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Turbotax 6. Turbotax   How To Report Table of Contents Where To ReportGifts. Turbotax Statutory employees. Turbotax Vehicle Provided by Your Employer ReimbursementsAccountable Plans Nonaccountable Plans Rules for Independent Contractors and Clients How To Use Per Diem Rate TablesThe Two Substantiation Methods Transition Rules Completing Forms 2106 and 2106-EZInformation on use of cars. Turbotax Standard mileage rate. Turbotax Actual expenses. Turbotax Car rentals. Turbotax Hours of service limits. Turbotax Allocating your reimbursement. Turbotax 1. Turbotax Limit on meals and entertainment. Turbotax 2. Turbotax Limit on miscellaneous itemized deductions. Turbotax 3. Turbotax Limit on total itemized deductions. Turbotax Special Rules This chapter explains where and how to report the expenses discussed in this publication. Turbotax It discusses reimbursements and how to treat them under accountable and nonaccountable plans. Turbotax It also explains rules for independent contractors and clients, fee-basis officials, certain performing artists, Armed Forces reservists, and certain disabled employees. Turbotax The chapter ends with illustrations of how to report travel, entertainment, gift, and car expenses on Forms 2106 and 2106-EZ. Turbotax Where To Report This section provides general information on where to report the expenses discussed in this publication. Turbotax Self-employed. Turbotax   You must report your income and expenses on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) if you are a sole proprietor, or on Schedule F (Form 1040) if you are a farmer. Turbotax You do not use Form 2106 or 2106-EZ. Turbotax    If you claim car or truck expenses, you must provide certain information on the use of your vehicle. Turbotax You provide this information on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Form 4562. Turbotax   If you file Schedule C (Form 1040): Report your travel expenses, except meals, on line 24a, Report your deductible meals (actual cost or standard meal allowance) and entertainment on line 24b, Report your gift expenses and transportation expenses, other than car expenses, on line 27a, and Report your car expenses on line 9. Turbotax Complete Part IV of the form unless you have to file Form 4562 for depreciation or amortization. Turbotax   If you file Schedule C-EZ (Form 1040), report the total of all business expenses on line 2. Turbotax You can only include 50% of your meals and entertainment in that total. Turbotax If you include car expenses, you must also complete Part III of the form. Turbotax    If you file Schedule F (Form 1040): Report your car expenses on line 10. Turbotax Attach Form 4562 and provide information on the use of your car in Part V of Form 4562. Turbotax Report all other business expenses discussed in this publication on line 32. Turbotax You can only include 50% of your meals and entertainment on that line. Turbotax See your form instructions for more information on how to complete your tax return. Turbotax Both self-employed and an employee. Turbotax   If you are both self-employed and an employee, you must keep separate records for each business activity. Turbotax Report your business expenses for self-employment on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040), as discussed earlier. Turbotax Report your business expenses for your work as an employee on Form 2106 or 2106-EZ, as discussed next. Turbotax Employees. Turbotax    If you are an employee, you generally must complete Form 2106 to deduct your travel, transportation, and entertainment expenses. Turbotax However, you can use the shorter Form 2106-EZ instead of Form 2106 if you meet all of the following conditions. Turbotax You are an employee deducting expenses attributable to your job. Turbotax You were not reimbursed by your employer for your expenses (amounts included in box 1 of your Form W-2 are not considered reimbursements). Turbotax If you claim car expenses, you use the standard mileage rate. Turbotax   For more information on how to report your expenses on Forms 2106 and 2106-EZ, see Completing Forms 2106 and 2106-EZ , later. Turbotax Gifts. Turbotax   If you did not receive any reimbursements (or the reimbursements were all included in box 1 of your Form W-2), the only business expense you are claiming is for gifts, and the Special Rules discussed later do not apply to you, do not complete Form 2106 or 2106-EZ. Turbotax Instead, claim the amount of your deductible gifts directly on line 21 of Schedule A (Form 1040). Turbotax Statutory employees. Turbotax    If you received a Form W-2 and the “Statutory employee” box in box 13 was checked, report your income and expenses related to that income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040). Turbotax Do not complete Form 2106 or 2106-EZ. Turbotax   Statutory employees include full-time life insurance salespersons, certain agent or commission drivers, traveling salespersons, and certain homeworkers. Turbotax If you are entitled to a reimbursement from your employer but you do not claim it, you cannot claim a deduction for the expenses to which that unclaimed reimbursement applies. Turbotax Reimbursement for personal expenses. Turbotax    If your employer reimburses you for nondeductible personal expenses, such as for vacation trips, your employer must report the reimbursement as wage income in box 1 of your Form W-2. Turbotax You cannot deduct personal expenses. Turbotax Income-producing property. Turbotax   If you have travel or transportation expenses related to income-producing property, report your deductible expenses on the form appropriate for that activity. Turbotax   For example, if you have rental real estate income and expenses, report your expenses on Schedule E (Form 1040), Supplemental Income and Loss. Turbotax See Publication 527, Residential Rental Property, for more information on the rental of real estate. Turbotax If you have deductible investment-related transportation expenses, report them on Schedule A (Form 1040), line 23. Turbotax Vehicle Provided by Your Employer If your employer provides you with a car, you may be able to deduct the actual expenses of operating that car for business purposes. Turbotax The amount you can deduct depends on the amount that your employer included in your income and the business and personal miles you drove during the year. Turbotax You cannot use the standard mileage rate. Turbotax Value reported on Form W-2. Turbotax   Your employer can figure and report either the actual value of your personal use of the car or the value of the car as if you used it only for personal purposes (100% income inclusion). Turbotax Your employer must separately state the amount if 100% of the annual lease value was included in your income. Turbotax If you are unsure of the amount included on your Form W-2, ask your employer. Turbotax Full value included in your income. Turbotax   You can deduct the value of the business use of an employer-provided car if your employer reported 100% of the value of the car in your income. Turbotax On your 2013 Form W-2, the amount of the value will be included in box 1, Wages, tips, other compensation, and box 14. Turbotax    To claim your expenses, complete Form 2106, Part II, Sections A and C. Turbotax Enter your actual expenses on line 23 of Section C and include the entire value of the employer-provided car on line 25. Turbotax Complete the rest of the form. Turbotax Less than full value included in your income. Turbotax   If less than the full annual lease value of the car was included on your Form W-2, this means that your Form W-2 only includes the value of your personal use of the car. Turbotax Do not enter this value on your Form 2106 because it is not deductible. Turbotax   If you paid any actual costs (that your employer did not provide or reimburse you for) to operate the car, you can deduct the business portion of those costs. Turbotax Examples of costs that you may have are gas, oil, and repairs. Turbotax Complete Form 2106, Part II, Sections A and C. Turbotax Enter your actual costs on line 23 of Section C and leave line 25 blank. Turbotax Complete the rest of the form. Turbotax Reimbursements This section explains what to do when you receive an advance or are reimbursed for any of the employee business expenses discussed in this publication. Turbotax If you received an advance, allowance, or reimbursement for your expenses, how you report this amount and your expenses depends on whether your employer reimbursed you under an accountable plan or a nonaccountable plan. Turbotax This section explains the two types of plans, how per diem and car allowances simplify proving the amount of your expenses, and the tax treatment of your reimbursements and expenses. Turbotax It also covers rules for independent contractors. Turbotax No reimbursement. Turbotax   You are not reimbursed or given an allowance for your expenses if you are paid a salary or commission with the understanding that you will pay your own expenses. Turbotax In this situation, you have no reimbursement or allowance arrangement, and you do not have to read this section on reimbursements. Turbotax Instead, see Completing Forms 2106 and 2106-EZ , later, for information on completing your tax return. Turbotax Reimbursement, allowance, or advance. Turbotax   A reimbursement or other expense allowance arrangement is a system or plan that an employer uses to pay, substantiate, and recover the expenses, advances, reimbursements, and amounts charged to the employer for employee business expenses. Turbotax Arrangements include per diem and car allowances. Turbotax    A per diem allowance is a fixed amount of daily reimbursement your employer gives you for your lodging, meals, and incidental expenses when you are away from home on business. Turbotax (The term “ incidental expenses ” is defined in chapter 1 under Standard Meal Allowance. Turbotax ) A car allowance is an amount your employer gives you for the business use of your car. Turbotax   Your employer should tell you what method of reimbursement is used and what records you must provide. Turbotax Employers. Turbotax   If you are an employer and you reimburse employee business expenses, how you treat this reimbursement on your employee's Form W-2 depends in part on whether you have an accountable plan. Turbotax Reimbursements treated as paid under an accountable plan, as explained next, are not reported as pay. Turbotax Reimbursements treated as paid under nonaccountable plans , as explained later, are reported as pay. Turbotax See Publication 15 (Circular E), Employer's Tax Guide, for information on employee pay. Turbotax Accountable Plans To be an accountable plan, your employer's reimbursement or allowance arrangement must include all of the following rules: 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 You must adequately account to your employer for these expenses within a reasonable period of time. Turbotax You must return any excess reimbursement or allowance within a reasonable period of time. Turbotax “ Adequate accounting ” and “ returning excess reimbursements ” are discussed later. Turbotax An excess reimbursement or allowance is any amount you are paid that is more than the business-related expenses that you adequately accounted for to your employer. Turbotax Reasonable period of time. Turbotax   The definition of reasonable period of time depends on the facts and circumstances of your situation. Turbotax However, regardless of the facts and circumstances of your