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2009 Tax Forms 1040

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2009 Tax Forms 1040

2009 tax forms 1040 2. 2009 tax forms 1040   Possession Source Income Table of Contents Types of IncomeCompensation for Labor or Personal Services Investment Income Sales or Other Dispositions of Property Scholarships, Fellowships, Grants, Prizes, and Awards Effectively Connected Income In order to determine where to file your return and which form(s) you need to complete, you must determine the source of each item of income you received during the tax year. 2009 tax forms 1040 Income you received from sources within, or that was effectively connected with the conduct of a trade or business within, the relevant possession must be identified separately from U. 2009 tax forms 1040 S. 2009 tax forms 1040 or foreign source income. 2009 tax forms 1040 This chapter discusses the rules for determining if the source of your income is from: American Samoa, The Commonwealth of the Northern Mariana Islands (CNMI), The Commonwealth of Puerto Rico (Puerto Rico), Guam, or The U. 2009 tax forms 1040 S. 2009 tax forms 1040 Virgin Islands (USVI). 2009 tax forms 1040 Generally, the same rules that apply for determining U. 2009 tax forms 1040 S. 2009 tax forms 1040 source income also apply for determining possession source income. 2009 tax forms 1040 However, there are some important exceptions to these rules. 2009 tax forms 1040 Both the general rules and the exceptions are discussed in this chapter. 2009 tax forms 1040 U. 2009 tax forms 1040 S. 2009 tax forms 1040 income rule. 2009 tax forms 1040   This rule states that income is not possession source income if, under the rules of Internal Revenue Code sections 861–865, it is treated as income: From sources within the United States, or Effectively connected with the conduct of a trade or business within the United States. 2009 tax forms 1040 Table 2-1 shows the general rules for determining whether income is from sources within the United States. 2009 tax forms 1040 Table 2-1. 2009 tax forms 1040 General Rules for Determining U. 2009 tax forms 1040 S. 2009 tax forms 1040 Source of Income Item of Income Factor Determining Source Salaries, wages, and other compensation for labor or personal services Where labor or services performed Pensions Contributions: Where services were performed that earned the pension Investment earnings: Where pension trust is located Interest Residence of payer Dividends Where corporation created or organized Rents Location of property Royalties:   Natural resources Location of property Patents, copyrights, etc. 2009 tax forms 1040 Where property is used Sale of business inventory—purchased Where sold Sale of business inventory—produced Allocation if produced and sold in different locations Sale of real property Location of property Sale of personal property Seller's tax home (but see Special Rules for Gains From Dispositions of Certain Property , later, for exceptions) Sale of natural resources Allocation based on fair market value of product at export terminal. 2009 tax forms 1040 For more information, see Regulations section 1. 2009 tax forms 1040 863-1(b). 2009 tax forms 1040 Types of Income This section looks at the most common types of income received by individuals, and the rules for determining the source of the income. 2009 tax forms 1040 Generally, the same rules shown in Table 2-1 are used to determine if you have possession source income. 2009 tax forms 1040 Compensation for Labor or Personal Services Income from labor or personal services includes wages, salaries, commissions, fees, per diem allowances, employee allowances and bonuses, and fringe benefits. 2009 tax forms 1040 It also includes income earned by sole proprietors and general partners from providing personal services in the course of their trade or business. 2009 tax forms 1040 Services performed wholly within a relevant possession. 2009 tax forms 1040   Generally, all pay you receive for services performed in a relevant possession is considered to be from sources within that possession. 2009 tax forms 1040 However, there is an exception for income earned as a member of the U. 2009 tax forms 1040 S. 2009 tax forms 1040 Armed Forces or a civilian spouse. 2009 tax forms 1040 U. 2009 tax forms 1040 S. 2009 tax forms 1040 Armed Forces. 2009 tax forms 1040   If you are a bona fide resident of a relevant possession, your military service pay will be sourced in that possession even if you perform the services in the United States or another possession. 2009 tax forms 1040 However, if you are not a bona fide resident of a possession, your military service pay will be income from the  United States even if you perform services in a possession. 2009 tax forms 1040 Civilian spouse of active duty member of the U. 2009 tax forms 1040 S. 2009 tax forms 1040 Armed Forces. 