meet this test if your actual net earnings from self-employment were $400 or more in at least 2 of the 3 tax years before the one for which you use this method. Turbotax deluxe federal e file state 2012 The net earnings can be from either farm or nonfarm earnings or both. Turbotax deluxe federal e file state 2012 You have used this method less than 5 prior years. Turbotax deluxe federal e file state 2012 (There is a 5-year lifetime limit. Turbotax deluxe federal e file state 2012 ) The years do not have to be consecutive. Turbotax deluxe federal e file state 2012 Your net nonfarm profits were: Less than $5,024, and Less than 72. Turbotax deluxe federal e file state 2012 189% of your gross nonfarm income. Turbotax deluxe federal e file state 2012 If you meet all three tests, use Table 3 to figure your net earnings from self-employment under the nonfarm optional method. Turbotax deluxe federal e file state 2012 Table 3. Turbotax deluxe federal e file state 2012 Figuring Nonfarm Net Earnings IF your gross nonfarm income is . Turbotax deluxe federal e file state 2012 . Turbotax deluxe federal e file state 2012 . Turbotax deluxe federal e file state 2012 THEN your net earnings are equal to . Turbotax deluxe federal e file state 2012 . Turbotax deluxe federal e file state 2012 . Turbotax deluxe federal e file state 2012 $6,960 or less Two-thirds of your gross nonfarm income. Turbotax deluxe federal e file state 2012 More than $6,960 $4,640. Turbotax deluxe federal e file state 2012 Actual net earnings. Turbotax deluxe federal e file state 2012   Multiply your total earnings subject to SE tax by 92. Turbotax deluxe federal e file state 2012 35% (. Turbotax deluxe federal e file state 2012 9235) to get actual net earnings. Turbotax deluxe federal e file state 2012 Actual net earnings are equivalent to net earnings under the “Regular Method. Turbotax deluxe federal e file state 2012 ” More information. Turbotax deluxe federal e file state 2012   For more information on the nonfarm optional method, see Publication 334, Tax Guide for Small Business, and the Schedule SE (Form 1040) instructions. Turbotax deluxe federal e file state 2012 Income Tax: Income and Expenses Some income and expense items are treated the same for both income tax and SE tax purposes and some are treated differently. Turbotax deluxe federal e file state 2012 Note. Turbotax deluxe federal e file state 2012 For purposes of this section, references to members of the clergy are only to ministers or members of a religious order. Turbotax deluxe federal e file state 2012 Income Items The tax treatment of offerings and fees, outside earnings, rental allowances, rental value of a parsonage, earnings of members of religious orders, and foreign earned income is discussed here. Turbotax deluxe federal e file state 2012 Offerings and Fees If you are a member of the clergy, you must include in your income offerings and fees you receive for marriages, baptisms, funerals, masses, etc. Turbotax deluxe federal e file state 2012 , in addition to your salary. Turbotax deluxe federal e file state 2012 If the offering is made to the religious institution, it is not taxable to you. Turbotax deluxe federal e file state 2012 Outside Earnings If you are a member of a religious organization and you give your outside earnings to the organization, you still must include the earnings in your income. Turbotax deluxe federal e file state 2012 However, you may be entitled to a charitable contribution deduction for the amount paid to the organization. Turbotax deluxe federal e file state 2012 For more information, see Publication 526. Turbotax deluxe federal e file state 2012 Exclusion of Rental Allowance and Fair Rental Value of a Parsonage Ordained, commissioned, or licensed ministers of the gospel may be able to exclude from income tax the rental allowance or fair rental value of a parsonage that is provided to them as pay for their services. Turbotax deluxe federal e file state 2012 Services include: Ministerial services, discussed earlier, Administrative duties and teaching at theological seminaries, and The ordinary duties of a minister performed as an employee of the United States (other than as a chaplain in the Armed Forces), a state, possession, political subdivision, or the District of Columbia. Turbotax deluxe federal e file state 2012 This exclusion applies only for income tax purposes. Turbotax deluxe federal e file state 2012 It does not apply for SE tax purposes, as discussed earlier under Amounts included in gross income under Self-Employment Tax: Figuring Net Earnings. Turbotax deluxe federal e file state 2012 Designation requirement. Turbotax deluxe federal e file state 2012   The church or organization that employs you must officially designate the payment as a housing