situation, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time. Turbotax You receive an advance within 30 days of the time you have an expense. Turbotax You adequately account for your expenses within 60 days after they were paid or incurred. Turbotax You return any excess reimbursement within 120 days after the expense was paid or incurred. Turbotax You are given a periodic statement (at least quarterly) that asks you to either return or adequately account for outstanding advances and you comply within 120 days of the statement. Turbotax Employee meets accountable plan rules. Turbotax   If you meet the three rules for accountable plans, your employer should not include any reimbursements in your income in box 1 of your Form W-2. Turbotax If your expenses equal your reimbursements, you do not complete Form 2106. Turbotax You have no deduction since your expenses and reimbursement are equal. Turbotax    If your employer included reimbursements in box 1 of your Form W-2 and you meet all the rules for accountable plans, ask your employer for a corrected Form W-2. Turbotax Accountable plan rules not met. Turbotax   Even though you are reimbursed under an accountable plan, some of your expenses may not meet all three rules. Turbotax All reimbursements that fail to meet all three rules for accountable plans are generally treated as having been reimbursed under a nonaccountable plan (discussed later). Turbotax Failure to return excess reimbursements. Turbotax   If you are reimbursed under an accountable plan, but you fail to return, within a reasonable time, any amounts in excess of the substantiated amounts, the amounts paid in excess of the substantiated expenses are treated as paid under a nonaccountable plan. Turbotax See Reasonable period of time , earlier, and Returning Excess Reimbursements , later. Turbotax Reimbursement of nondeductible expenses. Turbotax   You may be reimbursed under your employer's accountable plan for expenses related to that employer's business, some of which are deductible as employee business expenses and some of which are not deductible. Turbotax The reimbursements you receive for the nondeductible expenses do not meet rule (1) for accountable plans, and they are treated as paid under a nonaccountable plan. Turbotax Example. Turbotax Your employer's plan reimburses you for travel expenses while away from home on business and also for meals when you work late at the office, even though you are not away from home. Turbotax The part of the arrangement that reimburses you for the nondeductible meals when you work late at the office is treated as paid under a nonaccountable plan. Turbotax The employer makes the decision whether to reimburse employees under an accountable plan or a nonaccountable plan. Turbotax If you are an employee who receives payments under a nonaccountable plan, you cannot convert these amounts to payments under an accountable plan by voluntarily accounting to your employer for the expenses and voluntarily returning excess reimbursements to the employer. Turbotax Adequate Accounting One of the rules for an accountable plan is that you must adequately account to your employer for your expenses. Turbotax You adequately account by giving your employer a statement of expense, an account book, a diary, or a similar record in which you entered each expense at or near the time you had it, along with documentary evidence (such as receipts) of your travel, mileage, and other employee business expenses. Turbotax (See Table 5-1 in chapter 5 for details you need to enter in your record and documents you need to prove certain expenses. Turbotax ) A per diem or car allowance satisfies the adequate accounting requirement under certain conditions. Turbotax See Per Diem and Car Allowances , later. Turbotax You must account for all amounts you received from your employer during the year as advances, reimbursements, or allowances. Turbotax This includes amounts you charged to your employer by credit card or other method. Turbotax You must give your employer the same type of records and supporting information that you would have to give to the IRS if the IRS questioned a deduction on your return. Turbotax You must pay back the amount of any reimbursement or other expense allowance for which you do not adequately account or that is more than the amount for which you accounted. Turbotax Per Diem and Car Allowances If your employer reimburses you for your expenses using a per diem or a car allowance, you can generally use the allowance as proof for the amount of your expenses. Turbotax A per diem or car allowance satisfies the adequate accounting requirements for the amount of your expenses only if all the following conditions apply. Turbotax Your employer reasonably limits payments of your expenses to those that are ordinary and necessary in the conduct of the trade or business. Turbotax The allowance is similar in form to and not more than the federal rate (defined later). Turbotax You prove the time (dates), place, and business purpose of your expenses to your employer (as explained in Table 5-1 ) within a reasonable period of time. Turbotax You are not related to your employer (as defined next). Turbotax If you are related to your employer, you must be able to prove your expenses to the IRS even if you have already adequately accounted to your employer and returned any excess reimbursement. Turbotax If the IRS finds that an employer's travel allowance practices are not based on reasonably accurate estimates of travel costs (including recognition of cost differences in different areas for per diem amounts), you will not be considered to have accounted to your employer. Turbotax In this case, you must be able to prove your expenses to the IRS. Turbotax Related to employer. Turbotax   You are related to your employer if: Your employer is your brother or sister, half brother or half sister, spouse, ancestor, or lineal descendant, Your employer is a corporation in which you own, directly or indirectly, more than 10% in value of the outstanding stock, or Certain relationships (such as grantor, fiduciary, or beneficiary) exist between you, a trust, and your employer. Turbotax You may be considered to indirectly own stock, for purposes of (2), if you have an interest in a corporation, partnership, estate, or trust that owns the stock or if a member of your family or your partner owns the stock. Turbotax The federal rate. Turbotax   The federal rate can be figured using any one of the following methods. Turbotax For per diem amounts: The regular federal per diem rate. Turbotax The standard meal allowance. Turbotax The high-low rate. Turbotax For car expenses: The standard mileage rate. Turbotax A fixed and variable rate (FAVR). Turbotax    For per diem amounts, use the rate in effect for the area where you stop for sleep or rest. Turbotax Regular federal per diem rate. Turbotax   The regular federal per diem rate is the highest amount that the federal government will pay to its employees for lodging, meals, and incidental expenses (or meals and incidental expenses only) while they are traveling away from home in a particular area. Turbotax The rates are different for different locations. Turbotax Your employer should have these rates available. Turbotax You can also find federal per diem rates at www. Turbotax gsa. Turbotax gov/perdiem. Turbotax The standard meal allowance. Turbotax   The standard meal allowance (discussed in chapter 1) is the federal rate for meals and incidental expenses (M&IE). Turbotax The rate for most small localities in the United States is $46 a day. Turbotax Most major cities and many other localities qualify for higher rates. Turbotax You can find this information on the Internet at www. Turbotax gsa. Turbotax gov/perdiem. Turbotax   You receive an allowance only for meals and incidental expenses when your employer does one of the following. Turbotax Provides you with lodging (furnishes it in kind). Turbotax Reimburses you, based on your receipts, for the actual cost of your lodging. Turbotax Pays the hotel, motel, etc. Turbotax , directly for your lodging. Turbotax Does not have a reasonable belief that you had (or will have) lodging expenses, such as when you stay with friends or relatives or sleep in the cab of your truck. Turbotax Figures the allowance on a basis similar to that used in computing your compensation, such as number of hours worked or miles traveled. Turbotax High-low rate. Turbotax   This is a simplified method of computing the federal per diem rate for travel within the continental United States. Turbotax It eliminates the need to keep a current list of the per diem rates for each city. Turbotax   Under the high-low method, the per diem amount for travel during January through September of 2013 is $242 (including $65 for M&IE) for certain high-cost locations. Turbotax All other areas have a per diem amount of $163 (including $52 for M&IE). Turbotax For more information, see Notice 2012-63, which can be found on the Internet at www. Turbotax irs. Turbotax gov/irb/2012-42_IRB/ar12. Turbotax html. Turbotax    Effective October 1, 2013, the per diem rate for certain high-cost locations increased to $251 (including $65 for M&IE). Turbotax The rate for all other locations increased to $170 (including $52 for M&IE). Turbotax Employers who did not use the high-low method during the first 9 months of 2013 cannot begin to use it before 2014. Turbotax For more information, see Notice 2013-65, which can be found on the Internet at www. Turbotax irs. Turbotax gov/pub/irs-drop/n-13–65. Turbotax pdf and Revenue Procedure 2011-47 at www. Turbotax irs. Turbotax gov/irb/2011-42_IRB/ar12. Turbotax html. Turbotax Prorating the standard meal allowance on partial days of travel. Turbotax   The standard meal allowance is for a full 24-hour day of travel. Turbotax If you travel for part of a day, such as on the days you depart and return, you must prorate the full-day M&IE rate. Turbotax This rule also applies if your employer uses the regular federal per diem rate or the high-low rate. Turbotax   You can use either of the following methods to figure the federal M&IE for that day. Turbotax Method 1: For the day you depart, add 3/4 of the standard meal allowance amount for that day. Turbotax For the day you return, add 3/4 of the standard meal allowance amount for the preceding day. Turbotax Method 2: Prorate the standard meal allowance using any method you consistently apply in accordance with reasonable business practice. Turbotax For example, an employer can treat 2 full days of per diem (that includes M&IE) paid for travel away from home from 9 a. Turbotax m. Turbotax of one day to 5 p. Turbotax m. Turbotax of the next day as being no more than the federal rate. Turbotax This is true even though a federal employee would be limited to a reimbursement of M&IE for only 1½ days of the federal M&IE rate. Turbotax The standard mileage rate. Turbotax   This is a set rate per mile that you can use to compute your deductible car expenses. Turbotax For 2013, the standard mileage rate for the cost of operating your car for business use is 56½ cents per mile. Turbotax Fixed and variable rate (FAVR). Turbotax   This is an allowance your employer may use to reimburse your car expenses. Turbotax Under this method, your employer pays an allowance that includes a combination of payments covering fixed and variable costs, such as a cents-per-mile rate to cover your variable operating costs (such as gas, oil, etc. Turbotax ) plus a flat amount to cover your fixed costs (such as depreciation (or lease