2009 tax forms 1040   If you are a bona fide resident of a U. 2009 tax forms 1040 S. 2009 tax forms 1040 possession and choose to keep that possession as your tax residence under MSRRA when relocating with your servicemember spouse under military orders, the source of income for your labor or personal services is considered to be that possession. 2009 tax forms 1040 Likewise, if your tax residence is in one of the 50 states or the District of Columbia before relocating and you choose to keep it as your tax residence, the source of income for services performed in any of the U. 2009 tax forms 1040 S. 2009 tax forms 1040 possessions is considered to be the United States and, specifically, your state of residence or the District of Columbia. 2009 tax forms 1040 Services performed partly inside and partly outside a relevant possession. 2009 tax forms 1040   If you are an employee and receive compensation for labor or personal services performed both inside and outside the relevant possession, special rules apply in determining the source of the compensation. 2009 tax forms 1040 Compensation (other than certain fringe benefits) is sourced on a time basis. 2009 tax forms 1040 Certain fringe benefits (such as housing and education) are sourced on a geographical basis. 2009 tax forms 1040   Or, you may be permitted to use an alternative basis to determine the source of compensation. 2009 tax forms 1040 See Alternative basis , later. 2009 tax forms 1040   If you are self-employed, determine the source of your income for labor or personal services from self-employment on the basis that most correctly reflects the proper source of that income under the facts and circumstances of your particular case. 2009 tax forms 1040 In many cases, the facts and circumstances will call for an apportionment on a time basis as explained next. 2009 tax forms 1040 Time basis. 2009 tax forms 1040   Use a time basis to figure your compensation for labor or personal services from the relevant possession (other than the fringe benefits discussed later). 2009 tax forms 1040 Do this by multiplying your total compensation (other than the fringe benefits discussed later) by the following fraction:   Number of days you performed  services in the relevant  possession during the year     Total number of days you  performed services during the year           You can use a unit of time less than a day in the above fraction, if appropriate. 2009 tax forms 1040 The time period for which the income is made does not have to be a year. 2009 tax forms 1040 Instead, you can use another distinct, separate, and continuous time period if you can establish to the satisfaction of the IRS that this other period is more appropriate. 2009 tax forms 1040 Example. 2009 tax forms 1040 In 2013, you worked in your employer's office in the United States for 60 days and in the Puerto Rico office for 180 days, earning a total of $80,000 for the year. 2009 tax forms 1040 Your Puerto Rico source income is $60,000, figured as follows. 2009 tax forms 1040       180 days 240 days × $80,000 = $60,000                 Multi-year compensation. 2009 tax forms 1040   The source of multi-year compensation is generally determined on a time basis over the period to which the compensation is attributable. 2009 tax forms 1040 Multi-year compensation is compensation that is included in your income in 1 tax year but is attributable to a period that includes 2 or more tax years. 2009 tax forms 1040 You determine the period to which the income is attributable based on the facts and circumstances of your case. 2009 tax forms 1040 For more information on multi-year compensation, see Treasury Decision (T. 2009 tax forms 1040 D. 2009 tax forms 1040 ) 9212 and Regulations section 1. 2009 tax forms 1040 861-4, 2005-35 I. 2009 tax forms 1040 R. 2009 tax forms 1040 B. 2009 tax forms 1040 429, available at www. 2009 tax forms 1040 irs. 2009 tax forms 1040 gov/irb/2005-35_IRB/ar14. 2009 tax forms 1040 html. 2009 tax forms 1040 Certain fringe benefits sourced on a geographical basis. 2009 tax forms 1040   If you received any of the following fringe benefits as compensation for labor or services performed as an employee partly inside and partly outside a relevant possession, you must source that income on a geographical basis. 2009 tax forms 1040 Housing. 2009 tax forms 1040 Education. 2009 tax forms 1040 Local transportation. 2009 tax forms 1040 Tax reimbursement. 2009 tax forms 1040 Hazardous or hardship duty pay. 2009 tax forms 1040 Moving expense reimbursement. 2009 tax forms 1040 For information on determining the source of the fringe benefits listed above, see Regulations section 1. 2009 tax forms 1040 861-4. 2009 tax forms 1040 Alternative basis. 