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H And R Block 2012 Tax Return

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H And R Block 2012 Tax Return

H and r block 2012 tax return Publication 15-A - Main Content Table of Contents 1. H and r block 2012 tax return Who Are Employees?Independent Contractors Common-Law Employees Statutory Employees Statutory Nonemployees Misclassification of Employees 2. H and r block 2012 tax return Employee or Independent Contractor?Common-Law Rules Industry Examples 3. H and r block 2012 tax return Employees of Exempt OrganizationsSocial security and Medicare taxes. H and r block 2012 tax return FUTA tax. H and r block 2012 tax return 4. H and r block 2012 tax return Religious Exemptions and Special Rules for MinistersForm W-2. H and r block 2012 tax return Self-employed. H and r block 2012 tax return Employees. H and r block 2012 tax return 5. H and r block 2012 tax return Wages and Other CompensationRelocating for Temporary Work Assignments Employee Achievement Awards Scholarship and Fellowship Payments Outplacement Services Withholding for Idle Time Back Pay Supplemental Unemployment Benefits Golden Parachute Payments Interest-Free and Below-Market-Interest-Rate Loans Leave Sharing Plans Nonqualified Deferred Compensation Plans Tax-Sheltered Annuities Contributions to a Simplified Employee Pension (SEP) SIMPLE Retirement Plans 6. H and r block 2012 tax return Sick Pay ReportingSick Pay Payments That Are Not Sick Pay Sick Pay Plan Third-Party Payers of Sick Pay Social Security, Medicare, and FUTA Taxes on Sick Pay Income Tax Withholding on Sick Pay Depositing and Reporting Example of Figuring and Reporting Sick Pay 7. H and r block 2012 tax return Special Rules for Paying TaxesCommon Paymaster Agents Reporting Agents Employee's Portion of Taxes Paid by Employer International Social Security Agreements 8. H and r block 2012 tax return Pensions and AnnuitiesFederal Income Tax Withholding 9. H and r block 2012 tax return Alternative Methods for Figuring WithholdingTerm of continuous employment. H and r block 2012 tax return Formula Tables for Percentage Method Withholding (for Automated Payroll Systems) Wage Bracket Percentage Method Tables (for Automated Payroll Systems) Combined Federal Income Tax, Employee Social Security Tax, and Employee Medicare Tax Withholding Tables 10. H and r block 2012 tax return Tables for Withholding on Distributions of Indian Gaming Profits to Tribal MembersWithholding Tables How To Get Tax Help 1. H and r block 2012 tax return Who Are Employees? Before you can know how to treat payments that you make to workers for services, you must first know the business relationship that exists between you and the person performing the services. H and r block 2012 tax return The person performing the services may be: An independent contractor, A common-law employee, A statutory employee, or A statutory nonemployee. H and r block 2012 tax return This discussion explains these four categories. H and r block 2012 tax return A later discussion, Employee or Independent Contractor in section 2, points out the differences between an independent contractor and an employee and gives examples from various types of occupations. H and r block 2012 tax return If an individual who works for you is not an employee under the common-law rules (see section 2), you generally do not have to withhold federal income tax from that individual's pay. H and r block 2012 tax return However, in some cases you may be required to withhold under the backup withholding requirements on these payments. H and r block 2012 tax return See Publication 15 (Circular E) for information on backup withholding. H and r block 2012 tax return Independent Contractors People such as doctors, veterinarians, and auctioneers who follow an independent trade, business, or profession in which they offer their services to the public, are generally not employees. H and r block 2012 tax return However, whether such people are employees or independent contractors depends on the facts in each case. H and r block 2012 tax return The general rule is that an individual is an independent contractor if you, the person for whom the services are performed, have the right to control or direct only the result of the work and not the means and methods of accomplishing the result. H and r block 2012 tax return Common-Law Employees Under common-law rules, anyone who performs services for you is generally your employee if you have the right to control what will be done and how it will be done. H and r block 2012 tax return This is so even when you give the employee freedom of action. H and r block 2012 tax return What matters is that you have the right to control the details of how the services are performed. H and r block 2012 tax return For a discussion of facts that indicate whether an individual providing services is an independent contractor or employee, see section 2. H and r block 2012 tax return If you have an employer-employee relationship, it makes no difference how it is labeled. H and r block 2012 tax return The substance of the relationship, not the label, governs the worker's status. H and r block 2012 tax return It does not matter whether the individual is employed full time or part time. H and r block 2012 tax return For employment tax purposes, no distinction is made between classes of employees. H and r block 2012 tax return Superintendents, managers, and other supervisory personnel are all employees. H and r block 2012 tax return An officer of a corporation is generally an employee; however, an officer who performs no services or only minor services, and neither receives nor is entitled to receive any pay, is not considered an employee. H and r block 2012 tax return A director of a corporation is not an employee with respect to services performed as a director. H and r block 2012 tax return You generally have to withhold and pay income, social security, and Medicare taxes on wages that you pay to common-law employees. H and r block 2012 tax return However, the wages of certain employees may be exempt from one or more of these taxes. H and r block 2012 tax return See Employees of Exempt Organizations (section 3) and Religious Exemptions and Special Rules for Ministers (section 4). H and r block 2012 tax return Leased employees. H and r block 2012 tax return   Under certain circumstances, a firm that furnishes workers to other firms is the employer of those workers for employment tax purposes. H and r block 2012 tax return For example, a temporary staffing service may provide the services of secretaries, nurses, and other similarly trained workers to its clients on a temporary basis. H and r block 2012 tax return   The staffing service enters into contracts with the clients under which the clients specify the services to be provided and a fee is paid to the staffing service for each individual furnished. H and r block 2012 tax return The staffing service has the right to control and direct the worker's services for the client, including the right to discharge or reassign the worker. H and r block 2012 tax return The staffing service hires the workers, controls the payment of their wages, provides them with unemployment insurance and other benefits, and is the employer for employment tax purposes. H and r block 2012 tax return For information on employee leasing as it relates to pension plan qualification requirements, see Leased employee in Publication 560, Retirement Plans for Small Business. H and r block 2012 tax return Additional information. H and r block 2012 tax return   For more information about the treatment of special types of employment, the treatment of special types of payments, and similar subjects, see Publication 15 (Circular E) or Publication 51 (Circular A), Agricultural Employer's Tax Guide. H and r block 2012 tax return Statutory Employees If workers are independent contractors under the common law rules, such workers may nevertheless be treated as employees by statute, (also known as “statutory employees”) for certain employment tax purposes. H and r block 2012 tax return This would happen if they fall within any one of the following four categories and meet the three conditions described next under Social security and Medicare taxes . H and r block 2012 tax return A driver who distributes beverages (other than milk) or meat, vegetable, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning, if the driver is your agent or is paid on commission. H and r block 2012 tax return A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company. H and r block 2012 tax return An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name, if you also furnish specifications for the work to be done. H and r block 2012 tax return A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. H and r block 2012 tax return The goods sold must be merchandise for resale or supplies for use in the buyer's business operation. H and r block 2012 tax return The work performed for you must be the salesperson's principal business activity. H and r block 2012 tax return See Salesperson in section 2. H and r block 2012 tax return Social security and Medicare taxes. H and r block 2012 tax return   You must withhold social security and Medicare taxes from the wages of statutory employees if all three of the following conditions apply. H and r block 2012 tax return The service contract states or implies that substantially all the services are to be performed personally by them. H and r block 2012 tax return They do not have a substantial investment in the equipment and property used to perform the services (other than an investment in facilities for transportation, such as a car or truck). H and r block 2012 tax return The services are performed on a continuing basis for the same payer. H and r block 2012 tax return Federal unemployment (FUTA) tax. H and r block 2012 tax return   For FUTA tax (the unemployment tax paid under the Federal Unemployment Tax Act), the term “employee” means the same as it does for social security and Medicare taxes, except that it does not include statutory employees defined above in categories 2 and 3. H and r block 2012 tax return Any individual who is a statutory employee described above under category 1 or 4 is also an employee for FUTA tax purposes and subject to FUTA tax. H and r block 2012 tax return Income tax. H and r block 2012 tax return   Do not withhold federal income tax from the wages of statutory employees. H and r block 2012 tax return Reporting payments to statutory employees. H and r block 2012 tax return   Furnish Form W-2 to a statutory employee, and check “Statutory employee” in box 13. H and r block 2012 tax return Show your payments to the employee as “other compensation” in box 1. H and r block 2012 tax return Also, show social security wages in box 3, social security tax withheld in box 4, Medicare wages in box 5, and Medicare tax withheld in box 6. H and r block 2012 tax return The statutory employee can deduct his or her trade or business expenses from the payments shown on Form W-2. H and r block 2012 tax return He or she reports earnings as a statutory employee on line 1 of Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. H and r block 2012 tax return A statutory employee's business expenses are deductible on Schedule C (Form 1040) or C-EZ (Form 1040) and are not subject to the reduction by 2% of his or her adjusted gross income that applies to common-law employees. H and r block 2012 tax return H-2A agricultural workers. H and r block 2012 tax return   On Form W-2, do not check box 13 (Statutory employee), as H-2A workers are not statutory employees. H and r block 2012 tax return Statutory Nonemployees There are three categories of statutory nonemployees: direct sellers, licensed real estate agents, and certain companion sitters. H and r block 2012 tax return Direct sellers and licensed real estate agents are treated as self-employed for all federal tax purposes, including income and employment taxes, if: Substantially all payments for their services as direct sellers or real estate agents are directly related to sales or other output, rather than to the number of hours worked, and Their services are performed under a written contract providing that they will not be treated as employees for federal tax purposes. H and r block 2012 tax return Direct sellers. H and r block 2012 tax return   Direct sellers include persons falling within any of the following three groups. H and r block 2012 tax return Persons engaged in selling (or soliciting the sale of) consumer products in the home or place of business other than in a permanent retail establishment. H and r block 2012 tax return Persons engaged in selling (or soliciting the sale of) consumer products to any buyer on a buy-sell basis, a deposit-commission basis, or any similar basis prescribed by regulations, for resale in the home or at a place of business other than in a permanent retail establishment. H and r block 2012 tax return Persons engaged in the trade or business of delivering or distributing newspapers or shopping news (including any services directly related to such delivery or distribution). H and r block 2012 tax return   Direct selling includes activities of individuals who attempt to increase direct sales activities of their direct sellers and who earn income based on the productivity of their direct sellers. H and r block 2012 tax return Such activities include providing motivation and encouragement; imparting skills, knowledge, or experience; and recruiting. H and r block 2012 tax return Licensed real estate agents. H and r block 2012 tax return   This category includes individuals engaged in appraisal activities for real estate sales if they earn income based on sales or other output. H and r block 2012 tax return Companion sitters. H and r block 2012 tax return   Companion sitters are individuals who furnish personal attendance, companionship, or household care services to children or to individuals who are elderly or disabled. H and r block 2012 tax return A person engaged in the trade or business of putting the sitters in touch with individuals who wish to employ them (that is, a companion sitting placement service) will not be treated as the employer of the sitters if that person does not receive or pay the salary or wages of the sitters and is compensated by the sitters or the persons who employ them on a fee basis. H and r block 2012 tax return Companion sitters who are not employees of a companion sitting placement service are generally treated as self-employed for all federal tax purposes. H and r block 2012 tax return Misclassification of Employees Consequences of treating an employee as an independent contractor. H and r block 2012 tax return   If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you are liable for employment taxes for that worker and the relief provision, discussed next, will not apply. H and r block 2012 tax return See section 2 in Publication 15 (Circular E) for more information. H and r block 2012 tax return Relief provision. H and r block 2012 tax return   If you have a reasonable basis for not treating a worker as an employee, you may be relieved from having to pay employment taxes for that worker. H and r block 2012 tax return To get this relief, you must file all required federal information returns on a basis consistent with your treatment of the worker. H and r block 2012 tax return You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977. H and r block 2012 tax return Technical service specialists. H and r block 2012 tax return   This relief provision does not apply for a technical services specialist you provide to another business under an arrangement between you and the other business. H and r block 2012 tax return A technical service specialist is an engineer, designer, drafter, computer programmer, systems analyst, or other similarly skilled worker engaged in a similar line of work. H and r block 2012 tax return   This limit on the application of the rule does not affect the determination of whether such workers are employees under the common-law rules. H and r block 2012 tax return The common-law rules control whether