payments), insurance, etc. Turbotax ). Turbotax If your employer chooses to use this method, your employer will request the necessary records from you. Turbotax Reporting your expenses with a per diem or car allowance. Turbotax   If your reimbursement is in the form of an allowance received under an accountable plan, the following facts affect your reporting. Turbotax The federal rate. Turbotax Whether the allowance or your actual expenses were more than the federal rate. Turbotax The following discussions explain where to report your expenses depending upon how the amount of your allowance compares to the federal rate. Turbotax Allowance less than or equal to the federal rate. Turbotax   If your allowance is less than or equal to the federal rate, the allowance will not be included in box 1 of your Form W-2. Turbotax You do not need to report the related expenses or the allowance on your return if your expenses are equal to or less than the allowance. Turbotax   However, if your actual expenses are more than your allowance, you can complete Form 2106 and deduct the excess amount on Schedule A (Form 1040). Turbotax If you are using actual expenses, you must be able to prove to the IRS the total amount of your expenses and reimbursements for the entire year. Turbotax If you are using the standard meal allowance or the standard mileage rate, you do not have to prove that amount. Turbotax Example 1. Turbotax In April, Jeremy takes a 2-day business trip to Denver. Turbotax The federal rate for Denver is $215 per day. Turbotax As required by his employer's accountable plan, he accounts for the time (dates), place, and business purpose of the trip. Turbotax His employer reimburses him $215 a day ($430 total) for living expenses. Turbotax Jeremy's living expenses in Denver are not more than $215 a day. Turbotax Jeremy's employer does not include any of the reimbursement on his Form W-2 and Jeremy does not deduct the expenses on his return. Turbotax Example 2. Turbotax In June, Matt takes a 2-day business trip to Boston. Turbotax Matt's employer uses the high-low method to reimburse employees. Turbotax Since Boston is a high-cost area, Matt is given an advance of $242 a day ($484 total) for his lodging, meals, and incidental expenses. Turbotax Matt's actual expenses totaled $700. Turbotax Since Matt's $700 of expenses are more than his $484 advance, he includes the excess expenses when he itemizes his deductions. Turbotax Matt completes Form 2106 (showing all of his expenses and reimbursements). Turbotax He must also allocate his reimbursement between his meals and other expenses as discussed later under Completing Forms 2106 and 2106-EZ . Turbotax Example 3. Turbotax Nicole drives 10,000 miles in 2013 for business. Turbotax Under her employer's accountable plan, she accounts for the time (dates), place, and business purpose of each trip. Turbotax Her employer pays her a mileage allowance of 40 cents a mile. Turbotax Since Nicole's $5,650 expense computed under the standard mileage rate (10,000 miles x 56½ cents) is more than her $4,000 reimbursement (10,000 miles × 40 cents), she itemizes her deductions to claim the excess expense. Turbotax Nicole completes Form 2106 (showing all her expenses and reimbursements) and enters $1,650 ($5,650 − $4,000) as an itemized deduction. Turbotax Allowance more than the federal rate. Turbotax   If your allowance is more than the federal rate, your employer must include the allowance amount up to the federal rate in box 12 of your Form W-2. Turbotax This amount is not taxable. Turbotax However, the excess allowance will be included in box 1 of your Form W-2. Turbotax You must report this part of your allowance as if it were wage income. Turbotax   If your actual expenses are less than or equal to the federal rate, you do not complete Form 2106 or claim any of your expenses on your return. Turbotax   However, if your actual expenses are more than the federal rate, you can complete Form 2106 and deduct those excess expenses. Turbotax You must report on Form 2106 your reimbursements up to the federal rate (as shown in box 12 of your Form W-2) and all your expenses. Turbotax You should be able to prove these amounts to the IRS. Turbotax Example 1. Turbotax Laura lives and works in Austin. Turbotax In July her employer sent her to Albuquerque for 4 days on business. Turbotax Laura's employer paid the hotel directly for her lodging and reimbursed Laura $65 a day ($260 total) for meals and incidental expenses. Turbotax Laura's actual meal expenses were not more than the federal rate for Albuquerque, which is $56 per day. Turbotax Table 6-1. Turbotax Reporting Travel, Entertainment, Gift, and Car Expenses and Reimbursements IF the type of reimbursement (or  other expense allowance)  arrangement is under: THEN the employer reports on Form W-2: AND the employee reports on  Form 2106: * An accountable plan with: Actual expense reimbursement: Adequate accounting made and excess returned. Turbotax No amount. Turbotax No amount. Turbotax Actual expense reimbursement: Adequate accounting and return of excess both required but excess not returned. Turbotax The excess amount as wages in box 1. Turbotax No amount. Turbotax Per diem or mileage allowance up to the federal rate: Adequate accounting made and excess returned. Turbotax No amount. Turbotax All expenses and reimbursements only if excess expenses are claimed. Turbotax Otherwise, form is not filed. Turbotax Per diem or mileage allowance up to the federal rate: Adequate accounting and return of excess both required but excess not returned. Turbotax The excess amount as wages in box 1. Turbotax The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Turbotax No amount. Turbotax Per diem or mileage allowance exceeds the federal rate: Adequate accounting up to the federal rate only and excess not returned. Turbotax The excess amount as wages in box 1. Turbotax The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Turbotax All expenses (and reimbursements reported on Form W-2, box 12) only if expenses in excess of the federal rate are claimed. Turbotax Otherwise, form is not filed. Turbotax A nonaccountable plan with: Either adequate accounting or return of excess, or both, not required by plan. Turbotax The entire amount as wages in box 1. Turbotax All expenses. Turbotax No reimbursement plan: The entire amount as wages in box 1. Turbotax All expenses. Turbotax * You may be able to use Form 2106-EZ. Turbotax See Completing Forms 2106 and 2106-EZ . Turbotax Her employer included the $36 that was more than the federal rate (($65 − $56) × 4) in box 1 of Laura's Form W-2. Turbotax Her employer shows $224 ($56 a day × 4) in box 12 of her Form W-2. Turbotax This amount is not included in Laura's income. Turbotax Laura does not have to complete Form 2106; however, she must include the $36 in her gross income as wages (by reporting the total amount shown in box 1 of her Form W-2). Turbotax Example 2. Turbotax Joe also lives in Austin and works for the same employer as Laura. Turbotax In May the employer sent Joe to San Diego for 4 days and paid the hotel directly for Joe's hotel bill. Turbotax The employer reimbursed Joe $75 a day for his meals and incidental expenses. Turbotax The federal rate for San Diego is $71 a day. Turbotax Joe can prove that his actual meal expenses totaled $380. Turbotax His employer's accountable plan will not pay more than $75 a day for travel to San Diego, so Joe does not give his employer the records that prove that he actually spent $380. Turbotax However, he does account for the time, place, and business purpose of the trip. Turbotax This is Joe's only business trip this year. Turbotax Joe was reimbursed $300 ($75 × 4 days), which is $16 more than the federal rate of $284 ($71 × 4 days). Turbotax The employer includes the $16 as income on Joe's Form W-2 in box 1. Turbotax The employer also enters $284 in box 12 of Joe's Form W-2. Turbotax Joe completes Form 2106 to figure his deductible expenses. Turbotax He enters the total of his actual expenses for the year ($380) on Form 2106. Turbotax He also enters the reimbursements that were not included in his income ($284). Turbotax His total deductible expense, before the 50% limit, is $96. Turbotax After he figures the 50% limit on his unreimbursed meals and entertainment, he will include the balance, $48, as an itemized deduction. Turbotax Example 3. Turbotax Debbie drives 10,000 miles in 2013 for business. Turbotax Under her employer's accountable plan, she gets reimbursed 60 cents a mile, which is more than the standard mileage rate. Turbotax Her total reimbursement is $6,000. Turbotax Debbie's employer must include the reimbursement amount up to the standard mileage rate, $5,650 (10,000 × 56½ cents), in box 12 of her Form W-2. Turbotax That amount is not taxable. Turbotax Her employer must also include $350 ($6,000 − $5,650) in box 1 of her Form W-2. Turbotax This is the reimbursement that is more than the standard mileage rate. Turbotax If Debbie's expenses are equal to or less than the standard mileage rate, she would not complete Form 2106. Turbotax If her expenses are more than the standard mileage rate, she would complete Form 2106 and report her total expenses and reimbursement (shown in box 12 of her Form W-2). Turbotax She would then claim the excess expenses as an itemized deduction. Turbotax Returning Excess Reimbursements Under an accountable plan, you are required to return any excess reimbursement or other expense allowances for your business expenses to the person paying the reimbursement or allowance. Turbotax Excess reimbursement means any amount for which you did not adequately account within a reasonable period of time. Turbotax For example, if you received a travel advance and you did not spend all the money on business-related expenses or you do not have proof of all your expenses, you have an excess reimbursement. Turbotax “ Adequate accounting ” and “ reasonable period of time ” were discussed earlier in this chapter. Turbotax Travel advance. Turbotax   You receive a travel advance if your employer provides you with an expense allowance before you actually have the expense, and the allowance is reasonably expected to be no more than your expense. Turbotax Under an accountable plan, you are required to adequately account to your employer for this advance and to return any excess within a reasonable period of time. Turbotax   If you do not adequately account for or do not return any excess advance within a reasonable period of time, the amount you do not account for or return will be treated as having been paid under a nonaccountable plan (discussed later). Turbotax Unproved amounts. Turbotax   If you do not prove that you actually traveled on each day for which you received a per diem or car allowance (proving the elements described in Table 5-1 ), you must return this unproved amount of the travel advance within a reasonable period of time. Turbotax If you do not do this, the unproved amount will be considered paid under a nonaccountable plan (discussed later). Turbotax Per diem allowance more than federal rate. Turbotax   If your employer's accountable plan pays you an allowance that is higher than the federal rate, you do not have to return the difference between the two rates for the period you can prove business-related travel expenses. Turbotax However, the difference will be reported as wages on your Form W-2. Turbotax This excess amount is considered paid under a nonaccountable plan (discussed later). Turbotax Example. Turbotax Your employer sends you on a 5-day