2009 tax forms 1040   You can determine the source of your compensation under an alternative basis if you establish to the satisfaction of the IRS that, under the facts and circumstances of your case, the alternative basis more properly determines the source of your income than the time or geographical basis. 2009 tax forms 1040 If you use an alternative basis, you must keep (and have available for inspection) records to document why the alternative basis more properly determines the source of your income. 2009 tax forms 1040 De minimis exception. 2009 tax forms 1040   There is an exception to the rule for determining the source of income earned in a possession. 2009 tax forms 1040 Generally, you will not have income from a possession if during a tax year you: Are a U. 2009 tax forms 1040 S. 2009 tax forms 1040 citizen or resident, Are not a bona fide resident of that possession, Are not employed by or under contract with an individual, partnership, or corporation that is engaged in a trade or business in that possession, Temporarily perform services in that possession for 90 days or less, and Earned $3,000 or less from such services. 2009 tax forms 1040 This exception began with income earned during your 2008 tax year. 2009 tax forms 1040 Pensions. 2009 tax forms 1040   Generally, pension income has two components: contributions to the pension plan and the earnings accrued from investing those contributions. 2009 tax forms 1040 The contribution portion is sourced according to where services were performed that earned the pension. 2009 tax forms 1040 The investment earnings portion is sourced according to the location of the pension trust. 2009 tax forms 1040 Example. 2009 tax forms 1040 You are a U. 2009 tax forms 1040 S. 2009 tax forms 1040 citizen who worked in Puerto Rico for a U. 2009 tax forms 1040 S. 2009 tax forms 1040 company. 2009 tax forms 1040 All services were performed in Puerto Rico. 2009 tax forms 1040 Upon retirement you remained in Puerto Rico and began receiving your pension from the U. 2009 tax forms 1040 S. 2009 tax forms 1040 pension trust of your employer. 2009 tax forms 1040 Distributions from the U. 2009 tax forms 1040 S. 2009 tax forms 1040 pension trust must be allocated between (1) contributions, which are Puerto Rico source income, and (2) investment earnings, which are U. 2009 tax forms 1040 S. 2009 tax forms 1040 source income. 2009 tax forms 1040 Investment Income This category includes such income as interest, dividends, rents, and royalties. 2009 tax forms 1040 Interest income. 2009 tax forms 1040   The source of interest income is generally determined by the residence of the payer. 2009 tax forms 1040 Interest paid by corporations created or organized in a relevant possession (possession corporation) or by individuals who are bona fide residents of a relevant possession is considered income from sources within that possession. 2009 tax forms 1040   However, there is an exception to this rule if you are a bona fide resident of a relevant possession, receive interest from a corporation created or organized in that possession, and are a shareholder of that corporation who owns, directly or indirectly, at least 10% of the total voting stock of the corporation. 2009 tax forms 1040 See Regulations section 1. 2009 tax forms 1040 937-2(i) for more information. 2009 tax forms 1040 Dividends. 2009 tax forms 1040   Generally, dividends paid by a corporation created or organized in a relevant possession will be considered income from sources within that possession. 2009 tax forms 1040 There are additional rules for bona fide residents of a relevant possession who receive dividend income from possession corporations, and who own, directly or indirectly, at least 10% of the voting stock of the corporation. 2009 tax forms 1040 For more information, see Regulations section 1. 2009 tax forms 1040 937-2(g). 2009 tax forms 1040 Rental income. 2009 tax forms 1040   Rents from property located in a relevant possession are treated as income from sources within that possession. 2009 tax forms 1040 Royalties. 2009 tax forms 1040   Royalties from natural resources located in a relevant possession are considered income from sources within that possession. 2009 tax forms 1040   Also considered possession source income are royalties received for the use of, or for the privilege of using, in a relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and other like property. 2009 tax forms 1040 Sales or Other Dispositions of Property The source rules for sales or other dispositions of property are varied. 2009 tax forms 1040 The most common situations are discussed below. 2009 tax forms 1040 Real property. 