the specialist is treated as an employee or an independent contractor. H and r block 2012 tax return However, if you directly contract with a technical service specialist to provide services for your business and not for another business, you may still be entitled to the relief provision. H and r block 2012 tax return Test proctors and room supervisors. H and r block 2012 tax return   The consistent treatment requirement does not apply to services performed after December 31, 2006, by an individual as a test proctor or room supervisor assisting in the administration of college entrance or placement examinations if the individual: Is performing the services for a section 501(c) organization exempt from tax under section 501(a) of the code, and Is not otherwise treated as an employee of the organization for employment taxes. H and r block 2012 tax return Voluntary Classification Settlement Program (VCSP). H and r block 2012 tax return   Employers who are currently treating their workers (or a class or group of workers) as independent contractors or other nonemployees and want to voluntarily reclassify their workers as employees for future tax periods may be eligible to participate in the VCSP if certain requirements are met. H and r block 2012 tax return To apply, use Form 8952, Application for Voluntary Classification Settlement Program (VCSP). H and r block 2012 tax return For more information, visit IRS. H and r block 2012 tax return gov and enter “VCSP” in the search box. H and r block 2012 tax return 2. H and r block 2012 tax return Employee or Independent Contractor? An employer must generally withhold federal income taxes, withhold and pay over social security and Medicare taxes, and pay unemployment tax on wages paid to an employee. H and r block 2012 tax return An employer does not generally have to withhold or pay over any federal taxes on payments to independent contractors. H and r block 2012 tax return Common-Law Rules To determine whether an individual is an employee or an independent contractor under the common law, the relationship of the worker and the business must be examined. H and r block 2012 tax return In any employee-independent contractor determination, all information that provides evidence of the degree of control and the degree of independence must be considered. H and r block 2012 tax return Facts that provide evidence of the degree of control and independence fall into three categories: behavioral control, financial control, and the type of relationship of the parties. H and r block 2012 tax return These facts are discussed next. H and r block 2012 tax return Behavioral control. H and r block 2012 tax return   Facts that show whether the business has a right to direct and control how the worker does the task for which the worker is hired include the type and degree of: Instructions that the business gives to the worker. H and r block 2012 tax return   An employee is generally subject to the business' instructions about when, where, and how to work. H and r block 2012 tax return All of the following are examples of types of instructions about how to do work. H and r block 2012 tax return When and where to do the work. H and r block 2012 tax return What tools or equipment to use. H and r block 2012 tax return What workers to hire or to assist with the work. H and r block 2012 tax return Where to purchase supplies and services. H and r block 2012 tax return What work must be performed by a specified  individual. H and r block 2012 tax return What order or sequence to follow. H and r block 2012 tax return   The amount of instruction needed varies among different jobs. H and r block 2012 tax return Even if no instructions are given, sufficient behavioral control may exist if the employer has the right to control how the work results are achieved. H and r block 2012 tax return A business may lack the knowledge to instruct some highly specialized professionals; in other cases, the task may require little or no instruction. H and r block 2012 tax return The key consideration is whether the business has retained the right to control the details of a worker's performance or instead has given up that right. H and r block 2012 tax return Training that the business gives to the worker. H and r block 2012 tax return   An employee may be trained to perform services in a particular manner. H and r block 2012 tax return Independent contractors ordinarily use their own methods. H and r block 2012 tax return Financial control. H and r block 2012 tax return   Facts that show whether the business has a right to control the business aspects of the worker's job include: The extent to which the worker has unreimbursed business expenses. H and r block 2012 tax return   Independent contractors are more likely to have unreimbursed expenses than are employees. H and r block 2012 tax return Fixed ongoing costs that are incurred regardless of whether work is currently being performed are especially important. H and r block 2012 tax return However, employees may also incur unreimbursed expenses in connection with the services that they perform for their employer. H and r block 2012 tax return The extent of the worker's investment. H and r block 2012 tax return   An independent contractor often has a significant investment in the facilities or tools he or she uses in performing services for someone else. H and r block 2012 tax return However, a significant investment is not necessary for independent contractor status. H and r block 2012 tax return The extent to which the worker makes his or her services available to the relevant market. H and r block 2012 tax return   An independent contractor is generally free to seek out business opportunities. H and r block 2012 tax return Independent contractors often advertise, maintain a visible business location, and are available to work in the relevant market. H and r block 2012 tax return How the business pays the worker. H and r block 2012 tax return   An employee is generally guaranteed a regular wage amount for an hourly, weekly, or other period of time. H and r block 2012 tax return This usually indicates that a worker is an employee, even when the wage or salary is supplemented by a commission. H and r block 2012 tax return An independent contractor is often paid a flat fee or on a time and materials basis for the job. H and r block 2012 tax return However, it is common in some professions, such as law, to pay independent contractors hourly. H and r block 2012 tax return The extent to which the worker can realize a profit or loss. H and r block 2012 tax return   An independent contractor can make a profit or loss. H and r block 2012 tax return Type of relationship. H and r block 2012 tax return   Facts that show the parties' type of relationship include: Written contracts describing the relationship the parties intended to create. H and r block 2012 tax return Whether or not the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay. H and r block 2012 tax return The permanency of the relationship. H and r block 2012 tax return If you engage a worker with the expectation that the relationship will continue indefinitely, rather than for a specific project or period, this is generally considered evidence that your intent was to create an employer-employee relationship. H and r block 2012 tax return The extent to which services performed by the worker are a key aspect of the regular business of the company. H and r block 2012 tax return If a worker provides services that are a key aspect of your regular business activity, it is more likely that you will have the right to direct and control his or her activities. H and r block 2012 tax return For example, if a law firm hires an attorney, it is likely that it will present the attorney's work as its own and would have the right to control or direct that work. H and r block 2012 tax return This would indicate an employer-employee relationship. H and r block 2012 tax return IRS help. H and r block 2012 tax return   If you want the IRS to determine whether or not a worker is an employee, file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS. H and r block 2012 tax return Industry Examples The following examples may help you properly classify your workers. H and r block 2012 tax return Building and Construction Industry Example 1. H and r block 2012 tax return Jerry Jones has an agreement with Wilma White to supervise the remodeling of her house. H and r block 2012 tax return She did not advance funds to help him carry on the work. H and r block 2012 tax return She makes direct payments to the suppliers for all necessary materials. H and r block 2012 tax return She carries liability and workers' compensation insurance covering Jerry and others that he engaged to assist him. H and r block 2012 tax return She pays them an hourly rate and exercises almost constant supervision over the work. H and r block 2012 tax return Jerry is not free to transfer his assistants to other jobs. H and r block 2012 tax return He may not work on other jobs while working for Wilma. H and r block 2012 tax return He assumes no responsibility to complete the work and will incur no contractual liability if he fails to do so. H and r block 2012 tax return He and his assistants perform personal services for hourly wages. H and r block 2012 tax return Jerry Jones and his assistants are employees of Wilma White. H and r block 2012 tax return Example 2. H and r block 2012 tax return Milton Manning, an experienced tile setter, orally agreed with a corporation to perform full-time services at construction sites. H and r block 2012 tax return He uses his own tools and performs services in the order designated by the corporation and according to its specifications. H and r block 2012 tax return The corporation supplies all materials, makes frequent inspections of his work, pays him on a piecework basis, and carries workers' compensation insurance on him. H and r block 2012 tax return He does not have a place of business or hold himself out to perform similar services for others. H and r block 2012 tax return Either party can end the services at any time. H and r block 2012 tax return Milton Manning is an employee of the corporation. H and r block 2012 tax return Example 3. H and r block 2012 tax return Wallace Black agreed with the Sawdust Co. H and r block 2012 tax return to supply the construction labor for a group of houses. H and r block 2012 tax return The company agreed to pay all construction costs. H and r block 2012 tax return However, he supplies all the tools and equipment. H and r block 2012 tax return He performs personal services as a carpenter and mechanic for an hourly wage. H and r block 2012 tax return He also acts as superintendent and foreman and engages other individuals to assist him. H and r block 2012 tax return The company has the right to select, approve, or discharge any helper. H and r block 2012 tax return A company representative makes frequent inspections of the construction site. H and r block 2012 tax return When a house is finished, Wallace is paid a certain percentage of its costs. H and r block 2012 tax return He is not responsible for faults, defects of construction, or wasteful operation. H and r block 2012 tax return At the end of each week, he presents the company with a statement of the amount that he has spent, including the payroll. H and r block 2012 tax return The company gives him a check for that amount from which he pays the assistants, although he is not personally liable for their wages. H and r block 2012 tax return Wallace Black and his assistants are employees of the Sawdust Co. H and r block 2012 tax return Example 4. H and r block 2012 tax return Bill Plum contracted with Elm Corporation to complete the roofing on a housing complex. H and r block 2012 tax return A signed contract established a flat amount for the services rendered by Bill Plum. H and r block 2012 tax return Bill is a licensed roofer and carries workers' compensation and liability insurance under the business name, Plum Roofing. H and r block 2012 tax return He hires his own roofers who are treated as employees for federal employment tax purposes. H and r block 2012 tax return If there is a problem with the roofing work, Plum Roofing is responsible for paying for any repairs. H and r block 2012 tax return Bill Plum, doing business as Plum Roofing, is an independent contractor. H and r block 2012 tax return Example 5. H and r block 2012 tax return Vera Elm, an electrician, submitted a job estimate to a housing complex for electrical work at $16 per hour for 400 hours. H and r block 2012 tax return She is to receive $1,280 every 2 weeks for the next 10 weeks. H and r block 2012 tax return This is not considered payment by the hour. H and r block 2012 tax return Even if she works more or less than 400 hours to complete the work, Vera Elm will receive $6,400. H and r block 2012 tax return She also performs additional electrical installations under contracts with other companies, that she obtained through advertisements. H and r block 2012 tax return Vera is an independent contractor. H and r block 2012 tax return Trucking Industry Example. H and r block 2012 tax return Rose Trucking contracts to deliver material for Forest, Inc. H and r block 2012 tax return , at $140 per ton. H and r block 2012 tax return Rose Trucking is not paid for any articles that are not delivered. H and r block 2012 tax return At times, Jan Rose, who operates as Rose Trucking, may also lease another truck and engage a driver to complete the contract. H and r block 2012 tax return All operating expenses, including insurance coverage, are paid by Jan Rose. H and r block 2012 tax return All equipment is owned or rented by Jan and she is responsible for all maintenance. H and r block 2012 tax return None of the drivers are provided by Forest, Inc. H and r block 2012 tax return Jan Rose, operating as Rose Trucking, is an independent contractor. H and r block 2012 tax return Computer Industry Example. H and r block 2012 tax return Steve Smith, a computer programmer, is laid off when Megabyte, Inc. H and r block 2012 tax return , downsizes. H and r block 2012 tax return Megabyte agrees to pay Steve a flat amount to complete a one-time project to create a certain product. H and r block 2012 tax return It is not clear how long that it will take to complete the project, and Steve is not guaranteed any minimum payment for the hours spent on the program. H and r block 2012 tax return Megabyte provides Steve with no instructions beyond the specifications for the product itself. H and r block 2012 tax return Steve and Megabyte have a written contract, which provides that Steve is considered to be an independent contractor, is required to pay federal and state taxes, and receives no benefits from Megabyte. H and r block 2012 tax return Megabyte will file Form 1099-MISC, Miscellaneous Income, to report the amount paid to Steve. H and r block 2012 tax return Steve works at home and is not expected or allowed to attend meetings of the software development group. H and r block 2012 tax return Steve is an independent contractor. H and r block 2012 tax return Automobile Industry Example 1. H and r block 2012 tax return Donna Lee is a salesperson employed on a full-time basis by Bob Blue, an auto dealer. H and r block 2012 tax return She works six days a week and is on duty in Bob's showroom on certain assigned days and times. H and r block 2012 tax return She appraises trade-ins, but her appraisals are subject to the sales manager's approval. H and r block 2012 tax return Lists of prospective customers belong to the dealer. H and r block 2012 tax return She is required to develop leads and report results to the sales manager. H and r block 2012 tax return Because of her experience, she requires only minimal assistance in closing and financing sales and in other phases of her work. H and r block 2012 tax return She is paid a commission and is eligible for prizes and bonuses offered by Bob. H and r block 2012 tax return Bob also pays the cost of health insurance and group-term life insurance for Donna. H and r block 2012 tax return Donna is an employee of Bob Blue. H