allowance before it makes the payment. Turbotax deluxe federal e file state 2012 It must designate a definite amount. Turbotax deluxe federal e file state 2012 It cannot determine the amount of the housing allowance at a later date. Turbotax deluxe federal e file state 2012 If the church or organization does not officially designate a definite amount as a housing allowance, you must include your total salary in your income. Turbotax deluxe federal e file state 2012   If you are employed and paid by a local congregation, a resolution by a national church agency of your denomination does not effectively designate a housing allowance for you. Turbotax deluxe federal e file state 2012 The local congregation must officially designate the part of your salary that is a housing allowance. Turbotax deluxe federal e file state 2012 However, a resolution of a national church agency can designate your housing allowance if you are directly employed by the national agency. Turbotax deluxe federal e file state 2012 Rental allowances. Turbotax deluxe federal e file state 2012   If you receive in your salary an amount officially designated as a rental allowance (including an amount to pay utility costs), you can exclude the allowance from your gross income if: You use the amount to provide or rent a home, and The amount is not more than reasonable pay for your services. Turbotax deluxe federal e file state 2012   The amount you exclude cannot be more than the fair rental value of the home, including furnishings, plus the cost of utilities. Turbotax deluxe federal e file state 2012 Fair rental value of parsonage. Turbotax deluxe federal e file state 2012   You can exclude from gross income the fair rental value of a house or parsonage, including utilities, furnished to you as part of your earnings. Turbotax deluxe federal e file state 2012 However, the exclusion cannot be more than the reasonable pay for your services. Turbotax deluxe federal e file state 2012 If you pay for the utilities, you can exclude any allowance designated for utility costs, up to your actual cost. Turbotax deluxe federal e file state 2012 Example. Turbotax deluxe federal e file state 2012 Rev. Turbotax deluxe federal e file state 2012 Joanna Baker is a full-time minister. Turbotax deluxe federal e file state 2012 The church allows her to use a parsonage that has an annual fair rental value of $24,000. Turbotax deluxe federal e file state 2012 The church pays her an annual salary of $67,000, of which $7,500 is designated for utility costs. Turbotax deluxe federal e file state 2012 Her actual utility costs during the year were $7,000. Turbotax deluxe federal e file state 2012 For income tax purposes, Rev. Turbotax deluxe federal e file state 2012 Baker excludes $31,000 from gross income ($24,000 fair rental value of the parsonage plus $7,000 from the allowance for utility costs). Turbotax deluxe federal e file state 2012 She will report $60,000 ($59,500 salary plus $500 of unused utility allowance). Turbotax deluxe federal e file state 2012 Her income for SE tax purposes, however, is $91,000 ($67,000 salary + $24,000 fair rental value of the parsonage). Turbotax deluxe federal e file state 2012 Home ownership. Turbotax deluxe federal e file state 2012   If you own your home and you receive as part of your salary a housing or rental allowance, you may exclude from gross income the smallest of: The amount actually used to provide a home, The amount officially designated as a rental allowance, or The fair rental value of the home, including furnishings, utilities, garage, etc. Turbotax deluxe federal e file state 2012 Excess rental allowance. Turbotax deluxe federal e file state 2012   You must include in gross income the amount of any rental allowance that is more than the smallest of: Your reasonable salary, The fair rental value of the home plus utilities, or The amount actually used to provide a home. Turbotax deluxe federal e file state 2012   Include in the total on Form 1040, line 7. Turbotax deluxe federal e file state 2012 On the dotted line next to line 7, enter “Excess allowance” and the amount. Turbotax deluxe federal e file state 2012 You may deduct the home mortgage interest and real estate taxes paid on your home even though you pay all or part of those expenses with funds you get through a tax-free rental or parsonage allowance. Turbotax deluxe federal e file state 2012 However, you can only deduct these expenses as itemized deductions on Schedule A (Form 1040). Turbotax deluxe federal e file state 2012 Retired ministers. Turbotax deluxe federal e file state 2012   If you are a retired minister, you can exclude from your gross income the rental value of a home (plus utilities) furnished to you by your church as a part of your pay for past