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Nm taxation and revenue 13. Nm taxation and revenue   Employment Taxes Table of Contents What's New for 2013 What's New for 2014 Reminders Important Dates for 2014 Introduction Topics - This chapter discusses: Useful Items - You may want to see: Farm Employment Family Employees Crew Leaders Social Security and Medicare TaxesReligious exemption. Nm taxation and revenue Wage limit. Nm taxation and revenue Federal Income Tax WithholdingNew Form W-4 for 2014. Nm taxation and revenue Required Notice to Employees About Earned Income Credit (EIC) Reporting and Paying Social Security, Medicare, and Withheld Federal Income TaxesElectronic deposit requirement. Nm taxation and revenue Federal Unemployment (FUTA) TaxReporting and Paying FUTA Tax What's New for 2013 Social security and Medicare tax for 2013. Nm taxation and revenue  The employee tax rate for social security is 6. Nm taxation and revenue 2%. Nm taxation and revenue Previously, the employee tax rate for social security was 4. Nm taxation and revenue 2%. Nm taxation and revenue The employer tax rate for social security remains unchanged at 6. Nm taxation and revenue 2%. Nm taxation and revenue The social security wage base limit is $113,700. Nm taxation and revenue The Medicare tax rate is 1. Nm taxation and revenue 45% each for the employee and employer, unchanged from 2012. Nm taxation and revenue There is no wage base limit for Medicare tax. Nm taxation and revenue Additional Medicare Tax. Nm taxation and revenue  In addition to withholding Medicare tax at 1. Nm taxation and revenue 45%, you must withhold a 0. Nm taxation and revenue 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Nm taxation and revenue You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Nm taxation and revenue Additional Medicare Tax is only imposed on the employee. Nm taxation and revenue There is no employer share of Additional Medicare Tax. Nm taxation and revenue All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 threshold. Nm taxation and revenue For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E), Employer's Tax Guide. Nm taxation and revenue For more information on Additional Medicare Tax, visit IRS. Nm taxation and revenue gov and enter “Additional Medicare Tax” in the search box. Nm taxation and revenue Leave-based donation programs to aid victims of Hurricane Sandy. Nm taxation and revenue  Under these programs, employees may donate their vacation, sick, or personal leave in exchange for employer cash payments made before January 1, 2014, to qualified tax-exempt organizations providing relief for the victims of Hurricane Sandy. Nm taxation and revenue The donated leave will not be included in the income or wages of the employee. Nm taxation and revenue The employer may deduct the cash payments as business expenses or charitable contributions. Nm taxation and revenue For more information, see Notice 2012-69, 2012-51 I. Nm taxation and revenue R. Nm taxation and revenue B. Nm taxation and revenue 712, available at www. Nm taxation and revenue irs. Nm taxation and revenue gov/irb/2012-51_IRB/ar09. Nm taxation and revenue html. Nm taxation and revenue Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans extended. Nm taxation and revenue  The work opportunity tax credit is now available for eligible unemployed veterans who begin work before January 1, 2014. Nm taxation and revenue Previously, the credit was available for unemployed veterans who began work on or after November 22, 2011, and before January 1, 2013. Nm taxation and revenue Qualified tax-exempt organizations that hire eligible unemployed veterans can claim the work opportunity tax credit against their payroll tax liability using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. Nm taxation and revenue For more information, visit IRS. Nm taxation and revenue gov and enter “work opportunity credit” in the search box. Nm taxation and revenue What's New for 2014 Social security and Medicare tax for 2014. Nm taxation and revenue  The employee and employer tax rates for social security and the maximum amount of wages subject to social security tax for 2014 will be discussed in Publication 51 (Circular A), Agricultural Employer's Tax Guide (For use in 2014). Nm taxation and revenue The Medicare tax rate for 2014 will also be discussed in Publication 51 (Circular A) (For use in 2014). Nm taxation and revenue There is no limit on the amount of wages subject to Medicare tax. Nm taxation and revenue Reminders Additional employment tax information for farmers. Nm taxation and revenue  See Publication 51 (Circular A) for more detailed guidance on employment taxes. Nm taxation and revenue For the latest information about employment tax developments impacting farmers, go to www. Nm taxation and revenue irs. Nm taxation and revenue gov/pub51. Nm taxation and revenue Correcting a previously filed Form 943. Nm taxation and revenue  If you discover an error on a previously filed Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, make the correction using Form 943-X, Adjusted Employer's Annual Federal Tax Return for Agricultural Employees or Claim for Refund. Nm taxation and revenue Form 943-X is filed separately from Form 943. Nm taxation and revenue For more information on correcting Form 943, see the Instructions for Form 943-X. Nm taxation and revenue Federal tax deposits must be made by electronic funds transfer. Nm taxation and revenue  You must use electronic funds transfer to make all federal tax deposits. Nm taxation and revenue Generally, electronic funds transfers are made using the Electronic Federal Tax Payment System (EFTPS). Nm taxation and revenue If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Nm taxation and revenue Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. Nm taxation and revenue EFTPS is a free service provided by the Department of Treasury. Nm taxation and revenue Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. Nm taxation and revenue For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). Nm taxation and revenue To get more information about EFTPS or to enroll in EFTPS, visit www. Nm taxation and revenue eftps. Nm taxation and revenue gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Nm taxation and revenue Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started. Nm taxation and revenue Important Dates for 2014 You should take the action indicated by the dates listed. Nm taxation and revenue See By February 15 and On February 16 for Form W-4, Employee's Withholding Allowance Certificate, information. Nm taxation and revenue Due dates for deposits of withheld federal income taxes, social security taxes, and Medicare taxes are not listed here. Nm taxation and revenue For these dates, see Publication 509, Tax Calendars (For use in 2014). Nm taxation and revenue Note. Nm taxation and revenue  If any date shown below for filing a return, furnishing a form, or depositing taxes falls on a Saturday, Sunday, or legal holiday, the due date is the next business day. Nm taxation and revenue A statewide legal holiday delays a filing or furnishing due date only if the IRS office where you are required to file a return or furnish a form is located in that state. Nm taxation and revenue For any due date, you will meet the “file” or “furnish” date requirement if the envelope containing the tax return or form is properly addressed, contains sufficient postage, and is postmarked by the U. Nm taxation and revenue S. Nm taxation and revenue Postal Service by the due date, or sent by an IRS-designated delivery service by the due date. Nm taxation and revenue See Private delivery services in Publication 51 (Circular A). Nm taxation and revenue Federal tax deposits can only be made by electronic funds transfer and are governed by legal holidays in the District of Columbia. Nm taxation and revenue Statewide holidays no longer apply. Nm taxation and revenue For a list of legal holidays that delay the due date of a federal tax deposit, see section 7 of Publication 51 (Circular A). Nm taxation and revenue Fiscal year taxpayers. Nm taxation and revenue  The due dates listed below apply whether you use a calendar or a fiscal year. Nm taxation and revenue By January 31. Nm taxation and revenue   File Form 943 with the IRS. Nm taxation and revenue If you deposited all Form 943 taxes when due, you have 10 additional days to file. Nm taxation and revenue Furnish each employee with a completed Form W-2, Wage and Tax Statement. Nm taxation and revenue Furnish each recipient to whom you paid $600 or more in nonemployee compensation with a completed Form 1099 (for example, Form 1099-MISC). Nm taxation and revenue File Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, with the IRS. Nm taxation and revenue If you deposited all the FUTA tax when due, you have 10 additional days to file. Nm taxation and revenue File Form 945, Annual Return of Withheld Federal Income Tax, with the IRS to report any nonpayroll income tax withheld during 2013. Nm taxation and revenue If you deposited all Form 945 taxes when due, you have 10 additional days to file. Nm taxation and revenue By February 15. Nm taxation and revenue  Ask for a new Form W-4 or Formulario W-4(SP), Certificado de Exención de Retenciones del Empleado, from each employee who claimed exemption from federal income tax withholding last year. Nm taxation and revenue On February 16. Nm taxation and revenue  Any Form W-4 claiming exemption from withholding for the previous year has now expired. Nm taxation and revenue Begin withholding for any employee who previously claimed exemption from withholding but has not given you a new Form W-4 for the current year. Nm taxation and revenue If the employee does not give you a new Form W-4, withhold taxes based on the last valid Form W-4 you have for the employee that does not claim exemption from withholding or, if one does not exist, as if he or she is single with zero withholding allowances. Nm taxation and revenue If the employee furnishes a new Form W-4 claiming exemption from withholding after February 15, you may apply the exemption to future wages, but do not refund taxes withheld while the exempt status was not in place. Nm taxation and revenue By February 28. Nm taxation and revenue   File paper Forms 1099 and 1096. Nm taxation and revenue File Copy A of all paper Forms 1099 with Form 1096, Annual Summary and Transmittal of U. Nm taxation and revenue S. Nm taxation and revenue Information Returns, with the IRS. Nm taxation and revenue For electronically filed returns, see By March 31 below. Nm taxation and revenue File paper Forms W-2 and W-3. Nm taxation and revenue File Copy A of all paper Forms W-2 with Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration (SSA). Nm taxation and revenue For electronically filed returns, see By March 31 below. Nm taxation and revenue By March 31. Nm taxation and revenue   File electronic Forms W-2 and 1099. Nm taxation and revenue File electronic Forms W-2 with the SSA and Forms 1099 with the IRS. Nm taxation and revenue For more information on reporting Form W-2 information to the SSA electronically, visit the SSA's Employer W-2 Filing Instructions & Information webpage at www. Nm taxation and revenue socialsecurity. Nm taxation and revenue gov/employer. Nm taxation and revenue For information on filing information returns electronically with the IRS, see Publication 1220, Specifications for Filing Forms 1097, 1098, 1099, 3921, 3922, 5498, 8935, and W-2G Electronically. Nm taxation and revenue By April 30, July 31, October 31, and January 31. Nm taxation and revenue   Deposit FUTA taxes. Nm taxation and revenue Deposit FUTA tax due if it is more than $500. Nm taxation and revenue Before December 1. Nm taxation and revenue  Remind employees to submit a new Form W-4 if their withholding allowances have changed or will change for the next year. Nm taxation and revenue Introduction You are generally required to withhold federal income tax from the wages of your employees. Nm taxation and revenue You may also be subject to social security and Medicare taxes under the Federal Insurance Contributions Act (FICA) and federal unemployment tax under the Federal Unemployment Tax Act (FUTA). Nm taxation and revenue You must also withhold Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Nm taxation and revenue This chapter includes information about these taxes. Nm taxation and revenue You must also pay self-employment tax on your net earnings from farming. Nm taxation and revenue See chapter 12 for information on self-employment tax. Nm taxation and revenue Topics - This chapter discusses: Farm employment, Family employees, Crew leaders, Social security and Medicare taxes, Additional Medicare Tax withholding, Federal income tax withholding, Reporting and paying social security, Medicare, and withheld federal income taxes, and FUTA tax. Nm taxation and revenue 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 51 (Circular A), Agricultural Employer's Tax Guide 926 Household Employer's Tax Guide Form (and Instructions) W-2 Wage and Tax Statement W-4 Employee's Withholding Allowance Certificate W-9 Request for Taxpayer Identification Number and Certification 940 Employer's Annual Federal Unemployment (FUTA) Tax Return 943 Employer's Annual Federal Tax Return for Agricultural Employees 943-X Adjusted Employer's Annual Federal Tax Return for Agricultural Employees or Claim for Refund See chapter 16 for information about getting publications and forms. Nm taxation and revenue Farm Employment In general, you are an employer of farmworkers if your employees do any of the following types of work. Nm taxation and revenue Raising or harvesting agricultural or horticultural products on a farm, including raising and feeding of livestock. Nm taxation and revenue Operating, managing, conserving, improving, or maintaining your farm and its tools and equipment. Nm taxation and revenue Services performed in salvaging timber, or clearing land of brush and other debris, left by a hurricane (also known as hurricane labor). Nm taxation and revenue Handling, processing, or packaging any agricultural or horticultural commodity if you produced more than half of the commodity (for a group of up to 20 unincorporated operators, all of the commodity). Nm taxation and revenue Work related to cotton ginning, turpentine, gum resin products, or the operation and maintenance of irrigation facilities. Nm taxation and revenue For more information, see Publication 51 (Circular A). Nm taxation and revenue Generally, a worker who performs services for you is your employee if you have the right to control what will be done and how it will be done. Nm taxation and revenue This is so even when you give the employee freedom of action. Nm taxation and revenue What matters is that you have the right to control the details of how the services are performed. Nm taxation and revenue You are responsible for withholding and paying employment taxes for your employees. Nm taxation and revenue You are also required to file employment tax returns. Nm taxation and revenue These requirements do not apply to amounts that you pay to independent contractors. Nm taxation and revenue See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. Nm taxation and revenue If you employ a family of workers, each worker subject to your control (not just the head of the family) is an employee. Nm taxation and revenue Special rules apply to crew leaders. Nm taxation and revenue See Crew Leaders , later. Nm taxation and revenue Employer identification number (EIN). Nm taxation and revenue   If you have employees, you must have an EIN. Nm taxation and revenue If you do not have an EIN, you may apply for one online. Nm taxation and revenue Go to IRS. Nm