business trip to Phoenix in March 2013 and gives you a $400 ($80 × 5 days) advance to cover your meals and incidental expenses. Turbotax The federal per diem for meals and incidental expenses for Phoenix is $71. Turbotax Your trip lasts only 3 days. Turbotax Under your employer's accountable plan, you must return the $160 ($80 × 2 days) advance for the 2 days you did not travel. Turbotax For the 3 days you did travel you do not have to return the $27 difference between the allowance you received and the federal rate for Phoenix (($80 − $71) × 3 days). Turbotax However, the $27 will be reported on your Form W-2 as wages. Turbotax Nonaccountable Plans A nonaccountable plan is a reimbursement or expense allowance arrangement that does not meet one or more of the three rules listed earlier under Accountable Plans. Turbotax In addition, even if your employer has an accountable plan, the following payments will be treated as being paid under a nonaccountable plan: Excess reimbursements you fail to return to your employer, and Reimbursement of nondeductible expenses related to your employer's business. Turbotax See Reimbursement of nondeductible expenses , earlier, under Accountable Plans. Turbotax An arrangement that repays you for business expenses by reducing the amount reported as your wages, salary, or other pay will be treated as a nonaccountable plan. Turbotax This is because you are entitled to receive the full amount of your pay whether or not you have any business expenses. Turbotax If you are not sure if the reimbursement or expense allowance arrangement is an accountable or nonaccountable plan, ask your employer. Turbotax Reporting your expenses under a nonaccountable plan. Turbotax   Your employer will combine the amount of any reimbursement or other expense allowance paid to you under a nonaccountable plan with your wages, salary, or other pay. Turbotax Your employer will report the total in box 1 of your Form W-2. Turbotax    You must complete Form 2106 or 2106-EZ and itemize your deductions to deduct your expenses for travel, transportation, meals, or entertainment. Turbotax Your meal and entertainment expenses will be subject to the 50% limit discussed in chapter 2. Turbotax Also, your total expenses will be subject to the 2%-of-adjusted-gross-income limit that applies to most miscellaneous itemized deductions. Turbotax Example 1. Turbotax Kim's employer gives her $1,000 a month ($12,000 total for the year) for her business expenses. Turbotax Kim does not have to provide any proof of her expenses to her employer, and Kim can keep any funds that she does not spend. Turbotax Kim is being reimbursed under a nonaccountable plan. Turbotax Her employer will include the $12,000 on Kim's Form W-2 as if it were wages. Turbotax If Kim wants to deduct her business expenses, she must complete Form 2106 or 2106-EZ and itemize her deductions. Turbotax Example 2. Turbotax Kevin is paid $2,000 a month by his employer. Turbotax On days that he travels away from home on business, his employer designates $50 a day of his salary as paid to reimburse his travel expenses. Turbotax Because his employer would pay Kevin his monthly salary whether or not he was traveling away from home, the arrangement is a nonaccountable plan. Turbotax No part of the $50 a day designated by his employer is treated as paid under an accountable plan. Turbotax Rules for Independent Contractors and Clients This section provides rules for independent contractors who incur expenses on behalf of a client or customer. Turbotax The rules cover the reporting and substantiation of certain expenses discussed in this publication, and they affect both independent contractors and their clients or customers. Turbotax You are considered an independent contractor if you are self-employed and you perform services for a customer or client. Turbotax Accounting to Your Client If you received a reimbursement or an allowance for travel, entertainment, or gift expenses that you incurred on behalf of a client, you should provide an adequate accounting of these expenses to your client. Turbotax If you do not account to your client for these expenses, you must include any reimbursements or allowances in income. Turbotax You must keep adequate records of these expenses whether or not you account to your client for these expenses. Turbotax If you do not separately account for and seek reimbursement for meals and entertainment in connection with providing services for a client, you are subject to the 50% limit on those expenses. Turbotax See 50% Limit in chapter 2. Turbotax Adequate accounting. Turbotax   As a self-employed person, you adequately account by reporting your actual expenses. Turbotax You should follow the recordkeeping rules in chapter 5 . Turbotax How to report. Turbotax   For information on how to report expenses on your tax return, see Self-employed at the beginning of this chapter. Turbotax Required Records for Clients or Customers If you are a client or customer, you generally do not have to keep records to prove the reimbursements or allowances you give, in the course of your business, to an independent contractor for travel or gift expenses incurred on your behalf. Turbotax However, you must keep records if: You reimburse the contractor for entertainment expenses incurred on your behalf, and The contractor adequately accounts to you for these expenses. Turbotax Contractor adequately accounts. Turbotax   If the contractor adequately accounts to you for entertainment expenses, you (the client or customer) must keep records documenting each element of the expense, as explained in chapter 5 . Turbotax Use your records as proof for a deduction on your tax return. Turbotax If entertainment expenses are accounted for separately, you are subject to the 50% limit on entertainment. Turbotax If the contractor adequately accounts to you for reimbursed amounts, you do not have to report the amounts on an information return. Turbotax Contractor does not adequately account. Turbotax    If the contractor does not adequately account to you for allowances or reimbursements of entertainment expenses, you do not have to keep records of these items. Turbotax You are not subject to the 50% limit on entertainment in this case. Turbotax You can deduct the reimbursements or allowances as payment for services if they are ordinary and necessary business expenses. Turbotax However, you must file Form 1099-MISC to report amounts paid to the independent contractor if the total of the reimbursements and any other fees is $600 or more during the calendar year. Turbotax How To Use Per Diem Rate Tables This section contains information about the per diem rate substantiation methods available and the choice of rates you must make for the last 3 months of the year. Turbotax The Two Substantiation Methods High-low method. Turbotax   IRS notices list the localities that are treated under the high-low substantiation method as high-cost localities for all or part of the year. Turbotax Notice 2012–63, available at www. Turbotax irs. Turbotax gov/irb/2012–42_IRB/ar12. Turbotax html, lists the localities that are eligible for $242 ($65 meals and incidental expenses (M&IE)) per diem, effective October 1, 2012. Turbotax For travel on or after October 1, 2012, all other localities within CONUS are eligible for $163 ($52 M&IE) per diem under the high-low method. Turbotax   Notice 2013–65, available at www. Turbotax irs. Turbotax gov/pub/irs-drop/n-13–65. Turbotax pdf, lists the localities that are eligible for $251 ($65 M&IE) per diem, effective October 1, 2013. Turbotax For travel on or after October 1, 2013, the per diem for all other localities increased to $170 ($52 M&IE). Turbotax Regular federal per diem rate method. Turbotax   Regular federal per diem rates are published by the General Services Administration (GSA). Turbotax Both tables include the separate rate for meals and incidental expenses (M&IE) for each locality. Turbotax The rates listed for FY2013 at www. Turbotax gsa. Turbotax gov/perdiem are effective October 1, 2012 and those listed for FY2014 are effective October 1, 2013. Turbotax The standard rate for all locations within CONUS not specifically listed for FY2013 is $123 ($77 for lodging and $46 for M&IE). Turbotax For FY2014, this rate increased to $129 ($83 for lodging and $46 for M&IE). Turbotax Transition Rules The transition period covers the last 3 months of the calendar year, from the time that new rates are effective (generally October 1) through December 31. Turbotax During this period, you generally may change to the new rates or finish out the year with the rates you had been using. Turbotax High-low method. Turbotax   If you use the high-low substantiation method, when new rates become effective (generally October 1) you can either continue with the rates you used for the first part of the year or change to the new rates. Turbotax However, you must continue using the high-low method for the rest of the calendar year (through December 31). Turbotax If you are an employer, you must use the same rates for all employees reimbursed under the high-low method during that calendar year. Turbotax   The new rates and localities for the high-low method are included each year in a notice that is generally published in mid-to-late-September. Turbotax You can find the notice in the weekly Internal Revenue Bulletin (IRB) on the Internet at www. Turbotax irs. Turbotax gov/irb. Turbotax Federal per diem rate method. Turbotax   New CONUS per diem rates become effective on October 1 of each year and remain in effect through September 30 of the following year. Turbotax Employees being reimbursed under the per diem rate method during the first 9 months of a year (January 1–September 30) must continue under the same method through the end of that calendar year (December 31). Turbotax However, for travel by these employees from October 1 through December 31, you can choose to continue using the same per diem rates or use the new rates. Turbotax   The new federal CONUS per diem rates are published each year, generally early in September, on the Internet. Turbotax Go to www. Turbotax gsa. Turbotax gov/perdiem. Turbotax Per diem rates for localities listed for FY2014 may change at any time. Turbotax To be sure you have the most current rate, check www. Turbotax gsa. Turbotax gov/perdiem. Turbotax Completing Forms 2106 and 2106-EZ This section briefly describes how employees complete Forms 2106 and 2106-EZ. Turbotax Table 6-1 explains what the employer reports on Form W-2 and what the employee reports on Form 2106. Turbotax The instructions for the forms have more information on completing them. Turbotax If you are self-employed, do not file Form 2106 or 2106-EZ. Turbotax Report your expenses on Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040). Turbotax See the instructions for the form that you must file. Turbotax Form 2106-EZ. Turbotax   You may be able to use the shorter Form 2106-EZ to claim your employee business expenses. Turbotax You can use this form if you meet all the following conditions. Turbotax You are an employee deducting ordinary and necessary expenses attributable to your job. Turbotax You were not reimbursed by your employer for your expenses (amounts included in box 1 of your Form W-2 are not considered reimbursements). Turbotax If you are claiming car expenses, you are using the standard mileage rate. Turbotax Car expenses. Turbotax   If you used a car to perform your job as an employee, you may be able to deduct certain car expenses. Turbotax These are generally figured on Form 