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Amend tax return 1. Amend tax return   Traditional IRAs Table of Contents What's New for 2013 What's New for 2014 Introduction Who Can Open a Traditional IRA?What Is Compensation? When Can a Traditional IRA Be Opened? How Can a Traditional IRA Be Opened?Individual Retirement Account Individual Retirement Annuity Individual Retirement Bonds Simplified Employee Pension (SEP) Employer and Employee Association Trust Accounts Required Disclosures How Much Can Be Contributed?Limit. Amend tax return When repayment contributions can be made. Amend tax return No deduction. Amend tax return Reserve component. Amend tax return Figuring your IRA deduction. Amend tax return Reporting the repayment. Amend tax return Example. Amend tax return General Limit Kay Bailey Hutchison Spousal IRA Limit Filing Status Less Than Maximum Contributions More Than Maximum Contributions When Can Contributions Be Made? How Much Can You Deduct?Kay Bailey Hutchison Spousal IRA. Amend tax return Are You Covered by an Employer Plan? Limit if Covered by Employer Plan Reporting Deductible Contributions Nondeductible Contributions Examples — Worksheet for Reduced IRA Deduction for 2013 What if You Inherit an IRA?Treating it as your own. Amend tax return Can You Move Retirement Plan Assets?Transfers to Roth IRAs from other retirement plans. Amend tax return Trustee-to-Trustee Transfer Rollovers Transfers Incident To Divorce Converting From Any Traditional IRA Into a Roth IRA Recharacterizations When Can You Withdraw or Use Assets?Contributions Returned Before Due Date of Return When Must You Withdraw Assets? (Required Minimum Distributions)IRA Owners IRA Beneficiaries Which Table Do You Use To Determine Your Required Minimum Distribution? What Age(s) Do You Use With the Table(s)? Miscellaneous Rules for Required Minimum Distributions Are Distributions Taxable?January 2013 QCDs treated as made in 2012. Amend tax return 2013 Reporting. Amend tax return Additional reporting requirements if you made the election to treat a January 2013 QCD as made in 2012. Amend tax return One-time transfer. Amend tax return Testing period rules apply. Amend tax return More information. Amend tax return Distributions Fully or Partly Taxable Figuring the Nontaxable and Taxable Amounts Recognizing Losses on Traditional IRA Investments Other Special IRA Distribution Situations Reporting and Withholding Requirements for Taxable Amounts What Acts Result in Penalties or Additional Taxes?Prohibited Transactions Investment in Collectibles Excess Contributions Early Distributions Excess Accumulations (Insufficient Distributions) Reporting Additional Taxes What's New for 2013 Traditional IRA contribution and deduction limit. Amend tax return  The contribution limit to your traditional IRA for 2013 will be increased to the smaller of the following amounts: $5,500, or Your taxable compensation for the year. Amend tax return If you were age 50 or older before 2014, the most that can be contributed to your traditional IRA for 2013 will be the smaller of the following amounts: $6,500, or Your taxable compensation for the year. Amend tax return For more information, see How Much Can Be Contributed? in this chapter. Amend tax return Modified AGI limit for traditional IRA contributions increased. Amend tax return  For 2013, if you were covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is: More than $95,000 but less than $115,000 for a married couple filing a joint return or a qualifying widow(er), More than $59,000 but less than $69,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. Amend tax return If you either lived with your spouse or file a joint return, and your spouse was covered by a retirement plan at work, but you were not, your deduction is phased out if your modified AGI is more than $178,000 but less than $188,000. Amend tax return If your modified AGI is $188,000 or more, you cannot take a deduction for contributions to a traditional IRA. Amend tax return See How Much Can You Deduct? in this chapter. Amend tax return Net Investment Income Tax. Amend tax return  For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan (for example, 401(a), 403(a), 403(b), 457(b) plans, and IRAs). Amend tax return However, these distributions are taken into account when determining the modified adjusted gross income threshold. Amend tax return Distributions from a nonqualified retirement plan are included in net investment income. Amend tax return See Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions for more information. Amend tax return What's New for 2014 Modified AGI limit for traditional IRA contributions increased. Amend tax return  For 2014, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is: More than $96,000 but less than $116,000 for a married couple filing a joint return or a qualifying widow(er), More than $60,000 but less than $70,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. Amend