taxation and revenue gov and click on the Apply for an EIN Online link under Tools. Nm taxation and revenue You may also apply for an EIN by calling 1-800-829-4933 or 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). Nm taxation and revenue The hours of operation for both numbers are Monday–Friday form 7:00 a. Nm taxation and revenue m. Nm taxation and revenue –7:00 p. Nm taxation and revenue m. Nm taxation and revenue local time (Alaska and Hawaii follow Pacific time). Nm taxation and revenue You can also fax or mail Form SS-4, Application for Employer Identification Number, to the IRS. Nm taxation and revenue Employee's social security number (SSN). Nm taxation and revenue   An employee who does not have an SSN should submit Form SS-5, Application for a Social Security Card, to the Social Security Administration (SSA). Nm taxation and revenue Form SS-5 is available from any SSA office or by calling 1-800-772-1213 (operates 24 hours per day). Nm taxation and revenue It is also available from the SSA's website at www. Nm taxation and revenue socialsecurity. Nm taxation and revenue gov. Nm taxation and revenue   The employee must furnish evidence of age, identity, and U. Nm taxation and revenue S. Nm taxation and revenue citizenship or lawful immigration status permitting employment with the Form SS-5. Nm taxation and revenue An employee who is age 18 or older must appear in person with this evidence at an SSA office. Nm taxation and revenue Form I-9. Nm taxation and revenue    You must verify that each new employee is legally eligible to work in the United States. Nm taxation and revenue This includes completing the Form I-9, Employment Eligibility Verification. Nm taxation and revenue Form I-9 is available from the U. Nm taxation and revenue S. Nm taxation and revenue Citizenship and Immigration Services (USCIS) offices or by calling the Bureau of Citizenship and Immigration Services Forms Request Line at 1-800-870-3676. Nm taxation and revenue Form I-9 is also available from the USCIS website at www. Nm taxation and revenue uscis. Nm taxation and revenue gov. Nm taxation and revenue You can also contact the USCIS at 1-800-375-5283 for more information. Nm taxation and revenue New hire reporting. Nm taxation and revenue   You are required to report any new employee to a designated state new hire registry. Nm taxation and revenue Many states accept a copy of Form W-4 with employer information added. Nm taxation and revenue Visit the Office of Child Support Enforcement website at www. Nm taxation and revenue acf. Nm taxation and revenue hhs. Nm taxation and revenue gov/programs/cse/newhire for more information. Nm taxation and revenue Family Employees Generally, the wages you pay to family members who are your employees are subject to employment taxes. Nm taxation and revenue However, certain exemptions may apply to wages paid to your child, spouse, or parent. Nm taxation and revenue Exemptions for your child. Nm taxation and revenue   Payments for the services of your child under age 18 who works for you in your trade or business (including a farm) are not subject to social security and Medicare taxes. Nm taxation and revenue However, see Nonexempt services of a child or spouse , later. Nm taxation and revenue Payments for the services of your child under age 21 employed by you in other than a trade or business, such as payments for household services in your home, are also not subject to social security or Medicare taxes. Nm taxation and revenue Payments for the services of your child under age 21 employed by you, whether or not in your trade or business, are not subject to FUTA tax. Nm taxation and revenue Although not subject to social security, Medicare, or FUTA tax, the child's wages still may be subject to federal income tax withholding. Nm taxation and revenue Exemptions for your spouse. Nm taxation and revenue   Payments for the services of your spouse who works for you in your trade or business are subject to federal income tax withholding and social security and Medicare taxes, but not FUTA tax. Nm taxation and revenue   Payments for the services of your spouse employed by you in other than a trade or business, such as payments for household services in your home, are not subject to social security, Medicare, or FUTA taxes. Nm taxation and revenue Nonexempt services of a child or spouse. Nm taxation and revenue   Payments for the services of your child or spouse are subject to federal income tax withholding as well as social security, Medicare, and FUTA taxes if he or she works for any of the following entities. Nm taxation and revenue A corporation, even if it is controlled by you. Nm taxation and revenue A partnership, even if you are a partner. Nm taxation and revenue This does not apply to wages paid to your child if each partner is a parent of the child. Nm taxation and revenue An estate or trust, even if it is the estate of a deceased parent. Nm taxation and revenue In these situations, the child or spouse is considered to work for the corporation, partnership, or estate, not you. Nm taxation and revenue Exemptions for your parent. Nm taxation and revenue   Payments for the services of your parent employed by you in your trade or business are subject to federal income tax withholding and social security and Medicare taxes. Nm taxation and revenue Social security and Medicare taxes do not apply to wages paid to your parent for services not in your trade or business, but they do apply to payments for household services in your home if both the following conditions are satisfied. Nm taxation and revenue You have a child living in your home who is under age 18 or has a physical or mental condition that requires care by an adult for at least 4 continuous weeks in a calendar quarter. Nm taxation and revenue You are a widow or widower; or divorced and not remarried; or have a spouse in the home who, because of a physical or mental condition, cannot care for your child for at least 4 continuous weeks in the quarter. Nm taxation and revenue   Wages you pay to your parent are not subject to FUTA tax, regardless of the type of services provided. Nm taxation and revenue Qualified joint venture. Nm taxation and revenue   If spouses elect to be treated as a qualified joint venture instead of a partnership, either spouse may report and pay the employment taxes due on the wages paid to employees using the EIN of that spouse's sole proprietorship. Nm taxation and revenue For more information about qualified joint ventures, see chapter 12. Nm taxation and revenue Crew Leaders If farmworkers are provided by a crew leader, the crew leader may be the employer of the workers. Nm taxation and revenue Social security and Medicare taxes. Nm taxation and revenue   For social security and Medicare tax purposes, the crew leader is the employer of the workers if both of the following requirements are met. Nm taxation and revenue The crew leader pays (either on his or her own behalf or on behalf of the farmer) the workers for their farm labor. Nm taxation and revenue The crew leader has not entered into a written agreement with the farmer under which the crew leader is designated as an employee of the farmer. Nm taxation and revenue Federal income tax withholding. Nm taxation and revenue   If the crew leader is the employer for social security and Medicare tax purposes, the crew leader is the employer for federal income tax withholding purposes. Nm taxation and revenue Federal unemployment (FUTA) tax. Nm taxation and revenue   For FUTA tax purposes, the crew leader is the employer of the workers if, in addition to the earlier requirements, either of the following requirements are met. Nm taxation and revenue The crew leader is registered under the Migrant and Seasonal Agricultural Worker Protection Act. Nm taxation and revenue Substantially all crew members operate or maintain mechanized equipment provided by the crew leader as part of the service to the farmer. Nm taxation and revenue   The farmer is the employer of workers furnished by a crew leader in all other situations. Nm taxation and revenue In addition, the farmer is the employer of workers furnished by a registered crew leader if the workers are the employees of the farmer under the common-law test. Nm taxation and revenue For example, some farmers employ individuals to recruit farmworkers exclusively for them. Nm taxation and revenue Although these individuals may be required to register under the Migrant and Seasonal Agricultural Worker Protection Act, the workers are employed directly by the farmer. Nm taxation and revenue The farmer is the employer in these cases. Nm taxation and revenue For information about common-law employees, see section 1 of Publication 15-A. Nm taxation and revenue For information about crew leaders, see the Department of Labor website at www. Nm taxation and revenue dol. Nm taxation and revenue gov/whd/regs/compliance/whdfs49. Nm taxation and revenue htm. Nm taxation and revenue Social Security and Medicare Taxes All cash wages you pay to an employee during the year for farmwork are subject to social security and Medicare taxes if you meet either of the following tests. Nm taxation and revenue You pay the employee $150 or more in cash wages (count all wages paid on a time, piecework, or other basis) during the year for farmwork (the $150 test). Nm taxation and revenue The $150 test applies separately to each farmworker that you employ. Nm taxation and revenue If you employ a family of workers, each member is treated separately. Nm taxation and revenue Do not count wages paid by other employers. Nm taxation and revenue You pay cash and noncash wages of $2,500 or more during the year to all your employees for farmwork (the $2,500 test). Nm taxation and revenue If the $2,500 test for the group is not met, the $150 test for an employee still applies. Nm taxation and revenue Exceptions. Nm taxation and revenue   Annual cash wages of less than $150 you pay to a seasonal farmworker are not subject to social security and Medicare taxes, even if you pay $2,500 or more to all your farmworkers. Nm taxation and revenue However, these wages count toward the $2,500 test for determining whether other farmworkers' wages are subject to social security and Medicare taxes. Nm taxation and revenue   A seasonal farmworker is a worker who: Works as a hand-harvest laborer, Is paid piece rates in an operation usually paid on this basis in the region of employment, Commutes daily from his or her permanent home to the farm, and Worked in agriculture less than 13 weeks in the preceding calendar year. Nm taxation and revenue   See Family Employees , earlier, for certain exemptions from social security and Medicare taxes that apply to your child, spouse, and parent. Nm taxation and revenue Religious exemption. Nm taxation and revenue   An exemption from social security and Medicare taxes is available to members of a recognized religious group or division opposed to public insurance. Nm taxation and revenue This exemption is available only if both the employee and the employer are members of the group or division. Nm taxation and revenue   For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. Nm taxation and revenue Cash wages. Nm taxation and revenue   Only cash wages paid to farmworkers are subject to social security and Medicare taxes. Nm taxation and revenue Cash wages include checks, money orders, and any kind of money or cash. Nm taxation and revenue   Only cash wages subject to social security and Medicare taxes are credited to your employees for social security benefit purposes. Nm taxation and revenue Payments not subject to these taxes, such as commodity wages, do not contribute to your employees' social security coverage. Nm taxation and revenue For information about social security benefits, contact the SSA at 1-800-772-1213 or online at www. Nm taxation and revenue socialsecurity. Nm taxation and revenue gov. Nm taxation and revenue Noncash wages. Nm taxation and revenue    Noncash wages include food, lodging, clothing, transportation passes, and other goods and services. Nm taxation and revenue Noncash wages paid to farmworkers, including commodity wages, are not subject to social security and Medicare taxes. Nm taxation and revenue However, they are subject to these taxes if the substance of the transaction is a cash payment. Nm taxation and revenue For information on lodging provided as a condition of employment, see Publication 15-B. Nm taxation and revenue   Report the value of noncash wages in box 1 of Form W-2 together with cash wages. Nm taxation and revenue Do not show noncash wages in box 3 or in box 5, (unless the substance of the transaction is a cash payment). Nm taxation and revenue Tax rates and social security wage limit. Nm taxation and revenue   For 2013, the employer and the employee will pay the following taxes. Nm taxation and revenue The employer and employee each pay 6. Nm taxation and revenue 2% of cash wages for social security tax (old-age, survivors, and disability insurance). Nm taxation and revenue The employer and employee each pay 1. Nm taxation and revenue 45% of cash wages for Medicare tax (hospital insurance). Nm taxation and revenue The employee pays 0. Nm taxation and revenue 9% of cash wages in excess of $200,000 for Additional Medicare Tax. Nm taxation and revenue Wage limit. Nm taxation and revenue   The limit on wages subject to the social security tax for 2013 is $113,700. Nm taxation and revenue There is no limit on wages subject to the Medicare tax. Nm taxation and revenue All covered wages are subject to the Medicare tax. Nm taxation and revenue Additionally, all wages in excess of $200,000 are subject to Additional Medicare Tax withholding. Nm taxation and revenue Paying employee's share. Nm taxation and revenue   If you would rather pay the employee's share of social security and Medicare taxes without deducting it from his or her wages, you may do so. Nm taxation and revenue It is additional income to the employee. Nm taxation and revenue You must include it in box 1 of the employee's Form W-2, but do not count it as social security and Medicare wages (boxes 3 and 5 on Form W-2) or as wages for federal unemployment (FUTA) tax purposes. Nm taxation and revenue Example. Nm taxation and revenue Jane operates a small family fruit farm. Nm taxation and revenue She employs day laborers in the picking season to enable her to timely get her crop to market. Nm taxation and revenue She does not deduct the employees' share of social security and Medicare taxes from their pay; instead, she pays it on their behalf. Nm taxation and revenue When her accountant, Susan, prepares the employees' Forms W-2, she adds each employee's share of social security and Medicare taxes paid by Jane to the employee's wage income (box 1 of Form W-2), but does not include it in box 3 (social security wages) or box 5 (Medicare wages and tips). Nm taxation and revenue For 2013, Jane paid Mary $1,000 during the year. Nm taxation and revenue Susan enters $1,076. Nm taxation and revenue 50 in box 1 of Mary's Form W-2 ($1,000 wages plus $76. Nm taxation and revenue 50 social security and Medicare taxes paid for Mary). Nm taxation and revenue She enters $1,000 in boxes 3 and 5 of Mary's Form W-2. Nm taxation and revenue Additional Medicare Tax. Nm taxation and revenue   In addition to withholding Medicare tax at 1. Nm taxation and revenue 45%, you must withhold a 0. Nm taxation and revenue 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Nm taxation and revenue You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Nm taxation and revenue Additional Medicare Tax is only imposed on the employee. Nm taxation and revenue There is no employer share of Additional Medicare Tax. Nm taxation and revenue