Is the exclusion from income of up to $5,250 of
employer-provided educational assistance under a qualified
program still available?
Yes. However, it applies only to benefits you receive for
courses that begin before December 31, 2001. The exclusion
does not apply to graduate-level courses that began after
June 30, 1996. For more information, refer to Publication
508, Educational Expenses.
References:
I received a Form 1099-MISC for an employee bonus. How
do I report it?
Employee bonuses should be reported on Form W-2, not on
Form 1099-MISC. Contact your employer and ask them to issue
the correct form. If they will not issue you a Form W-2 for
the bonus, complete Form
4852, Substitute for Form W-2, Wage and Tax Statement.
The bonus amount is reported on Line 7 on your Form 1040 or
1040A.
References:
Is tuition reimbursement for school a form of taxable
income or not?
If you receive educational assistance benefits from your
employer under an educational assistance program, you can
exclude from taxable income up to $5,250 of those benefits
each year.
References:
My employer is including my graduate school tuition
reimbursements on my Form W-2. Where do I claim education
expenses on my Form 1040?
They are miscellaneous itemized deductions on Form
1040, SCHEDULE A, Itemized Deductions.
References:
Is my employer supposed to include mileage reimbursement
as a part of my gross income on my Form W-2, and do I
include it on my return as wages, tips & salaries?
That depends on whether you were reimbursed under an
accountable plan or under a nonaccountable plan. Generally,
an employer will have an accountable plan if it pays
business expenses that would otherwise be deductible by the
employee, requires the employee to substantiate the expense,
and does not permit the employee to keep any reimbursements
that exceed expenses. If the employer does not use an
accountable plan, mileage reimbursement would be included in
your wages on Form W-2. For more information on
reimbursements and accountable plans, refer to Chapter 6 of Publication
463, Travel, Entertainment, Gift, and Car Expenses.
If your mileage reimbursement is included in box 1 on
Form W-2, you need to enter that amount on the "wages,
salaries, and tips" line of your tax return. If you
itemize your deductions on Form
1040, SCHEDULE A, Itemized Deductions, you may deduct
the business transportation expense as an employee business
expense, subject to the 2% of adjusted gross income
limitation. You may usually deduct either your actual
business automobile expenses or use the standard mileage
rate. For more information on when you may use the standard
mileage rate, refer to Chapter 4 of Publication
463, Travel, Entertainment, Gift, and Car Expenses.
References:
What is meant by "dependent care benefits"
(Box 10 of Form W-2)?
Dependent care benefits are amounts your employer paid
directly to either you or your care provider for the care of
your qualifying person(s) while you worked. They also
include the fair market value of care in a day-care facility
provided or sponsored by your employer. Dependent care
benefits include amounts placed into a flexible spending
account under a salary reduction arrangement if the benefit
provided was day care.
References:
Should Line 10, Dependent Care Benefits, of my Form W-2
be included when calculating my income?
A portion of all of the amount in Box 10 of the Form W-2
may be includable in your income. Please refer to the Instructions
for Form 2441, Child and Dependent Care Expenses, to
determine how much, if any, of the dependent care benefits
may be excluded. If you meet the requirements described in Form
2441, Child and Dependent Care Expenses, you can exclude
up to $5,000 of dependent care benefits provided under a
qualified employer plan. However, this amount is reduced if
your earned income (or your spouse's earned income) is less
than $5,000, or if your child is not under age 13. Any
benefits that exceed the exclusion limit ($5,000) are also
includable in your income, and your employer should have
included these amounts in Boxes 1, 3, and 5 of your Form W-2
in addition to reporting these amounts in Box 10. The amount
you can exclude is figured and claimed by completing Part
III of Form 2441 or Schedule 2 of Form 1040A.
References:
I paid into a dependent care benefits plan and the
amount is shown in Box 10 of the my Form W-2. However, the
cost paid to the child care provider was more. Can the
additional expense not paid into the dependent care benefits
plan and not shown in Box 10 of the W-2 be claimed on Form
2441?
That depends on the amount you elected to have
contributed to the flexible spending arrangement. The
exclusion from income for employer-provided benefits can be
as high as $5,000, while the credit for dependent care
expenses is based on annual dollar limits of $2,400 for one
person and $4,800 for two or more persons. You must reduce
those dollar limits by the amount of excludible dependent
care benefits. If you had expenses that you paid yourself
and the employer provided benefits were less than the
applicable dollar limit, you can also claim the credit.