2009 tax forms 1040   Real property includes land and buildings, and generally anything built on, growing on, or attached to land. 2009 tax forms 1040 The location of the property generally determines the source of income from the sale. 2009 tax forms 1040 For example, if you are a bona fide resident of Guam and sell your home that is located in Guam, the gain on the sale is sourced in Guam. 2009 tax forms 1040 If, however, the home you sold was located in the United States, the gain is U. 2009 tax forms 1040 S. 2009 tax forms 1040 source income. 2009 tax forms 1040 Personal property. 2009 tax forms 1040   The term “personal property” refers to property (such as machinery, equipment, or furniture) that is not real property. 2009 tax forms 1040 Generally, gain (or loss) from the sale or other disposition is sourced according to the seller's tax home. 2009 tax forms 1040 If personal property is sold by a bona fide resident of a relevant possession, the gain (or loss) from the sale is treated as sourced within that possession. 2009 tax forms 1040   This rule does not apply to the sale of inventory, intangible property, depreciable personal property, or property sold through a foreign office or fixed place of business. 2009 tax forms 1040 The rules applying to sales of inventory are discussed below. 2009 tax forms 1040 For information on sales of the other types of property mentioned, see Internal Revenue Code section 865. 2009 tax forms 1040 Inventory. 2009 tax forms 1040   Your inventory is personal property that is stock in trade or that is held primarily for sale to customers in the ordinary course of your trade or business. 2009 tax forms 1040 The source of income from the sale of inventory depends on whether the inventory was purchased or produced. 2009 tax forms 1040 Purchased. 2009 tax forms 1040   Income from the sale of inventory that you purchased is sourced where you sell the property. 2009 tax forms 1040 Generally, this is where title to the property passes to the buyer. 2009 tax forms 1040 Produced. 2009 tax forms 1040   Income from the sale of inventory that you produced in a relevant possession and sold outside that possession (or vice versa) is sourced based on an allocation. 2009 tax forms 1040 For information on making the allocation, see Regulations section 1. 2009 tax forms 1040 863-3(f). 2009 tax forms 1040 Special Rules for Gains From Dispositions of Certain Property There are special rules for gains from dispositions of certain investment property (for example, stocks, bonds, debt instruments, diamonds, and gold) owned by a U. 2009 tax forms 1040 S. 2009 tax forms 1040 citizen or resident alien prior to becoming a bona fide resident of a possession. 2009 tax forms 1040 You are subject to these special rules if you meet both of the following conditions. 2009 tax forms 1040 For the tax year for which the source of the gain must be determined, you are a bona fide resident of the relevant possession. 2009 tax forms 1040 For any of the 10 years preceding that year, you were a citizen or resident alien of the United States (other than a bona fide resident of the relevant possession). 2009 tax forms 1040 If you meet these conditions, gains from the disposition of this property will not be treated as income from sources within the relevant possession for purposes of the Internal Revenue Code. 2009 tax forms 1040 Accordingly, bona fide residents of American Samoa and Puerto Rico, for example, may not exclude the gain on their U. 2009 tax forms 1040 S. 2009 tax forms 1040 tax return. 2009 tax forms 1040 (See chapter 3 for additional filing information. 2009 tax forms 1040 ) With respect to the CNMI, Guam, and the USVI, the gain from the disposition of this property will not meet the requirements for certain tax rules that may allow bona fide residents of those possessions to reduce or obtain a rebate of taxes on income from sources within the relevant possessions. 2009 tax forms 1040 These rules apply to dispositions after April 11, 2005. 2009 tax forms 1040 For details, see Regulations section 1. 2009 tax forms 1040 937-2(f)(1) and Examples 1 and 2 of section 1. 2009 tax forms 1040 937-2(k). 2009 tax forms 1040 Example 1. 2009 tax forms 1040 In 2007, Cheryl Jones, a U. 2009 tax forms 1040 S. 2009 tax forms 1040 citizen, lived in the United States and paid $1,000 for 100 shares of stock in the Rose Corporation, a U. 2009 tax forms 1040 S. 2009 tax forms 1040 corporation listed on the New York Stock Exchange. 2009 tax forms 1040 On March 1, 2010, she moved to Puerto Rico and changed her tax home to Puerto Rico on the same date. 2009 tax forms 1040 Cheryl satisfied the presence test in 2010 and, under the year-of-move exception, she was considered a bona fide resident of Puerto Rico for the rest of 2010. 2009 tax forms 1040 On March 1, 2010, the closing value of Cheryl's stock in the Rose Corporation was $2,000. 2009 tax forms 1040 On January 5, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold all her Rose Corporation stock for $7,000. 