services, or the part of your pension that was designated as a rental allowance. Turbotax deluxe federal e file state 2012 However, a minister's surviving spouse cannot exclude the rental value unless the rental value is for ministerial services he or she performs or performed. Turbotax deluxe federal e file state 2012 Teachers or administrators. Turbotax deluxe federal e file state 2012   If you are a minister employed as a teacher or administrator by a church school, college, or university, you are performing ministerial services for purposes of the housing exclusion. Turbotax deluxe federal e file state 2012 However, if you perform services as a teacher or administrator on the faculty of a nonchurch college, you cannot exclude from your income a housing allowance or the value of a home that the college provides to you. Turbotax deluxe federal e file state 2012    If you live in faculty lodging as an employee of an educational institution or academic health center, all or part of the value of that lodging may be nontaxable under a different rule. Turbotax deluxe federal e file state 2012 In Publication 525, see Faculty lodging in the discussion on meals and lodging under Fringe Benefits. Turbotax deluxe federal e file state 2012   If you serve as a minister of music or minister of education, or serve in an administrative or other function of your religious organization, but are not authorized to perform substantially all of the religious duties of an ordained minister in your church (even if you are commissioned as a minister of the gospel), the housing exclusion does not apply to you. Turbotax deluxe federal e file state 2012 Theological students. Turbotax deluxe federal e file state 2012   If you are a theological student serving a required internship as a part-time or assistant pastor, you cannot exclude a parsonage or rental allowance from your income unless you are ordained, commissioned, or licensed as a minister. Turbotax deluxe federal e file state 2012 Traveling evangelists. Turbotax deluxe federal e file state 2012   You can exclude a designated rental allowance from out-of-town churches if you meet all of the following requirements. Turbotax deluxe federal e file state 2012 You are an ordained minister. Turbotax deluxe federal e file state 2012 You perform ministerial services at churches located away from your community. Turbotax deluxe federal e file state 2012 You actually use the rental allowance to maintain your permanent home. Turbotax deluxe federal e file state 2012 Cantors. Turbotax deluxe federal e file state 2012   If you have a bona fide commission and your congregation employs you on a full-time basis to perform substantially all the religious functions of the Jewish faith, you can exclude a rental allowance from your gross income. Turbotax deluxe federal e file state 2012 Earnings—Members of Religious Orders Your earnings may be exempt from both income tax and SE tax if you are a member of a religious order who: Has taken a vow of poverty, Receives earnings for services performed as an agent of the order and in the exercise of duties required by the order, and Renounces the earnings and gives them to the order. Turbotax deluxe federal e file state 2012 See Members of Religious Orders , earlier, under Social Security Coverage. Turbotax deluxe federal e file state 2012 Foreign Earned Income Certain income may be exempt from income tax if you work in a foreign country or in a specified U. Turbotax deluxe federal e file state 2012 S. Turbotax deluxe federal e file state 2012 possession. Turbotax deluxe federal e file state 2012 Publication 54 discusses the foreign earned income exclusion. Turbotax deluxe federal e file state 2012 Publication 570, Tax Guide for Individuals With Income From U. Turbotax deluxe federal e file state 2012 S. Turbotax deluxe federal e file state 2012 Possessions, covers the rules for taxpayers with income from U. Turbotax deluxe federal e file state 2012 S. Turbotax deluxe federal e file state 2012 possessions. Turbotax deluxe federal e file state 2012 You can get these free publications from the Internal Revenue Service at IRS. Turbotax deluxe federal e file state 2012 gov or from most U. Turbotax deluxe federal e file state 2012 S. Turbotax deluxe federal e file state 2012 Embassies or consulates. Turbotax deluxe federal e file state 2012 Expense Items The tax treatment of ministerial trade or business expenses, expenses allocable to tax-free income, and health insurance costs is discussed here. Turbotax deluxe federal e file state 2012 Ministerial Trade or Business Expenses as an Employee When you figure your income tax, you must itemize your deductions on Schedule A (Form 1040) to claim allowable deductions for ministerial trade or business expenses incurred while