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Massachusetts Income Tax Forms 2013

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Massachusetts Income Tax Forms 2013

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The Massachusetts Income Tax Forms 2013

Massachusetts income tax forms 2013 2. Massachusetts income tax forms 2013   Employees' Pay Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Tests for Deducting PayTest 1—Reasonableness Test 2—For Services Performed Kinds of PayAwards Bonuses Education Expenses Fringe Benefits Loans or Advances Property Reimbursements for Business Expenses Sick and Vacation Pay Introduction You can generally deduct the amount you pay your employees for the services they perform. Massachusetts income tax forms 2013 The pay may be in cash, property, or services. Massachusetts income tax forms 2013 It may include wages, salaries, bonuses, commissions, or other non-cash compensation such as vacation allowances and fringe benefits. Massachusetts income tax forms 2013 For information about deducting employment taxes, see chapter 5. Massachusetts income tax forms 2013 You can claim employment credits, such as the following, if you hire individuals who meet certain requirements. Massachusetts income tax forms 2013 Empowerment zone employment credit (Form 8844). Massachusetts income tax forms 2013 Indian employment credit (Form 8845). Massachusetts income tax forms 2013 Work opportunity credit (Form 5884). Massachusetts income tax forms 2013 Credit for employer differential wage payments (Form 8932). Massachusetts income tax forms 2013 Reduce your deduction for employee wages by the amount of employment credits you claim. Massachusetts income tax forms 2013 For more information about these credits, see the form on which the credit is claimed. Massachusetts income tax forms 2013 Topics - This chapter discusses: Tests for deducting pay Kinds of pay Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 15-A Employer's Supplemental Tax Guide 15-B Employer's Tax Guide to Fringe Benefits See chapter 12 for information about getting publications and forms. Massachusetts income tax forms 2013 Tests for Deducting Pay To be deductible, your employees' pay must be an ordinary and necessary business expense and you must pay or incur it. Massachusetts income tax forms 2013 These and other requirements that apply to all business expenses are explained in chapter 1. Massachusetts income tax forms 2013 In addition, the pay must meet both of the following tests. Massachusetts income tax forms 2013 Test 1. Massachusetts income tax forms 2013 It must be reasonable. Massachusetts income tax forms 2013 Test 2. Massachusetts income tax forms 2013 It must be for services performed. Massachusetts income tax forms 2013 The form or method of figuring the pay does not affect its deductibility. Massachusetts income tax forms 2013 For example, bonuses and commissions based on sales or earnings, and paid under an agreement made before the services were performed, are both deductible. Massachusetts income tax forms 2013 Test 1—Reasonableness You must be able to prove that the pay is reasonable. Massachusetts income tax forms 2013 Whether the pay is reasonable depends on the circumstances that existed when you contracted for the services, not those that exist when reasonableness is questioned. Massachusetts income tax forms 2013 If the pay is excessive, the excess pay is disallowed as a deduction. Massachusetts income tax forms 2013 Factors to consider. Massachusetts income tax forms 2013   Determine the reasonableness of pay by the facts and circumstances. Massachusetts income tax forms 2013 Generally, reasonable pay is the amount that a similar business would pay for the same or similar services. Massachusetts income tax forms 2013   To determine if pay is reasonable, also consider the following items and any other pertinent facts. Massachusetts income tax forms 2013 The duties performed by the employee. Massachusetts income tax forms 2013 The volume of business handled. Massachusetts income tax forms 2013 The character and amount of responsibility. Massachusetts income tax forms 2013 The complexities of your business. Massachusetts income tax forms 2013 The amount of time required. Massachusetts income tax forms 2013 The cost of living in the locality. Massachusetts income tax forms 2013 The ability and achievements of the individual employee performing the service. Massachusetts income tax forms 2013 The pay compared with the gross and net income of the business, as well as with distributions to shareholders if the business is a corporation. Massachusetts income tax forms 2013 Your policy regarding pay for all your employees. Massachusetts income tax forms 2013 The history of pay for each employee. Massachusetts income tax forms 2013 Test 2—For Services Performed You must be able to prove the payment was made for services actually performed. Massachusetts income tax forms 2013 Employee-shareholder salaries. Massachusetts income tax forms 2013   If a corporation pays an employee who is also a shareholder a salary that is unreasonably high considering the services actually performed, the excessive part of the salary may be treated as a constructive dividend to the employee-shareholder. Massachusetts income tax forms 2013 The excessive part of the salary would not be allowed as a salary deduction by the corporation. Massachusetts income tax forms 2013 For more information on corporate