2009 tax forms 1040 Under the earlier rules, none of Cheryl's $6,000 gain will be treated as income from sources within Puerto Rico. 2009 tax forms 1040 The source rules discussed in the preceding paragraphs supplement, and may apply in conjunction with, an existing special rule. 2009 tax forms 1040 This existing special rule applies if you are a U. 2009 tax forms 1040 S. 2009 tax forms 1040 citizen or resident alien who becomes a bona fide resident of American Samoa, the CNMI, or Guam, and who has gain from the disposition of certain U. 2009 tax forms 1040 S. 2009 tax forms 1040 assets during the 10-year period beginning when you became a bona fide resident. 2009 tax forms 1040 The gain is U. 2009 tax forms 1040 S. 2009 tax forms 1040 source income that generally is subject to U. 2009 tax forms 1040 S. 2009 tax forms 1040 tax if the property is either (1) located in the United States; (2) stock issued by a U. 2009 tax forms 1040 S. 2009 tax forms 1040 corporation or a debt obligation of a U. 2009 tax forms 1040 S. 2009 tax forms 1040 person or of the United States, a state (or political subdivision), or the District of Columbia; or (3) property that has a basis in whole or in part by reference to property described in (1) or (2). 2009 tax forms 1040 See chapter 3 for filing information. 2009 tax forms 1040 Special election. 2009 tax forms 1040   For dispositions after April 11, 2005, you can choose to treat the part of gain (or loss) attributable to the time you held the property while a bona fide resident of the relevant possession (the possession holding period) as gain (or loss) from sources within that possession. 2009 tax forms 1040 Make the election by reporting the gain attributable to the possession holding period on your income tax return for the year of disposition. 2009 tax forms 1040 This election overrides both of the special rules discussed earlier. 2009 tax forms 1040   There are two methods for figuring the gain for the possession holding period, one for marketable securities and another for other types of investment property. 2009 tax forms 1040 Marketable securities. 2009 tax forms 1040   Marketable securities are those actively traded on an established financial market, such as stock in a publicly held corporation. 2009 tax forms 1040 Under the special election, allocate the gain (or loss) by figuring the appreciation separately for your possession and U. 2009 tax forms 1040 S. 2009 tax forms 1040 holding periods. 2009 tax forms 1040   Your possession holding period begins on the first day you do not have a tax home outside the relevant possession. 2009 tax forms 1040 The gain (or loss) attributable to the possession holding period is the difference in fair market value of the security at the close of the market on the first and last days of this holding period. 2009 tax forms 1040 This is your gain (or loss) that is treated as being from sources within the relevant possession. 2009 tax forms 1040 If you were a bona fide resident of the relevant possession for more than one continuous period, combine the gains (or losses) from each possession holding period. 2009 tax forms 1040 Example 2. 2009 tax forms 1040 Assume the same facts as in Example 1, except that Cheryl makes the special election to allocate the gain between her U. 2009 tax forms 1040 S. 2009 tax forms 1040 and possession holding periods. 2009 tax forms 1040 Cheryl's possession holding period began March 1, 2010, the date her tax home changed to Puerto Rico. 2009 tax forms 1040 Therefore, the portion of gain attributable to her possession holding period is $5,000 ($7,000 sale price – $2,000 closing value on first day of the possession holding period). 2009 tax forms 1040 By reporting $5,000 of her $6,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. 2009 tax forms 1040 Other personal property. 2009 tax forms 1040   For personal property other than marketable securities, use a time-based allocation. 2009 tax forms 1040 Figure the gain (or loss) attributable to the possession holding period by multiplying your total gain (or loss) by the following fraction. 2009 tax forms 1040      Number of days in the  possession holding period     Total number of days  in your holding period         The result is your gain (or loss) that is treated as being from sources within the relevant possession. 2009 tax forms 1040 Example 3. 2009 tax forms 1040 In addition to the stock in Rose Corporation, Cheryl acquired a 5% interest in the Alder Partnership on January 1, 2009. 2009 tax forms 1040 On March 1, 2010, when she established bona fide residency in Puerto Rico, her partnership interest was not considered a marketable security. 2009 tax forms 1040 On September 16, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold her interest in Alder Partnership for a $100,000 gain. 2009 tax forms 1040 She had owned the interest for a total of 1,720 days. 2009 tax forms 1040 Cheryl's possession holding period (from March 1, 2010, through September 16, 2013) is 1,296 days. 2009 tax forms 1040 The portion of her gain attributable to Puerto Rico is $75,349 ($100,000 x (1,296 Puerto Rico days ÷ 1,720 total days)). 