tax return If you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work, but you are not, your deduction is phased out if your modified AGI is more than $181,000 but less than $191,000. Amend tax return If your modified AGI is $191,000 or more, you cannot take a deduction for contributions to a traditional IRA. Amend tax return Introduction This chapter discusses the original IRA. Amend tax return In this publication the original IRA (sometimes called an ordinary or regular IRA) is referred to as a “traditional IRA. Amend tax return ” A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA. Amend tax return The following are two advantages of a traditional IRA: You may be able to deduct some or all of your contributions to it, depending on your circumstances. Amend tax return Generally, amounts in your IRA, including earnings and gains, are not taxed until they are distributed. Amend tax return Who Can Open a Traditional IRA? You can open and make contributions to a traditional IRA if: You (or, if you file a joint return, your spouse) received taxable compensation during the year, and You were not age 70½ by the end of the year. Amend tax return You can have a traditional IRA whether or not you are covered by any other retirement plan. Amend tax return However, you may not be able to deduct all of your contributions if you or your spouse is covered by an employer retirement plan. Amend tax return See How Much Can You Deduct , later. Amend tax return Both spouses have compensation. Amend tax return   If both you and your spouse have compensation and are under age 70½, each of you can open an IRA. Amend tax return You cannot both participate in the same IRA. Amend tax return If you file a joint return, only one of you needs to have compensation. Amend tax return What Is Compensation? Generally, compensation is what you earn from working. Amend tax return For a summary of what compensation does and does not include, see Table 1-1. Amend tax return Compensation includes all of the items discussed next (even if you have more than one type). Amend tax return Wages, salaries, etc. Amend tax return   Wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services are compensation. Amend tax return The IRS treats as compensation any amount properly shown in box 1 (Wages, tips, other compensation) of Form W-2, Wage and Tax Statement, provided that amount is reduced by any amount properly shown in box 11 (Nonqualified plans). Amend tax return Scholarship and fellowship payments are compensation for IRA purposes only if shown in box 1 of Form W-2. Amend tax return Commissions. Amend tax return   An amount you receive that is a percentage of profits or sales price is compensation. Amend tax return Self-employment income. Amend tax return   If you are self-employed (a sole proprietor or a partner), compensation is the net earnings from your trade or business (provided your personal services are a material income-producing factor) reduced by the total of: The deduction for contributions made on your behalf to retirement plans, and The deduction allowed for the deductible part of your self-employment taxes. Amend tax return   Compensation includes earnings from self-employment even if they are not subject to self-employment tax because of your religious beliefs. Amend tax return Self-employment loss. Amend tax return   If you have a net loss from self-employment, do not subtract the loss from your salaries or wages when figuring your total compensation. Amend tax return Alimony and separate maintenance. Amend tax return   For IRA purposes, compensation includes any taxable alimony and separate maintenance payments you receive under a decree of divorce or separate maintenance. Amend tax return Nontaxable combat pay. Amend tax return   If you were a member of the U. Amend tax return S. Amend tax return Armed Forces, compensation includes any nontaxable combat pay you received. Amend tax return This amount should be reported in box 12 of your 2013 Form W-2 with code Q. Amend tax return Table 1-1. Amend tax return Compensation for Purposes of an IRA Includes . Amend tax return . Amend tax return . Amend tax return Does not include . Amend tax return . Amend tax return . Amend tax return   earnings and profits from property. Amend tax return wages, salaries, etc. Amend tax return     interest and dividend income. Amend tax return commissions. Amend tax return     pension or annuity income. Amend tax return self-employment income. Amend tax return     deferred compensation. Amend tax return alimony and separate maintenance. Amend tax return     income from certain  partnerships. Amend tax return nontaxable combat pay. Amend tax return     any amounts you exclude from income. Amend tax return     What Is Not Compensation? Compensation does not include any of the following items. Amend tax return Earnings and profits from property, such as rental income, interest income, and dividend income. Amend tax return Pension or