distributions to shareholders, see Publication 542, Corporations. Massachusetts income tax forms 2013 Kinds of Pay Some of the ways you may provide pay to your employees in addition to regular wages or salaries are discussed next. Massachusetts income tax forms 2013 For specialized and detailed information on employees' pay and the employment tax treatment of employees' pay, see Publications 15, 15-A, and 15-B. Massachusetts income tax forms 2013 Awards You can generally deduct amounts you pay to your employees as awards, whether paid in cash or property. Massachusetts income tax forms 2013 If you give property to an employee as an employee achievement award, your deduction may be limited. Massachusetts income tax forms 2013 Achievement awards. Massachusetts income tax forms 2013   An achievement award is an item of tangible personal property that meets all the following requirements. Massachusetts income tax forms 2013 It is given to an employee for length of service or safety achievement. Massachusetts income tax forms 2013 It is awarded as part of a meaningful presentation. Massachusetts income tax forms 2013 It is awarded under conditions and circumstances that do not create a significant likelihood of disguised pay. Massachusetts income tax forms 2013 Length-of-service award. Massachusetts income tax forms 2013    An award will qualify as a length-of-service award only if either of the following applies. Massachusetts income tax forms 2013 The employee receives the award after his or her first 5 years of employment. Massachusetts income tax forms 2013 The employee did not receive another length-of-service award (other than one of very small value) during the same year or in any of the prior 4 years. Massachusetts income tax forms 2013 Safety achievement award. Massachusetts income tax forms 2013    An award for safety achievement will qualify as an achievement award unless one of the following applies. Massachusetts income tax forms 2013 It is given to a manager, administrator, clerical employee, or other professional employee. Massachusetts income tax forms 2013 During the tax year, more than 10% of your employees, excluding those listed in (1), have already received a safety achievement award (other than one of very small value). Massachusetts income tax forms 2013 Deduction limit. Massachusetts income tax forms 2013   Your deduction for the cost of employee achievement awards given to any one employee during the tax year is limited to the following. Massachusetts income tax forms 2013 $400 for awards that are not qualified plan awards. Massachusetts income tax forms 2013 $1,600 for all awards, whether or not qualified plan awards. Massachusetts income tax forms 2013   A qualified plan award is an achievement award given as part of an established written plan or program that does not favor highly compensated employees as to eligibility or benefits. Massachusetts income tax forms 2013   A highly compensated employee is an employee who meets either of the following tests. Massachusetts income tax forms 2013 The employee was a 5% owner at any time during the year or the preceding year. Massachusetts income tax forms 2013 The employee received more than $115,000 in pay for the preceding year. Massachusetts income tax forms 2013 You can choose to ignore test (2) if the employee was not also in the top 20% of employees ranked by pay for the preceding year. Massachusetts income tax forms 2013   An award is not a qualified plan award if the average cost of all the employee achievement awards given during the tax year (that would be qualified plan awards except for this limit) is more than $400. Massachusetts income tax forms 2013 To figure this average cost, ignore awards of nominal value. Massachusetts income tax forms 2013 Deduct achievement awards as a nonwage business expense on your return or business schedule. Massachusetts income tax forms 2013 You may not owe employment taxes on the value of some achievement awards you provide to an employee. Massachusetts income tax forms 2013 See Publication 15-B. Massachusetts income tax forms 2013 Bonuses You can generally deduct a bonus paid to an employee if you intended the bonus as additional pay for services, not as a gift, and the services were performed. Massachusetts income tax forms 2013 However, the total bonuses, salaries, and other pay must be reasonable for the services performed. Massachusetts income tax forms 2013 If the bonus is paid in property, see Property , later. Massachusetts income tax forms 2013 Gifts of nominal value. Massachusetts income tax forms 2013    If, to promote employee goodwill, you distribute food or merchandise of nominal value to your employees at holidays, you can deduct the cost of these items as a nonwage business expense. Massachusetts income tax forms 2013 Your deduction for de minimis gifts of food or drink are not subject to the 50% deduction limit that generally applies to meals. Massachusetts income tax forms 2013 For more information on this deduction limit, see Meals and lodging , later. Massachusetts income tax forms 2013 Education Expenses If you pay or reimburse education expenses for an employee, you can deduct the payments if they are part of a qualified educational assistance program. Massachusetts income tax forms 2013 Deduct them on the “Employee benefit programs” or other appropriate line of your tax return. Massachusetts income tax forms 2013 For information on educational assistance programs, see Educational