2009 tax forms 1040 By reporting $75,349 of her $100,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. 2009 tax forms 1040 Scholarships, Fellowships, Grants, Prizes, and Awards The source of these types of income is generally the residence of the payer, regardless of who actually disburses the funds. 2009 tax forms 1040 Therefore, in order to be possession source income, the payer must be a resident of the relevant possession, such as an individual who is a bona fide resident or a corporation created or organized in that possession. 2009 tax forms 1040 These rules do not apply to amounts paid as salary or other compensation for services. 2009 tax forms 1040 See Compensation for Labor or Personal Services, earlier in this chapter, for the source rules that apply. 2009 tax forms 1040 Effectively Connected Income In limited circumstances, some kinds of income from sources outside the relevant possession must be treated as effectively connected with a trade or business in that possession. 2009 tax forms 1040 These circumstances are listed below. 2009 tax forms 1040 You have an office or other fixed place of business in the relevant possession to which the income can be attributed. 2009 tax forms 1040 That office or place of business is a material factor in producing the income. 2009 tax forms 1040 The income is produced in the ordinary course of the trade or business carried on through that office or other fixed place of business. 2009 tax forms 1040 An office or other fixed place of business is a material factor if it significantly contributes to, and is an essential economic element in, the earning of the income. 2009 tax forms 1040 The three kinds of income from sources outside the relevant possession to which these rules apply are the following. 2009 tax forms 1040 Rents and royalties for the use of, or for the privilege of using, intangible personal property located outside the relevant possession or from any interest in such property. 2009 tax forms 1040 Included are rents or royalties for the use of, or for the privilege of using, outside the relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and similar properties if the rents or royalties are from the active conduct of a trade or business in the relevant possession. 2009 tax forms 1040 Dividends or interest from the active conduct of a banking, financing, or similar business in the relevant possession. 2009 tax forms 1040 Income, gain, or loss from the sale or exchange outside the relevant possession, through the office or other fixed place of business in the relevant possession, of: Stock in trade, Property that would be included in inventory if on hand at the end of the tax year, or Property held primarily for sale to customers in the ordinary course of business. 2009 tax forms 1040 Item (3) will not apply if you sold the property for use, consumption, or disposition outside the relevant possession and an office or other fixed place of business in a foreign country was a material factor in the sale. 2009 tax forms 1040 Example. 2009 tax forms 1040 Marcy Jackson is a bona fide resident of American Samoa. 2009 tax forms 1040 Her business, which she conducts from an office in American Samoa, is developing and selling specialized computer software. 2009 tax forms 1040 A software purchaser will frequently pay Marcy an additional amount to install the software on the purchaser's operating system and to ensure that the software is functioning properly. 2009 tax forms 1040 Marcy installs the software at the purchaser's place of business, which may be in American Samoa, in the United States, or in another country. 2009 tax forms 1040 The income from selling the software is effectively connected with the conduct of Marcy's business in American Samoa, even though the product's destination may be outside the possession. 2009 tax forms 1040 However, the compensation she receives for installing the software (personal services) outside of American Samoa is not effectively connected with the conduct of her business in the possession—the income is sourced where she performs the services. 2009 tax forms 1040 Prev  Up  Next   Home   More Online Publications
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The 2009 Tax Forms 1040