annuity income. Amend tax return Deferred compensation received (compensation payments postponed from a past year). Amend tax return Income from a partnership for which you do not provide services that are a material income-producing factor. Amend tax return Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b. Amend tax return Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs. Amend tax return When Can a Traditional IRA Be Opened? You can open a traditional IRA at any time. Amend tax return However, the time for making contributions for any year is limited. Amend tax return See When Can Contributions Be Made , later. Amend tax return How Can a Traditional IRA Be Opened? You can open different kinds of IRAs with a variety of organizations. Amend tax return You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. Amend tax return You can also open an IRA through your stockbroker. Amend tax return Any IRA must meet Internal Revenue Code requirements. Amend tax return The requirements for the various arrangements are discussed below. Amend tax return Kinds of traditional IRAs. Amend tax return   Your traditional IRA can be an individual retirement account or annuity. Amend tax return It can be part of either a simplified employee pension (SEP) or an employer or employee association trust account. Amend tax return Individual Retirement Account An individual retirement account is a trust or custodial account set up in the United States for the exclusive benefit of you or your beneficiaries. Amend tax return The account is created by a written document. Amend tax return The document must show that the account meets all of the following requirements. Amend tax return The trustee or custodian must be a bank, a federally insured credit union, a savings and loan association, or an entity approved by the IRS to act as trustee or custodian. Amend tax return The trustee or custodian generally cannot accept contributions of more than the deductible amount for the year. Amend tax return However, rollover contributions and employer contributions to a simplified employee pension (SEP) can be more than this amount. Amend tax return Contributions, except for rollover contributions, must be in cash. Amend tax return See Rollovers , later. Amend tax return You must have a nonforfeitable right to the amount at all times. Amend tax return Money in your account cannot be used to buy a life insurance policy. Amend tax return Assets in your account cannot be combined with other property, except in a common trust fund or common investment fund. Amend tax return You must start receiving distributions by April 1 of the year following the year in which you reach age 70½. Amend tax return See When Must You Withdraw Assets? (Required Minimum Distributions) , later. Amend tax return Individual Retirement Annuity You can open an individual retirement annuity by purchasing an annuity contract or an endowment contract from a life insurance company. Amend tax return An individual retirement annuity must be issued in your name as the owner, and either you or your beneficiaries who survive you are the only ones who can receive the benefits or payments. Amend tax return An individual retirement annuity must meet all the following requirements. Amend tax return Your entire interest in the contract must be nonforfeitable. Amend tax return The contract must provide that you cannot transfer any portion of it to any person other than the issuer. Amend tax return There must be flexible premiums so that if your compensation changes, your payment can also change. Amend tax return This provision applies to contracts issued after November 6, 1978. Amend tax return The contract must provide that contributions cannot be more than the deductible amount for an IRA for the year, and that you must use any refunded premiums to pay for future premiums or to buy more benefits before the end of the calendar year after the year in which you receive the refund. Amend tax return Distributions must begin by April 1 of the year following the year in which you reach age 70½. Amend tax return See When Must You Withdraw Assets? (Required Minimum Distributions) , later. Amend tax return Individual Retirement Bonds The sale of individual retirement bonds issued by the federal government was suspended after April 30, 1982. Amend tax return The bonds have the following features. Amend tax return They stop earning interest when you reach age 70½. Amend tax return If you die, interest will stop 5 years after your death, or on the date you would have reached age 70½, whichever is earlier. Amend tax return You cannot transfer the bonds. Amend tax return If you cash (redeem) the bonds before the year in which you reach age 59½, you may be subject to a 10% additional tax. Amend tax return See Age 59½ Rule under Early Distributions, later. Amend tax return You can roll over redemption proceeds into IRAs. Amend tax return Simplified Employee Pension (SEP) A simplified