All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 threshold. Nm taxation and revenue   For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E). Nm taxation and revenue For more information on Additional Medicare Tax, visit IRS. Nm taxation and revenue gov and enter “Additional Medicare Tax” in the search box. Nm taxation and revenue Federal Income Tax Withholding If the cash wages you pay to farmworkers are subject to social security and Medicare taxes, they are also subject to federal income tax withholding. Nm taxation and revenue Although noncash wages are subject to federal income tax, withhold income tax only if you and the employee agree to do so. Nm taxation and revenue The amount to withhold is figured on gross wages without taking out social security and Medicare taxes, union dues, insurance, etc. Nm taxation and revenue Form W-4. Nm taxation and revenue   Generally, the amount of federal income tax you withhold is based on the employee's marital status and withholding allowances claimed on the employee's Form W-4. Nm taxation and revenue In general, an employee can claim withholding allowances on Form W-4 equal to the number of exemptions the employee will be entitled to claim on his or her tax return. Nm taxation and revenue An employee may also be able to claim a special withholding allowance and allowances for estimated deductions and credits. Nm taxation and revenue   Do not withhold federal income tax from the wages of an employee who, by filing Form W-4, certifies that he or she had no federal income tax liability last year and anticipates no liability for the current year. Nm taxation and revenue   You should give each new employee a Form W-4 as soon as you hire the employee. Nm taxation and revenue For Spanish-speaking employees, you may use Formulario W-4(SP) which is the Spanish translation of Form W-4. Nm taxation and revenue Have the employee complete and return the form to you before the first payday. Nm taxation and revenue If the employee does not return the completed form, you must withhold federal income tax as if the employee is single and claims no withholding allowances. Nm taxation and revenue New Form W-4 for 2014. Nm taxation and revenue   You should make the 2014 Form W-4 available to your employees and encourage them to check their income tax withholding for 2014. Nm taxation and revenue Those employees who owed a large amount of tax or received a large refund for 2013 may want to submit a new Form W-4. Nm taxation and revenue You cannot accept substitute Forms W-4 developed by employees. Nm taxation and revenue How to figure withholding. Nm taxation and revenue   You can use one of several methods to determine the amount to withhold. Nm taxation and revenue The methods are described in Publication 51 (Circular A), which contains tables showing the correct amount of federal income tax you should withhold. Nm taxation and revenue Publication 51 (Circular A) also contains additional information about federal income tax withholding. Nm taxation and revenue Nonemployee compensation. Nm taxation and revenue   Generally, you do not have to withhold federal income tax on payments for services to individuals who are not your employees. Nm taxation and revenue However, you may be required to report these payments on Form 1099-MISC, Miscellaneous Income, and to withhold under the backup withholding rules. Nm taxation and revenue For more information, see the Instructions for Form 1099-MISC. Nm taxation and revenue Required Notice to Employees About Earned Income Credit (EIC) You must provide notification about EIC to each employee who worked for you at any time during the year and from whom you did not withhold any federal income tax. Nm taxation and revenue However, you do not have to notify employees who claim exemption from federal income tax withholding on Form W-4. Nm taxation and revenue You meet the notification requirement by giving each employee any of the following. Nm taxation and revenue Form W-2, which contains EIC notification on the back of Copy B. Nm taxation and revenue A substitute Form W-2 with the exact EIC wording shown on the back of copy B of Form W-2. Nm taxation and revenue Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit (EIC). Nm taxation and revenue Your own written statement with the exact wording of Notice 797. Nm taxation and revenue For more information, see Publication 51 (Circular A). Nm taxation and revenue Reporting and Paying Social Security, Medicare, and Withheld Federal Income Taxes You must withhold federal income, social security, and Medicare taxes required to be withheld from the salaries and wages of your employees. Nm taxation and revenue You are liable for the payment of these taxes to the federal government whether or not you collect them from your employees. Nm taxation and revenue If, for example, you withhold less than the correct tax from an employee's wages, you are still liable for the full amount. Nm taxation and revenue You must also pay the employer's share of social security and Medicare taxes. Nm taxation and revenue There is no employer share of Additional Medicare Tax. Nm taxation and revenue Form 943. Nm taxation and revenue   Report withheld federal income tax, social security tax, and Medicare tax on Form 943. Nm taxation and revenue Your 2013 Form 943 is due by January 31, 2014 (or February 10, 2014, if you made deposits on time in full payment of the taxes due for the year). Nm taxation and revenue Deposits. Nm taxation and revenue   Generally, you must deposit both the employer and employee shares of social security and Medicare taxes and federal income tax withheld during the year. Nm taxation and revenue However, you may make payments with Form 943 instead of depositing them if you accumulate less than a $2,500 tax liability (“Total taxes after adjustments” line on Form 943) during the year and you pay in full with a timely filed return. Nm taxation and revenue   For more information on deposit rules, see Publication 51 (Circular A). Nm taxation and revenue Electronic deposit requirement. Nm taxation and revenue   You must use electronic funds transfer to make all federal tax deposits. Nm taxation and revenue Generally, electronic funds transfers are made using EFTPS. Nm taxation and revenue If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Nm taxation and revenue Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. Nm taxation and revenue EFTPS is a free service provided by the Department of Treasury. Nm taxation and revenue Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. Nm taxation and revenue   For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). Nm taxation and revenue To get more information about EFTPS or to enroll in EFTPS, visit www. Nm taxation and revenue eftps. Nm taxation and revenue gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Nm taxation and revenue Additional information about EFTPS is also available in Publication 966. Nm taxation and revenue Form W-2. Nm taxation and revenue   By January 31, you must furnish each employee a Form W-2 showing total wages for the previous year and total federal income tax, social security tax, and Medicare tax withheld. Nm taxation and revenue However, if an employee stops working for you and requests the form earlier, you must give it to the employee within 30 days of the later of the following dates. Nm taxation and revenue The date the employee requests the form. Nm taxation and revenue The date you make your final payment of wages to the employee. Nm taxation and revenue Compensation paid to H-2A visa holders. Nm taxation and revenue   Report compensation of $600 or more paid to foreign agricultural workers who entered the country on H-2A visas in box 1 of Form W-2. Nm taxation and revenue Compensation paid to H-2A workers for agricultural labor performed in connection with this visa is not subject to social security and Medicare taxes, and therefore should not be reported as wages subject to social security tax (line 2), Medicare tax (line 4), or Additional Medicare Tax (line 6) on Form 943, and should not be reported as social security wages (box 3) or Medicare wages (box 5) on Form W-2. Nm taxation and revenue   An employer is not required to withhold federal income tax from compensation it pays to an H-2A worker for agricultural labor performed in connection with this visa unless the worker asks for withholding and the employer agrees. Nm taxation and revenue In this case, the worker must give the employer a completed Form W-4. Nm taxation and revenue Federal income tax withheld should be reported on Form 943, line 8, and in box 2 of Form W-2. Nm taxation and revenue   These reporting rules apply when the H-2A worker provides his or her taxpayer identification number (TIN) to the employer. Nm taxation and revenue For the rules relating to backup withholding and reporting when the H-2A worker does not provide a TIN, see the Instructions for Form 1099-MISC and the Instructions for Form 945. Nm taxation and revenue Trust fund recovery penalty. Nm taxation and revenue   If you are responsible for withholding, accounting for, depositing, or paying federal withholding taxes and willfully fail to do so, you can be held liable for a penalty equal to the withheld tax not paid. Nm taxation and revenue A responsible person can be an officer of a corporation, a partner, a sole proprietor, or an employee of any form of business. Nm taxation and revenue A trustee or agent with authority over the funds of the business can also be held responsible for the penalty. Nm taxation and revenue   Willfully means voluntarily, consciously, and intentionally. Nm taxation and revenue Paying other expenses of the business instead of the taxes due is acting willfully. Nm taxation and revenue Consequences of treating an employee as an independent contractor. Nm taxation and revenue   If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker. Nm taxation and revenue See Publication 15-A for more information. Nm taxation and revenue Federal Unemployment (FUTA) Tax You must pay FUTA tax if you meet either of the following tests. Nm taxation and revenue You paid cash wages of $20,000 or more to farmworkers in any calendar quarter during the current or preceding calendar year. Nm taxation and revenue You employed 10 or more farmworkers for some part of at least 1 day during any 20 or more different calendar weeks during the current or preceding calendar year. Nm taxation and revenue These rules do not apply to exempt services of your spouse, your parents, or your children under age 21. Nm taxation and revenue See Family Employees , earlier. Nm taxation and revenue Alien farmworkers. Nm taxation and revenue   Wages paid to aliens admitted on a temporary basis to the United States to perform farmwork (also known as “H-2A visa workers”) are exempt from FUTA tax. Nm taxation and revenue However, include your employment of these workers and the wages you paid them to determine whether you meet either of the above tests. Nm taxation and revenue Commodity wages. Nm taxation and revenue   Payments in kind for farm labor are not cash wages. Nm taxation and revenue Do not count them to figure whether you are subject to FUTA tax or to figure how much tax you owe. Nm taxation and revenue Tax rate and credit. Nm taxation and revenue   The gross FUTA tax rate is 6. Nm taxation and revenue 0% of the first $7,000 cash wages you pay to each employee during the year. Nm taxation and revenue However, you are given a credit of up to 5. Nm taxation and revenue 4% of the first $7,000 cash wages you pay to each employee for the state unemployment tax you pay. Nm taxation and revenue If your state tax rate (experience rate) is less than 5. Nm taxation and revenue 4%, you may still be allowed the full 5. Nm taxation and revenue 4% credit. Nm taxation and revenue   If you do not pay the state tax, you cannot take the credit. Nm taxation and revenue If you are exempt from state unemployment tax for any reason, the full 6. Nm taxation and revenue 0% rate applies. Nm taxation and revenue See the Instructions for Form 940 for additional information. Nm taxation and revenue More information. Nm taxation and revenue   For more information on FUTA tax, see Publication 51 (Circular A). Nm taxation and revenue Reporting and Paying FUTA Tax The FUTA tax is imposed on you as the employer. Nm taxation and revenue It must not be collected or deducted from the wages of your employees. Nm taxation and revenue Form 940. Nm taxation and revenue   Report FUTA tax on Form 940. Nm taxation and revenue The 2013 Form 940 is due January 31, 2014 (or February 10, 2014, if you timely deposited the full amount of your 2013 FUTA tax). Nm taxation and revenue Deposits. Nm taxation and revenue   If at the end of any calendar quarter you owe, but have not yet deposited, more than $500 in FUTA tax for the year, you must make a deposit by the end of the following month. Nm taxation and revenue If the undeposited tax is $500 or less at the end of a quarter, you do not have to deposit it. Nm taxation and revenue You can add it to the tax for the next quarter. Nm taxation and revenue If the total undeposited tax is more than $500 at the end of the next quarter, a deposit will be required. Nm taxation and revenue If the total undeposited tax at the end of the 4th quarter is $500 or less, you can either make a deposit or pay it with your return by the January 31, 2014, due date. Nm taxation and revenue Electronic deposit requirement. Nm taxation and revenue   You must use electronic funds transfer to make all federal tax deposits. Nm taxation and revenue Generally, electronic funds transfers are made using EFTPS. Nm taxation and revenue If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Nm taxation and revenue Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. Nm taxation and revenue EFTPS is a free service provided by the Department of Treasury. Nm taxation and revenue Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. Nm taxation and revenue   For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). Nm taxation and revenue To get more information about EFTPS or to enroll in EFTPS, visit www. Nm taxation and revenue eftps. Nm taxation and revenue gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). Nm taxation and revenue Additional information about EFTPS is also available in Publication 966. Nm taxation and revenue Prev  Up  Next   Home   More Online Publications
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Employment Agencies

Times have changed with job-searching, and there are numerous websites now available that post jobs for private industry. Many companies also offer a way to apply online. However, these sites do not replace traditional and proven job-hunting approaches such as networking, personal contacts, business organizations, and interviewing.

If you're looking for a job, you might come across ads from employment agencies that promise wonderful opportunities. While some companies honestly want to help you, others are more interested in taking your money. Be wary of:

  • Promises to get you a job and a guaranteed income.
  • Up-front fees, even when you are guaranteed a refund if you are dissatisfied.
  • Employment agencies whose ads read like job ads.
  • Promotions of "previously undisclosed" government jobs. All federal jobs are announced to the public on the USAJOBS website.

Get a copy of the employment agency contract and review it carefully before you pay any money. Check with your local consumer protection agency and the Better Business Bureau to see if any complaints have been filed about a company.

The Federal Trade Commission (FTC) sues businesses that fraudulently advertise employment openings and guarantee job placement. Contact the FTC if you have a complaint.