and r block 2012 tax return Example 2. H and r block 2012 tax return Sam Sparks performs auto repair services in the repair department of an auto sales company. H and r block 2012 tax return He works regular hours and is paid on a percentage basis. H and r block 2012 tax return He has no investment in the repair department. H and r block 2012 tax return The sales company supplies all facilities, repair parts, and supplies; issues instructions on the amounts to be charged, parts to be used, and the time for completion of each job; and checks all estimates and repair orders. H and r block 2012 tax return Sam is an employee of the sales company. H and r block 2012 tax return Example 3. H and r block 2012 tax return An auto sales agency furnishes space for Helen Bach to perform auto repair services. H and r block 2012 tax return She provides her own tools, equipment, and supplies. H and r block 2012 tax return She seeks out business from insurance adjusters and other individuals and does all of the body and paint work that comes to the agency. H and r block 2012 tax return She hires and discharges her own helpers, determines her own and her helpers' working hours, quotes prices for repair work, makes all necessary adjustments, assumes all losses from uncollectible accounts, and receives, as compensation for her services, a large percentage of the gross collections from the auto repair shop. H and r block 2012 tax return Helen is an independent contractor and the helpers are her employees. H and r block 2012 tax return Attorney Example. H and r block 2012 tax return Donna Yuma is a sole practitioner who rents office space and pays for the following items: telephone, computer, on-line legal research linkup, fax machine, and photocopier. H and r block 2012 tax return Donna buys office supplies and pays bar dues and membership dues for three other professional organizations. H and r block 2012 tax return Donna has a part-time receptionist who also does the bookkeeping. H and r block 2012 tax return She pays the receptionist, withholds and pays federal and state employment taxes, and files a Form W-2 each year. H and r block 2012 tax return For the past 2 years, Donna has had only three clients, corporations with which there have been long-standing relationships. H and r block 2012 tax return Donna charges the corporations an hourly rate for her services, sending monthly bills detailing the work performed for the prior month. H and r block 2012 tax return The bills include charges for long distance calls, on-line research time, fax charges, photocopies, postage, and travel, costs for which the corporations have agreed to reimburse her. H and r block 2012 tax return Donna is an independent contractor. H and r block 2012 tax return Taxicab Driver Example. H and r block 2012 tax return Tom Spruce rents a cab from Taft Cab Co. H and r block 2012 tax return for $150 per day. H and r block 2012 tax return He pays the costs of maintaining and operating the cab. H and r block 2012 tax return Tom Spruce keeps all fares that he receives from customers. H and r block 2012 tax return Although he receives the benefit of Taft's two-way radio communication equipment, dispatcher, and advertising, these items benefit both Taft and Tom Spruce. H and r block 2012 tax return Tom Spruce is an independent contractor. H and r block 2012 tax return Salesperson To determine whether salespersons are employees under the usual common-law rules, you must evaluate each individual case. H and r block 2012 tax return If a salesperson who works for you does not meet the tests for a common-law employee, discussed earlier in this section, you do not have to withhold federal income tax from his or her pay (see Statutory Employees in section 1). H and r block 2012 tax return However, even if a salesperson is not an employee under the usual common-law rules for income tax withholding, his or her pay may still be subject to social security, Medicare, and FUTA taxes as a statutory employee. H and r block 2012 tax return To determine whether a salesperson is an employee for social security, Medicare, and FUTA tax purposes, the salesperson must meet all eight elements of the statutory employee test. H and r block 2012 tax return A salesperson is a statutory employee for social security, Medicare, and FUTA tax purposes if he or she: Works full time for one person or company except, possibly, for sideline sales activities on behalf of some other person, Sells on behalf of, and turns his or her orders over to, the person or company for which he or she works, Sells to wholesalers, retailers, contractors, or operators of hotels, restaurants, or similar establishments, Sells merchandise for resale, or supplies for use in the customer's business, Agrees to do substantially all of this work personally, Has no substantial investment in the facilities used to do the work, other than in facilities for transportation, Maintains a continuing relationship with the person or company for which he or she works, and Is not an employee under common-law rules. H and r block 2012 tax return 3. H and r block 2012 tax return Employees of Exempt Organizations Many nonprofit organizations are exempt from federal income tax. H and r block 2012 tax return Although they do not have to pay federal income tax themselves, they must still withhold federal income tax from the pay of their employees. H and r block 2012 tax return However, there are special social security, Medicare, and FUTA tax rules that apply to the wages that they pay their employees. H and r block 2012 tax return Section 501(c)(3) organizations. H and r block 2012 tax return   Nonprofit organizations that are exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code include any community chest, fund, or foundation organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary or educational purposes, fostering national or international amateur sports competition, or for the prevention of cruelty to children or animals. H and r block 2012 tax return These organizations are usually corporations and are exempt from federal income tax under section 501(a). H and r block 2012 tax return Social security and Medicare taxes. H and r block 2012 tax return   Wages paid to employees of section 501(c)(3) organizations are subject to social security and Medicare taxes unless one of the following situations applies. H and r block 2012 tax return The organization pays an employee less than $100 in a calendar year. H and r block 2012 tax return The organization is a church or church-controlled organization opposed for religious reasons to the payment of social security and Medicare taxes and has filed Form 8274, Certification by Churches and Qualified Church-Controlled Organizations Electing Exemption From Employer Social Security and Medicare Taxes, to elect exemption from social security and Medicare taxes. H and r block 2012 tax return The organization must have filed for exemption before the first date on which a quarterly employment tax return (Form 941) or annual employment tax return (Form 944) would otherwise be due. H and r block 2012 tax return   An employee of a church or church-controlled organization that is exempt from social security and Medicare taxes must pay self-employment tax if the employee is paid $108. H and r block 2012 tax return 28 or more in a year. H and r block 2012 tax return However, an employee who is a member of a qualified religious sect can apply for an exemption from the self-employment tax by filing Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits. H and r block 2012 tax return See Members of recognized religious sects opposed to insurance in section 4. H and r block 2012 tax return FUTA tax. H and r block 2012 tax return   An organization that is exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code is also exempt from FUTA tax. H and r block 2012 tax return This exemption cannot be waived. H and r block 2012 tax return Do not file Form 940 to report wages paid by these organizations or pay the tax. H and r block 2012 tax return Note. H and r block 2012 tax return An organization wholly owned by a state or its political subdivision should contact the appropriate state official for information about reporting and getting social security and Medicare coverage for its employees. H and r block 2012 tax return Other than section 501(c)(3) organizations. H and r block 2012 tax return   Nonprofit organizations that are not section 501(c)(3) organizations may also be exempt from federal income tax under section 501(a) or section 521. H and r block 2012 tax return However, these organizations are not exempt from withholding federal income, social security, or Medicare tax from their employees' pay, or from paying FUTA tax. H and r block 2012 tax return Two special rules for social security, Medicare, and FUTA taxes apply. H and r block 2012 tax return If an employee is paid less than $100 during a calendar year, his or her wages are not subject to social security and Medicare taxes. H and r block 2012 tax return If an employee is paid less than $50 in a calendar quarter, his or her wages are not subject to FUTA tax for the quarter. H and r block 2012 tax return The above rules do not apply to employees who work for pension plans and other similar organizations described in section 401(a). H and r block 2012 tax return 4. H and r block 2012 tax return Religious Exemptions and Special Rules for Ministers Special rules apply to the treatment of ministers for social security and Medicare tax purposes. H and r block 2012 tax return An exemption from social security and Medicare taxes is available for ministers and certain other religious workers and members of certain recognized religious sects. H and r block 2012 tax return For more information on getting an exemption, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. H and r block 2012 tax return Ministers. H and r block 2012 tax return   Ministers are individuals who are duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination. H and r block 2012 tax return They are given the authority to conduct religious worship, perform sacerdotal functions, and administer ordinances and sacraments according to the prescribed tenets and practices of that religious organization. H and r block 2012 tax return   Ministers are employees if they perform services in the exercise of ministry and are subject to your will and control. H and r block 2012 tax return The common-law rules discussed in section 1 and section 2 should be applied to determine whether a minister is your employee or is self-employed. H and r block 2012 tax return Whether the minister is an employee or self-employed, the earnings of a minister are not subject to federal income, social security, and Medicare tax withholding. H and r block 2012 tax return However, even if the minister is a common law employee, the earnings as reported on the minister's Form 1040 are subject to self-employment tax and federal income tax. H and r block 2012 tax return You do not withhold these taxes from wages earned by a minister, but if the minister is your employee, you may agree with the minister to voluntarily withhold tax to cover the minister's liability for self-employment tax and federal income tax. H and r block 2012 tax return For more information, see Publication 517. H and r block 2012 tax return Form W-2. H and r block 2012 tax return   If your minister is an employee, report all taxable compensation as wages in box 1 on Form W-2. H and r block 2012 tax return Include in this amount expense allowances or reimbursements paid under a nonaccountable plan, discussed in section 5 of Publication 15 (Circular E). H and r block 2012 tax return Do not include a parsonage allowance (excludable housing allowance) in this amount. H and r block 2012 tax return You may report a designated parsonage or rental allowance (housing allowance) and a utilities allowance, or the rental value of housing provided in a separate statement or in box 14 on Form W-2. H and r block 2012 tax return Do not show on Form W-2, Form 941, or Form 944 any amount as social security or Medicare wages, or any withholding for social security or Medicare taxes. H and r block 2012 tax return If you withheld federal income tax from the minister under a voluntary agreement, this amount should be shown in box 2 on Form W-2 as federal income tax withheld. H and r block 2012 tax return For more information on ministers, see Publication 517. H and r block 2012 tax return Exemptions for ministers and others. H and r block 2012 tax return   Certain ordained ministers, Christian Science practitioners, and members of religious orders who have not taken a vow of poverty may apply to exempt their earnings from self-employment tax on religious grounds. H and r block 2012 tax return The application must be based on conscientious opposition because of personal considerations to public insurance that makes payments in the event of death, disability, old age, or retirement, or that makes payments toward the cost of, or provides services for, medical care, including social security and Medicare benefits. H and r block 2012 tax return The exemption applies only to qualified services performed for the religious organization. H and r block 2012 tax return See Revenue Procedure 91-20, 1991-1 C. H and r block 2012 tax return B. H and r block 2012 tax return 524, for guidelines to determine whether an organization is a religious order or whether an individual is a member of a religious order. H and r block 2012 tax return   To apply for the exemption, the employee should file Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners. H and r block 2012 tax return See Publication 517 for more information about claiming an exemption from self-employment tax using Form 4361. H and r block 2012 tax return Members of recognized religious sects opposed to insurance. H and r block 2012 tax return   If you belong to a recognized religious sect or to a division of such sect that is opposed to insurance, you may qualify for an exemption from the self-employment tax. H and r block 2012 tax return To qualify, you must be conscientiously opposed to accepting the benefits of any public or private insurance that makes payments because of death, disability, old age, or retirement, or makes payments toward the cost of, or provides services for, medical care (including social security and Medicare benefits). H and r block 2012 tax return If you buy a retirement annuity from an insurance company, you will not be eligible for this exemption. H and r block 2012 tax return Religious opposition based on the teachings of the sect is the only legal basis for the exemption. H and r block 2012 tax return In addition, your religious sect (or division) must have existed since December 31, 1950. H and r block 2012 tax return Self-employed. H and r block 2012 tax return   If you are self-employed and a member of a recognized religious sect opposed to insurance, you can apply for exemption by filing Form 4029 to waive all social security and Medicare benefits. H and r block 2012 tax return Employees. H and r block 2012 tax return   The social security and Medicare tax exemption available to the self-employed who are members of a recognized religious sect opposed to insurance is also available to their employees who are members of such a sect. H and r block 2012 tax return This applies to partnerships only if each partner is a member of the sect. H and r block 2012 tax return This exemption for employees applies only if both the employee and the employer are members of such a sect, and the employer has an exemption. H and r block 2012 tax return To get the exemption, the employee must file Form 4029. H and r block 2012 tax return   An employee of a church or church-controlled organization that is exempt from social security and Medicare taxes can also apply for an exemption on Form 4029. H and r block 2012 tax return 5. H and r block 2012 tax return Wages and Other Compensation Publication 15 (Circular E) provides a general discussion of taxable wages. H and r block 2012 tax return Publication 15-B discusses fringe benefits. H and r block 2012 tax return The following topics