Complete Part III of either Form
2441, Child and Dependent Care Expenses, or Form
1040A, SCHEDULE 2, Child and Dependent Care Expenses for
Form 1040A Filers, to determine the excluded benefits and
whether you can claim the credit.
References:
If my employer did not put the amount I paid into a
flexible spending account for dependent care in box 10 on my
Form W-2, can I claim the Child Care and Dependent Tax
Credit?
If the omission was simply a clerical oversight, you may
not claim the child care tax credit. If the flexible
spending account was an eligible plan under Internal Revenue
Code Section 125, the amount of the salary reduction that
was contributed to your account should appear in box 10 of
your Form W-2. Request a corrected Form W-2 from your
employer.
You may claim the child care tax credit if the
contribution to your flexible spending account was less than
your annual dollar limitation for eligible expenses ($2,400
for one person, or $4,800 for two or more persons). Even if
you cannot claim the credit, you must complete Part III of
either Form
2441, Child and Dependent Care Expenses, or Form
1040A, SCHEDULE 2, Child and Dependent Care Expenses for
Form 1040A Filers, to exclude your employer provided
benefits from your income. If the amount you paid into a
flexible spending account reduced your wages in box 1 of
Form W-2, it is considered an employer provided benefit.
References:
I was under the impression that a Dependent Care Benefit
Plan would benefit me, not penalize me with an increase in
taxes. How can my employer say they provided a benefit in
the total amount of $3,000 in W-2, Block 10 when I had
$3,000 in wages set aside for dependent care benefits?
The actual mechanism for this type of plan is an
agreement to voluntarily reduce your salary in return for an
employer-provided fringe benefit. These plans must be set up
this way to avoid the constructive receipt of the forgone
cash wages, which would make the benefit taxable to you.
Therefore, the benefits are actually employer provided or
funded.
References:
How do I complete Form 2441 if I have flexible dependent
care benefits through my employer?
You must complete Part III of Form
2441, Child and Dependent Care Expenses, (or Form
1040A, SCHEDULE 2, Child and Dependent Care Expenses for
Form 1040A Filers) to claim the exclusion of the benefits
from income even if you cannot claim the credit. Enter your
total employer-provided dependent care benefits on line 10
(this amount should appear in box 10 of your Form W-2) and
your qualified expenses on line 13. The last five lines of
Part III will determine whether you can also take the credit
and what your dollar limit is on qualified expenses.
Complete Part I, Persons or Organizations Who Provided
the Care, also.
References:
I am self-employed, but did not have net a profit last
year. Is it correct that we do not qualify for the Child
Care Credit on our joint return even though my wife received
dependent care benefits on her W-2 box 10?
Generally, yes. When you complete Part III of Form
2441, Child and Dependent Care Expenses, which you must
do to claim excluded benefits, line 17 asks you to enter the
smallest of:
- your dependent care benefits,
- your qualified expenses,
- your earned income, or
- your spouse's earned income.
If you had a loss from self-employment and no other
earned income, your earned income would be $0, unless you
can use one of the optional methods on Form
1040, SCHEDULE SE, Self-Employment Tax. That would mean
that the amount in box 10 of your wife's Form W-2 would have
to be included in income. (For more information on the
optional methods of computing self-employment tax, refer to Publication
533, Self-Employment Tax, or Instructions
for Form 1040, Schedule SE, Self-Employment Tax.) If you
were a full-time student during any five calendar months
during the year, you would have deemed earned income of $200
per month.
References:
Is a flexible spending account for dependent care a
dependent care benefit?
Yes. If the flexible spending account is providing you
with a dependent care benefit, then it should be reported in
box 10 of your Form W-2. These accounts are funded through a
salary reduction, so the contribution to the account is
considered an employer contribution. When you receive a
dependent care benefit from your employer, you must complete
Part III of Form
2441, Child and Dependent Care Expenses, (or Form
1040A, SCHEDULE 2, Child and Dependent Care Expenses for
Form 1040A Filers) to see if the benefits are fully excluded
from income. You may be able to also claim a credit for
child and dependent care expenses if the excluded benefits
are less than the dollar limit on qualified expenses.
References:
What publications are available that would explain the
taxation policy for Flexible Spending Arrangements (FSAs)?
There is limited information about cafeteria plans in Publication
535, Business Expenses.
References:
When an employer provides day care assistance, should
the employer's contribution be reported in box 10 of Form
W-2?
Yes. An employer reports dependent care assistance
payments in box 10 on Form W-2.