Assistance in section 2 of Publication 15-B. Massachusetts income tax forms 2013 Fringe Benefits A fringe benefit is a form of pay for the performance of services. Massachusetts income tax forms 2013 You can generally deduct the cost of fringe benefits. Massachusetts income tax forms 2013 You may be able to exclude all or part of the value of some fringe benefits from your employees' pay. Massachusetts income tax forms 2013 You also may not owe employment taxes on the value of the fringe benefits. Massachusetts income tax forms 2013 See Table 2-1, Special Rules for Various Types of Fringe Benefits, in Publication 15-B for details. Massachusetts income tax forms 2013 Your deduction for the cost of fringe benefits for activities generally considered entertainment, amusement, or recreation, or for a facility used in connection with such an activity (for example, a company aircraft) for certain officers, directors, and more-than-10% shareholders is limited. Massachusetts income tax forms 2013 Certain fringe benefits are discussed next. Massachusetts income tax forms 2013 See Publication 15-B for more details on these and other fringe benefits. Massachusetts income tax forms 2013 Meals and lodging. Massachusetts income tax forms 2013   You can usually deduct the cost of furnishing meals and lodging to your employees. Massachusetts income tax forms 2013 Deduct the cost in whatever category the expense falls. Massachusetts income tax forms 2013 For example, if you operate a restaurant, deduct the cost of the meals you furnish to employees as part of the cost of goods sold. Massachusetts income tax forms 2013 If you operate a nursing home, motel, or rental property, deduct the cost of furnishing lodging to an employee as expenses for utilities, linen service, salaries, depreciation, etc. Massachusetts income tax forms 2013 Deduction limit on meals. Massachusetts income tax forms 2013   You can generally deduct only 50% of the cost of furnishing meals to your employees. Massachusetts income tax forms 2013 However, you can deduct the full cost of the following meals. Massachusetts income tax forms 2013 Meals whose value you include in an employee's wages. Massachusetts income tax forms 2013 Meals that qualify as a de minimis fringe benefit as discussed in section 2 of Publication 15-B. Massachusetts income tax forms 2013 This generally includes meals you furnish to employees at your place of business if more than half of these employees are provided the meals for your convenience. Massachusetts income tax forms 2013 Meals you furnish to your employees at the work site when you operate a restaurant or catering service. Massachusetts income tax forms 2013 Meals you furnish to your employees as part of the expense of providing recreational or social activities, such as a company picnic. Massachusetts income tax forms 2013 Meals you are required by federal law to furnish to crew members of certain commercial vessels (or would be required to furnish if the vessels were operated at sea). Massachusetts income tax forms 2013 This does not include meals you furnish on vessels primarily providing luxury water transportation. Massachusetts income tax forms 2013 Meals you furnish on an oil or gas platform or drilling rig located offshore or in Alaska. Massachusetts income tax forms 2013 This includes meals you furnish at a support camp that is near and integral to an oil or gas drilling rig located in Alaska. Massachusetts income tax forms 2013 Employee benefit programs. Massachusetts income tax forms 2013   Employee benefit programs include the following. Massachusetts income tax forms 2013 Accident and health plans. Massachusetts income tax forms 2013 Adoption assistance. Massachusetts income tax forms 2013 Cafeteria plans. Massachusetts income tax forms 2013 Dependent care assistance. Massachusetts income tax forms 2013 Education assistance. Massachusetts income tax forms 2013 Life insurance coverage. Massachusetts income tax forms 2013 Welfare benefit funds. Massachusetts income tax forms 2013   You can generally deduct amounts you spend on employee benefit programs on the applicable line of your tax return. Massachusetts income tax forms 2013 For example, if you provide dependent care by operating a dependent care facility for your employees, deduct your costs in whatever categories they fall (utilities, salaries, etc. Massachusetts income tax forms 2013 ). Massachusetts income tax forms 2013 Life insurance coverage. Massachusetts income tax forms 2013   You cannot deduct the cost of life insurance coverage for you, an employee, or any person with a financial interest in your business, if you are directly or indirectly the beneficiary of the policy. Massachusetts income tax forms 2013 See Regulations section 1. Massachusetts income tax forms 2013 264-1 for more information. Massachusetts income tax forms 2013 Welfare benefit funds. Massachusetts income tax forms 2013   A welfare benefit fund is a funded plan (or a funded arrangement having the effect of a plan) that provides welfare benefits to your employees, independent contractors, or their beneficiaries. Massachusetts income tax forms 2013 Welfare benefits are any benefits other than deferred compensation or transfers of restricted property. Massachusetts income tax forms 2013   Your deduction for contributions to a welfare benefit fund is limited to the fund's qualified cost for the tax year. Massachusetts income tax forms 2013 If your contributions to the fund