supplement those discussions. H and r block 2012 tax return Relocating for Temporary Work Assignments If an employee is given a temporary work assignment away from his or her regular place of work, certain travel expenses reimbursed or paid directly by the employer in accordance with an accountable plan (see section 5 in Publication 15 (Circular E)) may be excludable from the employee's wages. H and r block 2012 tax return Generally, a temporary work assignment in a single location is one that is realistically expected to last (and does in fact last) for 1 year or less. H and r block 2012 tax return If the employee's new work assignment is indefinite, any living expenses reimbursed or paid by the employer (other than qualified moving expenses) must be included in the employee's wages as compensation. H and r block 2012 tax return For the travel expenses to be excludable: The new work location must be outside of the city or general area of the employee's regular work place or post of duty, The travel expenses must otherwise qualify as deductible by the employee, and The expenses must be for the period during which the employee is at the temporary work location. H and r block 2012 tax return If you reimburse or pay any personal expenses of an employee during his or her temporary work assignment, such as expenses for home leave for family members or for vacations, these amounts must be included in the employee's wages. H and r block 2012 tax return See chapter 1 of Publication 463, Travel, Entertainment, Gift, and Car Expenses, and section 5 of Publication 15 (Circular E), for more information. H and r block 2012 tax return These rules generally apply to temporary work assignments both inside and outside the U. H and r block 2012 tax return S. H and r block 2012 tax return Employee Achievement Awards Do not withhold federal income, social security, or Medicare taxes on the fair market value of an employee achievement award if it is excludable from your employee's gross income. H and r block 2012 tax return To be excludable from your employee's gross income, the award must be tangible personal property (not cash, gift certificates, or securities) given to an employee for length of service or safety achievement, awarded as part of a meaningful presentation, and awarded under circumstances that do not indicate that the payment is disguised compensation. H and r block 2012 tax return Excludable employee achievement awards also are not subject to FUTA tax. H and r block 2012 tax return Limits. H and r block 2012 tax return   The most that you can exclude for the cost of all employee achievement awards to the same employee for the year is $400. H and r block 2012 tax return A higher limit of $1,600 applies to qualified plan awards. H and r block 2012 tax return Qualified plan awards are employee achievement awards under a written plan that does not discriminate in favor of highly compensated employees. H and r block 2012 tax return An award cannot be treated as a qualified plan award if the average cost per recipient of all awards under all of your qualified plans is more than $400. H and r block 2012 tax return   If during the year an employee receives awards not made under a qualified plan and also receives awards under a qualified plan, the exclusion for the total cost of all awards to that employee cannot be more than $1,600. H and r block 2012 tax return The $400 and $1,600 limits cannot be added together to exclude more than $1,600 for the cost of awards to any one employee during the year. H and r block 2012 tax return Scholarship and Fellowship Payments Only amounts that you pay as a qualified scholarship to a candidate for a degree may be excluded from the recipient's gross income. H and r block 2012 tax return A qualified scholarship is any amount granted as a scholarship or fellowship that is used for: Tuition and fees required to enroll in, or to attend, an educational institution, or Fees, books, supplies, and equipment that are required for courses at the educational institution. H and r block 2012 tax return The exclusion from income does not apply to the portion of any amount received that represents payment for teaching, research, or other services required as a condition of receiving the scholarship or tuition reduction. H and r block 2012 tax return These amounts are reportable on Form W-2. H and r block 2012 tax return However, the exclusion will still apply for any amount received under two specific programs—the National Health Service Corps Scholarship Program and the Armed Forces Health Professions Scholarship and Financial Assistance Program—despite any service condition attached to those amounts. H and r block 2012 tax return Any amounts that you pay for room and board are not excludable from the recipient's gross income. H and r block 2012 tax return A qualified scholarship is not subject to social security, Medicare, and FUTA taxes, or federal income tax withholding. H and r block 2012 tax return For more information, see Publication 970, Tax Benefits for Education. H and r block 2012 tax return Outplacement Services If you provide outplacement services to your employees to help them find new employment (such as career counseling, resume assistance, or skills assessment), the value of these benefits may be income to them and subject to all withholding taxes. H and r block 2012 tax return However, the value of these services will not be subject to any employment taxes if: You derive a substantial business benefit from providing the services (such as improved employee morale or business image) separate from the benefit that you would receive from the mere payment of additional compensation, and The employee would be able to deduct the cost of the services as employee business expenses if he or she had paid for them. H and r block 2012 tax return However, if you receive no additional benefit from providing the services, or if the services are not provided on the basis of employee need, then the value of the services is treated as wages and is subject to federal income tax withholding and social security and Medicare taxes. H and r block 2012 tax return Similarly, if an employee receives the outplacement services in exchange for reduced severance pay (or other taxable compensation), then the amount the severance pay is reduced is treated as wages for employment tax purposes. H and r block 2012 tax return Withholding for Idle Time Payments made under a voluntary guarantee to employees for idle time (any time during which an employee performs no services) are wages for the purposes of social security, Medicare, and FUTA taxes, and federal income tax withholding. H and r block 2012 tax return Back Pay Treat back pay as wages in the year paid and withhold and pay employment taxes as required. H and r block 2012 tax return If back pay was awarded by a court or government agency to enforce a federal or state statute protecting an employee's right to employment or wages, special rules apply for reporting those wages to the Social Security Administration. H and r block 2012 tax return These rules also apply to litigation actions and settlement agreements or agency directives that are resolved out of court and not under a court decree or order. H and r block 2012 tax return Examples of pertinent statutes include, but are not limited to, the National Labor Relations Act, Fair Labor Standards Act, Equal Pay Act, and Age Discrimination in Employment Act. H and r block 2012 tax return See Publication 957, Reporting Back Pay and Special Wage Payments to the Social Security Administration, and Form SSA-131, Employer Report of Special Wage Payments, for details. H and r block 2012 tax return Supplemental Unemployment Benefits If you pay, under a plan, supplemental unemployment benefits to a former employee, all or part of the payments may be taxable and subject to federal income tax withholding, depending on how the plan is funded. H and r block 2012 tax return Amounts that represent a return to the employee of amounts previously subject to tax are not taxable and are not subject to withholding. H and r block 2012 tax return You should withhold federal income tax on the taxable part of the payments made, under a plan, to an employee who is involuntarily separated because of a reduction in force, discontinuance of a plant or operation, or other similar condition. H and r block 2012 tax return It does not matter whether the separation is temporary or permanent. H and r block 2012 tax return There are special rules that apply in determining whether benefits qualify as supplemental unemployment benefits that are excluded from wages for social security, Medicare, and FUTA tax purposes. H and r block 2012 tax return To qualify as supplemental unemployment benefits for these purposes, the benefits must meet the following requirements. H and r block 2012 tax return Benefits are paid only to unemployed former employees who are laid off by the employer. H and r block 2012 tax return Eligibility for benefits depends on meeting prescribed conditions after termination. H and r block 2012 tax return The amount of weekly benefits payable is based upon state unemployment benefits, other compensation allowable under state law, and the amount of regular weekly pay. H and r block 2012 tax return The right to benefits does not accrue until a prescribed period after termination. H and r block 2012 tax return Benefits are not attributable to the performance of particular services. H and r block 2012 tax return No employee has any right to the benefits until qualified and eligible to receive benefits. H and r block 2012 tax return Benefits may not be paid in a lump sum. H and r block 2012 tax return Withholding on taxable supplemental unemployment benefits must be based on the withholding certificate (Form W-4) that the employee gave to you. H and r block 2012 tax return Golden Parachute Payments A golden parachute payment, in general, is a payment made under a contract entered into by a corporation and key personnel. H and r block 2012 tax return Under the agreement, the corporation agrees to pay certain amounts to its key personnel in the event of a change in ownership or control of the corporation. H and r block 2012 tax return Payments to employees under golden parachute contracts are subject to social security, Medicare, and FUTA taxes, and federal income tax withholding. H and r block 2012 tax return See Regulations section 1. H and r block 2012 tax return 280G-1 for more information. H and r block 2012 tax return No deduction is allowed to the corporation for any excess parachute payment. H and r block 2012 tax return To determine the amount of the excess parachute payment, you must first determine if there is a parachute payment for purposes of section 280G. H and r block 2012 tax return A parachute payment for purposes of section 280G is any payment that meets all of the following. H and r block 2012 tax return The payment is in the nature of compensation. H and r block 2012 tax return The payment is to, or for the benefit of, a disqualified individual. H and r block 2012 tax return A disqualified individual is anyone who at any time during the 12-month period prior to and ending on the date of the change in ownership or control of the corporation (the disqualified individual determination period) was an employee or independent contractor and was, in regard to that corporation, a shareholder, an officer, or highly compensated individual. H and r block 2012 tax return The payment is contingent on a change in ownership of the corporation, the effective control of the corporation, or the ownership of a substantial portion of the assets of the corporation. H and r block 2012 tax return The payment has an aggregate present value of at least three times the individual's base amount. H and r block 2012 tax return The base amount is the average annual compensation for service includible in the individual's gross income over the most recent 5 taxable years. H and r block 2012 tax return An excess parachute payment amount is the excess of any parachute payment over the base amount. H and r block 2012 tax return For more information, see Regulations section 1. H and r block 2012 tax return 280G-1. H and r block 2012 tax return The recipient of an excess parachute payment is subject to a 20% nondeductible excise tax. H and r block 2012 tax return If the recipient is an employee, the 20% excise tax is to be withheld by the corporation. H and r block 2012 tax return Example. H and r block 2012 tax return An officer of a corporation receives a golden parachute payment of $400,000. H and r block 2012 tax return This is more than three times greater than his or her average compensation of $100,000 over the previous 5-year period. H and r block 2012 tax return The excess parachute payment is $300,000 ($400,000 minus $100,000). H and r block 2012 tax return The corporation cannot deduct the $300,000 and must withhold the excise tax of $60,000 (20% of $300,000). H and r block 2012 tax return Reporting golden parachute payments. H and r block 2012 tax return   Golden parachute payments to employees must be reported on Form W-2. H and r block 2012 tax return See the General Instructions for Forms W-2 and W-3 for details. H and r block 2012 tax return For nonemployee reporting of these payments, see Box 7. H and r block 2012 tax return Nonemployee Compensation in the Instructions for Form 1099-MISC. H and r block 2012 tax return Exempt payments. H and r block 2012 tax return   Payments by most small business corporations and payments under certain qualified plans are exempt from the golden parachute rules. H and r block 2012 tax return See section 280G(b)(5) and (6) for more information. H and r block 2012 tax return Interest-Free and Below-Market-Interest-Rate Loans In general, if an employer lends an employee more than $10,000 at an interest rate less than the current applicable federal rate (AFR), the difference between the interest paid and the interest that would be paid under the AFR is considered additional compensation to the employee. H and r block 2012 tax return This rule applies to a loan of $10,000 or less if one of its principal purposes is the avoidance of federal tax. H and r block 2012 tax return This additional compensation to the employee is subject to social security, Medicare, and FUTA taxes, but not to federal income tax withholding. H and r block 2012 tax return Include it in compensation on Form W-2 (or Form 1099-MISC for an independent contractor). H and r block 2012 tax return The AFR is established monthly and published by the IRS each month in the Internal Revenue Bulletin. H and r block 2012 tax return You can get these rates by calling 1-800-829-4933 or by visiting IRS. H and r block 2012 tax return gov. H and r block 2012 tax return For more information, see section 7872 and its related regulations. H and r block 2012 tax return Leave Sharing Plans If you establish a leave sharing plan for your employees that allows them to transfer leave to other employees for medical emergencies, the amounts paid to the recipients of the leave are considered wages. H and r block 2012 tax return These amounts are includible in the gross income of the recipients and are subject to social security, Medicare, and FUTA taxes, and federal income tax withholding. H and r block 2012 tax return Do not include these amounts in the income of the transferors. H and r block 2012 tax return These rules apply only to leave sharing plans that permit employees to transfer leave to other employees for medical emergencies. H and r block 2012 tax return Nonqualified Deferred Compensation Plans Income Tax and Reporting Section 409A provides that all amounts deferred under a nonqualified deferred compensation (NQDC) plan for all tax years are currently includible in gross income (to the extent not subject to a substantial risk of forfeiture and not previously included in gross income) and subject to additional taxes, unless certain requirements are met pertaining to, among other things, elections to defer compensation and distributions under a NQDC plan. H and r block 2012 tax return Section 409A also includes rules that apply to certain