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1040nr 2013 3. 1040nr 2013 Savings Incentive Match Plans for Employees (SIMPLE) Table of Contents Introduction What Is a SIMPLE Plan?Eligible Employees How Are Contributions Made? How Much Can Be Contributed on Your Behalf?Matching contributions less than 3%. 1040nr 2013 Traditional IRA mistakenly moved to SIMPLE IRA. 1040nr 2013 When Can You Withdraw or Use Assets?Are Distributions Taxable? Introduction This chapter is for employees who need information about savings incentive match plans for employees (SIMPLE plans). 1040nr 2013 It explains what a SIMPLE plan is, contributions to a SIMPLE plan, and distributions from a SIMPLE plan. 1040nr 2013 Under a SIMPLE plan, SIMPLE retirement accounts for participating employees can be set up either as: Part of a 401(k) plan, or A plan using IRAs (SIMPLE IRA). 1040nr 2013 This chapter only discusses the SIMPLE plan rules that relate to SIMPLE IRAs. 1040nr 2013 See chapter 3 of Publication 560 for information on any special rules for SIMPLE plans that do not use IRAs. 1040nr 2013 If your employer maintains a SIMPLE plan, you must be notified, in writing, that you can choose the financial institution that will serve as trustee for your SIMPLE IRA and that you can roll over or transfer your SIMPLE IRA to another financial institution. 1040nr 2013 See Rollovers and Transfers Exception, later under When Can You Withdraw or Use Assets. 1040nr 2013 What Is a SIMPLE Plan? A SIMPLE plan is a tax-favored retirement plan that certain small employers (including self-employed individuals) can set up for the benefit of their employees. 1040nr 2013 See chapter 3 of Publication 560 for information on the requirements employers must satisfy to set up a SIMPLE plan. 1040nr 2013 A SIMPLE plan is a written agreement (salary reduction agreement) between you and your employer that allows you, if you are an eligible employee (including a self-employed individual), to choose to: Reduce your compensation (salary) by a certain percentage each pay period, and Have your employer contribute the salary reductions to a SIMPLE IRA on your behalf. 1040nr 2013 These contributions are called salary reduction contributions. 1040nr 2013 All contributions under a SIMPLE IRA plan must be made to SIMPLE IRAs, not to any other type of IRA. 1040nr 2013 The SIMPLE IRA can be an individual retirement account or an individual retirement annuity, described in chapter 1. 1040nr 2013 Contributions are made on behalf of eligible employees. 1040nr 2013 (See Eligible Employees below. 1040nr 2013 ) Contributions are also subject to various limits. 1040nr 2013 (See How Much Can Be Contributed on Your Behalf , later. 1040nr 2013 ) In addition to salary reduction contributions, your employer must make either matching contributions or nonelective contributions. 1040nr 2013 See How Are Contributions Made , later. 1040nr 2013 You may be able to claim a credit for contributions to your SIMPLE plan. 1040nr 2013 For more information, see chapter 4. 1040nr 2013 Eligible Employees You must be allowed to participate in your employer's SIMPLE plan if you: Received at least $5,000 in compensation from your employer during any 2 years prior to the current year, and Are reasonably expected to receive at least $5,000 in compensation during the calendar year for which contributions are made. 1040nr 2013 Self-employed individual. 1040nr 2013 For SIMPLE plan purposes, the term employee includes a self-employed individual who received earned income. 1040nr 2013 Excludable employees. 1040nr 2013 Your employer can exclude the following employees from participating in the SIMPLE plan. 1040nr 2013 Employees whose retirement benefits are covered by a collective bargaining agreement (union contract). 1040nr 2013 Employees who are nonresident aliens and received no earned income from sources within the United States. 1040nr 2013 Employees who would not have been eligible employees if an acquisition, disposition, or similar transaction had not occurred during the year. 1040nr 2013 Compensation. 1040nr 2013 For purposes of the SIMPLE plan rules, your compensation for a year generally includes the following amounts. 1040nr 2013 Wages, tips, and other pay from your employer that is subject to income tax withholding. 1040nr 2013 Deferred amounts elected under any 401(k) plans, 403(b) plans, government (section 457) plans, SEP plans, and SIMPLE plans. 1040nr 2013 Self-employed individual compensation. 1040nr 2013 For purposes of the SIMPLE plan rules, if you are self-employed, your compensation for a year is your net earnings from self-employment (Schedule SE (Form 1040), Section A, line 4, or Section B, line 6) before subtracting any contributions made to a SIMPLE IRA on your behalf. 1040nr 2013 For these purposes, net earnings from self-employment include services performed while claiming exemption from self-employment tax as a member of a group conscientiously opposed to social security benefits. 1040nr 2013 How Are Contributions Made? Contributions under a salary reduction agreement are called salary reduction contributions. 