working as an employee. Turbotax deluxe federal e file state 2012 You also may have to file Form 2106, Employee Business Expenses (or Form 2106-EZ, Unreimbursed Employee Business Expenses). Turbotax deluxe federal e file state 2012 You claim these expenses as miscellaneous itemized deductions that are subject to the 2%-of-adjusted-gross-income (AGI) limit. Turbotax deluxe federal e file state 2012 See Publication 529 for more information on this limit. Turbotax deluxe federal e file state 2012 However, you cannot deduct any of your employee business expenses that are allocable to tax-free income (discussed next). Turbotax deluxe federal e file state 2012 Expenses Allocable to Tax-Free Income If you receive a rental or parsonage allowance that is exempt from income tax (tax free), you must allocate a portion of the expenses of operating your ministry to that tax-free income. Turbotax deluxe federal e file state 2012 You cannot deduct the portion of your expenses that you allocate to your tax-free rental or parsonage allowance. Turbotax deluxe federal e file state 2012 Exception. Turbotax deluxe federal e file state 2012   This rule does not apply to your deductions for home mortgage interest or real estate taxes on your home. Turbotax deluxe federal e file state 2012 Figuring the allocation. Turbotax deluxe federal e file state 2012   Figure the portion of your otherwise deductible expenses that you cannot deduct (because you must allocate that portion to tax-free income) by multiplying the expenses by the following fraction:      Tax-free rental or parsonage allowance     All income (taxable and tax free) earned from your ministry           When figuring the allocation, include the income and expenses related to the ministerial duties you perform both as an employee and as a self-employed person. Turbotax deluxe federal e file state 2012    Reduce your otherwise deductible expenses only in figuring your income tax, not your SE tax. Turbotax deluxe federal e file state 2012 Example. Turbotax deluxe federal e file state 2012 Rev. Turbotax deluxe federal e file state 2012 Charles Ashford received $40,000 in earnings for ministerial services consisting of a $28,000 salary for ministerial services performed as an employee, $2,000 for weddings and baptisms performed as a self-employed person, and a $10,000 tax-free parsonage allowance. Turbotax deluxe federal e file state 2012 He incurred $4,000 of unreimbursed expenses connected with his earnings for ministerial services. Turbotax deluxe federal e file state 2012 $3,500 of the $4,000 is for employee expenses related to his ministerial salary, and $500 is related to the weddings and baptisms he performed as a self-employed person. Turbotax deluxe federal e file state 2012 Rev. Turbotax deluxe federal e file state 2012 Ashford figures the nondeductible (tax-free) portion of expenses related to his ministerial salary as follows: ($10,000 ÷ $40,000) x $3,500 = $875   Rev. Turbotax deluxe federal e file state 2012 Ashford figures the nondeductible (tax-free) portion of expenses related to his wedding and baptism income as follows: ($10,000 ÷ $40,000) x $500 = $125 Required statement. Turbotax deluxe federal e file state 2012   If you receive a tax-free rental or parsonage allowance and have ministerial expenses, attach a statement to your tax return. Turbotax deluxe federal e file state 2012 The statement must contain all of the following information. Turbotax deluxe federal e file state 2012 A list of each item of taxable ministerial income by source (such as wages, salary, weddings, baptisms, etc. Turbotax deluxe federal e file state 2012 ) plus the amount. Turbotax deluxe federal e file state 2012 A list of each item of tax-free ministerial income by source (parsonage allowance) plus the amount. Turbotax deluxe federal e file state 2012 A list of each item of otherwise deductible ministerial expenses plus the amount. Turbotax deluxe federal e file state 2012 How you figured the nondeductible part of your otherwise deductible expenses. Turbotax deluxe federal e file state 2012 A statement that the other deductions claimed on your tax return are not allocable to your tax-free income. Turbotax deluxe federal e file state 2012   See the attachments prepared for the Comprehensive Example , later. Turbotax deluxe federal e file state 2012 Following the example, you will find blank worksheets for your own use. Turbotax deluxe federal e file state 2012 Health Insurance Costs of Self-Employed Ministers If you are self-employed, you may be able to deduct the amount you paid in 2013 for medical and dental insurance and qualified long-term care insurance for you, your spouse, and your dependents. Turbotax deluxe federal e file state 2012 If you qualify, you can take this deduction as an