trusts or similar arrangements associated with NQDC plans if the trusts or arrangements are located outside of the United States, are restricted to the provision of benefits in connection with a decline in the financial health of the plan sponsor, or contributions are made to the trust during certain periods such as when a qualified plan of the service recipient is underfunded. H and r block 2012 tax return Employers must withhold federal income tax (but not the additional Section 409A taxes) on any amount includible in gross income under section 409A. H and r block 2012 tax return Other changes to the Internal Revenue Code provide that the deferrals under a NQDC plan must be reported separately on Form W-2 or Form 1099-MISC, whichever applies. H and r block 2012 tax return Specific rules for reporting are provided in the instructions to the forms. H and r block 2012 tax return The provisions do not affect the application or reporting of social security, Medicare, or FUTA taxes. H and r block 2012 tax return The provisions do not prevent the inclusion of amounts in income or wages under other provisions of the Internal Revenue Code or common law principles, such as when amounts are actually or constructively received or irrevocably contributed to a separate fund. H and r block 2012 tax return For more information about nonqualified deferred compensation plans, see Regulations sections 1. H and r block 2012 tax return 409A-1 through 1. H and r block 2012 tax return 409A-6. H and r block 2012 tax return Notice 2008-113 provides guidance on the correction of certain operation failures of a NQDC plan. H and r block 2012 tax return Notice 2008-113, 2008-51 I. H and r block 2012 tax return R. H and r block 2012 tax return B. H and r block 2012 tax return 1305, is available at www. H and r block 2012 tax return irs. H and r block 2012 tax return gov/irb/2008-51_IRB/ar12. H and r block 2012 tax return html. H and r block 2012 tax return Also see Notice 2010-6, 2010-3 I. H and r block 2012 tax return R. H and r block 2012 tax return B. H and r block 2012 tax return 275, available at www. H and r block 2012 tax return irs. H and r block 2012 tax return gov/irb/2010-03_IRB/ar08. H and r block 2012 tax return html and Notice 2010-80, 2010-51 I. H and r block 2012 tax return R. H and r block 2012 tax return B. H and r block 2012 tax return 853, available at www. H and r block 2012 tax return irs. H and r block 2012 tax return gov/irb/2010-51_IRB/ar08. H and r block 2012 tax return html. H and r block 2012 tax return Social security, Medicare, and FUTA taxes. H and r block 2012 tax return   Employer contributions to nonqualified deferred compensation (NQDC) plans, as defined in the applicable regulations, are treated as wages subject to social security, Medicare, and FUTA taxes when the services are performed or the employee no longer has a substantial risk of forfeiting the right to the deferred compensation, whichever is later. H and r block 2012 tax return   Amounts deferred are subject to social security, Medicare, and FUTA taxes at that time unless the amount that is deferred cannot be reasonably ascertained; for example, if benefits are based on final pay. H and r block 2012 tax return If the value of the future benefit is based on any factors that are not yet reasonably ascertainable, you may choose to estimate the value of the future benefit and withhold and pay social security, Medicare, and FUTA taxes on that amount. H and r block 2012 tax return You will have to determine later, when the amount is reasonably ascertainable, whether any additional taxes are required. H and r block 2012 tax return If taxes are not paid before the amounts become reasonably ascertainable, when the amounts become reasonably ascertainable they are subject to social security, Medicare, and FUTA taxes on the amounts deferred plus the income attributable to those amounts deferred. H and r block 2012 tax return For more information, see Regulations sections 31. H and r block 2012 tax return 3121(v)(2)-1 and 31. H and r block 2012 tax return 3306(r)(2)-1. H and r block 2012 tax return Tax-Sheltered Annuities Employer payments made by a public educational institution or a tax-exempt organization to purchase a tax-sheltered annuity for an employee (annual deferrals) are included in the employee's social security and Medicare wages, if the payments are made because of a salary reduction agreement. H and r block 2012 tax return However, they are not included in box 1 on Form W-2 in the year the deferrals are made and are not subject to federal income tax withholding. H and r block 2012 tax return See Regulations section 31. H and r block 2012 tax return 3121(a)(5)-2 for the definition of a salary reduction agreement. H and r block 2012 tax return Contributions to a Simplified Employee Pension (SEP) An employer's SEP contributions to an employee's individual retirement arrangement (IRA) are excluded from the employee's gross income. H and r block 2012 tax return These excluded amounts are not subject to social security, Medicare, or FUTA taxes, or federal income tax withholding. H and r block 2012 tax return However, any SEP contributions paid under a salary reduction agreement (SARSEP) are included in wages for purposes of social security, Medicare, and FUTA taxes. H and r block 2012 tax return See Publication 560 for more information about SEPs. H and r block 2012 tax return Salary reduction simplified employee pensions (SARSEP) repealed. H and r block 2012 tax return   You may not establish a SARSEP after 1996. H and r block 2012 tax return However, SARSEPs established before January 1, 1997, may continue to receive contributions. H and r block 2012 tax return SIMPLE Retirement Plans Employer and employee contributions to a savings incentive match plan for employees (SIMPLE) retirement account (subject to limitations) are excludable from the employee's income and are exempt from federal income tax withholding. H and r block 2012 tax return An employer's nonelective (2%) or matching contributions are exempt from social security, Medicare, and FUTA taxes. H and r block 2012 tax return However, an employee's salary reduction contributions to a SIMPLE are subject to social security, Medicare, and FUTA taxes. H and r block 2012 tax return For more information about SIMPLE retirement plans, see Publication 560. H and r block 2012 tax return 6. H and r block 2012 tax return Sick Pay Reporting The IRS expects to change the third-party sick pay recap reporting and filing requirements for wages paid in 2014. H and r block 2012 tax return Information about this change will be included in the revision of Publication 15-A that is expected to post to IRS. H and r block 2012 tax return gov in December 2014. H and r block 2012 tax return Special rules apply to the reporting of sick pay payments to employees. H and r block 2012 tax return How these payments are reported depends on whether the payments are made by the employer or a third party, such as an insurance company. H and r block 2012 tax return Sick pay is usually subject to social security, Medicare, and FUTA taxes. H and r block 2012 tax return For exceptions, see Social Security, Medicare, and FUTA Taxes on Sick Pay , later in this section. H and r block 2012 tax return Sick pay may also be subject to either mandatory or voluntary federal income tax withholding, depending on who pays it. H and r block 2012 tax return Sick Pay Sick pay generally means any amount paid under a plan because of an employee's temporary absence from work due to injury, sickness, or disability. H and r block 2012 tax return It may be paid by either the employer or a third party, such as an insurance company. H and r block 2012 tax return Sick pay includes both short- and long-term benefits. H and r block 2012 tax return It is often expressed as a percentage of the employee's regular wages. H and r block 2012 tax return Payments That Are Not Sick Pay Sick pay does not include the following payments. H and r block 2012 tax return Disability retirement payments. H and r block 2012 tax return Disability retirement payments are not sick pay and are not discussed in this section. H and r block 2012 tax return Those payments are subject to the rules for federal income tax withholding from pensions and annuities. H and r block 2012 tax return See section 8. H and r block 2012 tax return Workers' compensation. H and r block 2012 tax return Payments because of a work-related injury or sickness that are made under a workers' compensation law are not sick pay and are not subject to employment taxes. H and r block 2012 tax return But see Payments in the nature of workers' compensation—public employees next. H and r block 2012 tax return Payments in the nature of workers' compensation—public employees. H and r block 2012 tax return State and local government employees, such as police officers and firefighters, sometimes receive payments due to an injury in the line of duty under a statute that is not the general workers' compensation law of a state. H and r block 2012 tax return If the statute limits benefits to work-related injuries or sickness and does not base payments on the employee's age, length of service, or prior contributions, the statute is “in the nature of” a workers' compensation law. H and r block 2012 tax return Payments under a statute in the nature of a workers' compensation law are not sick pay and are not subject to employment taxes. H and r block 2012 tax return For more information, see Regulations section 31. H and r block 2012 tax return 3121(a)(2)-1. H and r block 2012 tax return Medical expense payments. H and r block 2012 tax return Payments under a definite plan or system for medical and hospitalization expenses, or for insurance covering these expenses, are not sick pay and are not subject to employment taxes. H and r block 2012 tax return Payments unrelated to absence from work. H and r block 2012 tax return Accident or health insurance payments unrelated to absence from work are not sick pay and are not subject to employment taxes. H and r block 2012 tax return These include payments for: Permanent loss of a member or function of the body, Permanent loss of the use of a member or function of the body, or Permanent disfigurement of the body. H and r block 2012 tax return Example. H and r block 2012 tax return Donald was injured in a car accident and lost an eye. H and r block 2012 tax return Under a policy paid for by Donald's employer, Delta Insurance Co. H and r block 2012 tax return paid Donald $20,000 as compensation for the loss of his eye. H and r block 2012 tax return Because the payment was determined by the type of injury and was unrelated to Donald's absence from work, it is not sick pay and is not subject to federal employment taxes. H and r block 2012 tax return Sick Pay Plan A sick pay plan is a plan or system established by an employer under which sick pay is available to employees generally or to a class or classes of employees. H and r block 2012 tax return This does not include a situation in which benefits are provided on a discretionary or occasional basis with merely an intention to aid particular employees in time of need. H and r block 2012 tax return You have a sick pay plan or system if the plan is in writing or is otherwise made known to employees, such as by a bulletin board notice or your long and established practice. H and r block 2012 tax return Some indications that you have a sick pay plan or system include references to the plan or system in the contract of employment, employer contributions to a plan, or segregated accounts for the payment of benefits. H and r block 2012 tax return Definition of employer. H and r block 2012 tax return   The employer for whom the employee normally works, a term used in the following discussion, is either the employer for whom the employee was working at the time that the employee became sick or disabled or the last employer for whom the employee worked before becoming sick or disabled, if that employer made contributions to the sick pay plan on behalf of the sick or disabled employee. H and r block 2012 tax return Note. H and r block 2012 tax return Contributions to a sick pay plan through a cafeteria plan (by direct employer contributions or salary reduction) are employer contributions unless they are after-tax employee contributions (that is, included in taxable wages). H and r block 2012 tax return Third-Party Payers of Sick Pay Employer's agent. H and r block 2012 tax return   An employer's agent is a third party that bears no insurance risk and is reimbursed on a cost-plus-fee basis for payment of sick pay and similar amounts. H and r block 2012 tax return A third party may be your agent even if the third party is responsible for determining which employees are eligible to receive payments. H and r block 2012 tax return For example, if a third party provides administrative services only, the third party is your agent. H and r block 2012 tax return If the third party is paid an insurance premium and is not reimbursed on a cost-plus-fee basis, the third party is not your agent. H and r block 2012 tax return Whether an insurance company or other third party is your agent depends on the terms of their agreement with you. H and r block 2012 tax return   A third party that makes payments of sick pay as your agent is not considered the employer and generally has no responsibility for employment taxes. H and r block 2012 tax return This responsibility remains with you. H and r block 2012 tax return However, under an exception to this rule, the parties may enter into an agreement that makes the third-party agent responsible for employment taxes. H and r block 2012 tax return In this situation, the third-party agent should use its own name and EIN (rather than your name and EIN) for the responsibilities that it has assumed. H and r block 2012 tax return Third party not employer's agent. H and r block 2012 tax return   A third party that makes payments of sick pay other than as an agent of the employer is liable for federal income tax withholding (if requested by the employee) and the employee part of the social security and Medicare taxes. H and r block 2012 tax return   The third party is also liable for the employer part of the social security and Medicare taxes, and the FUTA tax, unless the third party transfers this liability to the employer for whom the employee normally works. H and r block 2012 tax return This liability is transferred if the third party takes the following steps. H and r block 2012 tax return Withholds the employee social security and Medicare taxes from the sick pay payments. H and r block 2012 tax return Makes timely deposits of the employee social security and Medicare taxes. H and r block 2012 tax return Notifies the employer for whom the employee normally works of the payments on which employee taxes were withheld and deposited. H and r block 2012 tax return The third party must notify the employer within the time required for the third party's deposit of the employee part of the social security and Medicare taxes. H and r block 2012 tax return For instance, if the third party is a monthly schedule depositor, it must notify the employer by the 15th day of the month following the month in which the sick pay payment is made because that is the day by which the deposit is required to be made. H and r block 2012 tax return The third party should notify the employer as soon as information on payments is available so that an employer required to make electronic deposits can make them timely. H and r block 2012 tax return For multi-employer plans, see the special rule discussed next. H and r block 2012 tax return Multi-employer plan timing rule. H and r block 2012 tax return   A special rule applies to sick pay payments made to employees by a third-party insurer under an insurance contract with a multi-employer plan established under a collectively bargained agreement. H and r block 2012 tax return If the third-party insurer making the payments complies wi
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The H And R Block 2012 Tax Return