2106, Part II, and then claimed on Form 2106, Part I, line 1, Column A. Turbotax Car expenses using the standard mileage rate can also be figured on Form 2106-EZ by completing Part II and Part I, line 1. Turbotax Information on use of cars. Turbotax   If you claim any deduction for the business use of a car, you must answer certain questions and provide information about the use of the car. Turbotax The information relates to the following items. Turbotax Date placed in service. Turbotax Mileage (total, business, commuting, and other personal mileage). Turbotax Percentage of business use. Turbotax After-work use. Turbotax Use of other vehicles. Turbotax Whether you have evidence to support the deduction. Turbotax Whether or not the evidence is written. Turbotax Employees must complete Form 2106, Part II, Section A, or Form 2106-EZ, Part II, to provide this information. Turbotax Standard mileage rate. Turbotax   If you claim a deduction based on the standard mileage rate instead of your actual expenses, you must complete Form 2106, Part II, Section B. Turbotax The amount on line 22 (Section B) is carried to Form 2106, Part I, line 1. Turbotax In addition, on Part 1, line 2, you can deduct parking fees and tolls that apply to the business use of the car. Turbotax If you file Form 2106-EZ, complete Part I, line 1, for the standard mileage rate and line 2 for parking fees and tolls. Turbotax See Standard Mileage Rate in chapter 4 for information on using this rate. Turbotax Actual expenses. Turbotax   If you claim a deduction based on actual car expenses, you cannot use Form 2106-EZ. Turbotax You must complete Form 2106, Part II, Section C. Turbotax In addition, unless you lease your car, you must complete Section D to show your depreciation deduction and any section 179 deduction you claim. Turbotax   If you are still using a car that is fully depreciated, continue to complete Section C. Turbotax Since you have no depreciation deduction, enter zero on line 28. Turbotax In this case, do not complete Section D. Turbotax Car rentals. Turbotax   If you claim car rental expenses on Form 2106, line 24a, you may have to reduce that expense by an inclusion amount as described in chapter 4. Turbotax If so, you can show your car expenses and any inclusion amount as follows. Turbotax Compute the inclusion amount without taking into account your business use percentage for the tax year. Turbotax Report the inclusion amount from (1) on Form 2106, Part II, line 24b. Turbotax Report on line 24c the net amount of car rental expenses (total car rental expenses minus the inclusion amount computed in (1)). Turbotax The net amount of car rental expenses will be adjusted on Form 2106, Part II, line 27, to reflect the percentage of business use for the tax year. Turbotax Transportation expenses. Turbotax   Show your transportation expenses that did not involve overnight travel on Form 2106, line 2, Column A, or on Form 2106-EZ, Part I, line 2. Turbotax Also include on this line business expenses you have for parking fees and tolls. Turbotax Do not include expenses of operating your car or expenses of commuting between your home and work. Turbotax Employee business expenses other than meals and entertainment. Turbotax   Show your other employee business expenses on Form 2106, lines 3 and 4, Column A, or Form 2106-EZ, lines 3 and 4. Turbotax Do not include expenses for meals and entertainment on those lines. Turbotax Line 4 is for expenses such as gifts, educational expenses (tuition and books), office-in-the-home expenses, and trade and professional publications. Turbotax    If line 4 expenses are the only ones you are claiming, you received no reimbursements (or the reimbursements were all included in box 1 of your Form W-2), and the Special Rules discussed later do not apply to you, do not complete Form 2106 or 2106-EZ. Turbotax Claim these amounts directly on Schedule A (Form 1040), line 21. Turbotax List the type and amount of each expense on the dotted lines and include the total on line 21. Turbotax Meal and entertainment expenses. Turbotax   Show the full amount of your expenses for business-related meals and entertainment on Form 2106, line 5, Column B. Turbotax Include meals while away from your tax home overnight and other business meals and entertainment. Turbotax Enter 50% of the line 8, Column B, meal and entertainment expenses on line 9, Column B. Turbotax   If you file Form 2106-EZ, enter the full amount of your meals and entertainment on the line to the left of line 5 and multiply the total by 50%. Turbotax Enter the result on line 5. Turbotax Hours of service limits. Turbotax   If you are subject to the Department of Transportation's “hours of service” limits (as explained earlier under Individuals subject to “hours of service” limits in chapter 2), use 80% instead of 50% for meals while away from your tax home. Turbotax Reimbursements. Turbotax   Enter on Form 2106, line 7 (you cannot use Form 2106-EZ) the amounts your employer (or third party) reimbursed you that were not reported to you in box 1 of your Form W-2. Turbotax This includes any amount reported under code L in box 12 of Form W-2. Turbotax Allocating your reimbursement. Turbotax   If you were reimbursed under an accountable plan and want to deduct excess expenses that were not reimbursed, you may have to allocate your reimbursement. Turbotax This is necessary when your employer pays your reimbursement in the following manner: Pays you a single amount that covers meals and/or entertainment, as well as other business expenses, and Does not clearly identify how much is for deductible meals and/or entertainment. Turbotax You must allocate that single payment so that you know how much to enter on Form 2106, line 7, Column A and Column B. Turbotax Example. Turbotax Rob's employer paid him an expense allowance of $12,000 this year under an accountable plan. Turbotax The $12,000 payment consisted of $5,000 for airfare and $7,000 for meals, entertainment, and car expenses. Turbotax The employer did not clearly show how much of the $7,000 was for the cost of deductible meals and entertainment. Turbotax Rob actually spent $14,000 during the year ($5,500 for airfare, $4,500 for meals and entertainment, and $4,000 for car expenses). Turbotax Since the airfare allowance was clearly identified, Rob knows that $5,000 of the payment goes in Column A, line 7, of Form 2106. Turbotax To allocate the remaining $7,000, Rob uses the worksheet from the Instructions for Form 2106. Turbotax His completed worksheet follows. Turbotax Reimbursement Allocation Worksheet (Keep for your records)   1. Turbotax Enter the total amount of reimbursements your employer gave you that were not reported to you in box 1 of Form W-2 $7,000   2. Turbotax Enter the total amount of your expenses for the periods covered by this reimbursement 8,500   3. Turbotax Of the amount on line 2, enter your total expense for meals and entertainment 4,500   4. Turbotax Divide line 3 by line 2. Turbotax Enter the result as a decimal (rounded to at least three places) . Turbotax 529   5. Turbotax Multiply line 1 by line 4. Turbotax Enter the result here and in Column B, line 7 3,703   6. Turbotax Subtract line 5 from line 1. Turbotax Enter the result here and in Column A, line 7 $3,297 On line 7 of Form 2106, Rob enters $8,297 ($5,000 airfare and $3,297 of the $7,000) in Column A and $3,703 (of the $7,000) in Column B. Turbotax After you complete the form. Turbotax   After you have completed your Form 2106 or 2106-EZ, follow the directions on that form to deduct your expenses on the appropriate line of your tax return. Turbotax For most taxpayers, this is line 21 of Schedule A (Form 1040). Turbotax However, if you are a government official paid on a fee basis, a performing artist, an Armed Forces reservist, or a disabled employee with impairment-related work expenses, see Special Rules , later. Turbotax Limits on employee business expenses. Turbotax   Your employee business expenses may be subject to either of the limits described next. Turbotax They are figured in the following order on the specified form. Turbotax 1. Turbotax Limit on meals and entertainment. Turbotax   Certain meal and entertainment expenses are subject to a 50% limit. Turbotax If you are an employee, you figure this limit on line 9 of Form 2106 or line 5 of Form 2106-EZ. Turbotax (See 50% Limit in chapter 2. Turbotax ) 2. Turbotax Limit on miscellaneous itemized deductions. Turbotax   If you are an employee, deduct your employee business expenses (as figured on Form 2106 or 2106-EZ) on line 21 of Schedule A (Form 1040). Turbotax Most miscellaneous itemized deductions, including employee business expenses, are subject to a 2%-of-adjusted-gross-income limit. Turbotax This limit is figured on line 26 of Schedule A (Form 1040). Turbotax 3. Turbotax Limit on total itemized deductions. Turbotax   If your adjusted gross income (line 38 of Form 1040) is more than $300,000 ($150,000 if you are married filing separately), the total of certain itemized deductions, including employee business expenses, may be limited. Turbotax See your form instructions for information on how to figure this limit. Turbotax Special Rules This section discusses special rules that apply only to Armed Forces reservists, government officials who are paid on a fee basis, performing artists, and disabled employees with impairment-related work expenses. Turbotax Armed Forces Reservists Traveling More Than 100 Miles From Home If you are a member of a reserve component of the Armed Forces of the United States and you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you can deduct your travel expenses as an adjustment to gross income rather than as a miscellaneous itemized deduction. Turbotax The amount of expenses you can deduct as an adjustment to gross income is limited to the regular federal per diem rate (for lodging, meals, and incidental expenses) and the standard mileage rate (for car expenses) plus any parking fees, ferry fees, and tolls. Turbotax See Per Diem and Car Allowances , earlier, for more information. Turbotax Any expenses in excess of these amounts can be claimed only as a miscellaneous itemized deduction subject to the 2% limit. Turbotax Member of a reserve component. Turbotax   You are a member of a reserve component of the Armed Forces of the United States if you are in the Army, Navy, Marine Corps, Air Force, or Coast Guard Reserve; the Army National Guard of the United States; the Air National Guard of the United States; or the Reserve Corps of the Public Health Service. Turbotax How to report. Turbotax   If you have reserve-related travel that takes you more than 100 miles from home, you should first complete Form 2106 or Form 2106-EZ. Turbotax Then include your expenses for reserve travel over 100 miles from home, up to the federal rate, from Form 2106, line 10, or Form 2106-EZ, line 6, in the total on Form 1040, line 24. Turbotax Subtract this amount from the total on Form 2106, line 10, or Form 2106-EZ, line 6, and deduct the balance as an itemized deduction on Schedule A (Form 1040), line 21. Turbotax   You cannot deduct expenses of travel that does not take you more than 100 miles from home as an adjustment to gross income. Turbotax Instead, you must complete Form 2106 or 2106-EZ and deduct those expenses as an itemized deduction on Schedule A (Form 1040), line 21. Turbotax Officials Paid on a Fee Basis Certain fee-basis officials can claim their employee business expenses whether or not they itemize their other deductions on Schedule A (Form 1040). Turbotax Fee-basis