Social Media Profiles and Your Job Search

Are you in the market for a new job? If so, remember that potential employers aren’t just reading your resumé; they are also reviewing your social media profiles, blogs, pictures, and videos. In 2011, the FTC ruled that background investigation companies can keep your social media history for as long as seven years. Even if you clean up your profiles, companies can still have access to older content that you posted publicly. To err on the side of caution:

  • Use the privacy settings to manage who has access to your profile.
  • Refrain from making defamatory comments about current or past employers.
  • Avoid making statements that are discriminatory or demonstrate intolerance.
  • Untag yourself in pictures or posts that are inappropriate.

Unemployment

The government's Unemployment Insurance Program provides benefits to eligible workers who become unemployed through no fault of their own and who meet other eligibility requirements. Each state administers its own program under federal guidelines. Eligibility requirements, benefit amounts, and length of benefits are determined by the states. For more information, contact the Department of Labor.

In addition, some states are extending unemployment benefits for eligible recipients for up to 13 additional weeks. 

The Nm Taxation And Revenue

Nm taxation and revenue 1. Nm taxation and revenue   Investment Income Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: General InformationSSN for joint account. Nm taxation and revenue Custodian account for your child. Nm taxation and revenue Penalty for failure to supply SSN. Nm taxation and revenue Certification. Nm taxation and revenue Underreported interest and dividends. Nm taxation and revenue How to stop backup withholding due to underreporting. Nm taxation and revenue How to stop backup withholding due to an incorrect identification number. Nm taxation and revenue Reporting backup withholding. Nm taxation and revenue Nonresident aliens. Nm taxation and revenue Penalties. Nm taxation and revenue Savings account with parent as trustee. Nm taxation and revenue Interest IncomeInterest not reported on Form 1099-INT. Nm taxation and revenue Nominees. Nm taxation and revenue Incorrect amount. Nm taxation and revenue Information reporting requirement. Nm taxation and revenue Taxable Interest — General Below-Market Loans U. Nm taxation and revenue S. Nm taxation and revenue Savings Bonds U. Nm taxation and revenue S. Nm taxation and revenue Treasury Bills, Notes, and Bonds Bonds Sold Between Interest Dates Insurance State or Local Government Obligations Discount on Debt InstrumentsOriginal Issue Discount (OID) Market Discount Bonds Discount on Short-Term Obligations Election To Report All Interest as OID When To Report Interest IncomeConstructive receipt. Nm taxation and revenue How To Report Interest IncomeSchedule B (Form 1040A or 1040). Nm taxation and revenue Worksheet for savings bonds distributed from a retirement or profit-sharing plan. Nm taxation and revenue File Form 1099-INT with the IRS. Nm taxation and revenue Dividends and Other DistributionsDividends not reported on Form 1099-DIV. Nm taxation and revenue Nominees. Nm taxation and revenue Ordinary Dividends Capital Gain Distributions Nondividend Distributions Liquidating Distributions Distributions of Stock and Stock Rights Other Distributions How To Report Dividend IncomeElection. Nm taxation and revenue Independent contractor. Nm taxation and revenue Investment interest deducted. Nm taxation and revenue Exception 1. Nm taxation and revenue Exception 2. Nm taxation and revenue Undistributed capital gains. Nm taxation and revenue File Form 1099-DIV with the IRS. Nm taxation and revenue Stripped Preferred Stock REMICs, FASITs, and Other CDOsREMICs Collateralized Debt Obligations (CDOs) FASITs S CorporationsLimit on losses and deductions. Nm taxation and revenue Passive activity losses. Nm taxation and revenue Form 8582. Nm taxation and revenue Investment ClubsInvestments in name of member. Nm taxation and revenue Tax Treatment of the Club Topics - This chapter discusses: Interest Income , Discount on Debt Instruments , When To Report Interest Income , How To Report Interest Income , Dividends and Other Distributions , How To Report Dividend Income , Stripped Preferred Stock , Real estate mortgage investment conduits (REMICs), financial asset securitization investment trusts (FASITs), and other collateralized debt obligations (CDOs) , S Corporations , and Investment Clubs . Nm taxation and revenue Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 537 Installment Sales 590 Individual Retirement Arrangements (IRAs) 925 Passive Activity and At-Risk Rules 1212 Guide to Original Issue Discount (OID) Instruments Form (and Instructions) Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends Schedule D (Form 1040) Capital Gains and Losses 1040 U. Nm taxation and revenue S. Nm taxation and revenue Individual Income Tax Return 1040A U. Nm taxation and revenue S. Nm taxation and revenue Individual Income Tax Return 1040EZ Income Tax Return for Single and Joint Filers With No Dependents 1099 General Instructions for Certain Information Returns 2439 Notice to Shareholder of Undistributed Long-Term Capital Gains 3115 Application for Change in Accounting Method 6251 Alternative Minimum Tax — Individuals 8582 Passive Activity Loss Limitations 8615 Tax for Certain Children Who Have Unearned Income 8814 Parents' Election To Report Child's Interest and Dividends 8815 Exclusion of Interest From Series EE and I U. Nm taxation and revenue S. Nm taxation and revenue Savings Bonds Issued After 1989 8818 Optional Form To Record Redemption of Series EE and I U. Nm taxation and revenue S. Nm taxation and revenue Savings Bonds Issued After 1989 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets 8960 Net Investment Income Tax—Individuals, Estates, and Trusts See chapter 5, How To Get Tax Help , for information about getting these publications and forms. Nm taxation and revenue General Information A few items of general interest are covered here. Nm taxation and revenue Recordkeeping. Nm taxation and revenue You should keep a list showing sources and investment income amounts you receive during the year. Nm taxation and revenue Also keep the forms you receive showing your investment income (Forms 1099-INT, Interest Income, and 1099-DIV, Dividends and Distributions, for example) as an important part of your records. Nm taxation and revenue Net investment income tax (NIIT). Nm taxation and revenue   Beginning in 2013, you may be subject to the NIIT. Nm taxation and revenue The NIIT is a 3. Nm taxation and revenue 8% tax on the lesser of your net investment income or the amount of your modified adjusted gross income (MAGI) that is over a threshold amount based on your filing status. Nm taxation and revenue    Filing Status Threshold Amount Married filing jointly $250,000 Married filing separately $125,000 Single $200,000 Head of household (with qualifying person) $200,000 Qualifying Widow(er) with dependent child $250,000    For more information, see Form 8960 and Instructions for Form 8960. Nm taxation and revenue Tax on unearned income of certain children. Nm taxation and revenue   Part of a child's 2013 unearned income may be taxed at the parent's tax rate. Nm taxation and revenue This may happen if all of the following are true. Nm taxation and revenue The child had more than $2,000 of unearned income. Nm taxation and revenue The child is required to file a tax return. Nm taxation and revenue The child was: Under age 18 at the end of 2013, Age 18 at the end of 2013 and did not have earned income that was more than half of the child's support, or A full-time student over age 18 and under age 24 at the end of 2013 and did not have earned income that was more than half of the child's support. Nm taxation and revenue At least one of the child's parents was alive at the end of 2013. Nm taxation and revenue The child does not file a joint return for 2013. Nm taxation and revenue A child born on January 1, 1996, is considered to be age 18 at the end of 2013; a child born on January 1, 1995, is considered to be age 19 at the end of 2013; a child born on January 1, 1990, is considered to be age 24 at the end of 2013. Nm taxation and revenue   If all of these statements are true, Form 8615 must be completed and attached to the child's tax return. Nm taxation and revenue If any of these statements is not true, Form 8615 is not required and the child's income is taxed at his or her own tax rate. Nm taxation and revenue    However, the parent can choose to include the child's interest and dividends on the parent's return if certain requirements are met. Nm taxation and revenue Use Form 8814 for this purpose. Nm taxation and revenue   For more information about the tax on unearned income of children and the parents' election, see Publication 929, Tax Rules for Children and Dependents. Nm taxation and revenue Beneficiary of an estate or trust. Nm taxation and revenue   Interest, dividends, and other investment income you receive as a beneficiary of an estate or trust is generally taxable income. Nm taxation and revenue You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. Nm taxation and revenue , from the fiduciary. Nm taxation and revenue Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. Nm taxation and revenue Social security number (SSN). Nm taxation and revenue   You must give your name and SSN or individual tax identification number (ITIN) to any person required by federal tax law to make a return, statement, or other document that relates to you. Nm taxation and revenue This includes payers of interest and dividends. Nm taxation and revenue If you do not give your SSN or ITIN to the payer of interest, you may have to pay a penalty. Nm taxation and revenue SSN for joint account. Nm taxation and revenue   If the funds in a joint account belong to one person, list that person's name first on the account and give that person's SSN to the payer. Nm taxation and revenue (For information on who owns the funds in a joint account, see Joint accounts , later. Nm taxation and revenue ) If the joint account contains combined funds, give the SSN of the person whose name is listed first on the account. Nm taxation and revenue This is because only one name and SSN can be shown on Form 1099. Nm taxation and revenue   These rules apply both to joint ownership by a married couple and to joint ownership by other individuals. Nm taxation and revenue For example, if you open a joint savings account with your child using funds belonging to the child, list the child's name first on the account and give the child's SSN. Nm taxation and revenue Custodian account for your child. Nm taxation and revenue   If your child is the actual owner of an account that is recorded in your name as custodian for the child, give the child's SSN to the payer. Nm taxation and revenue For example, you must give your child's SSN to the payer of dividends on stock owned by your child, even though the dividends are paid to you as custodian. Nm taxation and revenue Penalty for failure to supply SSN. Nm taxation and revenue   You will be subject to a penalty if, when required, you fail to: Include your SSN on any return, statement, or other document, Give your SSN to another person who must include it on any return, statement, or other document, or Include the SSN of another person on any return, statement, or other document. Nm taxation and revenue The penalty is $50 for each failure up to a maximum penalty of $100,000 for any calendar year. Nm taxation and revenue   You will not be subject to this penalty if you can show that your failure to provide the SSN was due to reasonable cause and not to willful neglect. Nm taxation and revenue   If you fail to supply an SSN, you may also be subject to backup withholding. Nm taxation and revenue Backup withholding. Nm taxation and revenue   Your investment income is generally not subject to regular withholding. Nm taxation and revenue However, it may be subject to backup withholding to ensure that income tax is collected on the income. Nm taxation and revenue Under backup withholding, the bank, broker, or other payer of interest, original issue discount (OID), dividends, cash patronage dividends, or royalties must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. Nm taxation and revenue   Backup withholding applies if: You do not give the payer your identification number (either a social security number or an employer identification number) in the required manner, The IRS notifies the payer that you gave an incorrect identification number, The IRS notifies the payer that you are subject to backup withholding on interest or dividends because you have underreported interest or dividends on your income tax return, or You are required, but fail, to certify that you are not subject to backup withholding for the reason described in (3). Nm taxation and revenue Certification. Nm taxation and revenue   For new accounts paying interest or dividends, you must certify under penalties of perjury that your SSN is correct and that you are not subject to backup withholding. Nm taxation and revenue Your payer will give you a Form W-9, Request for Taxpayer Identification Number and Certification, or similar form, to make this certification. Nm taxation and revenue If you fail to make this certification, backup withholding may begin immediately on your new account or investment. Nm taxation and revenue Underreported interest and dividends. Nm taxation and revenue   You will be considered to have underreported your interest and dividends if the IRS has determined for a tax year that: You failed to include any part of a reportable interest or dividend payment required to be shown on your return, or You were required to file a return and to include a reportable interest or dividend payment on that return, but you failed to file the return. Nm taxation and revenue How to stop backup withholding due to underreporting. Nm taxation and revenue   If you have been notified that you underreported interest or dividends, you can request a determination from the IRS to prevent backup withholding from starting or to stop backup withholding once it has begun. Nm taxation and revenue You must show that at least one of the following situations applies. Nm taxation and revenue No underreporting occurred. Nm taxation and revenue You have a bona fide dispute with the IRS about whether underreporting occurred. Nm taxation and revenue Backup withholding will cause or is causing an undue hardship, and it is unlikely that you will underreport interest and dividends in the future. Nm taxation and revenue You have corrected the underreporting by filing a return if you did not previously file one and by paying all taxes, penalties, and interest due for any underreported interest or dividend payments. Nm taxation and revenue   If the IRS determines that backup withholding should stop, it will provide you with a certification and will notify the payers who were sent notices earlier. Nm taxation and revenue How to stop backup withholding due to an incorrect identification number. Nm taxation and revenue   If you have been notified by a payer that you are subject to backup withholding because you have provided an incorrect SSN or employer identification number, you can stop it by following the instructions the payer gives you. Nm taxation and revenue Reporting backup withholding. Nm taxation and revenue   If backup withholding is deducted from your interest or dividend income or other reportable payment, the bank or other business must give you an information return for the year (for example, a Form 1099-INT) indicating the amount withheld. Nm taxation and revenue The information return will show any backup withholding as “Federal income tax withheld. Nm taxation and revenue ” Nonresident aliens. Nm taxation and revenue    Generally, payments made to nonresident aliens are not subject to backup withholding. Nm taxation and revenue You can use Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding, to