H and r block 2012 tax return 12. H and r block 2012 tax return   Business Deduction for Work-Related Education Table of Contents What's New Introduction Qualifying Work-Related EducationEducation Required by Employer or by Law Education To Maintain or Improve Skills Education To Meet Minimum Requirements Education That Qualifies You for a New Trade or Business What Expenses Can Be DeductedUnclaimed reimbursement. H and r block 2012 tax return Transportation Expenses Travel Expenses No Double Benefit Allowed How To Treat ReimbursementsAccountable Plans Nonaccountable Plans Deducting Business ExpensesSelf-Employed Persons Employees Performing Artists and Fee-Basis Officials Impairment-Related Work Expenses Recordkeeping Illustrated Example What's New Standard mileage rate. H and r block 2012 tax return  Generally, if you claim a business deduction for work-related education and you drive your car to and from school, the amount you can deduct for miles driven from January 1, 2013 through December 31, 2013, is 56. H and r block 2012 tax return 5 cents per mile. H and r block 2012 tax return For more information, see Transportation Expenses under What Expenses Can Be Deducted, later. H and r block 2012 tax return Introduction This chapter discusses work-related education expenses that you may be able to deduct as business expenses. H and r block 2012 tax return To claim such a deduction, you must: Itemize your deductions on Schedule A (Form 1040 or 1040NR) if you are an employee, File Schedule C (Form 1040), Profit or Loss From Business, Schedule C-EZ (Form 1040), Net Profit From Business, or Schedule F (Form 1040), Profit or Loss From Farming if you are self-employed, and Have expenses for education that meet the requirements discussed under Qualifying Work-Related Education , later. H and r block 2012 tax return What is the tax benefit of taking a business deduction for work-related education. H and r block 2012 tax return   If you are an employee and can itemize your deductions, you may be able to claim a deduction for the expenses you pay for your work-related education. H and r block 2012 tax return Your deduction will be the amount by which your qualifying work-related education expenses plus other job and certain miscellaneous expenses (except for impairment-related work expenses of disabled individuals) is greater than 2% of your adjusted gross income. H and r block 2012 tax return An itemized deduction reduces the amount of your income subject to tax. H and r block 2012 tax return   If you are self-employed, you deduct your expenses for qualifying work-related education directly from your self-employment income. H and r block 2012 tax return This reduces the amount of your income subject to both income tax and self-employment tax. H and r block 2012 tax return   Your work-related education expenses may also qualify you for other tax benefits, such as the American opportunity and lifetime learning credits. H and r block 2012 tax return You may qualify for these other benefits even if you do not meet the requirements listed above. H and r block 2012 tax return   Also, your work-related education expenses may qualify you to claim more than one tax benefit. H and r block 2012 tax return Generally, you may claim any number of benefits as long as you use different expenses to figure each one. H and r block 2012 tax return Qualifying Work-Related Education You can deduct the costs of qualifying work-related education as business expenses. H and r block 2012 tax return This is education that meets at least one of the following two tests. H and r block 2012 tax return The education is required by your employer or the law to keep your present salary, status, or job. H and r block 2012 tax return The required education must serve a bona fide business purpose of your employer. H and r block 2012 tax return The education maintains or improves skills needed in your present work. H and r block 2012 tax return However, even if the education meets one or both of the above tests, it is not qualifying work-related education if it: Is needed to meet the minimum educational requirements of your present trade or business, or Is part of a program of study that will qualify you for a new trade or business. H and r block 2012 tax return You can deduct the costs of qualifying work-related education as a business expense even if the education could lead to a degree. H and r block 2012 tax return Use Figure 12-1, Does Your Work-Related Education Qualify as a quick check to see if your education qualifies. H and r block 2012 tax return Education Required by Employer or by Law Once you have met the minimum educational requirements for your job, your employer or the law may require you to get more education. H and r block 2012 tax return This additional education is qualifying work-related education if all three of the following requirements are met. H and r block 2012 tax return It is required for you to keep your present salary, status, or job, The requirement serves a bona fide business purpose of your employer, and The education is not part of a program that will qualify you for a new trade or business. H and r block 2012 tax return When you get more education than your employer or the law requires, the additional education can be qualifying work-related education only if it maintains or improves skills required in your present work. H and r block 2012 tax return See Education To Maintain or Improve Skills , later. H and r block 2012 tax return Example. H and r block 2012 tax return You are a teacher who has satisfied the minimum requirements for teaching. H and r block 2012 tax return Your employer requires you to take an additional college course each year to keep your teaching job. H and r block 2012 tax return If the courses will not qualify you for a new trade or business, they are qualifying work-related education even if you eventually receive a master's degree and an increase in salary because of this extra education. H and r block 2012 tax return This image is too large to be displayed in the current screen. H and r block 2012 tax return Please click the link to view the image. H and r block 2012 tax return Figure 12-1 Education To Maintain or Improve Skills If your education is not required by your employer or the law, it can be qualifying work-related education only if it maintains or improves skills needed in your present work. H and r block 2012 tax return This could include refresher courses, courses on current developments, and academic or vocational courses. H and r block 2012 tax return Example. H and r block 2012 tax return You repair televisions, radios, and stereo systems for XYZ Store. H and r block 2012 tax return To keep up with the latest changes, you take special courses in radio and stereo service. H and r block 2012 tax return These courses maintain and improve skills required in your work. H and r block 2012 tax return Maintaining skills vs. H and r block 2012 tax return qualifying for new job. H and r block 2012 tax return   Education to maintain or improve skills needed in your present work is not qualifying education if it will also qualify you for a new trade or business. H and r block 2012 tax return Education during temporary absence. H and r block 2012 tax return   If you stop working for a year or less in order to get education to maintain or improve skills needed in your present work and then return to the same general type of work, your absence is considered temporary. H and r block 2012 tax return Education that you get during a temporary absence is qualifying work-related education if it maintains or improves skills needed in your present work. H and r block 2012 tax return Example. H and r block 2012 tax return You quit your biology research job to become a full-time biology graduate student for 1 year. H and r block 2012 tax return If you return to work in biology research after completing the courses, the education is related to your present work even if you do not go back to work with the same employer. H and r block 2012 tax return Education during indefinite absence. H and r block 2012 tax return   If you stop work for more than a year, your absence from your job is considered indefinite. H and r block 2012 tax return Education during an indefinite absence, even if it maintains or improves skills needed in the work from which you are absent, is considered to qualify you for a new trade or business. H and r block 2012 tax return Therefore, it is not qualifying work-related education. H and r block 2012 tax return Education To Meet Minimum Requirements Education you need to meet the minimum educational requirements for your present trade or business is not qualifying work-related education. H and r block 2012 tax return The minimum educational requirements are determined by: Laws and regulations, Standards of your profession, trade, or business, and Your employer. H and r block 2012 tax return Once you have met the minimum educational requirements that were in effect when you were hired, you do not have to meet any new minimum educational requirements. H and r block 2012 tax return This means that if the minimum requirements change after you were hired, any education you need to meet the new requirements can be qualifying education. H and r block 2012 tax return You have not necessarily met the minimum educational requirements of your trade or business simply because you are already doing the work. H and r block 2012 tax return Example 1. H and r block 2012 tax return You are a full-time engineering student. H and r block 2012 tax return Although you have not received your degree or certification, you work part time as an engineer for a firm that will employ you as a full-time engineer after you finish college. H and r block 2012 tax return Although your college engineering courses improve your skills in your present job, they are also needed to meet the minimum job requirements for a full-time engineer. H and r block 2012 tax return The education is not qualifying work-related education. H and r block 2012 tax return Example 2. H and r block 2012 tax return You are an accountant and you have met the minimum educational requirements of your employer. H and r block 2012 tax return Your employer later changes the minimum educational requirements and requires you to take college courses to keep your job. H and r block 2012 tax return These additional courses can be qualifying work-related education because you have already satisfied the minimum requirements that were in effect when you were hired. H and r block 2012 tax return Requirements for Teachers States or school districts usually set the minimum educational requirements for teachers. H and r block 2012 tax return The requirement is the college degree or the minimum number of college hours usually required of a person hired for that position. H and r block 2012 tax return If there are no requirements, you will have met the minimum educational requirements when you become a faculty member. H and r block 2012 tax return The determination of whether you are a faculty member of an educational institution must be made on the basis of the particular practices of the institution. H and r block 2012 tax return You generally will be considered a faculty member when one or more of the following occurs. H and r block 2012 tax return You have tenure. H and r block 2012 tax return Your years of service count toward obtaining tenure. H and r block 2012 tax return You have a vote in faculty decisions. H and r block 2012 tax return Your school makes contributions for you to a retirement plan other than social security or a similar program. H and r block 2012 tax return Example 1. H and r block 2012 tax return The law in your state requires beginning secondary school teachers to have a bachelor's degree, including 10 professional education courses. H and r block 2012 tax return In addition, to keep the job a teacher must complete a fifth year of training within 10 years from the date of hire. H and r block 2012 tax return If the employing school certifies to the state Department of Education that qualified teachers cannot be found, the school can hire persons with only 3 years of college. H and r block 2012 tax return However, to keep their jobs, these teachers must get a bachelor's degree and the required professional education courses within 3 years. H and r block 2012 tax return Under these facts, the bachelor's degree, whether or not it includes the 10 professional education courses, is considered the minimum educational requirement for qualification as a teacher in your state. H and r block 2012 tax return If you have all the required education except the fifth year, you have met the minimum educational requirements. H and r block 2012 tax return The fifth year of training is qualifying work-related education unless it is part of a program of study that will qualify you for a new trade or business. H and r block 2012 tax return Example 2. H and r block 2012 tax return Assume the same facts as in Example 1 except that you have a bachelor's degree and only six professional education courses. H and r block 2012 tax return The additional four education courses can be qualifying work-related education. H and r block 2012 tax return Although you do not have all the required courses, you have already met the minimum educational requirements. H and r block 2012 tax return Example 3. H and r block 2012 tax return Assume the same facts as in Example 1 except that you are hired with only 3 years of college. H and r block 2012 tax return The courses you take that lead to a bachelor's degree (including those in education) are not qualifying work-related education. H and r block 2012 tax return They are needed to meet the minimum educational requirements for employment as a teacher. H and r block 2012 tax return Example 4. H and r block 2012 tax return You have a bachelor's degree and you work as a temporary instructor at a university. H and r block 2012 tax return At the same time, you take graduate courses toward an advanced degree. H and r block 2012 tax return The rules of the university state that you can become a faculty member only if you get a graduate degree. H and r block 2012 tax return Also, you can keep your job as an instructor only as long as you show satisfactory progress toward getting this degree. H and r block 2012 tax return You have not met the minimum educational requirements to qualify you as a faculty member. H and r block 2012 tax return The graduate courses are not qualifying work-related education. H and r block 2012 tax return Certification in a new state. H and r block 2012 tax return   Once you have met the minimum educational requirements for teachers for your state, you are considered to have met the minimum educational requirements in all states. H and r block 2012 tax return This is true even if you must get additional education to be certified in another state. H and r block 2012 tax return Any additional education you need is qualifying work-related education. H and r block 2012 tax return You have already met the minimum requirements for teaching. H and r block 2012 tax return Teaching in another state is not a new trade or business. H and r block 2012 tax return Example. H and r block 2012 tax return You hold a permanent teaching certificate in State A and are employed as a teacher in that state for several years. H and r block 2012 tax return You move to State B and are promptly hired as a teacher. H and r block 2012 tax return You are required, however, to complete certain prescribed courses to get a permanent teaching certificate in State B. H and r block 2012 tax return These additional courses are qualifying work-related education because the teaching position in State B involves the same general kind of work for which you were qualified in State A. H and r block 2012 tax return Education That Qualifies You for a New Trade or Business Education that is part of a program of study that will qualify you for a new trade or business is not qualifying work-related education. H and r block 2012 tax return This is true even if you do not plan to enter that trade or business. H and r block 2012 tax return If you are an employee, a change of duties that involves the same