adjustment to income on Form 1040, line 29. Turbotax deluxe federal e file state 2012 See the Instructions for Form 1040 to figure your deduction. Turbotax deluxe federal e file state 2012 The following special rules apply to the self-employed health insurance deduction. Turbotax deluxe federal e file state 2012 You cannot take a medical expense deduction on Schedule A (Form 1040) for any expenses you claim for purposes of the self-employed health insurance deduction. Turbotax deluxe federal e file state 2012 You cannot take the deduction for any month you are eligible to participate in a subsidized plan of your (or your spouse's) employer. Turbotax deluxe federal e file state 2012 The deduction cannot exceed your net earnings from the business under which the insurance plan is established. Turbotax deluxe federal e file state 2012 Your net earnings under this rule do not include the income you earned as a common-law employee (discussed earlier) of a church. Turbotax deluxe federal e file state 2012 More information. Turbotax deluxe federal e file state 2012   For more information about the self-employed health insurance deduction, see chapter 6 in Publication 535. Turbotax deluxe federal e file state 2012 Deduction for SE Tax You can deduct one-half of your SE tax in figuring adjusted gross income. Turbotax deluxe federal e file state 2012 This is an income tax deduction only, on Form 1040, line 27. Turbotax deluxe federal e file state 2012 Do not claim this deduction in figuring net earnings from self-employment subject to SE tax. Turbotax deluxe federal e file state 2012 Income Tax Withholding and Estimated Tax The federal income tax is a pay-as-you-go tax. Turbotax deluxe federal e file state 2012 You must pay the tax as you earn or receive income during the year. Turbotax deluxe federal e file state 2012 An employee usually has income tax withheld from his or her wages or salary. Turbotax deluxe federal e file state 2012 However, your salary is not subject to federal income tax withholding if both of the following conditions apply. Turbotax deluxe federal e file state 2012 You are a duly ordained, commissioned, or licensed minister, a member of a religious order (who has not taken a vow of poverty), or a Christian Science practitioner or reader. Turbotax deluxe federal e file state 2012 Your salary is for ministerial services (see Ministerial Services , earlier). Turbotax deluxe federal e file state 2012 If your salary is not subject to withholding, or if you do not pay enough tax through withholding, you may need to make estimated tax payments to avoid penalties for not paying enough tax as you earn your income. Turbotax deluxe federal e file state 2012 You generally must make estimated tax payments if you expect to owe taxes, including SE tax, of $1,000 or more, when you file your return. Turbotax deluxe federal e file state 2012 Determine your estimated tax by using the worksheets in Publication 505, Tax Withholding and Estimated Tax. Turbotax deluxe federal e file state 2012 Pay the entire estimated tax for 2014 or the first installment by April 15, 2014. Turbotax deluxe federal e file state 2012 See Form 1040-ES for the different payment methods. Turbotax deluxe federal e file state 2012 The April 15 date applies whether or not your tax home and your abode are outside the United States and Puerto Rico. Turbotax deluxe federal e file state 2012 For more information, see chapter 2 of Publication 505. Turbotax deluxe federal e file state 2012 If you perform your services as a common-law employee of the church and your salary is not subject to income tax withholding, you can enter into a voluntary withholding agreement with the church to cover any income and SE tax that may be due. Turbotax deluxe federal e file state 2012 Filing Your Return You must file an income tax return for 2013 if your gross income was at least the amount shown in the third column of Table 4 above. Turbotax deluxe federal e file state 2012 Table 4. Turbotax deluxe federal e file state 2012 2013 Filing Requirements for Most Taxpayers IF your filing status is . Turbotax deluxe federal e file state 2012 . Turbotax deluxe federal e file state 2012 . Turbotax deluxe federal e file state 2012 AND at the end of 2013 you were* . Turbotax deluxe federal e file state 2012 . Turbotax deluxe federal e file state 2012 . Turbotax deluxe federal e file state 2012 THEN file a return if your gross income** was at least . Turbotax deluxe federal e file state 2012 . Turbotax deluxe federal e file state 2012 . Turbotax deluxe federal e file state 2012 single under age 65 65 or older   $10,000 $11,500   married filing jointly*** under 65 (both spouses) 65 or older (one spouse) 65 or older (both spouses)   $20,000  $21,200  $22,400   married filing separately