certify exempt status. Nm taxation and revenue However, this does not exempt you from the 30% (or lower treaty) withholding rate that may apply to your investment income. Nm taxation and revenue For information on the 30% rate, see Publication 519, U. Nm taxation and revenue S. Nm taxation and revenue Tax Guide for Aliens. Nm taxation and revenue Penalties. Nm taxation and revenue   There are civil and criminal penalties for giving false information to avoid backup withholding. Nm taxation and revenue The civil penalty is $500. Nm taxation and revenue The criminal penalty, upon conviction, is a fine of up to $1,000, or imprisonment of up to 1 year, or both. Nm taxation and revenue Where to report investment income. Nm taxation and revenue   Table 1-1 gives an overview of the forms and schedules to use to report some common types of investment income. Nm taxation and revenue But see the rest of this publication for detailed information about reporting investment income. Nm taxation and revenue Joint accounts. Nm taxation and revenue   If two or more persons hold property (such as a savings account, bond, or stock) as joint tenants, tenants by the entirety, or tenants in common, each person's share of any interest or dividends from the property is determined by local law. Nm taxation and revenue Community property states. Nm taxation and revenue   If you are married and receive a distribution that is community income, one-half of the distribution is generally considered to be received by each spouse. Nm taxation and revenue If you file separate returns, you must each report one-half of any taxable distribution. Nm taxation and revenue See Publication 555, Community Property, for more information on community income. Nm taxation and revenue   If the distribution is not considered community property and you and your spouse file separate returns, each of you must report your separate taxable distributions. Nm taxation and revenue Example. Nm taxation and revenue You and your spouse have a joint money market account. Nm taxation and revenue Under state law, half the income from the account belongs to you, and half belongs to your spouse. Nm taxation and revenue If you file separate returns, you each report half the income. Nm taxation and revenue Income from property given to a child. Nm taxation and revenue   Property you give as a parent to your child under the Model Gifts of Securities to Minors Act, the Uniform Gifts to Minors Act, or any similar law becomes the child's property. Nm taxation and revenue   Income from the property is taxable to the child, except that any part used to satisfy a legal obligation to support the child is taxable to the parent or guardian having that legal obligation. Nm taxation and revenue Savings account with parent as trustee. Nm taxation and revenue   Interest income from a savings account opened for a minor child, but placed in the name and subject to the order of the parents as trustees, is taxable to the child if, under the law of the state in which the child resides, both of the following are true. Nm taxation and revenue The savings account legally belongs to the child. Nm taxation and revenue The parents are not legally permitted to use any of the funds to support the child. Nm taxation and revenue Table 1-1. Nm taxation and revenue Where To Report Common Types of Investment Income (For detailed information about reporting investment income, see the rest of this publication, especially How To Report Interest Income and How To Report Dividend Income in chapter 1. Nm taxation and revenue ) Type of Income If you file Form 1040, report on . Nm taxation and revenue . Nm taxation and revenue . Nm taxation and revenue If you can file Form 1040A, report on . Nm taxation and revenue . Nm taxation and revenue . Nm taxation and revenue If you can file Form 1040EZ, report on . Nm taxation and revenue . Nm taxation and revenue . Nm taxation and revenue Tax-exempt interest (Form 1099-INT, box 8) Line 8b Line 8b Space to the left of line 2 (enter “TEI” and the amount) Taxable interest that totals $1,500 or less Line 8a (You may need to file Schedule B as well. Nm taxation and revenue ) Line 8a (You may need to file Schedule B as well. Nm taxation and revenue ) Line 2 Taxable interest that totals more than $1,500 Line 8a; also use Schedule B, line 1 Line 8a; also use Schedule B, line 1   Savings bond interest you will exclude because of higher education expenses Schedule B; also use Form 8815 Schedule B; also use Form 8815   Ordinary dividends that total $1,500 or less Line 9a (You may need to file Schedule B as well. Nm taxation and revenue ) Line 9a (You may need to file Schedule B as well. Nm taxation and revenue )   Ordinary dividends that total more than $1,500 Line 9a; also use Schedule B, line 5 Line 9a; also use Schedule B, line 5   Qualified dividends (if you do not have to file Schedule D) Line 9b; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 2 Line 9b; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 2   Qualified dividends (if you have to file Schedule D) Line 9b; also use the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet, line 2 You cannot use Form 1040A    You cannot use Form 1040EZ Capital gain distributions (if you do not have to file Schedule D) Line 13; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 3 Line 10; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 3   Capital gain distributions (if you have to file Schedule D) Schedule D, line 13; also use the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet     Section 1250, 1202, or collectibles gain (Form 1099-DIV, box 2b, 2c, or 2d) Form 8949 and Schedule D     Nondividend distributions (Form 1099-DIV, box 3) Generally not reported*     Undistributed capital gains (Form 2439, boxes 1a - 1d) Schedule D     Gain or loss from sales of stocks or bonds Line 13; also use Form 8949, Schedule D, and the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet You cannot use Form 1040A   Gain or loss from exchanges of like-kind investment property Line 13; also use Schedule D, Form 8824, and the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet     *Report any amounts in excess of your basis in your mutual fund shares on Form 8949. Nm taxation and revenue Use Part II if you held the shares more than 1 year. Nm taxation and revenue Use Part I if you held your mutual fund shares 1 year or less. Nm taxation and revenue For details on Form 8949, see Reporting Capital Gains and Losses in chapter 4, and the Instructions for Form 8949. Nm taxation and revenue Accuracy-related penalty. Nm taxation and revenue   An accuracy-related penalty of 20% can be charged for underpayments of tax due to negligence or disregard of rules or regulations or substantial understatement of tax. Nm taxation and revenue For information on the penalty and any interest that applies, see Penalties in chapter 2. Nm taxation and revenue Interest Income This section discusses the tax treatment of different types of interest income. Nm taxation and revenue In general, any interest that you receive or that is credited to your account and can be withdrawn is taxable income. Nm taxation and revenue (It does not have to be entered in your passbook. Nm taxation and revenue ) Exceptions to this rule are discussed later. Nm taxation and revenue Form 1099-INT. Nm taxation and revenue   Interest income is generally reported to you on Form 1099-INT, or a similar statement, by banks, savings and loans, and other payers of interest. Nm taxation and revenue This form shows you the interest you received during the year. Nm taxation and revenue Keep this form for your records. Nm taxation and revenue You do not have to attach it to your tax return. Nm taxation and revenue   Report on your tax return the total interest income you receive for the tax year. Nm taxation and revenue Interest not reported on Form 1099-INT. Nm taxation and revenue   Even if you do not receive Form 1099-INT, you must still report all of your interest income. Nm taxation and revenue For example, you may receive distributive shares of interest from partnerships or S corporations. Nm taxation and revenue This interest is reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Nm taxation and revenue , and Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. Nm taxation and revenue Nominees. Nm taxation and revenue   Generally, if someone receives interest as a nominee for you, that person must give you a Form 1099-INT showing the interest received on your behalf. Nm taxation and revenue   If you receive a Form 1099-INT that includes amounts belonging to another person, see the discussion on Nominee distributions , later, under How To Report Interest Income. Nm taxation and revenue Incorrect amount. Nm taxation and revenue   If you receive a Form 1099-INT that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. Nm taxation and revenue The new Form 1099-INT you receive will be marked “Corrected. Nm taxation and revenue ” Form 1099-OID. Nm taxation and revenue   Reportable interest income also may be shown on Form 1099-OID, Original Issue Discount. Nm taxation and revenue For more information about amounts shown on this form, see Original Issue Discount (OID) , later in this chapter. Nm taxation and revenue Exempt-interest dividends. Nm taxation and revenue   Exempt-interest dividends you receive from a mutual fund or other regulated investment company, including those received from a qualified fund of funds in any tax year beginning after December 22, 2010, are not included in your taxable income. Nm taxation and revenue (However, see Information reporting requirement , next. Nm taxation and revenue ) Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. Nm taxation and revenue You do not reduce your basis for distributions that are exempt-interest dividends. Nm taxation and revenue Information reporting requirement. Nm taxation and revenue   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file. Nm taxation and revenue This is an information reporting requirement and does not change the exempt-interest dividends into taxable income. Nm taxation and revenue See How To Report Interest Income , later. Nm taxation and revenue Note. Nm taxation and revenue Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. Nm taxation and revenue The exempt-interest dividends subject to the alternative minimum tax are shown in box 11 of Form 1099-DIV. Nm taxation and revenue See Form 6251 and its instructions for more information about this tax. Nm taxation and revenue Private activity bonds are discussed later under State or Local Government Obligations. Nm taxation and revenue Interest on VA dividends. Nm taxation and revenue   Interest on insurance dividends left on deposit with the Department of Veterans Affairs (VA) is not taxable. Nm taxation and revenue This includes interest paid on dividends on converted United States Government Life Insurance policies and on National Service Life Insurance policies. Nm taxation and revenue Individual retirement arrangements (IRAs). Nm taxation and revenue   Interest on a Roth IRA generally is not taxable. Nm taxation and revenue Interest on a traditional IRA is tax deferred. Nm taxation and revenue You generally do not include it in your income until you make withdrawals from the IRA. Nm taxation and revenue See Publication 590 for more information. Nm taxation and revenue Taxable Interest — General Taxable interest includes interest you receive from bank accounts, loans you make to others, and other sources. Nm taxation and revenue The following are some sources of taxable interest. Nm taxation and revenue Dividends that are actually interest. Nm taxation and revenue   Certain distributions commonly called dividends are actually interest. Nm taxation and revenue You must report as interest so-called “dividends” on deposits or on share accounts in: Cooperative banks, Credit unions, Domestic building and loan associations, Domestic savings and loan associations, Federal savings and loan associations, and Mutual savings banks. Nm taxation and revenue  The “dividends” will be shown as interest income on Form 1099-INT. Nm taxation and revenue Money market funds. Nm taxation and revenue   Money market funds are offered by nonbank financial institutions such as mutual funds and stock brokerage houses, and pay dividends. Nm taxation and revenue Generally, amounts you receive from money market funds should be reported as dividends, not as interest. Nm taxation and revenue Certificates of deposit and other deferred interest accounts. Nm taxation and revenue   If you open any of these accounts, interest may be paid at fixed intervals of 1 year or less during the term of the account. Nm taxation and revenue You generally must include this interest in your income when you actually receive it or are entitled to receive it without paying a substantial penalty. Nm taxation and revenue The same is true for accounts that mature in 1 year or less and pay interest in a single payment at maturity. Nm taxation and revenue If interest is deferred for more than 1 year, see Original Issue Discount (OID) , later. Nm taxation and revenue Interest subject to penalty for early withdrawal. Nm taxation and revenue   If you withdraw funds from a deferred interest account before maturity, you may have to pay a penalty. Nm taxation and revenue You must report the total amount of interest paid or credited to your account during the year, without subtracting the penalty. Nm taxation and revenue See Penalty on early withdrawal of savings under How To Report Interest Income, later, for more information on how to report the interest and deduct the penalty. Nm taxation and revenue Money borrowed to invest in certificate of deposit. Nm taxation and revenue   The interest you pay on money borrowed from a bank or savings institution to meet the minimum deposit required for a certificate of deposit from the institution and the interest you earn on the certificate are two separate items. Nm taxation and revenue You must report the total interest you earn on the certificate in your income. Nm taxation and revenue If you itemize deductions, you can deduct the interest you pay as investment interest, up to the amount of your net investment income. Nm taxation and revenue See Interest Expenses in chapter 3. Nm taxation and revenue Example. Nm taxation and revenue You deposited $5,000 with a bank and borrowed $5,000 from the bank to make up the $10,000 minimum deposit required to buy a 6-month certificate of deposit. Nm taxation and revenue The certificate earned $575 at maturity in 2013, but you received only $265, which represented the $575 you earned minus $310 interest charged on your $5,000 loan. Nm taxation and revenue The bank gives you a Form 1099-INT for 2013 showing the $575 interest you earned. Nm taxation and revenue The bank also gives you a statement showing that you paid $310 interest for 2013. Nm taxation and revenue You must include the $575 in your income. Nm taxation and revenue If you itemize your deductions on Schedule A (Form 1040), Itemized Deductions, you can deduct $310, subject to the net investment income limit. Nm taxation and revenue Gift for opening account. Nm taxation and revenue   If you receive noncash gifts or services for making deposits or for opening an account in a savings institution, you may have to report the value as interest. Nm taxation and revenue   For deposits of less than $5,000, gifts or services valued at more than $10 must be reported as interest. Nm taxation and revenue For deposits of $5,000 or more, gifts or services valued at more than $20 must be reported as interest. Nm taxation and revenue The value is determined by the cost to the financial institution. Nm taxation and revenue Example. Nm taxation and revenue You open a savings account at your local bank and deposit $800. Nm taxation and revenue The account earns $20 interest. Nm taxation and revenue You also receive a $15 calculator. Nm taxation and revenue If no other interest is credited to your account during the year, the Form 1099-INT you receive will show $35 interest for the