2009 tax forms 1040 3. 2009 tax forms 1040   Adjustments to Income Table of Contents Individual Retirement Arrangement (IRA) Contributions and DeductionsContributions to Kay Bailey Hutchison Spousal IRAs. 2009 tax forms 1040 Deductible contribution. 2009 tax forms 1040 Nondeductible contribution. 2009 tax forms 1040 You may be able to subtract amounts from your total income (Form 1040, line 22 or Form 1040A, line 15) or total effectively connected income (Form 1040NR, line 23) to get your adjusted gross income (Form 1040, line 37; Form 1040A, line 21; or Form 1040NR, line 36). 2009 tax forms 1040 Some adjustments to income follow. 2009 tax forms 1040 Contributions to your individual retirement arrangement (IRA) (Form 1040, line 32; Form 1040A, line 17; or Form 1040NR, line 32), explained later in this publication. 2009 tax forms 1040 Certain moving expenses (Form 1040, line 26; or Form 1040NR, line 26) if you changed job locations or started a new job in 2013. 2009 tax forms 1040 See Publication 521, Moving Expenses, or see Form 3903, Moving Expenses, and its instructions. 2009 tax forms 1040 Some health insurance costs (Form 1040, line 29 or Form 1040NR, line 29) if you were self-employed and had a net profit for the year, or if you received wages in 2013 from an S corporation in which you were a more-than-2% shareholder. 2009 tax forms 1040 For more details, see Publication 535, Business Expenses. 2009 tax forms 1040 Payments to your self-employed SEP, SIMPLE, or qualified plan (Form 1040, line 28 or Form 1040NR, line 28). 2009 tax forms 1040 For more information, including limits on how much you can deduct, see Publication 560, Retirement Plans for Small Business. 2009 tax forms 1040 Penalties paid on early withdrawal of savings (Form 1040, line 30 or Form 1040NR, line 30). 2009 tax forms 1040 Form 1099-INT, Interest Income, or Form 1099-OID, Original Issue Discount, will show the amount of any penalty you were charged. 2009 tax forms 1040 Alimony payments (Form 1040, line 31a). 2009 tax forms 1040 For more information, see Publication 504, Divorced or Separated Individuals. 2009 tax forms 1040 There are other items you can claim as adjustments to income. 2009 tax forms 1040 These adjustments are discussed in your tax return instructions. 2009 tax forms 1040 Individual Retirement Arrangement (IRA) Contributions and Deductions This section explains the tax treatment of amounts you pay into traditional IRAs. 2009 tax forms 1040 A traditional IRA is any IRA that is not a Roth or SIMPLE IRA. 2009 tax forms 1040 Roth and SIMPLE IRAs are defined earlier in the IRA discussion under Retirement Plan Distributions . 2009 tax forms 1040 For more detailed information, see Publication 590. 2009 tax forms 1040 Contributions. 2009 tax forms 1040   An IRA is a personal savings plan that offers you tax advantages to set aside money for your retirement. 2009 tax forms 1040 Two advantages of a traditional IRA are: You may be able to deduct some or all of your contributions to it, depending on your circumstances, and Generally, amounts in your IRA, including earnings and gains, are not taxed until distributed. 2009 tax forms 1040    Although interest earned from your traditional IRA generally is not taxed in the year earned, it is not tax-exempt interest. 2009 tax forms 1040 Do not report this interest on your tax return as tax-exempt interest. 2009 tax forms 1040 General limit. 2009 tax forms 1040   The most that can be contributed for 2013 to your traditional IRA is the smaller of the following amounts. 2009 tax forms 1040 Your taxable compensation for the year, or $5,500 ($6,500 if you were age 50 or older by the end of 2013). 2009 tax forms 1040 Contributions to Kay Bailey Hutchison Spousal IRAs. 2009 tax forms 1040   In the case of a married couple filing a joint return for 2013, up to $5,500 ($6,500 for each spouse age 50 or older by the end of 2013) can be contributed to IRAs on behalf of each spouse, even if one spouse has little or no compensation. 2009 tax forms 1040 For more information on the general limit and the Kay Bailey Hutchison Spousal IRA limit, see How Much Can Be Contributed? in Publication 590. 2009 tax forms 1040 Deductible contribution. 2009 tax forms 1040   Generally, you can deduct the lesser of the contributions to your traditional IRA for the year or the general limit (or Kay Bailey Hutchison Spousal IRA limit, if applicable) just explained. 2009 tax forms 1040 However, if you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, you may not be able to deduct all of the contributions. 2009 tax forms 1040 Your deduction may be reduced or eliminated, depending on your filing status and the amount of your income. 2009 tax forms 1040 For more information, see Limit if Covered by Employer Plan in Publication 590. 2009 tax forms 1040 Nondeductible contribution. 2009 tax forms 1040   The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. 2009 tax forms 1040 You must file Form 8606, Nondeductible IRAs, to report nondeductible contributions even if you do not have to file a tax return for the year. 2009 tax forms 1040    For 2014, the most that can be contributed to your traditional IRA is $5,500 ($6,500 if you are age 50 or older at the end of 2014). 2009 tax forms 1040 Prev  Up  Next   Home   More Online Publications