general kind of work is not a new trade or business. H and r block 2012 tax return Example 1. H and r block 2012 tax return You are an accountant. H and r block 2012 tax return Your employer requires you to get a law degree at your own expense. H and r block 2012 tax return You register at a law school for the regular curriculum that leads to a law degree. H and r block 2012 tax return Even if you do not intend to become a lawyer, the education is not qualifying because the law degree will qualify you for a new trade or business. H and r block 2012 tax return Example 2. H and r block 2012 tax return You are a general practitioner of medicine. H and r block 2012 tax return You take a 2-week course to review developments in several specialized fields of medicine. H and r block 2012 tax return The course does not qualify you for a new profession. H and r block 2012 tax return It is qualifying work- related education because it maintains or improves skills required in your present profession. H and r block 2012 tax return Example 3. H and r block 2012 tax return While working in the private practice of psychiatry, you enter a program to study and train at an accredited psychoanalytic institute. H and r block 2012 tax return The program will lead to qualifying you to practice psychoanalysis. H and r block 2012 tax return The psychoanalytic training does not qualify you for a new profession. H and r block 2012 tax return It is qualifying work-related education because it maintains or improves skills required in your present profession. H and r block 2012 tax return Bar or CPA Review Course Review courses to prepare for the bar examination or the certified public accountant (CPA) examination are not qualifying work-related education. H and r block 2012 tax return They are part of a program of study that can qualify you for a new profession. H and r block 2012 tax return Teaching and Related Duties All teaching and related duties are considered the same general kind of work. H and r block 2012 tax return A change in duties in any of the following ways is not considered a change to a new business. H and r block 2012 tax return Elementary school teacher to secondary school teacher. H and r block 2012 tax return Teacher of one subject, such as biology, to teacher of another subject, such as art. H and r block 2012 tax return Classroom teacher to guidance counselor. H and r block 2012 tax return Classroom teacher to school administrator. H and r block 2012 tax return What Expenses Can Be Deducted If your education meets the requirements described earlier under Qualifying Work-Related Education you can generally deduct your education expenses as business expenses. H and r block 2012 tax return If you are not self-employed, you can deduct business expenses only if you itemize your deductions. H and r block 2012 tax return You cannot deduct expenses related to tax-exempt and excluded income. H and r block 2012 tax return Deductible expenses. H and r block 2012 tax return   The following education expenses can be deducted. H and r block 2012 tax return Tuition, books, supplies, lab fees, and similar items. H and r block 2012 tax return Certain transportation and travel costs. H and r block 2012 tax return Other education expenses, such as costs of research and typing when writing a paper as part of an educational program. H and r block 2012 tax return Nondeductible expenses. H and r block 2012 tax return   You cannot deduct personal or capital expenses. H and r block 2012 tax return For example, you cannot deduct the dollar value of vacation time or annual leave you take to attend classes. H and r block 2012 tax return This amount is a personal expense. H and r block 2012 tax return Unclaimed reimbursement. H and r block 2012 tax return   If you do not claim reimbursement that you are entitled to receive from your employer, you cannot deduct the expenses that apply to that unclaimed reimbursement. H and r block 2012 tax return Example. H and r block 2012 tax return Your employer agrees to pay your education expenses if you file a voucher showing your expenses. H and r block 2012 tax return You do not file a voucher and you do not get reimbursed. H and r block 2012 tax return Because you did not file a voucher, you cannot deduct the expenses on your tax return. H and r block 2012 tax return Transportation Expenses If your education qualifies, you can deduct local transportation costs of going directly from work to school. H and r block 2012 tax return If you are regularly employed and go to school on a temporary basis, you can also deduct the costs of returning from school to home. H and r block 2012 tax return Temporary basis. H and r block 2012 tax return   You go to school on a temporary basis if either of the following situations applies to you. H and r block 2012 tax return Your attendance at school is realistically expected to last 1 year or less and does indeed last for 1 year or less. H and r block 2012 tax return Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. H and r block 2012 tax return Your attendance is temporary up to the date you determine it will last more than 1 year. H and r block 2012 tax return If you are in either situation (1) or (2) above, your attendance is not temporary if facts and circumstances indicate otherwise. H and r block 2012 tax return Attendance not on a temporary basis. H and r block 2012 tax return   You do not go to school on a temporary basis if either of the following situations apply to you. H and r block 2012 tax return Your attendance at school is realistically expected to last more than 1 year. H and r block 2012 tax return It does not matter how long you actually attend. H and r block 2012 tax return Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. H and r block 2012 tax return Your attendance is not temporary after the date you determine it will last more than 1 year. H and r block 2012 tax return Deductible Transportation Expenses If you are regularly employed and go directly from home to school on a temporary basis, you can deduct the round-trip costs of transportation between your home and school. H and r block 2012 tax return This is true regardless of the location of the school, the distance traveled, or whether you attend school on nonwork days. H and r block 2012 tax return Transportation expenses include the actual costs of bus, subway, cab, or other fares, as well as the costs of using your car. H and r block 2012 tax return Transportation expenses do not include amounts spent for travel, meals, or lodging while you are away from home overnight. H and r block 2012 tax return Example 1. H and r block 2012 tax return You regularly work in a nearby town, and go directly from work to home. H and r block 2012 tax return You also attend school every work night for 3 months to take a course that improves your job skills. H and r block 2012 tax return Since you are attending school on a temporary basis, you can deduct your daily round-trip transportation expenses in going between home and school. H and r block 2012 tax return This is true regardless of the distance traveled. H and r block 2012 tax return Example 2. H and r block 2012 tax return Assume the same facts as in Example 1 except that on certain nights you go directly from work to school and then home. H and r block 2012 tax return You can deduct your transportation expenses from your regular work site to school and then home. H and r block 2012 tax return Example 3. H and r block 2012 tax return Assume the same facts as in Example 1 except that you attend the school for 9 months on Saturdays, nonwork days. H and r block 2012 tax return Since you are attending school on a temporary basis, you can deduct your round-trip transportation expenses in going between home and school. H and r block 2012 tax return Example 4. H and r block 2012 tax return Assume the same facts as in Example 1 except that you attend classes twice a week for 15 months. H and r block 2012 tax return Since your attendance in school is not considered temporary, you cannot deduct your transportation expenses in going between home and school. H and r block 2012 tax return If you go directly from work to school, you can deduct the one-way transportation expenses of going from work to school. H and r block 2012 tax return If you go from work to home to school and return home, your transportation expenses cannot be more than if you had gone directly from work to school. H and r block 2012 tax return Using your car. H and r block 2012 tax return    If you use your car (whether you own or lease it) for transportation to school, you can deduct your actual expenses or use the standard mileage rate to figure the amount you can deduct. H and r block 2012 tax return The standard mileage rate for miles driven from January 1, 2013 through December 31, 2013, is 56. H and r block 2012 tax return 5 cents per mile. H and r block 2012 tax return Whichever method you use, you can also deduct parking fees and tolls. H and r block 2012 tax return See Publication 463, chapter 4, for information on deducting your actual expenses of using a car. H and r block 2012 tax return Travel Expenses You can deduct expenses for travel, meals (see 50% limit on meals , later), and lodging if you travel overnight mainly to obtain qualifying work-related education. H and r block 2012 tax return Travel expenses for qualifying work-related education are treated the same as travel expenses for other employee business purposes. H and r block 2012 tax return For more information, see chapter 1 of Publication 463. H and r block 2012 tax return You cannot deduct expenses for personal activities such as sightseeing, visiting, or entertaining. H and r block 2012 tax return Mainly personal travel. H and r block 2012 tax return   If your travel away from home is mainly personal, you cannot deduct all of your expenses for travel, meals, and lodging. H and r block 2012 tax return You can deduct only your expenses for lodging and 50% of your expenses for meals during the time you attend the qualified educational activities. H and r block 2012 tax return   Whether a trip's purpose is mainly personal or educational depends upon the facts and circumstances. H and r block 2012 tax return An important factor is the comparison of time spent on personal activities with time spent on educational activities. H and r block 2012 tax return If you spend more time on personal activities, the trip is considered mainly educational only if you can show a substantial nonpersonal reason for traveling to a particular location. H and r block 2012 tax return Example 1. H and r block 2012 tax return John works in Newark, New Jersey. H and r block 2012 tax return He traveled to Chicago to take a deductible 1-week course at the request of his employer. H and r block 2012 tax return His main reason for going to Chicago was to take the course. H and r block 2012 tax return While there, he took a sightseeing trip, entertained some friends, and took a side trip to Pleasantville for a day. H and r block 2012 tax return Since the trip was mainly for business, John can deduct his round-trip airfare to Chicago. H and r block 2012 tax return He cannot deduct his transportation expenses of going to Pleasantville. H and r block 2012 tax return He can deduct only the meals (subject to the 50% limit) and lodging connected with his educational activities. H and r block 2012 tax return Example 2. H and r block 2012 tax return Sue works in Boston. H and r block 2012 tax return She went to a university in Michigan to take a course for work. H and r block 2012 tax return The course is qualifying work-related education. H and r block 2012 tax return She took one course, which is one-fourth of a full course load of study. H and r block 2012 tax return She spent the rest of the time on personal activities. H and r block 2012 tax return Her reasons for taking the course in Michigan were all personal. H and r block 2012 tax return Sue's trip is mainly personal because three-fourths of her time is considered personal time. H and r block 2012 tax return She cannot deduct the cost of her round-trip train ticket to Michigan. H and r block 2012 tax return She can deduct one-fourth of the meals (subject to the 50% limit) and lodging costs for the time she attended the university. H and r block 2012 tax return Example 3. H and r block 2012 tax return Dave works in Nashville and recently traveled to California to take a 2-week seminar. H and r block 2012 tax return The seminar is qualifying work-related education. H and r block 2012 tax return While there, he spent an extra 8 weeks on personal activities. H and r block 2012 tax return The facts, including the extra 8-week stay, show that his main purpose was to take a vacation. H and r block 2012 tax return Dave cannot deduct his round-trip airfare or his meals and lodging for the 8 weeks. H and r block 2012 tax return He can deduct only his expenses for meals (subject to the 50% limit) and lodging for the 2 weeks he attended the seminar. H and r block 2012 tax return Cruises and conventions. H and r block 2012 tax return   Certain cruises and conventions offer seminars or courses as part of their itinerary. H and r block 2012 tax return Even if the seminars or courses are work related, your deduction for travel may be limited. H and r block 2012 tax return This applies to: Travel by ocean liner, cruise ship, or other form of luxury water transportation, and Conventions outside the North American area. H and r block 2012 tax return   For a discussion of the limits on travel expense deductions that apply to cruises and conventions, see Luxury Water Travel and Conventions in chapter 1 of Publication 463. H and r block 2012 tax return 50% limit on meals. H and r block 2012 tax return   You can deduct only 50% of the cost of your meals while traveling away from home to obtain qualifying work-related education. H and r block 2012 tax return If you were reimbursed for the meals, see How To Treat Reimbursements , later. H and r block 2012 tax return   Employees must use Form 2106 or Form 2106-EZ to apply the 50% limit. H and r block 2012 tax return Travel as Education You cannot deduct the cost of travel as a form of education even if it is directly related to your duties in your work or business. H and r block 2012 tax return Example. H and r block 2012 tax return You are a French language teacher. H and r block 2012 tax return While on sabbatical leave granted for travel, you traveled through France to improve your knowledge of the French language. H and r block 2012 tax return You chose your itinerary and most of your activities to improve your French language skills. H and r block 2012 tax return You cannot deduct your travel expenses as education expenses. H and r block 2012 tax return This is true even if you spent most of your time learning French by visiting French schools and families, attending movies or plays, and engaging in similar activities. H and r block 2012 tax return No Double Benefit Allowed You cannot do either of the following. H and r block 2012 tax return Deduct work-related education expenses as business expenses if you benefit from these expenses under any other provision of the law, for example, as a tuition and fees deduction. H and r block 2012 tax return Deduct work-related education expenses paid with tax-free scholarship, grant, or employer-provided educational assistance. H and r block 2012 tax return See Adjustments to Qualifying Work-Related Education Expenses, next. H and r block 2012 tax return Adjustments to Qualifying Work-Related Education Expenses If you pay qualifying work-related education expenses with certain tax-free funds, you cannot claim a deduction for those amounts. H and r block 2012 tax return You must reduce the qualifying expenses by the amount of such expenses allocable to the tax-free educational assistance. H and r block 2012 tax return Tax-free educational assistance. H and r block 2012 tax return   This includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions). H and r block 2012 tax return Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. H and r block 2012 tax return Amounts that do not reduce qualifying work-related