year. Nm taxation and revenue You must report $35 interest income on your tax return. Nm taxation and revenue Interest on insurance dividends. Nm taxation and revenue   Interest on insurance dividends left on deposit with an insurance company that can be withdrawn annually is taxable to you in the year it is credited to your account. Nm taxation and revenue However, if you can withdraw it only on the anniversary date of the policy (or other specified date), the interest is taxable in the year that date occurs. Nm taxation and revenue Prepaid insurance premiums. Nm taxation and revenue   Any increase in the value of prepaid insurance premiums, advance premiums, or premium deposit funds is interest if it is applied to the payment of premiums due on insurance policies or made available for you to withdraw. Nm taxation and revenue U. Nm taxation and revenue S. Nm taxation and revenue obligations. Nm taxation and revenue   Interest on U. Nm taxation and revenue S. Nm taxation and revenue obligations, such as U. Nm taxation and revenue S. Nm taxation and revenue Treasury bills, notes, and bonds, issued by any agency or instrumentality of the United States is taxable for federal income tax purposes. Nm taxation and revenue Interest on tax refunds. Nm taxation and revenue   Interest you receive on tax refunds is taxable income. Nm taxation and revenue Interest on condemnation award. Nm taxation and revenue   If the condemning authority pays you interest to compensate you for a delay in payment of an award, the interest is taxable. Nm taxation and revenue Installment sale payments. Nm taxation and revenue   If a contract for the sale or exchange of property provides for deferred payments, it also usually provides for interest payable with the deferred payments. Nm taxation and revenue That interest is taxable when you receive it. Nm taxation and revenue If little or no interest is provided for in a deferred payment contract, part of each payment may be treated as interest. Nm taxation and revenue See Unstated Interest and Original Issue Discount (OID) in Publication 537. Nm taxation and revenue Interest on annuity contract. Nm taxation and revenue   Accumulated interest on an annuity contract you sell before its maturity date is taxable. Nm taxation and revenue Usurious interest. Nm taxation and revenue   Usurious interest is interest charged at an illegal rate. Nm taxation and revenue This is taxable as interest unless state law automatically changes it to a payment on the principal. Nm taxation and revenue Interest income on frozen deposits. Nm taxation and revenue   Exclude from your gross income interest on frozen deposits. Nm taxation and revenue A deposit is frozen if, at the end of the year, you cannot withdraw any part of the deposit because: The financial institution is bankrupt or insolvent, or The state in which the institution is located has placed limits on withdrawals because other financial institutions in the state are bankrupt or insolvent. Nm taxation and revenue   The amount of interest you must exclude is the interest that was credited on the frozen deposits minus the sum of: The net amount you withdrew from these deposits during the year, and The amount you could have withdrawn as of the end of the year (not reduced by any penalty for premature withdrawals of a time deposit). Nm taxation and revenue If you receive a Form 1099-INT for interest income on deposits that were frozen at the end of 2013, see Frozen deposits under How To Report Interest Income for information about reporting this interest income exclusion on your tax return. Nm taxation and revenue   The interest you exclude is treated as credited to your account in the following year. Nm taxation and revenue You must include it in income in the year you can withdraw it. Nm taxation and revenue Example. Nm taxation and revenue $100 of interest was credited on your frozen deposit during the year. Nm taxation and revenue You withdrew $80 but could not withdraw any more as of the end of the year. Nm taxation and revenue You must include $80 in your income and exclude $20 from your income for the year. Nm taxation and revenue You must include the $20 in your income for the year you can withdraw it. Nm taxation and revenue Bonds traded flat. Nm taxation and revenue    If you buy a bond at a discount when interest has been defaulted or when the interest has accrued but has not been paid, the transaction is described as trading a bond flat. Nm taxation and revenue The defaulted or unpaid interest is not income and is not taxable as interest if paid later. Nm taxation and revenue When you receive a payment of that interest, it is a return of capital that reduces the remaining cost basis of your bond. Nm taxation and revenue Interest that accrues after the date of purchase, however, is taxable interest income for the year received or accrued. Nm taxation and revenue See Bonds Sold Between Interest Dates , later in this chapter. Nm taxation and revenue Below-Market Loans If you make a below-market gift or demand loan, you must report as interest income any forgone interest (defined later) from that loan. Nm taxation and revenue The below-market loan rules and exceptions are described in this section. Nm taxation and revenue For more information, see section 7872 of the Internal Revenue Code and its regulations. Nm taxation and revenue If you receive a below-market loan, you may be able to deduct the forgone interest as well as any interest you actually paid, but not if it is personal interest. Nm taxation and revenue Loans subject to the rules. Nm taxation and revenue   The rules for below-market loans apply to: Gift loans, Pay-related loans, Corporation-shareholder loans, Tax avoidance loans, and Certain loans made to qualified continuing care facilities under a continuing care contract. Nm taxation and revenue A pay-related loan is any below-market loan between an employer and an employee or between an independent contractor and a person for whom the contractor provides services. Nm taxation and revenue A tax avoidance loan is any below-market loan where the avoidance of federal tax is one of the main purposes of the interest arrangement. Nm taxation and revenue Forgone interest. Nm taxation and revenue   For any period, forgone interest is: The amount of interest that would be payable for that period if interest accrued on the loan at the applicable federal rate and was payable annually on December 31, minus Any interest actually payable on the loan for the period. Nm taxation and revenue Applicable federal rate. Nm taxation and revenue   Applicable federal rates are published by the IRS each month in the Internal Revenue Bulletin. Nm taxation and revenue Some IRS offices have these bulletins available for research. Nm taxation and revenue See chapter 5, How To Get Tax Help , for other ways to get this information. Nm taxation and revenue Rules for below-market loans. Nm taxation and revenue   The rules that apply to a below-market loan depend on whether the loan is a gift loan, demand loan, or term loan. Nm taxation and revenue Gift and demand loans. Nm taxation and revenue   A gift loan is any below-market loan where the forgone interest is in the nature of a gift. Nm taxation and revenue   A demand loan is a loan payable in full at any time upon demand by the lender. Nm taxation and revenue A demand loan is a below-market loan if no interest is charged or if interest is charged at a rate below the applicable federal rate. Nm taxation and revenue   A demand loan or gift loan that is a below-market loan is generally treated as an arm's-length transaction in which the lender is treated as having made: A loan to the borrower in exchange for a note that requires the payment of interest at the applicable federal rate, and An additional payment to the borrower in an amount equal to the forgone interest. Nm taxation and revenue The borrower is generally treated as transferring the additional payment back to the lender as interest. Nm taxation and revenue The lender must report that amount as interest income. Nm taxation and revenue   The lender's additional payment to the borrower is treated as a gift, dividend, contribution to capital, pay for services, or other payment, depending on the substance of the transaction. Nm taxation and revenue The borrower may have to report this payment as taxable income, depending on its classification. Nm taxation and revenue These transfers are considered to occur annually, generally on December 31. Nm taxation and revenue Term loans. Nm taxation and revenue   A term loan is any loan that is not a demand loan. Nm taxation and revenue A term loan is a below-market loan if the amount of the loan is more than the present value of all payments due under the loan. Nm taxation and revenue   A lender who makes a below-market term loan other than a gift loan is treated as transferring an additional lump-sum cash payment to the borrower (as a dividend, contribution to capital, etc. Nm taxation and revenue ) on the date the loan is made. Nm taxation and revenue The amount of this payment is the amount of the loan minus the present value, at the applicable federal rate, of all payments due under the loan. Nm taxation and revenue An equal amount is treated as original issue discount (OID). Nm taxation and revenue The lender must report the annual part of the OID as interest income. Nm taxation and revenue The borrower may be able to deduct the OID as interest expense. Nm taxation and revenue See Original Issue Discount (OID) , later. Nm taxation and revenue Exceptions to the below-market loan rules. Nm taxation and revenue   Exceptions to the below-market loan rules are discussed here. Nm taxation and revenue Exception for loans of $10,000 or less. Nm taxation and revenue   The rules for below-market loans do not apply to any day on which the total outstanding amount of loans between the borrower and lender is $10,000 or less. Nm taxation and revenue This exception applies only to: Gift loans between individuals if the gift loan is not directly used to buy or carry income-producing assets, and Pay-related loans or corporation-shareholder loans if the avoidance of federal tax is not a principal purpose of the interest arrangement. Nm taxation and revenue This exception does not apply to a term loan described in (2) earlier that previously has been subject to the below-market loan rules. Nm taxation and revenue Those rules will continue to apply even if the outstanding balance is reduced to $10,000 or less. Nm taxation and revenue Exception for loans to continuing care facilities. Nm taxation and revenue   Loans to qualified continuing care facilities under continuing care contracts are not subject to the rules for below-market loans for the calendar year if the lender or the lender's spouse is age 62 or older at the end of the year. Nm taxation and revenue For the definitions of qualified continuing care facility and continuing care contract, see Internal Revenue Code section 7872(h). Nm taxation and revenue Exception for loans without significant tax effect. Nm taxation and revenue   Loans are excluded from the below-market loan rules if their interest arrangements do not have a significant effect on the federal tax liability of the borrower or the lender. Nm taxation and revenue These loans include: Loans made available by the lender to the general public on the same terms and conditions that are consistent with the lender's customary business practice; Loans subsidized by a federal, state, or municipal government that are made available under a program of general application to the public; Certain employee-relocation loans; Certain loans from a foreign person, unless the interest income would be effectively connected with the conduct of a U. Nm taxation and revenue S. Nm taxation and revenue trade or business and would not be exempt from U. Nm taxation and revenue S. Nm taxation and revenue tax under an income tax treaty; Gift loans to a charitable organization, contributions to which are deductible, if the total outstanding amount of loans between the organization and lender is $250,000 or less at all times during the tax year; and Other loans on which the interest arrangement can be shown to have no significant effect on the federal tax liability of the lender or the borrower. Nm taxation and revenue For a loan described in (6) above, all the facts and circumstances are used to determine if the interest arrangement has a significant effect on the federal tax liability of the lender or borrower. Nm taxation and revenue Some factors to be considered are: Whether items of income and deduction generated by the loan offset each other; The amount of these items; The cost to you of complying with the below-market loan rules, if they were to apply; and Any reasons other than taxes for structuring the transaction as a below-market loan. Nm taxation and revenue If you structure a transaction to meet this exception and one of the principal purposes of that structure is the avoidance of federal tax, the loan will be considered a tax-avoidance loan, and this exception will not apply. Nm taxation and revenue Limit on forgone interest for gift loans of $100,000 or less. Nm taxation and revenue   For gift loans between individuals, if the outstanding loans between the lender and borrower total $100,000 or less, the forgone interest to be included in income by the lender and deducted by the borrower is limited to the amount of the borrower's net investment income for the year. Nm taxation and revenue If the borrower's net investment income is $1,000 or less, it is treated as zero. Nm taxation and revenue This limit does not apply to a loan if the avoidance of federal tax is one of the main purposes of the interest arrangement. Nm taxation and revenue Effective dates. Nm taxation and revenue    These rules apply to term loans made after June 6, 1984, and to demand loans outstanding after that date. Nm taxation and revenue U. Nm taxation and revenue S. Nm taxation and revenue Savings Bonds This section provides tax information on U. Nm taxation and revenue S. Nm taxation and revenue savings bonds. Nm taxation and revenue It explains how to report the interest income on these bonds and how to treat transfers of these bonds. Nm taxation and revenue U. Nm taxation and revenue S. Nm taxation and revenue savings bonds currently offered to individuals include Series EE bonds and Series I bonds. Nm taxation and revenue For other information on U. Nm taxation and revenue S. Nm taxation and revenue savings bonds, write to:  For Series HH/H: Bureau of the Fiscal Service Division of Customer Assistance P. Nm taxation and revenue O. Nm taxation and revenue Box 2186 Parkersburg, WV 26106-2186  For Series EE and I paper savings bonds: Bureau of the Fiscal Service Division of Customer Assistance P. Nm taxation and revenue O. Nm taxation and revenue Box 7012 Parkersburg, WV 26106-7012  For Series EE and I electronic bonds: Bureau of the Fiscal Service  Division of Customer Assistance P. Nm taxation and revenue O. Nm taxation and revenue Box 7015 Parkersburg, WV 26106-7015 Or, on the Internet, visit: www. Nm taxation and revenue treasurydirect. Nm taxation and revenue gov/indiv/indiv. Nm taxation and revenue htm. Nm taxation and revenue Accrual method taxpayers. Nm taxation and revenue   If you use an accrual method of accounting, you must report interest on U. Nm taxation and revenue S. Nm taxation and revenue savings bonds each year as it accrues. Nm taxation and revenue You cannot postpone reporting interest until you receive it or until the bonds mature. Nm taxation and revenue Cash method taxpayers. Nm taxation and revenue   If you use the cash method of accounting, as most individual taxpayers do, you generally report the interest on U. Nm taxation and revenue S. Nm taxation and revenue savings bonds when you receive it. Nm taxation and revenue But see Reporting options for cash method taxpayers , later. Nm taxation and revenue Series HH bonds. Nm taxation and revenue   These bonds were issued at face value. Nm taxation and revenue Interest is paid twice a year by