officials are persons who are employed by a state or local government and who are paid in whole or in part on a fee basis. Turbotax They can deduct their business expenses in performing services in that job as an adjustment to gross income rather than as a miscellaneous itemized deduction. Turbotax If you are a fee-basis official, include your employee business expenses from Form 2106, line 10, or Form 2106-EZ, line 6, in the total on Form 1040, line 24. Turbotax Expenses of Certain Performing Artists If you are a performing artist, you may qualify to deduct your employee business expenses as an adjustment to gross income rather than as a miscellaneous itemized deduction. Turbotax To qualify, you must meet all of the following requirements. Turbotax During the tax year, you perform services in the performing arts as an employee for at least two employers. Turbotax You receive at least $200 each from any two of these employers. Turbotax Your related performing-arts business expenses are more than 10% of your gross income from the performance of those services. Turbotax Your adjusted gross income is not more than $16,000 before deducting these business expenses. Turbotax Special rules for married persons. Turbotax   If you are married, you must file a joint return unless you lived apart from your spouse at all times during the tax year. Turbotax If you file a joint return, you must figure requirements (1), (2), and (3) separately for both you and your spouse. Turbotax However, requirement (4) applies to your and your spouse's combined adjusted gross income. Turbotax Where to report. Turbotax   If you meet all of the above requirements, you should first complete Form 2106 or 2106-EZ. Turbotax Then you include your performing-arts-related expenses from Form 2106, line 10, or Form 2106-EZ, line 6, in the total on Form 1040, line 24. Turbotax   If you do not meet all of the above requirements, you do not qualify to deduct your expenses as an adjustment to gross income. Turbotax Instead, you must complete Form 2106 or 2106-EZ and deduct your employee business expenses as an itemized deduction on Schedule A (Form 1040), line 21. Turbotax Impairment-Related Work Expenses of Disabled Employees If you are an employee with a physical or mental disability, your impairment-related work expenses are not subject to the 2%-of-adjusted-gross-income limit that applies to most other employee business expenses. Turbotax After you complete Form 2106 or 2106-EZ, enter your impairment-related work expenses from Form 2106, line 10, or Form 2106-EZ, line 6, on Schedule A (Form 1040), line 28, and identify the type and amount of this expense on the dotted line next to line 28. Turbotax Enter your employee business expenses that are unrelated to your disability from Form 2106, line 10, or Form 2106-EZ, line 6, on Schedule A (Form 1040), line 21. Turbotax Impairment-related work expenses are your allowable expenses for attendant care at your workplace and other expenses in connection with your workplace that are necessary for you to be able to work. Turbotax You are disabled if you have: A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed, or A physical or mental impairment (for example, a sight or hearing impairment) that substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, or working. Turbotax You can deduct impairment-related expenses as business expenses if they are: Necessary for you to do your work satisfactorily, For goods and services not required or used, other than incidentally, in your personal activities, and Not specifically covered under other income tax laws. Turbotax Example 1. Turbotax You are blind. Turbotax You must use a reader to do your work. Turbotax You use the reader both during your regular working hours at your place of work and outside your regular working hours away from your place of work. Turbotax The reader's services are only for your work. Turbotax You can deduct your expenses for the reader as business expenses. Turbotax Example 2. Turbotax You are deaf. Turbotax You must use a sign language interpreter during meetings while you are at work. Turbotax The interpreter's services are used only for your work. Turbotax You can deduct your expenses for the interpreter as business expenses. Turbotax Prev  Up  Next   Home   More Online Publications
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The Turbotax

Turbotax Publication 51 - Introductory Material Table of Contents Future Developments What's New Reminders Calendar Introduction Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 51 (Circular A), such as legislation enacted after it was published, go to www. Turbotax irs. Turbotax gov/pub51. Turbotax What's New Social security and Medicare tax for 2014. Turbotax  The social security tax rate is 6. Turbotax 2% each for the employee and employer, unchanged from 2013. Turbotax The social security wage base limit is $117,000. Turbotax The Medicare tax rate is 1. Turbotax 45% each for the employee and employer, unchanged from 2013. Turbotax There is no wage base limit for Medicare tax. Turbotax Social security and Medicare taxes apply to the wages of household workers you pay $1,900 or more in cash or an equivalent form of compensation. Turbotax Withholding allowance. Turbotax  The 2014 amount for one withholding allowance on an annual basis is $3,950. Turbotax Change of responsible party. Turbotax  Beginning January 1, 2014, any entity with an employer identification number (EIN) must file Form 8822-B, Change of Address or Responsible Party—Business, to report the latest change to its responsible party. Turbotax Form 8822-B must be filed within 60 days of the change. Turbotax If the change in the identity of your responsible party occurred before 2014, and you have not previously notified the IRS of the change, file Form 8822-B before March 1, 2014, reporting only the most recent change. Turbotax For a definition of "responsible party", see the Form 8822-B instructions. Turbotax Same-sex marriage. Turbotax  For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. Turbotax For more information, see Revenue Ruling 2013-17, 2013-38 I. Turbotax R. Turbotax B. Turbotax 201, available at www. Turbotax irs. Turbotax gov/irb/2013-38_IRB/ar07. Turbotax html. Turbotax Notice 2013-61 provides special administrative procedures for employers to make claims for refund or adjustments of overpayments of social security and Medicare taxes with respect to certain same-sex spouse benefits before expiration of the period of limitations. Turbotax Notice 2013-61, 2013-44 I. Turbotax R. Turbotax B. Turbotax 432, is available at www. Turbotax irs. Turbotax gov/irb/2013-44_IRB/ar10. Turbotax html. Turbotax Reminders Additional Medicare Tax withholding. Turbotax  In addition to withholding Medicare tax at 1. Turbotax 45%, you must withhold a 0. Turbotax 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Turbotax You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Turbotax Additional Medicare Tax is only imposed on the employee. Turbotax There is no employer share of Additional Medicare Tax. Turbotax All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. Turbotax For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E), Employer's Tax Guide. Turbotax For more information on Additional Medicare Tax, visit IRS. Turbotax gov and enter “Additional Medicare Tax” in the search box. Turbotax Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans. Turbotax  The work opportunity tax credit is available for eligible unemployed veterans who begin work on or after November 22, 2011, and before January 1, 2014. Turbotax Qualified tax-exempt organizations that hire eligible unemployed veterans can claim the work opportunity tax credit against their payroll tax liability using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. Turbotax For more information, visit IRS. Turbotax gov and enter “work opportunity tax credit” in the search box. Turbotax Outsourcing payroll duties. Turbotax  Employers are responsible to ensure that tax returns are filed and deposits and payments are made, even if the employer contracts with a third party to perform these acts. Turbotax The employer remains responsible if the third party fails to perform any required action. Turbotax If you choose to outsource any of your payroll and related tax duties (that is, withholding, reporting, and paying over social security, Medicare, FUTA, and income taxes) to a third-party payer such as a payroll service provider or reporting agent, visit IRS. Turbotax gov and enter “outsourcing payroll duties” in the search box for helpful information on this topic. Turbotax COBRA premium assistance credit. Turbotax  The credit for COBRA premium assistance payments applies to premiums paid for employees involuntarily terminated between September 1, 2008, and May 31, 2010, and to premiums paid for up to 15 months. Turbotax For more information, see COBRA premium assistance credit under Introduction. Turbotax Compensation paid to H-2A foreign agricultural workers. Turbotax  Report compensation of $600 or more paid to foreign agricultural workers who entered the country on H-2A visas in box 1 of Form W-2, Wage and Tax Statement. Turbotax Compensation paid to H-2A workers for agricultural labor performed in connection with this visa is not subject to social security and Medicare taxes, and therefore should not be reported as wages subject to social security tax (line 2), Medicare tax (line 4), or Additional Medicare Tax withholding (line 6) on Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, and should not be reported as social security wages (box 3) or Medicare wages (box 5) on Form W-2. Turbotax On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. Turbotax An employer is not required to withhold federal income tax from compensation it pays an H-2A worker for agricultural labor performed in connection with this visa unless the worker asks for withholding and the employer agrees. Turbotax In that case, the worker must give the employer a completed Form W-4, Employee's Withholding Allowance Certificate. Turbotax Federal income tax withheld should be reported on Form 943, line 8, and in box 2 of Form W-2. Turbotax These reporting rules apply when the H-2A worker provides his or her taxpayer identification number (TIN) to the employer. Turbotax For the rules relating to backup withholding and reporting when the H-2A worker does not provide a TIN, see the Instructions for Form 1099-MISC and the Instructions for Form 945. Turbotax Additional employment tax information. Turbotax  Visit the IRS website at www. Turbotax irs. Turbotax gov/businesses and click on Employment Taxes under Businesses Topics. Turbotax For employment tax information by telephone, call 1-800-829-4933 or 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability) Monday–Friday from 7:00 a. Turbotax m. Turbotax –7:00 p. Turbotax m. Turbotax local time (Alaska and Hawaii follow Pacific time). Turbotax Additionally, you can call IRS TeleTax at 1-800-829-4477 for recorded information by topic. Turbotax Disregarded entities and qualified subchapter S subsidiaries (QSubs). Turbotax  Eligible single-owner disregarded entities and QSubs are treated as separate entities for employment tax purposes. Turbotax Eligible single-member entities that have not elected to be taxed as corporations must report and pay employment taxes on wages paid to their employees using the entities' own names and EINs. Turbotax See Regulations sections 1. Turbotax 1361-4(a)(7) and 301. Turbotax 7701-2(c)(2)(iv). Turbotax Differential