any age   $3,900   head of household under 65 65 or older   $12,850 $14,350   qualifying widow(er) with dependent child under 65 65 or older   $16,100  $17,300   * If you were born on January 1, 1949, you are considered to be age 65 at the end of 2013. Turbotax deluxe federal e file state 2012 ** Gross income means all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States or from the sale of your main home (even if you can exclude part or all of it). Turbotax deluxe federal e file state 2012 Do not include any social security benefits unless (a) you are married filing a separate return and you lived with your spouse at any time in 2013, or (b) one-half of your social security benefits plus your other gross income and any tax-exempt interest is more than $25,000 ($32,000 if married filing jointly). Turbotax deluxe federal e file state 2012 If (a) or (b) applies, see the instructions for Form 1040, lines 20a and 20b, to figure the taxable part of social security benefits you must include in gross income. Turbotax deluxe federal e file state 2012 Gross income includes gains, but not losses, reported on Form 8949 or Schedule D (Form 1040). Turbotax deluxe federal e file state 2012 Gross income from a business means, for example, the amount on Schedule C (Form 1040), line 7, or Schedule F (Form 1040), line 9. Turbotax deluxe federal e file state 2012 But, in figuring gross income, do not reduce your income by any losses, including any loss on Schedule C (Form 1040), line 7, or Schedule F (Form 1040), line 9. Turbotax deluxe federal e file state 2012 *** If you did not live with your spouse at the end of 2013 (or on the date your spouse died) and your gross income was at least $3,900, you must file a return regardless of your age. Turbotax deluxe federal e file state 2012 Additional requirements. Turbotax deluxe federal e file state 2012   Even if your income was less than the amount shown in Table 4, you must file an income tax return on Form 1040, and attach a completed Schedule SE (Form 1040), if:    You are not exempt from SE tax, and you have net earnings from self-employment (discussed earlier under Self-Employment Tax: Figuring Net Earnings ) of $400 or more in the tax year, You are exempt from SE tax on earnings from ministerial services and you have $400 or more of other net earnings subject to SE tax, or You had wages of $108. Turbotax deluxe federal e file state 2012 28 or more from an electing church or church-controlled organization (see Coverage of Religious Workers (Church Employees) , earlier, under Social Security Coverage). Turbotax deluxe federal e file state 2012 Self-employment tax. Turbotax deluxe federal e file state 2012   If you are liable for SE tax, you must file Schedule SE (Form 1040) with your return. Turbotax deluxe federal e file state 2012   If you filed Form 4361 and did not receive approval from the IRS, you must pay SE tax on your ministerial earnings, as explained earlier. Turbotax deluxe federal e file state 2012 You should report ministerial earnings and expenses from nonemployee ministerial services on Schedule C or C-EZ (Form 1040). Turbotax deluxe federal e file state 2012 You should then carry the net amount over to line 2 of Schedule SE (Form 1040), Section A or B. Turbotax deluxe federal e file state 2012 However, if you were a duly ordained minister who was an employee of a church and you must pay SE tax on the wages you earned for those services, do not report those wages on Schedule C or C-EZ (Form 1040). Turbotax deluxe federal e file state 2012 Instead, report those wages less any allowable expenses (including any unreimbursed employee business expenses), on line 2 of Schedule SE (Form 1040), Section A or B, and attach an explanation. Turbotax deluxe federal e file state 2012 Note. Turbotax deluxe federal e file state 2012 For income tax purposes, the unreimbursed employee business expenses that you incurred as an employee of the church and subtracted from your wages on line 2 of Schedule SE (Form 1040) are allowed only as an itemized deduction on Schedule A (Form 1040) if they exceed 2% of your adjusted gross income. Turbotax deluxe federal e file state 2012 You cannot deduct these expenses on Schedule C or C-EZ (Form 1040) as a trade or business expense. Turbotax deluxe federal e file state 2012 Exemption from SE tax. Turbotax deluxe federal e file state 2012   If you filed Form 4361 and received IRS approval not to be taxed on your ministerial earnings, and you do not have any other income subject to SE tax, do not file Schedule SE (Form 1040). Turbotax deluxe federal e file state 2012 Instead, enter “Exempt—Form 4361” on the dotted line next to Form 1040, line 56. Turbotax deluxe federal e file state 2012 However, if you had net earnings from another trade or