direct deposit to your bank account. Nm taxation and revenue If you are a cash method taxpayer, you must report interest on these bonds as income in the year you receive it. Nm taxation and revenue   Series HH bonds were first offered in 1980 and last offered in August 2004. Nm taxation and revenue Before 1980, series H bonds were issued. Nm taxation and revenue Series H bonds are treated the same as series HH bonds. Nm taxation and revenue If you are a cash method taxpayer, you must report the interest when you receive it. Nm taxation and revenue   Series H bonds have a maturity period of 30 years. Nm taxation and revenue Series HH bonds mature in 20 years. Nm taxation and revenue The last series H bonds matured in 2009. Nm taxation and revenue The last series HH bonds will mature in 2024. Nm taxation and revenue Series EE and series I bonds. Nm taxation and revenue   Interest on these bonds is payable when you redeem the bonds. Nm taxation and revenue The difference between the purchase price and the redemption value is taxable interest. Nm taxation and revenue Series EE bonds. Nm taxation and revenue   Series EE bonds were first offered in January 1980 and have a maturity period of 30 years. Nm taxation and revenue Before July 1980, series E bonds were issued. Nm taxation and revenue The original 10-year maturity period of series E bonds has been extended to 40 years for bonds issued before December 1965 and 30 years for bonds issued after November 1965. Nm taxation and revenue Paper series EE and series E bonds are issued at a discount. Nm taxation and revenue The face value is payable to you at maturity. Nm taxation and revenue Electronic series EE bonds are issued at their face value. Nm taxation and revenue The face value plus accrued interest is payable to you at maturity. Nm taxation and revenue As of January 1, 2012, paper savings bonds were no longer sold at financial institutions. Nm taxation and revenue    Owners of paper series EE bonds can convert them to electronic bonds. Nm taxation and revenue These converted bonds do not retain the denomination listed on the paper certificate but are posted at their purchase price (with accrued interest). Nm taxation and revenue Series I bonds. Nm taxation and revenue   Series I bonds were first offered in 1998. Nm taxation and revenue These are inflation-indexed bonds issued at their face amount with a maturity period of 30 years. Nm taxation and revenue The face value plus all accrued interest is payable to you at maturity. Nm taxation and revenue Reporting options for cash method taxpayers. Nm taxation and revenue   If you use the cash method of reporting income, you can report the interest on series EE, series E, and series I bonds in either of the following ways. Nm taxation and revenue Method 1. Nm taxation and revenue Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year in which they mature. Nm taxation and revenue (However, see Savings bonds traded , later. Nm taxation and revenue )  Note. Nm taxation and revenue Series EE bonds issued in 1983 matured in 2013. Nm taxation and revenue If you have used method 1, you generally must report the interest on these bonds on your 2013 return. Nm taxation and revenue The last series E bonds were issued in 1980 and matured in 2010. Nm taxation and revenue If you used method 1, you generally should have reported the interest on these bonds on your 2010 return. Nm taxation and revenue Method 2. Nm taxation and revenue Choose to report the increase in redemption value as interest each year. Nm taxation and revenue  You must use the same method for all series EE, series E, and series I bonds you own. Nm taxation and revenue If you do not choose method 2 by reporting the increase in redemption value as interest each year, you must use method 1. Nm taxation and revenue If you plan to cash your bonds in the same year you will pay for higher educational expenses, you may want to use method 1 because you may be able to exclude the interest from your income. Nm taxation and revenue To learn how, see Education Savings Bond Program, later. Nm taxation and revenue Change from method 1. Nm taxation and revenue   If you want to change your method of reporting the interest from method 1 to method 2, you can do so without permission from the IRS. Nm taxation and revenue In the year of change, you must report all interest accrued to date and not previously reported for all your bonds. Nm taxation and revenue   Once you choose to report the interest each year, you must continue to do so for all series EE, series E, and series I bonds you own and for any you get later, unless you request permission to change, as explained next. Nm taxation and revenue Change from method 2. Nm taxation and revenue   To change from method 2 to method 1, you must request permission from the IRS. Nm taxation and revenue Permission for the change is automatically granted if you send the IRS a statement that meets all the following requirements. Nm taxation and revenue You have typed or printed the following number at the top: “131. Nm taxation and revenue ” It includes your name and social security number under “131. Nm taxation and revenue ” It includes the year of change (both the beginning and ending dates). Nm taxation and revenue It identifies the savings bonds for which you are requesting this change. Nm taxation and revenue It includes your agreement to: Report all interest on any bonds acquired during or after the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest; and Report all interest on the bonds acquired before the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, with the exception of the interest reported in prior tax years. Nm taxation and revenue   You must attach this statement to your tax return for the year of change, which you must file by the due date (including extensions). Nm taxation and revenue   You can have an automatic extension of 6 months from the due date of your return for the year of change (excluding extensions) to file the statement with an amended return. Nm taxation and revenue On the statement, type or print “Filed pursuant to section 301. Nm taxation and revenue 9100-2. Nm taxation and revenue ” To get this extension, you must have filed your original return for the year of the change by the due date (including extensions). Nm taxation and revenue    By the date you file the original statement with your return, you must also send a signed copy to the address below. Nm taxation and revenue    Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) P. Nm taxation and revenue O. Nm taxation and revenue Box 7604 Benjamin Franklin Station Washington, DC 20044   If you use a private delivery service, send the signed copy to the address below. Nm taxation and revenue Internal Revenue Service Attention: CC:IT&A  (Automatic Rulings Branch) Room 5336 1111 Constitution Avenue, NW Washington, DC 20224    Instead of filing this statement, you can request permission to change from method 2 to method 1 by filing Form 3115. Nm taxation and revenue In that case, follow the form instructions for an automatic change. Nm taxation and revenue No user fee is required. Nm taxation and revenue Co-owners. Nm taxation and revenue   If a U. Nm taxation and revenue S. Nm taxation and revenue savings bond is issued in the names of co-owners, such as you and your child or you and your spouse, interest on the bond is generally taxable to the co-owner who bought the bond. Nm taxation and revenue One co-owner's funds used. Nm taxation and revenue   If you used your funds to buy the bond, you must pay the tax on the interest. Nm taxation and revenue This is true even if you let the other co-owner redeem the bond and keep all the proceeds. Nm taxation and revenue Under these circumstances, the co-owner who redeemed the bond will receive a Form 1099-INT at the time of redemption and must provide you with another Form 1099-INT showing the amount of interest from the bond taxable to you. Nm taxation and revenue The co-owner who redeemed the bond is a “nominee. Nm taxation and revenue ” See Nominee distributions under How To Report Interest Income, later, for more information about how a person who is a nominee reports interest income belonging to another person. Nm taxation and revenue Both co-owners' funds used. Nm taxation and revenue   If you and the other co-owner each contribute part of the bond's purchase price, the interest is generally taxable to each of you, in proportion to the amount each of you paid. Nm taxation and revenue Community property. Nm taxation and revenue   If you and your spouse live in a community property state and hold bonds as community property, one-half of the interest is considered received by each of you. Nm taxation and revenue If you file separate returns, each of you generally must report one-half of the bond interest. Nm taxation and revenue For more information about community property, see Publication 555. Nm taxation and revenue Table 1-2. Nm taxation and revenue   These rules are also shown in Table 1-2. Nm taxation and revenue Child as only owner. Nm taxation and revenue   Interest on U. Nm taxation and revenue S. Nm taxation and revenue savings bonds bought for and registered only in the name of your child is income to your child, even if you paid for the bonds and are named as beneficiary. Nm taxation and revenue If the bonds are series EE, series E, or series I bonds, the interest on the bonds is income to your child in the earlier of the year the bonds are cashed or disposed of or the year the bonds mature, unless your child chooses to report the interest income each year. Nm taxation and revenue Choice to report interest each year. Nm taxation and revenue   The choice to report the accrued interest each year can be made either by your child or by you for your child. Nm taxation and revenue This choice is made by filing an income tax return that shows all the interest earned to date, and by stating on the return that your child chooses to report the interest each year. Nm taxation and revenue Either you or your child should keep a copy of this return. Nm taxation and revenue   Unless your child is otherwise required to file a tax return for any year after making this choice, your child does not have to file a return only to report the annual accrual of U. Nm taxation and revenue S. Nm taxation and revenue savings bond interest under this choice. Nm taxation and revenue However, see Tax on unearned income of certain children , earlier, under General Information. Nm taxation and revenue Neither you nor your child can change the way you report the interest unless you request permission from the IRS, as discussed earlier under Change from method 2 . Nm taxation and revenue Ownership transferred. Nm taxation and revenue   If you bought series E, series EE, or series I bonds entirely with your own funds and had them reissued in your co-owner's name or beneficiary's name alone, you must include in your gross income for the year of reissue all interest that you earned on these bonds and have not previously reported. Nm taxation and revenue But, if the bonds were reissued in your name alone, you do not have to report the interest accrued at that time. Nm taxation and revenue   This same rule applies when bonds (other than bonds held as community property) are transferred between spouses or incident to divorce. Nm taxation and revenue Example. Nm taxation and revenue You bought series EE bonds entirely with your own funds. Nm taxation and revenue You did not choose to report the accrued interest each year. Nm taxation and revenue Later, you transfer the bonds to your former spouse under a divorce agreement. Nm taxation and revenue You must include the deferred accrued interest, from the date of the original issue of the bonds to the date of transfer, in your income in the year of transfer. Nm taxation and revenue Your former spouse includes in income the interest on the bonds from the date of transfer to the date of redemption. Nm taxation and revenue Table 1-2. Nm taxation and revenue Who Pays the Tax on U. Nm taxation and revenue S. Nm taxation and revenue Savings Bond Interest IF . Nm taxation and revenue . Nm taxation and revenue . Nm taxation and revenue THEN the interest must be reported by . Nm taxation and revenue . Nm taxation and revenue . Nm taxation and revenue you buy a bond in your name and the name of another person as co-owners, using only your own funds you. Nm taxation and revenue you buy a bond in the name of another person, who is the sole owner of the bond the person for whom you bought the bond. Nm taxation and revenue you and another person buy a bond as co-owners, each contributing part of the purchase price both you and the other co-owner, in proportion to the amount each paid for the bond. Nm taxation and revenue you and your spouse, who live in a community property state, buy a bond that is community property you and your spouse. Nm taxation and revenue If you file separate returns, both you and your spouse generally report one-half of the interest. Nm taxation and revenue Purchased jointly. Nm taxation and revenue   If you and a co-owner each contributed funds to buy series E, series EE, or series I bonds jointly and later have the bonds reissued in the co-owner's name alone, you must include in your gross income for the year of reissue your share of all the interest earned on the bonds that you have not previously reported. Nm taxation and revenue The former co-owner does not have to include in gross income at the time of reissue his or her share of the interest earned that was not reported before the transfer. Nm taxation and revenue This interest, however, as well as all interest earned after the reissue, is income to the former co-owner. Nm taxation and revenue   This income-reporting rule also applies when the bonds are reissued in the name of your former co-owner and a new co-owner. Nm taxation and revenue But the new co-owner will report only his or her share of the interest earned after the transfer. Nm taxation and revenue   If bonds that you and a co-owner bought jointly are reissued to each of you separately in the same proportion as your contribution to the purchase price, neither you nor your co-owner has to report at that time the interest earned before the bonds were reissued. Nm taxation and revenue Example 1. Nm taxation and revenue You and your spouse each spent an equal amount to buy a $1,000 series EE savings bond. Nm taxation and revenue The bond was issued to you and your spouse as co-owners. Nm taxation and revenue You both postpone reporting interest on the bond. Nm taxation and revenue You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Nm taxation and revenue At that time neither you nor your spouse has to report the interest earned to the date of reissue. Nm taxation and revenue Example 2. Nm taxation and revenue You bought a $1,000 series EE savings bond entirely with your own funds. Nm taxation and revenue The bond was issued to you and your spouse as co-owners. Nm taxation and revenue You both postponed reporting interest on the bond. Nm taxation and revenue You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Nm taxation and revenue You must report half the interest earned to the date of reissue. Nm taxation and revenue Transfer to a trust. Nm taxation and revenue   If you own series E, series EE, or series I bonds and transfer them to a trust, giving up all rights of ownership, you must include in your income for that year the interest earned to the date of transfer if you have not already reported it. Nm taxation and revenue However, if you are considered the owner of the trust and if the increase in value both before and after the transfer continues to be taxable to you, you can continue to defer reporting the interest earned each year. Nm taxation and revenue You must include the total interest in your income in the year you cash or dispose of the bonds or the year the bonds finally mature, whichever is earlier. Nm taxation and revenue   The same rules apply to previously unreported interest on series EE or series E bonds if the transfer to a trust