wage payments. Turbotax  Qualified differential wage payments made by employers to individuals serving in the Armed Forces after 2008 are subject to income tax withholding but not social security, Medicare, or FUTA taxes. Turbotax For more information, see Publication 15 (Circular E). Turbotax Federal tax deposits must be made by electronic funds transfer. Turbotax  You must use electronic funds transfer to make all federal tax deposits. Turbotax Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). Turbotax If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Turbotax Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. Turbotax EFTPS is a free service provided by the Department of Treasury. Turbotax Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. Turbotax For more information on making federal tax deposits, see How To Deposit in section 7. Turbotax To get more information about EFTPS or to enroll in EFTPS, visit www. Turbotax eftps. Turbotax gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Turbotax Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started. Turbotax Electronic filing and payment. Turbotax  Now, more than ever before, businesses can enjoy the benefits of filing tax returns and paying their taxes electronically. Turbotax Whether you rely on a tax professional or handle your own taxes, the IRS offers you convenient programs to make it easier. Turbotax Spend less time and worry on taxes and more time running your business. Turbotax Use e-file and the Electronic Federal Tax Payment System (EFTPS) to your benefit. Turbotax For e-file, visit the IRS website at www. Turbotax irs. Turbotax gov/efile for additional information. Turbotax For EFTPS, visit www. Turbotax eftps. Turbotax gov or call EFTPS Customer Service at 1-800-555-4477 (business), 1-800-316-6541 (individual), or 1-800-733-4829 (TDD) for additional information. Turbotax For electronic filing of Form W-2, visit www. Turbotax socialsecurity. Turbotax gov/employer. Turbotax If you are filing your tax return or paying your federal taxes electronically, a valid EIN is required. Turbotax If a valid EIN is not provided, the return or payment will not be processed. Turbotax This may result in penalties and delays in processing your return or payment. Turbotax Electronic funds withdrawal (EFW). Turbotax  If you file Form 943 electronically, you can e-file and e-pay (electronic funds withdrawal) the balance due in a single step using tax preparation software or through a tax professional. Turbotax However, do not use EFW to make federal tax deposits. Turbotax For more information on paying your taxes using EFW, visit the IRS website at www. Turbotax irs. Turbotax gov/e-pay. Turbotax A fee may be charged to file electronically. Turbotax Credit or debit card payments. Turbotax   Employers can pay the balance due shown on Form 943 by credit or debit card. Turbotax Do not use a credit or debit card to make federal tax deposits. Turbotax For more information on paying your taxes with a credit or debit card, visit the IRS website at www. Turbotax irs. Turbotax gov/e-pay. Turbotax When you hire a new employee. Turbotax  Ask each new employee to complete the 2014 Form W-4 or its Spanish version, Formulario W-4(SP), Certificado de Exención de Retenciones del Empleado. Turbotax Also, ask the employee to show you his or her social security card so that you can record the employee's name and social security number accurately. Turbotax If the employee has lost the card or recently changed names, have the employee apply for a duplicate or corrected card. Turbotax If the employee does not have a card, have the employee apply for one on Form SS-5, Application for a Social Security Card. Turbotax See section 1 for more information. Turbotax Eligibility for employment. Turbotax  You must verify that each new employee is legally eligible to work in the United States. Turbotax This includes completing the U. Turbotax S. Turbotax Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. Turbotax You can get the form from USCIS offices or by calling 1-800-870-3676. Turbotax Contact the USCIS at 1-800-375-5283, or visit the USCIS website at www. Turbotax uscis. Turbotax gov for more information. Turbotax New hire reporting. Turbotax   You are required to report any new employee to a designated state new-hire registry. Turbotax A new employee is an employee who has not previously been employed by you or was previously employed by you but has been separated from such prior employment for at least 60 consecutive days. Turbotax Many states accept a copy of Form W-4 with employer information added. Turbotax Visit the Office of Child Support Enforcement's website at www. Turbotax acf. Turbotax hhs. Turbotax gov/programs/cse/newhire for more information. Turbotax Dishonored payments. Turbotax  Any form of payment that is dishonored and returned from a financial institution is subject to a penalty. Turbotax The penalty is $25 or 2% of the payment, whichever is more. Turbotax However, the penalty on dishonored payments of $24. Turbotax 99 or less is an amount equal to the payment. Turbotax For example, a dishonored payment of $18 is charged a penalty of $18. Turbotax Forms in Spanish. Turbotax  You can provide Formulario W-4(SP) in place of Form W-4 to your Spanish-speaking employees. Turbotax For more information, see Publicación 17(SP), El Impuesto Federal sobre los Ingresos (Para Personas Físicas). Turbotax For nonemployees, Formulario W-9(SP), Solicitud y Certificación del Número de Identificación del Contribuyente, may be used in place of Form W-9, Request for Taxpayer Identification Number and Certification. Turbotax References in this publication to Form W-4 or Form W-9 also apply to their equivalent Spanish translations—Formulario W-4(SP) or Formulario W-9(SP). Turbotax Information returns. Turbotax  You may be required to file information returns to report certain types of payments made during the year. Turbotax For example, you must file Form 1099-MISC, Miscellaneous Income, to report payments of $600 or more to persons not treated as employees (for example, independent contractors) for services performed for your trade or business. Turbotax For details about filing Forms 1099 and for information about required electronic filing, see the General Instructions for Certain Information Returns for general information and the separate, specific instructions for each information return that you file (for example, Instructions for Form 1099-MISC). Turbotax Generally, do not use Forms 1099 to report wages or other compensation that you paid to employees; report these amounts on Form W-2. Turbotax See the General Instructions for Forms W-2 and W-3 for details about filing Forms W-2 and for information about required electronic filing. Turbotax If you file 250 or more Forms W-2, you must file them electronically. Turbotax SSA will not accept Forms W-2 and W-3 filed on any magnetic media. Turbotax Information reporting customer service site. Turbotax  The IRS operates the Enterprise Computing Center—Martinsburg, a centralized customer service site, to answer questions about reporting on Forms W-2, W-3, 1099, and other information returns. Turbotax If you have questions related to reporting on information returns, you may call 1-866-455-7438 (toll free), 304-263-8700 (toll call), or 304-267-3367 (TDD/TTY for persons who are deaf, heard of hearing, or have a speech disability). Turbotax The call site can also be reached by email at mccirp@irs. Turbotax gov. Turbotax Do not include tax identification numbers (TINs) or attachments in email correspondence because electronic mail is not secure. Turbotax Web-based application for an employer identification number (EIN). Turbotax  You can apply for an employer identification number (EIN) online by visiting IRS. Turbotax gov and clicking on the Apply for an EIN Online link under Tools. Turbotax When a crew leader furnishes workers to you. Turbotax  Record the crew leader's name, address, and EIN. Turbotax See sections 2 and 10. Turbotax Change of address. Turbotax  Use Form 8822-B to notify the IRS of an address change. Turbotax Do not mail form 8822-B with your employment tax return. Turbotax Ordering forms and publications. Turbotax  You can order your 2013 and 2014 employment tax and information return forms, instructions, and publications online at www. Turbotax irs. Turbotax gov/businesses. Turbotax Click on the Online Ordering for Information Returns and Employer Returns. Turbotax You can also visit www. Turbotax irs. Turbotax gov/formspubs to download other forms and publications. Turbotax Instead of ordering paper Forms W-2 and W-3, consider filing them electronically using the Social Security Administration's (SSA) free e-file service. Turbotax Visit the SSA's Employer W-2 Filing Instructions & Information website at  www. Turbotax socialsecurity. Turbotax gov/employer, to register for Business Services Online. Turbotax You will be able to create and file “fill-in” versions of Forms W-2 with SSA and can print out completed copies of Forms W-2 for filing with state and local governments, distribution to your employees, and for your records. Turbotax Form W-3 will be created for you based on your Forms W-2. Turbotax Tax Questions. Turbotax   If you have a tax question, check the information available on IRS. Turbotax gov or call 1-800-829-4933 (businesses), 1-800-829-1040 (individuals), or 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability) Monday–Friday from 7:00 a. Turbotax m. Turbotax –7:00 p. Turbotax m. Turbotax local time (Alaska and Hawaii follow Pacific time). Turbotax We cannot answer tax questions sent to the address provided later for comments and suggestions. Turbotax Recordkeeping. Turbotax  Keep all records of employment taxes for at least 4 years. Turbotax These should be available for IRS review. Turbotax Your records should include the following information. Turbotax Your employer identification number (EIN). Turbotax Amounts and dates of all wage, annuity, and pension payments. Turbotax Names, addresses, social security numbers, and occupations of employees and recipients. Turbotax Any employee copies of Forms W-2 and W-2c returned to you as undeliverable. Turbotax Dates of employment for each employee. Turbotax Periods for which employees and recipients were paid while absent due to sickness or injury and the amount and weekly rate of payments you or third-party payers made to them. Turbotax Copies of employees' and recipients' income tax withholding allowance certificates (Forms W-4, W-4(SP), W-4P, and W-4S). Turbotax Dates and amounts of tax deposits you made and acknowledgment numbers for deposits made by EFTPS. Turbotax Copies of returns filed and confirmation numbers. Turbotax Records of fringe benefits and expense reimbursements provided to your employees, including substantiation. Turbotax If a crew leader furnished you with farmworkers, you must keep a record of the name, permanent mailing address, and EIN of the crew leader. Turbotax If the crew leader has no permanent mailing address, record his or her present address. Turbotax Private delivery services. Turbotax  You can use certain private delivery services designated by the IRS to send tax returns and payments. Turbotax The list includes only the following. Turbotax DHL Express (DHL): DHL Same Day Service. Turbotax Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2Day, FedEx International Priority, and FedEx International First. Turbotax United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. Turbotax M. Turbotax , UPS Worldwide