education expenses. H and r block 2012 tax return   Do not reduce the qualifying work-related education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. H and r block 2012 tax return Also, do not reduce the qualifying work-related education expenses by any scholarship or fellowship reported as income on the student's return or any scholarship which, by its terms, cannot be applied to qualifying work-related education expenses. H and r block 2012 tax return How To Treat Reimbursements How you treat reimbursements depends on the arrangement you have with your employer. H and r block 2012 tax return There are two basic types of reimbursement arrangements—accountable plans and nonaccountable plans. H and r block 2012 tax return You can tell the type of plan you are reimbursed under by the way the reimbursement is reported on your Form W-2. H and r block 2012 tax return Note. H and r block 2012 tax return The following rules about reimbursement arrangements also apply to expense allowances received from your employer. H and r block 2012 tax return Accountable Plans To be an accountable plan, your employer's reimbursement arrangement must require you to meet all three of the following rules. H and r block 2012 tax return Your expenses must have a business connection. H and r block 2012 tax return This means your expenses must be deductible under the rules for qualifying work-related education explained earlier. H and r block 2012 tax return You must adequately account to your employer for your expenses within a reasonable period of time. H and r block 2012 tax return You must return any reimbursement or allowance in excess of the expenses accounted for within a reasonable period of time. H and r block 2012 tax return If you are reimbursed under an accountable plan, your employer should not include any reimbursement in your income in box 1 of your Form W-2. H and r block 2012 tax return If your employer included reimbursements in box 1 of your Form W-2 and you meet all three rules for accountable plans, ask your employer for a corrected Form W-2. H and r block 2012 tax return Accountable plan rules not met. H and r block 2012 tax return   Even though you are reimbursed under an accountable plan, some of your expenses may not meet all three rules for accountable plans. H and r block 2012 tax return Those expenses that fail to meet the three rules are treated as having been reimbursed under a Nonaccountable Plan (discussed later). H and r block 2012 tax return Expenses equal reimbursement. H and r block 2012 tax return   Under an accountable plan, if your expenses equal your reimbursement, you do not complete Form 2106 or 2106-EZ. H and r block 2012 tax return Because your expenses and reimbursements are equal, you do not have a deduction. H and r block 2012 tax return Excess expenses. H and r block 2012 tax return   If your expenses are more than your reimbursement, you can deduct your excess expenses. H and r block 2012 tax return This is discussed later, under Deducting Business Expenses . H and r block 2012 tax return Allocating your reimbursements for meals. H and r block 2012 tax return   Because your excess meal expenses are subject to the 50% limit, you must figure them separately from your other expenses. H and r block 2012 tax return If your employer paid you a single amount to cover both meals and other expenses, you must allocate the reimbursement so that you can figure your excess meal expenses separately. H and r block 2012 tax return Make the allocation as follows. H and r block 2012 tax return Divide your meal expenses by your total expenses. H and r block 2012 tax return Multiply your total reimbursement by the result from (1). H and r block 2012 tax return This is the allocated reimbursement for your meal expenses. H and r block 2012 tax return Subtract the amount figured in (2) from your total reimbursement. H and r block 2012 tax return The difference is the allocated reimbursement for your other expenses of qualifying work-related education. H and r block 2012 tax return Example. H and r block 2012 tax return Your employer paid you an expense allowance of $2,000 under an accountable plan. H and r block 2012 tax return The allowance was to cover all of your expenses of traveling away from home to take a 2-week training course for work. H and r block 2012 tax return There was no indication of how much of the reimbursement was for each type of expense. H and r block 2012 tax return Your actual expenses equal $2,500 ($425 for meals + $700 lodging + $150 transportation expenses + $1,225 for books and tuition). H and r block 2012 tax return Using the steps listed above, allocate the reimbursement between the $425 meal expenses and the $2,075 other expenses. H and r block 2012 tax return   1. H and r block 2012 tax return $425 meal expenses  $2,500 total expenses = . H and r block 2012 tax return 17   2. H and r block 2012 tax return $2,000 (reimbursement)×. H and r block 2012 tax return 17     =$340 (allocated reimbursement for meal expenses)   3. H and r block 2012 tax return $2,000 (reimbursement)−$340 (meals)     = $1,660 (allocated reimbursement for other qualifying work-related education expenses) Your excess meal expenses are $85 ($425 − $340) and your excess other expenses are $415 ($2,075 − $1,660). H and r block 2012 tax return After you apply the 50% limit to your meals, you have a deduction for work-related education expenses of $458 (($85 × 50%) + $415). H and r block 2012 tax return Nonaccountable Plans 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 and report the total in box 1 of your Form W-2. H and r block 2012 tax return You can deduct your expenses regardless of whether they are more than, less than, or equal to your reimbursement. H and r block 2012 tax return This is discussed later under Deducting Business Expenses . H and r block 2012 tax return An illustrated example of a nonaccountable plan, using Form 2106-EZ, is shown at the end of this chapter. H and r block 2012 tax return Reimbursements for nondeductible expenses. H and r block 2012 tax return   Reimbursements you received for nondeductible expenses are treated as paid under a nonaccountable plan. H and r block 2012 tax return You must include them in your income. H and r block 2012 tax return For example, you must include in your income reimbursements your employer gave you for expenses of education that: You need to meet the minimum educational requirements for your job, or Is part of a program of study that can qualify you for a new trade or business. H and r block 2012 tax return   For more information on accountable and nonaccountable plans, see chapter 6 of Publication 463. H and r block 2012 tax return Deducting Business Expenses Self-employed persons and employees report their business expenses differently. H and r block 2012 tax return The following information explains what forms you must use to deduct the cost of your qualifying work-related education as a business expense. H and r block 2012 tax return Self-Employed Persons If you are self-employed, you must report the cost of your qualifying work-related education on the appropriate form used to report your business income and expenses (generally Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040)). H and r block 2012 tax return If your education expenses include expenses for a car or truck, travel, or meals, report those expenses the same way you report other business expenses for those items. H and r block 2012 tax return See the instructions for the form you file for information on how to complete it. H and r block 2012 tax return Employees If you are an employee, you can deduct the cost of qualifying work-related education only if you: Did not receive (and were not entitled to receive) any reimbursement from your employer, Were reimbursed under a nonaccountable plan (amount is included in box 1 of Form W-2), or Received reimbursement under an accountable plan, but the amount received was less than your expenses for which you claimed reimbursement. H and r block 2012 tax return If either (1) or (2) applies, you can deduct the total qualifying cost. H and r block 2012 tax return If (3) applies, you can deduct only the qualifying costs that were more than your reimbursement. H and r block 2012 tax return In order to deduct the cost of your qualifying work-related education as a business expense, include the amount with your deduction for any other employee business expenses on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7. H and r block 2012 tax return (Special rules for expenses of certain performing artists and fee-basis officials and for impairment-related work expenses are explained later. H and r block 2012 tax return ) This deduction (except for impairment-related work expenses of disabled individuals) is subject to the 2%-of-adjusted-gross-income limit that applies to most miscellaneous itemized deductions. H and r block 2012 tax return Form 2106 or 2106-EZ. H and r block 2012 tax return   To figure your deduction for employee business expenses, including qualifying work-related education, you generally must complete Form 2106 or 2106-EZ. H and r block 2012 tax return Form not required. H and r block 2012 tax return   Do not complete either Form 2106 or 2106-EZ if: All reimbursements, if any, are included in box 1 of your Form W-2, and You are not claiming travel, transportation, meal, or entertainment expenses. H and r block 2012 tax return   If you meet both of these requirements, enter the expenses directly on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7. H and r block 2012 tax return (Special rules for expenses of certain Performing Artists and Fee-Basis Officials and for Impairment-Related Work Expenses are explained later. H and r block 2012 tax return ) Using Form 2106-EZ. H and r block 2012 tax return   This form is shorter and easier to use than Form 2106. H and r block 2012 tax return Generally, you can use this form if: All reimbursements, if any, are included in box 1 of your Form W-2, and You are using the standard mileage rate if you are claiming vehicle expenses. H and r block 2012 tax return   If you do not meet both of these requirements, use Form 2106. H and r block 2012 tax return Performing Artists and Fee-Basis Officials If you are a qualified performing artist, or a state (or local) government official who is paid in whole or in part on a fee basis, you can deduct the cost of your qualifying work-related education as an adjustment to gross income rather than as an itemized deduction. H and r block 2012 tax return Include the cost of your qualifying work-related education with any other employee business expenses on Form 1040, line 24, or Form 1040NR, line 35. H and r block 2012 tax return You do not have to itemize your deductions on Schedule A (Form 1040 or 1040NR), and, therefore, the deduction is not subject to the 2%-of-adjusted-gross-income limit. H and r block 2012 tax return You must complete Form 2106 or 2106-EZ to figure your deduction even if you meet the requirements described earlier under Form not required . H and r block 2012 tax return For more information on qualified performing artists, see chapter 6 of Publication 463. H and r block 2012 tax return Impairment-Related Work Expenses If you are disabled and have impairment-related work expenses that are necessary for you to be able to get qualifying work-related education, you can deduct these expenses on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 14. H and r block 2012 tax return They are not subject to the 2%-of-adjusted-gross-income limit. H and r block 2012 tax return To deduct these expenses, you must complete Form 2106 or 2106-EZ even if you meet the requirements described earlier under Form not required . H and r block 2012 tax return For more information on impairment-related work expenses, see chapter 6 of Publication 463. H and r block 2012 tax return Recordkeeping You must keep records as proof of any deduction claimed on your tax return. H and r block 2012 tax return Generally, you should keep your records for 3 years from the date of filing the tax return and claiming the deduction. H and r block 2012 tax return If you are an employee who is reimbursed for expenses and you give your records and documentation to your employer, you do not have to keep duplicate copies of this information. H and r block 2012 tax return However, you should keep your records for a 3-year period if: You claim deductions for expenses that are more than your reimbursement, Your employer does not use adequate accounting procedures to verify expense accounts, You are related to your employer, or Your expenses are reimbursed under a nonaccountable plan. H and r block 2012 tax return Examples of records to keep. H and r block 2012 tax return   If any of the above cases apply to you, you must be able to prove that your expenses are deductible. H and r block 2012 tax return You should keep adequate records or have sufficient evidence that will support your expenses. H and r block 2012 tax return Estimates or approximations do not qualify as proof of an expense. H and r block 2012 tax return Some examples of what can be used to help prove your expenses are: Documents, such as transcripts, course descriptions, catalogs, etc. H and r block 2012 tax return , showing periods of enrollment in educational institutions, principal subjects studied, and descriptions of educational activity. H and r block 2012 tax return Canceled checks and receipts to verify amounts you spent for: Tuition and books, Meals and lodging while away from home overnight for educational purposes, Travel and transportation, and Other education expenses. H and r block 2012 tax return Statements from your employer explaining whether the education was necessary for you to keep your job, salary, or status; how the education helped maintain or improve skills needed in your job; how much reimbursement you received; and, if you are a teacher, the type of certificate and subjects taught. H and r block 2012 tax return Complete information about any scholarship or fellowship grants, including amounts you received during the year. H and r block 2012 tax return Illustrated Example Victor Jones teaches math at a private high school in North Carolina. H and r block 2012 tax return He was selected to attend a 3-week math seminar at a university in California. H and r block 2012 tax return The seminar will improve his skills in his current job and is qualifying work-related education. H and r block 2012 tax return He was reimbursed for his expenses under his employer's nonaccountable plan, so his reimbursement of $2,100 is included in the wages shown in box 1 of his Form W-2. H and r block 2012 tax return Victor will file Form 1040. H and r block 2012 tax return His actual expenses for the seminar are as follows:   Lodging   $1,050     Meals   526     Airfare   550     Taxi fares   50     Tuition and books   400     Total Expenses   $2,576   Victor files Form 2106-EZ with his tax return. H and r block 2012 tax return He shows his expenses for the seminar in Part I of the form. H and r block 2012 tax return He enters $1,650 ($1,050 + $550 + $50) on line 3 to account for his lodging, airfare, and taxi fares. H and r block 2012 tax return He enters $400 on line 4 for his tuition and books. H and r block 2012 tax return On the line provided for total meals and entertainment expenses, Victor enters $526 for meal expenses. H and r block 2012 tax return He multiplies that amount by 50% and enters the result, $263, on line 5. H and r block 2012 tax return On line 6, Victor totals the amounts from lines 3 through 5. H and r block 2012 tax return He carries the total, $2,313, to Schedule A (Form 1040), line 21. H and r block 2012 tax return Since he does not claim any vehicle expenses, Victor leaves Part II blank. H and r block 2012 tax return His filled-in form is shown on the next page. H and r block 2012 tax return This image is too large to be displayed in the current screen. H and r block 2012 tax return Please click the link to view the image. H and r block 2012 tax return Form 2106-EZ for V. H and r block 2012 tax return Jones Prev  Up  Next   Home   More Online Publications