consisted of series HH or series H bonds you acquired in a trade for the series EE or series E bonds. Nm taxation and revenue See Savings bonds traded , later. Nm taxation and revenue Decedents. Nm taxation and revenue   The manner of reporting interest income on series E, series EE, or series I bonds, after the death of the owner (decedent), depends on the accounting and income-reporting methods previously used by the decedent. Nm taxation and revenue Decedent who reported interest each year. Nm taxation and revenue   If the bonds transferred because of death were owned by a person who used an accrual method, or who used the cash method and had chosen to report the interest each year, the interest earned in the year of death up to the date of death must be reported on that person's final return. Nm taxation and revenue The person who acquires the bonds includes in income only interest earned after the date of death. Nm taxation and revenue Decedent who postponed reporting interest. Nm taxation and revenue   If the transferred bonds were owned by a decedent who had used the cash method and had not chosen to report the interest each year, and who had bought the bonds entirely with his or her own funds, all interest earned before death must be reported in one of the following ways. Nm taxation and revenue The surviving spouse or personal representative (executor, administrator, etc. Nm taxation and revenue ) who files the final income tax return of the decedent can choose to include on that return all interest earned on the bonds before the decedent's death. Nm taxation and revenue The person who acquires the bonds then includes in income only interest earned after the date of death. Nm taxation and revenue If the choice in (1) is not made, the interest earned up to the date of death is income in respect of the decedent and should not be included in the decedent's final return. Nm taxation and revenue All interest earned both before and after the decedent's death (except any part reported by the estate on its income tax return) is income to the person who acquires the bonds. Nm taxation and revenue If that person uses the cash method and does not choose to report the interest each year, he or she can postpone reporting it until the year the bonds are cashed or disposed of or the year they mature, whichever is earlier. Nm taxation and revenue In the year that person reports the interest, he or she can claim a deduction for any federal estate tax paid on the part of the interest included in the decedent's estate. Nm taxation and revenue For more information on income in respect of a decedent, see Publication 559, Survivors, Executors, and Administrators. Nm taxation and revenue Example 1. Nm taxation and revenue Your uncle, a cash method taxpayer, died and left you a $1,000 series EE bond. Nm taxation and revenue He had bought the bond for $500 and had not chosen to report the interest each year. Nm taxation and revenue At the date of death, interest of $200 had accrued on the bond, and its value of $700 was included in your uncle's estate. Nm taxation and revenue Your uncle's executor chose not to include the $200 accrued interest in your uncle's final income tax return. Nm taxation and revenue The $200 is income in respect of the decedent. Nm taxation and revenue You are a cash method taxpayer and do not choose to report the interest each year as it is earned. Nm taxation and revenue If you cash the bond when it reaches maturity value of $1,000, you report $500 interest income—the difference between maturity value of $1,000 and the original cost of $500. Nm taxation and revenue For that year, you can deduct (as a miscellaneous itemized deduction not subject to the 2%-of-adjusted-gross-income limit) any federal estate tax paid because the $200 interest was included in your uncle's estate. Nm taxation and revenue Example 2. Nm taxation and revenue If, in Example 1 , the executor had chosen to include the $200 accrued interest in your uncle's final return, you would report only $300 as interest when you cashed the bond at maturity. Nm taxation and revenue $300 is the interest earned after your uncle's death. Nm taxation and revenue Example 3. Nm taxation and revenue If, in Example 1 , you make or have made the choice to report the increase in redemption value as interest each year, you include in gross income for the year you acquire the bond all of the unreported increase in value of all series E, series EE, and series I bonds you hold, including the $200 on the bond you inherited from your uncle. Nm taxation and revenue Example 4. Nm taxation and revenue When your aunt died, she owned series HH bonds that she had acquired in a trade for series EE bonds. Nm taxation and revenue You were the beneficiary of these bonds. Nm taxation and revenue Your aunt used the cash method and did not choose to report the interest on the series EE bonds each year as it accrued. Nm taxation and revenue Your aunt's executor chose not to include any interest earned before your aunt's death on her final return. Nm taxation and revenue The income in respect of the decedent is the sum of the unreported interest on the series EE bonds and the interest, if any, payable on the series HH bonds but not received as of the date of your aunt's death. Nm taxation and revenue You must report any interest received during the year as income on your return. Nm taxation and revenue The part of the interest payable but not received before your aunt's death is income in respect of the decedent and may qualify for the estate tax deduction. Nm taxation and revenue For information on when to report the interest on the series EE bonds traded, see Savings bonds traded , later. Nm taxation and revenue Savings bonds distributed from a retirement or profit-sharing plan. Nm taxation and revenue   If you acquire a U. Nm taxation and revenue S. Nm taxation and revenue savings bond in a taxable distribution from a retirement or profit-sharing plan, your income for the year of distribution includes the bond's redemption value (its cost plus the interest accrued before the distribution). Nm taxation and revenue When you redeem the bond (whether in the year of distribution or later), your interest income includes only the interest accrued after the bond was distributed. Nm taxation and revenue To figure the interest reported as a taxable distribution and your interest income when you redeem the bond, see Worksheet for savings bonds distributed from a retirement or profit-sharing plan under How To Report Interest Income, later. Nm taxation and revenue Savings bonds traded. Nm taxation and revenue   If you postponed reporting the interest on your series EE or series E bonds, you did not recognize taxable income when you traded the bonds for series HH or series H bonds, unless you received cash in the trade. Nm taxation and revenue (You cannot trade series I bonds for series HH bonds. Nm taxation and revenue After August 31, 2004, you cannot trade any other series of bonds for series HH bonds. Nm taxation and revenue ) Any cash you received is income up to the amount of the interest earned on the bonds traded. Nm taxation and revenue When your series HH or series H bonds mature, or if you dispose of them before maturity, you report as interest the difference between their redemption value and your cost. Nm taxation and revenue Your cost is the sum of the amount you paid for the traded series EE or series E bonds plus any amount you had to pay at the time of the trade. Nm taxation and revenue Example. Nm taxation and revenue You traded series EE bonds (on which you postponed reporting the interest) for $2,500 in series HH bonds and $223 in cash. Nm taxation and revenue You reported the $223 as taxable income on your tax return. Nm taxation and revenue At the time of the trade, the series EE bonds had accrued interest of $523 and a redemption value of $2,723. Nm taxation and revenue You hold the series HH bonds until maturity, when you receive $2,500. Nm taxation and revenue You must report $300 as interest income in the year of maturity. Nm taxation and revenue This is the difference between their redemption value, $2,500, and your cost, $2,200 (the amount you paid for the series EE bonds). Nm taxation and revenue (It is also the difference between the accrued interest of $523 on the series EE bonds and the $223 cash received on the trade. Nm taxation and revenue ) Choice to report interest in year of trade. Nm taxation and revenue   You could have chosen to treat all of the previously unreported accrued interest on series EE or series E bonds traded for series HH bonds as income in the year of the trade. Nm taxation and revenue If you made this choice, it is treated as a change from method 1. Nm taxation and revenue See Change from method 1 under Series EE and series I bonds, earlier. Nm taxation and revenue Form 1099-INT for U. Nm taxation and revenue S. Nm taxation and revenue savings bond interest. Nm taxation and revenue   When you cash a bond, the bank or other payer that redeems it must give you a Form 1099-INT if the interest part of the payment you receive is $10 or more. Nm taxation and revenue Box 3 of your Form 1099-INT should show the interest as the difference between the amount you received and the amount paid for the bond. Nm taxation and revenue However, your Form 1099-INT may show more interest than you have to include on your income tax return. Nm taxation and revenue For example, this may happen if any of the following are true. Nm taxation and revenue You chose to report the increase in the redemption value of the bond each year. Nm taxation and revenue The interest shown on your Form 1099-INT will not be reduced by amounts previously included in income. Nm taxation and revenue You received the bond from a decedent. Nm taxation and revenue The interest shown on your Form 1099-INT will not be reduced by any interest reported by the decedent before death, or on the decedent's final return, or by the estate on the estate's income tax return. Nm taxation and revenue Ownership of the bond was transferred. Nm taxation and revenue The interest shown on your Form 1099-INT will not be reduced by interest that accrued before the transfer. Nm taxation and revenue You were named as a co-owner, and the other co-owner contributed funds to buy the bond. Nm taxation and revenue The interest shown on your Form 1099-INT will not be reduced by the amount you received as nominee for the other co-owner. Nm taxation and revenue (See Co-owners , earlier in this section, for more information about the reporting requirements. Nm taxation and revenue ) You received the bond in a taxable distribution from a retirement or profit-sharing plan. Nm taxation and revenue The interest shown on your Form 1099-INT will not be reduced by the interest portion of the amount taxable as a distribution from the plan and not taxable as interest. Nm taxation and revenue (This amount is generally shown on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Nm taxation and revenue , for the year of distribution. Nm taxation and revenue )   For more information on including the correct amount of interest on your return, see U. Nm taxation and revenue S. Nm taxation and revenue savings bond interest previously reported or Nominee distributions under How To Report Interest Income, later. Nm taxation and revenue    Interest on U. Nm taxation and revenue S. Nm taxation and revenue savings bonds is exempt from state and local taxes. Nm taxation and revenue The Form 1099-INT you receive will indicate the amount that is for U. Nm taxation and revenue S. Nm taxation and revenue savings bonds interest in box 3. Nm taxation and revenue Do not include this income on your state or local income tax return. Nm taxation and revenue Education Savings Bond Program You may be able to exclude from income all or part of the interest you receive on the redemption of qualified U. Nm taxation and revenue S. Nm taxation and revenue savings bonds during the year if you pay qualified higher educational expenses during the same year. Nm taxation and revenue This exclusion is known as the Education Savings Bond Program. Nm taxation and revenue You do not qualify for this exclusion if your filing status is married filing separately. Nm taxation and revenue Form 8815. Nm taxation and revenue   Use Form 8815 to figure your exclusion. Nm taxation and revenue Attach the form to your Form 1040 or Form 1040A. Nm taxation and revenue Qualified U. Nm taxation and revenue S. Nm taxation and revenue savings bonds. Nm taxation and revenue   A qualified U. Nm taxation and revenue S. Nm taxation and revenue savings bond is a series EE bond issued after 1989 or a series I bond. Nm taxation and revenue The bond must be issued either in your name (sole owner) or in your and your spouse's names (co-owners). Nm taxation and revenue You must be at least 24 years old before the bond's issue date. Nm taxation and revenue For example, a bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or child. Nm taxation and revenue    The issue date of a bond may be earlier than the date the bond is purchased because the issue date assigned to a bond is the first day of the month in which it is purchased. Nm taxation and revenue Beneficiary. Nm taxation and revenue   You can designate any individual (including a child) as a beneficiary of the bond. Nm taxation and revenue Verification by IRS. Nm taxation and revenue   If you claim the exclusion, the IRS will check it by using bond redemption information from the Department of Treasury. Nm taxation and revenue Qualified expenses. Nm taxation and revenue   Qualified higher educational expenses are tuition and fees required for you, your spouse, or your dependent (for whom you claim an exemption) to attend an eligible educational institution. Nm taxation and revenue   Qualified expenses include any contribution you make to a qualified tuition program or to a Coverdell education savings account. Nm taxation and revenue For information about these programs, see Publication 970, Tax Benefits for Education. Nm taxation and revenue   Qualified expenses do not include expenses for room and board or for courses involving sports, games, or hobbies that are not part of a degree or certificate granting program. Nm taxation and revenue Eligible educational institutions. Nm taxation and revenue   These institutions include most public, private, and nonprofit universities, colleges, and vocational schools that are accredited and eligible to participate in student aid programs run by the Department of Education. Nm taxation and revenue Reduction for certain benefits. Nm taxation and revenue   You must reduce your qualified higher educational expenses by all of the following tax-free benefits. Nm taxation and revenue Tax-free part of scholarships and fellowships. Nm taxation and revenue Expenses used to figure the tax-free portion of distributions from a Coverdell ESA. Nm taxation and revenue Expenses used to figure the tax-free portion of distributions from a qualified tuition program. Nm taxation and revenue Any tax-free payments (other than gifts or inheritances) received as educational assistance, such as: Veterans' educational assistance benefits, Qualified tuition reductions, or Employer-provided educational assistance. Nm taxation and revenue Any expense used in figuring the American Opportunity and lifetime learning credits. Nm taxation and revenue For information about these benefits, see Publication 970. Nm taxation and revenue Amount excludable. Nm taxation and revenue   If the total proceeds (interest and principal) from the qualified U. Nm taxation and revenue S. Nm taxation and revenue savings bonds you redeem during the year are not more than your adjusted qualified higher educational expenses for the year, you may be able to exclude all of the interest. Nm taxation and revenue If the proceeds are more than the expenses, you may be able to exclude only part of the interest. Nm taxation and revenue   To determine the excludable amount, multiply the interest part of the proceeds by a fraction. Nm taxation and revenue The numer