employee pension (SEP) is a written arrangement that allows your employer to make deductible contributions to a traditional IRA (a SEP IRA) set up for you to receive such contributions. Amend tax return Generally, distributions from SEP IRAs are subject to the withdrawal and tax rules that apply to traditional IRAs. Amend tax return See Publication 560 for more information about SEPs. Amend tax return Employer and Employee Association Trust Accounts Your employer or your labor union or other employee association can set up a trust to provide individual retirement accounts for employees or members. Amend tax return The requirements for individual retirement accounts apply to these traditional IRAs. Amend tax return Required Disclosures The trustee or issuer (sometimes called the sponsor) of your traditional IRA generally must give you a disclosure statement at least 7 days before you open your IRA. Amend tax return However, the sponsor does not have to give you the statement until the date you open (or purchase, if earlier) your IRA, provided you are given at least 7 days from that date to revoke the IRA. Amend tax return The disclosure statement must explain certain items in plain language. Amend tax return For example, the statement should explain when and how you can revoke the IRA, and include the name, address, and telephone number of the person to receive the notice of cancellation. Amend tax return This explanation must appear at the beginning of the disclosure statement. Amend tax return If you revoke your IRA within the revocation period, the sponsor must return to you the entire amount you paid. Amend tax return The sponsor must report on the appropriate IRS forms both your contribution to the IRA (unless it was made by a trustee-to-trustee transfer) and the amount returned to you. Amend tax return These requirements apply to all sponsors. Amend tax return How Much Can Be Contributed? There are limits and other rules that affect the amount that can be contributed to a traditional IRA. Amend tax return These limits and rules are explained below. Amend tax return Community property laws. Amend tax return   Except as discussed later under Kay Bailey Hutchison Spousal IRA Limit , each spouse figures his or her limit separately, using his or her own compensation. Amend tax return This is the rule even in states with community property laws. Amend tax return Brokers' commissions. Amend tax return   Brokers' commissions paid in connection with your traditional IRA are subject to the contribution limit. Amend tax return For information about whether you can deduct brokers' commissions, see Brokers' commissions , later, under How Much Can You Deduct. Amend tax return Trustees' fees. Amend tax return   Trustees' administrative fees are not subject to the contribution limit. Amend tax return For information about whether you can deduct trustees' fees, see Trustees' fees , later, under How Much Can You Deduct. Amend tax return Qualified reservist repayments. Amend tax return   If you were a member of a reserve component and you were ordered or called to active duty after September 11, 2001, you may be able to contribute (repay) to an IRA amounts equal to any qualified reservist distributions (defined later under Early Distributions) you received. Amend tax return You can make these repayment contributions even if they would cause your total contributions to the IRA to be more than the general limit on contributions. Amend tax return To be eligible to make these repayment contributions, you must have received a qualified reservist distribution from an IRA or from a section 401(k) or 403(b) plan or a similar arrangement. Amend tax return Limit. Amend tax return   Your qualified reservist repayments cannot be more than your qualified reservist distributions, explained under Early Distributions , later. Amend tax return When repayment contributions can be made. Amend tax return   You cannot make these repayment contributions later than the date that is 2 years after your active duty period ends. Amend tax return No deduction. Amend tax return   You cannot deduct qualified reservist repayments. Amend tax return Reserve component. Amend tax return   The term “reserve component” means the: Army National Guard of the United States, Army Reserve, Naval Reserve, Marine Corps Reserve, Air National Guard of the United States, Air Force Reserve, Coast Guard Reserve, or Reserve Corps of the Public Health Service. Amend tax return Figuring your IRA deduction. Amend tax return   The repayment of qualified reservist distributions does not affect the amount you can deduct as an IRA contribution. Amend tax return Reporting the repayment. Amend tax return   If you repay a qualified reservist distribution, include the amount of the repayment with nondeductible contributions on line 1 of Form 8606. Amend tax return Example. Amend tax return   In 2013, your IRA contribution limit is $5,500. Amend tax return However, because of