1040nr 2013 They are made on your behalf by your employer. 1040nr 2013 Your employer must also make either matching contributions or nonelective contributions. 1040nr 2013 Salary reduction contributions. 1040nr 2013 During the 60-day period before the beginning of any year, and during the 60-day period before you are eligible, you can choose salary reduction contributions expressed either as a percentage of compensation, or as a specific dollar amount (if your employer offers this choice). 1040nr 2013 You can choose to cancel the election at any time during the year. 1040nr 2013 Salary reduction contributions are also referred to as “elective deferrals. 1040nr 2013 ” Your employer cannot place restrictions on the contributions amount (such as by limiting the contributions percentage), except to comply with the salary reduction contributions limit, discussed under How Much Can Be Contributed on Your Behalf, later. 1040nr 2013 Matching contributions. 1040nr 2013 Unless your employer chooses to make nonelective contributions, your employer must make contributions equal to the salary reduction contributions you choose (elect), but only up to certain limits. 1040nr 2013 See How Much Can Be Contributed on Your Behalf below. 1040nr 2013 These contributions are in addition to the salary reduction contributions and must be made to the SIMPLE IRAs of all eligible employees (defined earlier) who chose salary reductions. 1040nr 2013 These contributions are referred to as matching contributions. 1040nr 2013 Matching contributions on behalf of a self-employed individual are not treated as salary reduction contributions. 1040nr 2013 Nonelective contributions. 1040nr 2013 Instead of making matching contributions, your employer may be able to choose to make nonelective contributions on behalf of all eligible employees. 1040nr 2013 These nonelective contributions must be made on behalf of each eligible employee who has at least $5,000 of compensation from your employer, whether or not the employee chose salary reductions. 1040nr 2013 One of the requirements your employer must satisfy is notifying the employees that the election was made. 1040nr 2013 For other requirements that your employer must satisfy, see chapter 3 of Publication 560. 1040nr 2013 How Much Can Be Contributed on Your Behalf? The limits on contributions to a SIMPLE IRA vary with the type of contribution that is made. 1040nr 2013 Salary reduction contributions limit. 1040nr 2013 Salary reduction contributions (employee-chosen contributions or elective deferrals) that your employer can make on your behalf under a SIMPLE plan are limited to $12,000 for 2013. 1040nr 2013 The limitation remains at $12,000 for 2014. 1040nr 2013 If you are a participant in any other employer plans during 2013 and you have elective salary reductions or deferred compensation under those plans, the salary reduction contributions under the SIMPLE plan also are included in the annual limit of $17,500 for 2013 on exclusions of salary reductions and other elective deferrals. 1040nr 2013 You, not your employer, are responsible for monitoring compliance with these limits. 1040nr 2013 Additional elective deferrals can be contributed to your SIMPLE plan if: You reached age 50 by the end of 2013, and No other elective deferrals can be made for you to the plan for the year because of limits or restrictions, such as the regular annual limit. 1040nr 2013 The most that can be contributed in additional elective deferrals to your SIMPLE plan is the lesser of the following two amounts. 1040nr 2013 $2,500 for 2013, or Your compensation for the year reduced by your other elective deferrals for the year. 1040nr 2013 The additional deferrals are not subject to any other contribution limit and are not taken into account in applying other contribution limits. 1040nr 2013 The additional deferrals are not subject to the nondiscrimination rules as long as all eligible participants are allowed to make them. 1040nr 2013 Matching employer contributions limit. 1040nr 2013 Generally, your employer must make matching contributions to your SIMPLE IRA in an amount equal to your salary reduction contributions. 1040nr 2013 These matching contributions cannot be more than 3% of your compensation for the calendar year. 1040nr 2013 See Matching contributions less than 3% below. 1040nr 2013 Example 1. 1040nr 2013 In 2013, Joshua was a participant in his employer's SIMPLE plan. 1040nr 2013 His compensation, before SIMPLE plan contributions, was $41,600 ($800 per week). 1040nr 2013 Instead of taking it all in cash, Joshua elected to have 12. 1040nr 2013 5% of his weekly pay ($100) contributed to his SIMPLE IRA. 1040nr 2013 For the full year, Joshua's salary reduction contributions were $5,200, which is less than the $12,000 limit on these contributions. 1040nr 2013 Under the plan, Joshua's employer was required to make matching contributions to Joshua's SIMPLE IRA. 1040nr 2013 Because his employer's matching contributions must equal Joshua's salary reductions, but cannot be more than 3% of his compensation (before salary reductions) for the year, his employer's matching contribution was limited to $1,248 (3% of $41,600). 