Express Plus, and UPS Worldwide Express. Turbotax For the IRS mailing address to use if you are using a private delivery service, go to IRS. Turbotax gov and enter "private delivery service" in the search box. Turbotax Your private delivery service can tell you how to get written proof of the mailing date. Turbotax Private delivery services cannot deliver items to P. Turbotax O. Turbotax boxes. Turbotax You must use the U. Turbotax S. Turbotax Postal Service to mail any item to an IRS P. Turbotax O. Turbotax box address. Turbotax Photographs of missing children. Turbotax  The IRS is a proud partner with the National Center for Missing and Exploited Children. Turbotax Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Turbotax You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Turbotax Calendar The following are important dates and responsibilities. Turbotax See section 7 for information about depositing taxes reported on Forms 941, 943, 944, and 945. Turbotax Also see Publication 509, Tax Calendars. Turbotax   If any date shown below for filing a return, furnishing a form, or depositing taxes falls on a Saturday, Sunday, or legal holiday, the due date is the next business day. Turbotax A statewide legal holiday delays a filing due date only if the IRS office where you are required to file is located in that state. Turbotax However, a statewide legal holiday does not delay the due date of federal tax deposits. Turbotax See Deposits on Business Days Only in section 7. Turbotax For any filing due date, you will meet the “file” or “furnish” requirement if the envelope containing the return or form is properly addressed, contains sufficient postage, and is postmarked by the U. Turbotax S. Turbotax Postal Service on or before the due date, or sent by an IRS-designated delivery service on or before the due date. Turbotax See Private delivery services under Reminders. Turbotax By January 31 . Turbotax   File Form 943. Turbotax See section 8 for more information on Form 943. Turbotax If you deposited all Form 943 taxes when due, you have 10 additional calendar days to file. Turbotax Furnish each employee with a completed Form W-2. Turbotax Furnish each recipient to whom you paid $600 or more in nonemployee compensation with a completed Form 1099 (for example, Form 1099-MISC). Turbotax File Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. Turbotax See section 10 for more information on FUTA. Turbotax If you deposited all the FUTA tax when due, you have 10 additional calendar days to file. Turbotax File Form 945, Annual Return of Withheld Federal Income Tax, to report any nonpayroll federal income tax withheld in 2013. Turbotax If you deposited all Form 945 taxes when due, you have 10 additional calendar days to file. Turbotax By February 15. Turbotax  Ask for a new Form W-4 or Formulario W-4(SP) from each employee who claimed exemption from federal income tax withholding last year. Turbotax On February 16. Turbotax  Any Form W-4 claiming exemption from withholding for the previous year has now expired. Turbotax Begin withholding for any employee who previously claimed exemption from withholding but has not given you a new Form W-4 for the current year. Turbotax If the employee does not give you a new Form W-4, withhold tax based on the last valid Form W-4 you have for the employee that does not claim exemption from withholding or, if one does not exist, as if he or she is single with zero withholding allowances. Turbotax See section 5 for more information. Turbotax If the employee furnishes a new Form W-4 claiming exemption from withholding after February 15, you may apply the exemption to future wages, but do not refund taxes withheld while the exempt status was not in place. Turbotax By February 28. Turbotax   File paper Forms 1099 and 1096. Turbotax File Copy A of all paper Forms 1099 with Form 1096, Annual Summary and Transmittal of U. Turbotax S. Turbotax Information Returns, with the IRS. Turbotax For electronically filed returns, see By March 31 below. Turbotax File paper Forms W-2 and W-3. Turbotax File Copy A of all paper Forms W-2 with Form W-3, Transmittal of Wage and Tax Statements, with the SSA. Turbotax For electronically filed returns, see By March 31 next. Turbotax By March 31. Turbotax   File electronic Forms W-2 and 1099. Turbotax File electronic Forms W-2 with the SSA and Forms 1099 with the IRS. Turbotax For more information on reporting Form W-2 information to the SSA electronically, visit the SSA's Employer W-2 Filing Instructions & Information webpage at www. Turbotax socialsecurity. Turbotax gov/employer. Turbotax For information on filing information returns electronically with the IRS, see Publication 1220, Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, 8935, and W-2G. Turbotax By April 30, July 31, October 31, and January 31. Turbotax   Deposit FUTA taxes. Turbotax Deposit FUTA tax if the undeposited amount is over $500. Turbotax Before December 1. Turbotax  Remind employees to submit a new Form W-4 if their marital status or withholding allowances have changed or will change for the next year. Turbotax Introduction This publication is for employers of agricultural workers (farmworkers). Turbotax It contains information that you may need to comply with the laws for agricultural labor (farmwork) relating to social security and Medicare taxes, FUTA tax, and withheld federal income tax (employment taxes). Turbotax Agricultural employers report social security and Medicare taxes and withheld federal income tax on Form 943 and report FUTA tax on Form 940. Turbotax If you have nonfarm employees, see Publication 15 (Circular E). Turbotax If you have employees in the U. Turbotax S. Turbotax Virgin Islands, Guam, American Samoa, or the Commonwealth of the Northern Mariana Islands, see Publication 80 (Circular SS). Turbotax Publication 15-A, Employer's Supplemental Tax Guide, contains more employment-related information, including information about sick pay and pension income. Turbotax Publication 15-B, Employer's Tax Guide to Fringe Benefits, contains information about the employment tax treatment and valuation of various types of noncash compensation. Turbotax Comments and suggestions. Turbotax   We welcome your comments about this publication and your suggestions for future editions. Turbotax   You can write to us at the following address:  Internal Revenue Service Tax Forms and Publications Division  1111 Constitution Ave. Turbotax NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Turbotax Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Turbotax   You can also send us comments from www. Turbotax irs. Turbotax gov/formspubs. Turbotax Click on More Information and then click on Comment on Tax Forms and Publications. Turbotax   Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax forms, instructions, and publications. Turbotax COBRA premium assistance credit. Turbotax   The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates. Turbotax COBRA generally covers multiemployer health plans and health plans maintained by private-sector employers (other than churches) with 20 or more full and part-time employees. Turbotax Parallel requirements apply to these plans under the Employee Retirement Income Security Act of 1974 (ERISA). Turbotax Under the Public Health Service Act, COBRA requirements apply also to health plans covering state or local government employees. Turbotax Similar requirements apply under the Federal Employees Health Benefits Program and under some state laws. Turbotax For the premium assistance (or subsidy) discussed below, these requirements are all referred to as COBRA requirements. Turbotax   Under the American Recovery and Reinvestment Act of 2009 (ARRA), employers are allowed a credit against “payroll taxes” (referred to in this publication as “employment taxes”) for providing COBRA premium assistance to assistance eligible individuals. Turbotax For periods of COBRA continuation coverage beginning after February 16, 2009, a group health plan must treat an assistance eligible individual as having paid the required COBRA continuation coverage premium if the individual elects COBRA coverage and pays 35% of the amount of the premium. Turbotax   An assistance eligible individual is a qualified beneficiary of an employer's group health plan who is eligible for COBRA continuation coverage during the period beginning September 1, 2008, and ending May 31, 2010, due to the involuntarily termination from employment of a covered employee during the period and elects continuation COBRA coverage. Turbotax The assistance for the coverage can last up to 15 months. Turbotax   Employees terminated during the period beginning September 1, 2008, and ending May 31, 2010, who received a severance package that delayed the start of the COBRA continuation coverage, may still be eligible for premium assistance for COBRA continuation coverage. Turbotax For more information, see Notice 2009-27, 2009-16 I. Turbotax R. Turbotax B. Turbotax 838, available at www. Turbotax irs. Turbotax gov/irb/2009-16_irb/ar09. Turbotax html. Turbotax   Administrators of the group health plans (or other entities) that provide or administer COBRA continuation coverage must provide notice to assistance eligible individuals of the COBRA premium assistance. Turbotax   The 65% of the premium not paid by the assistance eligible individual is reimbursed to the employer maintaining the group health plan. Turbotax The reimbursement is made through a credit against the employer's employment tax liabilities. Turbotax For information on how to claim the credit, see the Instructions for Form 943. Turbotax The credit is treated as a deposit made on the first day of the return period. Turbotax In the case of a multiemployer plan, the credit is claimed by the plan, rather than the employer. Turbotax In the case of an insured plan subject to state law continuation coverage requirements, the credit is claimed by the insurance company, rather than the employer. Turbotax   Anyone claiming the credit for COBRA premium assistance payments must maintain the following information to support their claim, including the following. Turbotax Information on the receipt of the assistance eligible individuals' 35% share of the premium including dates and amounts. Turbotax In the case of an insurance plan, a copy of invoice or other supporting statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier required under COBRA. Turbotax In the case of a self-insured plan, proof of the premium amount and proof of the coverage provided to the assistance eligible individuals. Turbotax Attestation of involuntary termination, including the date of the involuntary termination for each covered employee whose involuntary termination is the basis for eligibility for the subsidy. Turbotax Proof of each assistance eligible individual's eligibility for COBRA coverage and the election of COBRA coverage. Turbotax A record of the social security numbers (SSNs) of all covered employees, the amount of the subsidy reimbursed with respect to each covered employee, and whether the subsidy was for one individual or two or more individuals. Turbotax   For more information, visit IRS. Turbotax gov and enter “COBRA” in the search box. Turbotax Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 15-A Employer's Supplemental Tax Guide 15-B Employer's Tax Guide to Fringe Benefits 225 Farmer's Tax Guide 535 Business Expenses 583 Starting a Business and Keeping Records 1635 Employer Identification Number: Understanding Your EIN Prev  Up  Next   Home   More Online Publications