your filing status and AGI, the limit on the amount you can deduct is $3,500. Amend tax return You can make a nondeductible contribution of $2,000 ($5,500 - $3,500). Amend tax return In an earlier year you received a $3,000 qualified reservist distribution, which you would like to repay this year. Amend tax return   For 2013, you can contribute a total of $8,500 to your IRA. Amend tax return This is made up of the maximum deductible contribution of $3,500; a nondeductible contribution of $2,000; and a $3,000 qualified reservist repayment. Amend tax return You contribute the maximum allowable for the year. Amend tax return Since you are making a nondeductible contribution ($2,000) and a qualified reservist repayment ($3,000), you must file Form 8606 with your return and include $5,000 ($2,000 + $3,000) on line 1 of Form 8606. Amend tax return The qualified reservist repayment is not deductible. Amend tax return Contributions on your behalf to a traditional IRA reduce your limit for contributions to a Roth IRA. Amend tax return See chapter 2 for information about Roth IRAs. Amend tax return General Limit For 2013, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts: $5,500 ($6,500 if you are age 50 or older), or Your taxable compensation (defined earlier) for the year. Amend tax return Note. Amend tax return This limit is reduced by any contributions to a section 501(c)(18) plan (generally, a pension plan created before June 25, 1959, that is funded entirely by employee contributions). Amend tax return This is the most that can be contributed regardless of whether the contributions are to one or more traditional IRAs or whether all or part of the contributions are nondeductible. Amend tax return (See Nondeductible Contributions , later. Amend tax return ) Qualified reservist repayments do not affect this limit. Amend tax return Examples. Amend tax return George, who is 34 years old and single, earns $24,000 in 2013. Amend tax return His IRA contributions for 2013 are limited to $5,500. Amend tax return Danny, an unmarried college student working part time, earns $3,500 in 2013. Amend tax return His IRA contributions for 2013 are limited to $3,500, the amount of his compensation. Amend tax return More than one IRA. Amend tax return   If you have more than one IRA, the limit applies to the total contributions made on your behalf to all your traditional IRAs for the year. Amend tax return Annuity or endowment contracts. Amend tax return   If you invest in an annuity or endowment contract under an individual retirement annuity, no more than $5,500 ($6,500 if you are age 50 or older) can be contributed toward its cost for the tax year, including the cost of life insurance coverage. Amend tax return If more than this amount is contributed, the annuity or endowment contract is disqualified. Amend tax return Kay Bailey Hutchison Spousal IRA Limit For 2013, if you file a joint return and your taxable compensation is less than that of your spouse, the most that can be contributed for the year to your IRA is the smaller of the following two amounts: $5,500 ($6,500 if you are age 50 or older), or The total compensation includible in the gross income of both you and your spouse for the year, reduced by the following two amounts. Amend tax return Your spouse's IRA contribution for the year to a traditional IRA. Amend tax return Any contributions for the year to a Roth IRA on behalf of your spouse. Amend tax return This means that the total combined contributions that can be made for the year to your IRA and your spouse's IRA can be as much as $11,000 ($12,000 if only one of you is age 50 or older or $13,000 if both of you are age 50 or older). Amend tax return Note. Amend tax return This traditional IRA limit is reduced by any contributions to a section 501(c)(18) plan (generally, a pension plan created before June 25, 1959, that is funded entirely by employee contributions). Amend tax return Example. Amend tax return Kristin, a full-time student with no taxable compensation, marries Carl during the year. Amend tax return Neither of them was age 50 by the end of 2013. Amend tax return For the year, Carl has taxable compensation of $30,000. Amend tax return He plans to contribute (and deduct) $5,500 to a traditional IRA. Amend tax return If he and Kristin file a joint return, each can contribute $5,500 to a traditional IRA. Amend tax return This is because Kristin, who has no compensation, can add Carl's compensation, reduced by the amount of his IRA contribution ($30,000 − $5,500 = $24,500), to her own compensation (-0-) to figure her maximum contribution to a traditional IRA. Amend tax return In her case, $5,500 is her contribution limit, because $5,500 is less than $24,500 (her compensation for purposes of figuring her contribution limit). Amend tax return Filing Status Generally, except as discussed earlier under Kay Bailey Hutchison Spousal IRA Limit , your filing status has no effect on the amount of