1040nr 2013 Example 2. 1040nr 2013 Assume the same facts as in Example 1 , except that Joshua's compensation for the year was $408,163 and he chose to have 2. 1040nr 2013 94% of his weekly pay contributed to his SIMPLE IRA. 1040nr 2013 In this example, Joshua's salary reduction contributions for the year (2. 1040nr 2013 94% × $408,163) were equal to the 2013 limit for salary reduction contributions ($12,000). 1040nr 2013 Because 3% of Joshua's compensation ($12,245) is more than the amount his employer was required to match ($12,000), his employer's matching contributions were limited to $12,000. 1040nr 2013 In this example, total contributions made on Joshua's behalf for the year were $24,000 ($12,000 (Joshua's contributions) + $12,000 (matching contributions)), the maximum contributions permitted under a SIMPLE IRA for 2013. 1040nr 2013 Matching contributions less than 3%. 1040nr 2013 Your employer can reduce the 3% limit on matching contributions for a calendar year, but only if: The limit is not reduced below 1%, The limit is not reduced for more than 2 years out of the 5-year period that ends with (and includes) the year for which the election is effective, and Employees are notified of the reduced limit within a reasonable period of time before the 60-day election period during which they can enter into salary reduction agreements. 1040nr 2013 For purposes of applying the rule in item (2) in determining whether the limit was reduced below 3% for the year, any year before the first year in which your employer (or a former employer) maintains a SIMPLE IRA plan will be treated as a year for which the limit was 3%. 1040nr 2013 If your employer chooses to make nonelective contributions for a year, that year also will be treated as a year for which the limit was 3%. 1040nr 2013 Nonelective employer contributions limit. 1040nr 2013 If your employer chooses to make nonelective contributions, instead of matching contributions, to each eligible employee's SIMPLE IRA, contributions must be 2% of your compensation for the entire year. 1040nr 2013 For 2013, only $255,000 of your compensation can be taken into account to figure the contribution limit. 1040nr 2013 Your employer can substitute the 2% nonelective contribution for the matching contribution for a year if both of the following requirements are met. 1040nr 2013 Eligible employees are notified that a 2% nonelective contribution will be made instead of a matching contribution. 1040nr 2013 This notice is provided within a reasonable period during which employees can enter into salary reduction agreements. 1040nr 2013 Example 3. 1040nr 2013 Assume the same facts as in Example 2 , except that Joshua's employer chose to make nonelective contributions instead of matching contributions. 1040nr 2013 Because his employer's nonelective contributions are limited to 2% of up to $255,000 of Joshua's compensation, his employer's contribution to Joshua's SIMPLE IRA was limited to $5,100. 1040nr 2013 In this example, total contributions made on Joshua's behalf for the year were $17,100 (Joshua's salary reductions of $12,000 plus his employer's contribution of $5,100). 1040nr 2013 Traditional IRA mistakenly moved to SIMPLE IRA. 1040nr 2013 If you mistakenly roll over or transfer an amount from a traditional IRA to a SIMPLE IRA, you can later recharacterize the amount as a contribution to another traditional IRA. 1040nr 2013 For more information, see Recharacterizations in chapter 1. 1040nr 2013 Recharacterizing employer contributions. 1040nr 2013 You cannot recharacterize employer contributions (including elective deferrals) under a SEP or SIMPLE plan as contributions to another IRA. 1040nr 2013 SEPs are discussed in chapter 2 of Publication 560. 1040nr 2013 SIMPLE plans are discussed in this chapter. 1040nr 2013 Converting from a SIMPLE IRA. 1040nr 2013 Generally, you can convert an amount in your SIMPLE IRA to a Roth IRA under the same rules explained in chapter 1 under Converting From Any Traditional IRA Into a Roth IRA . 1040nr 2013 However, you cannot convert any amount distributed from the SIMPLE IRA during the 2-year period beginning on the date you first participated in any SIMPLE IRA plan maintained by your employer. 1040nr 2013 When Can You Withdraw or Use Assets? Generally, the same distribution (withdrawal) rules that apply to traditional IRAs apply to SIMPLE IRAs. 1040nr 2013 These rules are discussed in chapter 1. 1040nr 2013 Your employer cannot restrict you from taking distributions from a SIMPLE IRA. 1040nr 2013 Are Distributions Taxable? Generally, distributions from a SIMPLE IRA are fully taxable as ordinary income. 1040nr 2013 If the distribution is an early distribution (discussed in chapter 1), it may be subject to the additional tax on early distributions. 1040nr 2013 See Additional Tax on Early Distributions, later. 1040nr 2013 Rollovers and Transfers Exception Generally, rollovers and trustee-to-trustee transfers are not taxable distributions. 