are more than its qualified cost, carry the excess over to the next tax year. Massachusetts income tax forms 2013   Generally, the fund's “qualified cost” is the total of the following amounts, reduced by the after-tax income of the fund. Massachusetts income tax forms 2013 The cost you would have been able to deduct using the cash method of accounting if you had paid for the benefits directly. Massachusetts income tax forms 2013 The contributions added to a reserve account that are needed to fund claims incurred but not paid as of the end of the year. Massachusetts income tax forms 2013 These claims can be for supplemental unemployment benefits, severance pay, or disability, medical, or life insurance benefits. Massachusetts income tax forms 2013   For more information, see sections 419(c) and 419A of the Internal Revenue Code and the related regulations. Massachusetts income tax forms 2013 Loans or Advances You generally can deduct as wages an advance you make to an employee for services performed if you do not expect the employee to repay the advance. Massachusetts income tax forms 2013 However, if the employee performs no services, treat the amount you advanced as a loan. Massachusetts income tax forms 2013 If the employee does not repay the loan, treat it as income to the employee. Massachusetts income tax forms 2013 Below-market interest rate loans. Massachusetts income tax forms 2013   On certain loans you make to an employee or shareholder, you are treated as having received interest income and as having paid compensation or dividends equal to that interest. Massachusetts income tax forms 2013 See Below-Market Loans in chapter 4. Massachusetts income tax forms 2013 Property If you transfer property (including your company's stock) to an employee as payment for services, you can generally deduct it as wages. Massachusetts income tax forms 2013 The amount you can deduct is the property's fair market value on the date of the transfer less any amount the employee paid for the property. Massachusetts income tax forms 2013 You can claim the deduction only for the tax year in which your employee includes the property's value in income. Massachusetts income tax forms 2013 Your employee is deemed to have included the value in income if you report it on Form W-2, Wage and Tax Statement, in a timely manner. Massachusetts income tax forms 2013 You treat the deductible amount as received in exchange for the property, and you must recognize any gain or loss realized on the transfer, unless it is the company's stock transferred as payment for services. Massachusetts income tax forms 2013 Your gain or loss is the difference between the fair market value of the property and its adjusted basis on the date of transfer. Massachusetts income tax forms 2013 These rules also apply to property transferred to an independent contractor for services, generally reported on Form 1099-MISC, Miscellaneous Income. Massachusetts income tax forms 2013 Restricted property. Massachusetts income tax forms 2013   If the property you transfer for services is subject to restrictions that affect its value, you generally cannot deduct it and do not report gain or loss until it is substantially vested in the recipient. Massachusetts income tax forms 2013 However, if the recipient pays for the property, you must report any gain at the time of the transfer up to the amount paid. Massachusetts income tax forms 2013    “Substantially vested” means the property is not subject to a substantial risk of forfeiture. Massachusetts income tax forms 2013 This means that the recipient is not likely to have to give up his or her rights in the property in the future. Massachusetts income tax forms 2013 Reimbursements for Business Expenses You can generally deduct the amount you pay or reimburse employees for business expenses incurred for your business. Massachusetts income tax forms 2013 However, your deduction may be limited. Massachusetts income tax forms 2013 If you make the payment under an accountable plan, deduct it in the category of the expense paid. Massachusetts income tax forms 2013 For example, if you pay an employee for travel expenses incurred on your behalf, deduct this payment as a travel expense. Massachusetts income tax forms 2013 If you make the payment under a nonaccountable plan, deduct it as wages and include it in the employee's Form W-2. Massachusetts income tax forms 2013 See Reimbursement of Travel, Meals, and Entertainment in chapter 11 for more information about deducting reimbursements and an explanation of accountable and nonaccountable plans. Massachusetts income tax forms 2013 Sick and Vacation Pay Sick pay. Massachusetts income tax forms 2013   You can deduct amounts you pay to your employees for sickness and injury, including lump-sum amounts, as wages. Massachusetts income tax forms 2013 However, your deduction is limited to amounts not compensated by insurance or other means. Massachusetts income tax forms 2013 Vacation pay. Massachusetts income tax forms 2013   Vacation pay is an employee benefit. Massachusetts income tax forms 2013 It includes amounts paid for unused vacation leave. Massachusetts income tax forms 2013 You can deduct vacation pay only in the tax year in which the employee actually receives it. Massachusetts income tax forms 2013 This rule applies regardless of whether you use the cash or accrual method of accounting. Massachusetts income tax forms 2013 Prev  Up  Next   Home   More Online Publications