business of $400 or more subject to SE tax, see line A at the top of Schedule SE (Form 1040), Section B. Turbotax deluxe federal e file state 2012    If you filed Form 4029 and received IRS approval not to be taxed on those earnings, and you do not have any other income subject to SE tax, do not file Schedule SE (Form 1040). Turbotax deluxe federal e file state 2012 Instead, enter “Exempt—Form 4029” on the dotted line next to Form 1040, line 56. Turbotax deluxe federal e file state 2012 More information. Turbotax deluxe federal e file state 2012   For more information on filing your return, including when and where to file it, see the Instructions for Form 1040. Turbotax deluxe federal e file state 2012 Retirement Savings Arrangements Retirement savings arrangements are plans that offer you a tax-favored way to save for your retirement. Turbotax deluxe federal e file state 2012 You generally can deduct your contributions to the plan. Turbotax deluxe federal e file state 2012 Your contributions and the earnings on them are not taxed until they are distributed. Turbotax deluxe federal e file state 2012 Retirement plans for the self-employed. Turbotax deluxe federal e file state 2012   To set up one of the following plans you must be self-employed. Turbotax deluxe federal e file state 2012 SEP (simplified employee pension) plan. Turbotax deluxe federal e file state 2012 SIMPLE (savings incentive match plan for employees) plan. Turbotax deluxe federal e file state 2012 Qualified retirement plan (also called a Keogh or H. Turbotax deluxe federal e file state 2012 R. Turbotax deluxe federal e file state 2012 10 plan). Turbotax deluxe federal e file state 2012   The common-law rules determine whether you are an employee or a self-employed person for purposes of setting up a retirement plan. Turbotax deluxe federal e file state 2012 See Employment status for other tax purposes under Coverage of Members of the Clergy, earlier. Turbotax deluxe federal e file state 2012 This result is true even if your compensation for ministerial services (defined earlier) is subject to SE tax. Turbotax deluxe federal e file state 2012   For example, if a congregation pays you a salary for performing ministerial services and you are subject to the congregation's control, you generally are a common-law employee. Turbotax deluxe federal e file state 2012 You are not a self-employed person for purposes of setting up a retirement plan. Turbotax deluxe federal e file state 2012 This result is true even if your salary is subject to SE tax. Turbotax deluxe federal e file state 2012   On the other hand, amounts received directly from members of the congregation, such as fees for performing marriages, baptisms, or other personal services that you report on Schedule C or C-EZ (Form 1040), are earnings from self-employment for all tax purposes. Turbotax deluxe federal e file state 2012   For more information on establishing a SEP, SIMPLE, or qualified retirement plan, see Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans). Turbotax deluxe federal e file state 2012 Individual retirement arrangements (IRAs). Turbotax deluxe federal e file state 2012   The traditional IRA and the Roth IRA are two individual retirement arrangements you can use to save money for your retirement. Turbotax deluxe federal e file state 2012 Generally, your maximum contribution for 2013 to either of these plans (or to a combination of the two) is the smaller of your taxable compensation or $5,500 ($6,500 if you are age 50 or older). Turbotax deluxe federal e file state 2012   However, your maximum contribution to a Roth IRA will be further reduced or eliminated if your adjusted gross income is above a certain amount. Turbotax deluxe federal e file state 2012 You cannot deduct Roth IRA contributions, but if you satisfy certain requirements, all earnings in the Roth IRA are tax free and neither your nondeductible contributions nor any earnings on them are taxable when distributed. Turbotax deluxe federal e file state 2012   If you contribute to a traditional IRA, your contribution may be deductible. Turbotax deluxe federal e file state 2012 However, your deduction may be reduced or eliminated if you or your spouse is covered by an employer retirement plan (including, but not limited to, a SEP, SIMPLE, or qualified retirement plan). Turbotax deluxe federal e file state 2012   For more information on IRAs, see Publication 590. Turbotax deluxe federal e file state 2012 Tax-sheltered annuity plans. Turbotax deluxe federal e file state 2012   Church employees, members of religious orders, and duly ordained, commissioned, or licensed ministers working as ministers or chaplains can participate in tax-sheltered annuity (403(b)) plans. Turbotax deluxe federal e file state 2012 For more