1040nr 2013 Two-year rule. 1040nr 2013 To qualify as a tax-free rollover (or a tax-free trustee-to-trustee transfer), a rollover distribution (or a transfer) made from a SIMPLE IRA during the 2-year period beginning on the date on which you first participated in your employer's SIMPLE plan must be contributed (or transferred) to another SIMPLE IRA. 1040nr 2013 The 2-year period begins on the first day on which contributions made by your employer are deposited in your SIMPLE IRA. 1040nr 2013 After the 2-year period, amounts in a SIMPLE IRA can be rolled over or transferred tax free to an IRA other than a SIMPLE IRA, or to a qualified plan, a tax-sheltered annuity plan (section 403(b) plan), or deferred compensation plan of a state or local government (section 457 plan). 1040nr 2013 Additional Tax on Early Distributions The additional tax on early distributions (discussed in chapter 1) applies to SIMPLE IRAs. 1040nr 2013 If a distribution is an early distribution and occurs during the 2-year period following the date on which you first participated in your employer's SIMPLE plan, the additional tax on early distributions is increased from 10% to 25%. 1040nr 2013 If a rollover distribution (or transfer) from a SIMPLE IRA does not satisfy the 2-year rule, and is otherwise an early distribution, the additional tax imposed because of the early distribution is increased from 10% to 25% of the amount distributed. 1040nr 2013 Prev Up Next Home More Online Publications
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1040nr 2013 Publication 3991 - Introductory Material Table of Contents Introduction Introduction All of the changes discussed in this publication resulted from the Job Creation and Worker Assistance Act of 2002. 1040nr 2013 This publication highlights tax law changes that took effect retroactively for 2001 and others that take effect in 2002 and later years. 1040nr 2013 The chapters are divided into separate sections based on when the changes take effect. 1040nr 2013 For example, this publication covers the following topics. 1040nr 2013 Tax benefits for the area of New York City damaged in terrorist attacks on September 11, 2001. 1040nr 2013 New deduction available for educator expenses. 1040nr 2013 Limit on the use of the non-accrual experience method of accounting. 1040nr 2013 Pension changes such as the new tax credit for certain pension plan startup costs, an increased SEP contribution limit, figuring 403(b) catch-up contributions, and a provision for deemed IRAs. 1040nr 2013 Extension of the welfare-to-work credit and work opportunity credit. 1040nr 2013 New 5-year carryback rule for net operating losses (NOLs). 1040nr 2013 See the discussion of each topic for more information. 1040nr 2013 Certain changes had a major effect on two of the publications we issued for 2001. 1040nr 2013 We published supplements to those two publications and they have been included in this publication as follows. 1040nr 2013 Chapter 4 contains the supplement to Publication 463, Travel, Entertainment, Gift, and Car Expenses. 1040nr 2013 This discusses the increase in the amount of depreciation deduction for certain automobiles. 1040nr 2013 Chapter 5 contains the supplement to Publication 946, How To Depreciate Property. 1040nr 2013 This discusses the special depreciation allowance for property acquired after September 10, 2001. 1040nr 2013 Adjusting your withholding or estimated tax payments for 2002. 1040nr 2013 If your tax for 2002 will be more or less than your 2001 tax, you may need to adjust your withholding or estimated tax payments accordingly. 1040nr 2013 If your tax will decrease, you can get the benefit of lower taxes throughout the year. 1040nr 2013 If you will owe more tax, you can avoid a penalty when you file your tax return. 1040nr 2013 See the following table for forms and publications that will help you adjust your withholding or estimated tax payments. 1040nr 2013 See chapter 6 for information on ordering forms and publications. 1040nr 2013 To adjust your. 1040nr 2013 . 1040nr 2013 . 1040nr 2013 . 1040nr 2013 Get Form. 1040nr 2013 . 1040nr 2013 . 1040nr 2013 And Publication. 1040nr 2013 . 1040nr 2013 . 1040nr 2013 Withholding W–4, Employee's Withholding Allowance Certificate 919, How Do I Adjust My Tax Withholding? Estimated tax payments 1040–ES, Estimated Tax for Individuals 505, Tax Withholding and Estimated Tax Photographs of missing children. 1040nr 2013 The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. 1040nr 2013 Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. 1040nr 2013 You can help bring these children home by looking at the photographs and calling 1–800–THE–LOST (1–800–843–5678) if you recognize a child. 1040nr 2013 Comments and suggestions. 1040nr 2013 We welcome your comments about this publication. 1040nr 2013 You can e-mail us while visiting our web site at www. 1040nr 2013 irs. 1040nr 2013 gov. 1040nr 2013 You can write to us at the following address: Internal Revenue Service Technical Publications Branch W:CAR:MP:FP:P 1111 Constitution Ave. 1040nr 2013 NW Washington, DC 20224 We respond to many letters by telephone. 1040nr 2013 Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. 1040nr 2013 Prev Up Next Home More Online Publications