References:
Is an employer required to provide the IRS with a signed
receipt from a dependent care provider in order to release
funds that are withheld from an employee's pretax salary and
deposited to a dependent care flexible spending account?
The Internal Revenue Service does not specify a method
for the documentation of reimbursable expenditures. Good
accounting and business practices should dictate the type
and sufficiency of documentation provided by employees who
claim reimbursable expenses. Please review the plan document
to determine if it specifies the type(s) of documentation
acceptable.
References:
Can an employer pay for health care costs of an employee
as a fringe benefit?
Yes, an employer may pay for health care costs of an
employee as a nontaxable fringe benefit provided it meets
certain nondiscrimination rules. Refer to Publication
535, Business Expenses, for a complete discussion of
employee benefit programs.
References:
If our company pays for the employee's health care costs
directly to the medical facility, as opposed to a
reimbursement, is the employee benefit reported on Form W-2
and subject to social security withholding?
Health care costs paid directly to the medical facility
is a nontaxable employee benefit provided that it is paid as
part of a qualifying accident and health plan. Refer to Publication
535, Business Expenses, for more information on employee
benefit programs.
References:
If an employer pays health insurance benefits for the
employee and dependents, are both the employee's and the
dependent's benefits income to the employee?
If an employer provides health insurance for the
employees, the benefit provided is not taxable to the
employee. An employer can generally deduct the cost of a
group health plan on the "employee benefit
programs" line of their business income tax return.
Group health plan defined: This (including a self-insured
plan) is a plan that provides medical care to your
employees, former employees, or their families. The plan can
provide care directly or through insurance, reimbursement,
or otherwise. The employer can exclude the cost of providing
group health insurance to an employee from his or her wages.
References:
If we give an employee a monthly car allowance, must it
be included in the employee's taxable wages on their Form
W-2?
Generally yes, unless paid under an accountable plan.
To be an accountable plan, your reimbursement or expense
allowance arrangement must meet the qualifying requirements,
explained later. A reimbursement or expense allowance
arrangement is a system by which you substantiate and pay
the advances, reimbursements, and charges for your
employees' business expenses. If you make a single payment
to your employees and it includes both wages and an expense
reimbursement, you must specify the amount of the
reimbursement.
Qualifying requirements. To qualify
as an accountable plan, your reimbursement or expense
allowance arrangement must require your employees to meet
all of the following rules:
- They must have paid or incurred deductible expenses
while performing services as your employees,
- They must adequately account to you for these expenses
within a reasonable period of time, and
- They must return any excess reimbursement or allowance
within a reasonable period of time.
Please refer to Publication
535, Business Expenses, for additional information about
accountable and nonaccountable plans.
References:
If our business pays for an employee's airfare on a
business trip, but the employee does not submit an expense
form relating to the travel, do we need to issue a Form
1099-MISC?
No, you should report the amounts as wages on Form W-2.
Payments to your employee for travel and other necessary
expenses of your business under a nonaccountable plan are
wages and subject to income tax withholding and payment of
social security, Medicare, and FUTA taxes. Your payments are
treated as paid under a nonaccountable plan if:
- Your employee is not required to or does not
substantiate timely those expenses to you with receipts
or other documentation, or
- You advance an amount to your employee for business
expenses and your employee is not required to or does
not return timely any amount he or she does not use for
business expenses.
The amount of the airfare should be included on the
employee's Form W-2.
References:
How should a tuition reimbursement program for employees
be reported as income to an employee? Should the employee be
taxed at the 28% rate for supplemental payments on the next
pay check after successful completion of the course or is
this something that we just include on the W-2?
For employment tax and withholding purposes, you can
treat fringe benefits as paid on a pay period, a quarter, a
semiannual, annual, or other basis as long as the benefits
are treated as paid no less frequently than annually. You do
not have to choose the same period for all employees.
You can change the period as often as you like as long as
you treat all the benefits provided in a calendar year as
paid no later than December 31. You can also treat the value
of a single fringe benefit as paid on one or more dates in
the same calendar year, even if the employee receives the
entire benefit at one time.
You can add the value of fringe benefits to regular wages
for a payroll period and figure income tax withholding on
the total, or you can withhold Federal income tax on the
value of fringe benefits at the flat 28% rate applicable to
supplemental wages. You must withhold the applicable income,
social security, and Medicare taxes on the date or dates you
chose to treat the benefits as paid. Deposit the amounts
withheld as discussed in section 11 of Publication
15, Circular E, Employer's Tax Guide.
References:
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