allowable contributions to your traditional IRA. Amend tax return However, if during the year either you or your spouse was covered by a retirement plan at work, your deduction may be reduced or eliminated, depending on your filing status and income. Amend tax return See How Much Can You Deduct , later. Amend tax return Example. Amend tax return Tom and Darcy are married and both are 53. Amend tax return They both work and each has a traditional IRA. Amend tax return Tom earned $3,800 and Darcy earned $48,000 in 2013. Amend tax return Because of the Kay Bailey Hutchison Spousal IRA limit rule, even though Tom earned less than $6,500, they can contribute up to $6,500 to his IRA for 2013 if they file a joint return. Amend tax return They can contribute up to $6,500 to Darcy's IRA. Amend tax return If they file separate returns, the amount that can be contributed to Tom's IRA is limited by his earned income, $3,800. Amend tax return Less Than Maximum Contributions If contributions to your traditional IRA for a year were less than the limit, you cannot contribute more after the due date of your return for that year to make up the difference. Amend tax return Example. Amend tax return Rafael, who is 40, earns $30,000 in 2013. Amend tax return Although he can contribute up to $5,500 for 2013, he contributes only $3,000. Amend tax return After April 15, 2014, Rafael cannot make up the difference between his actual contributions for 2013 ($3,000) and his 2013 limit ($5,500). Amend tax return He cannot contribute $2,500 more than the limit for any later year. Amend tax return More Than Maximum Contributions If contributions to your IRA for a year were more than the limit, you can apply the excess contribution in one year to a later year if the contributions for that later year are less than the maximum allowed for that year. Amend tax return However, a penalty or additional tax may apply. Amend tax return See Excess Contributions , later, under What Acts Result in Penalties or Additional Taxes. Amend tax return When Can Contributions Be Made? As soon as you open your traditional IRA, contributions can be made to it through your chosen sponsor (trustee or other administrator). Amend tax return Contributions must be in the form of money (cash, check, or money order). Amend tax return Property cannot be contributed. Amend tax return Although property cannot be contributed, your IRA may invest in certain property. Amend tax return For example, your IRA may purchase shares of stock. Amend tax return For other restrictions on the use of funds in your IRA, see Prohibited Transactions , later in this chapter. Amend tax return You may be able to transfer or roll over certain property from one retirement plan to another. Amend tax return See the discussion of rollovers and other transfers later in this chapter under Can You Move Retirement Plan Assets . Amend tax return You can make a contribution to your IRA by having your income tax refund (or a portion of your refund), if any, paid directly to your traditional IRA, Roth IRA, or SEP IRA. Amend tax return For details, see the instructions for your income tax return or Form 8888, Allocation of Refund (Including Savings Bond Purchases). Amend tax return Contributions can be made to your traditional IRA for each year that you receive compensation and have not reached age 70½. Amend tax return For any year in which you do not work, contributions cannot be made to your IRA unless you receive alimony, nontaxable combat pay, military differential pay, or file a joint return with a spouse who has compensation. Amend tax return See Who Can Open a Traditional IRA , earlier. Amend tax return Even if contributions cannot be made for the current year, the amounts contributed for years in which you did qualify can remain in your IRA. Amend tax return Contributions can resume for any years that you qualify. Amend tax return Contributions must be made by due date. Amend tax return   Contributions can be made to your traditional IRA for a year at any time during the year or by the due date for filing your return for that year, not including extensions. Amend tax return For most people, this means that contributions for 2013 must be made by April 15, 2014, and contributions for 2014 must be made by April 15, 2015. Amend tax return Age 70½ rule. Amend tax return   Contributions cannot be made to your traditional IRA for the year in which you reach age 70½ or for any later year. Amend tax return   You attain age 70½ on the date that is 6 calendar months after the 70th anniversary of your birth. Amend tax return If you were born on or before June 30, 1943, you cannot contribute for 2013 or any later year. Amend tax return Designating year for which contribution is made. Amend tax return   If an amount is contributed to your traditional IRA between January 1 and April 15, you should tell the sponsor which year (the current year or the previous year) the contribution is for. Amend tax return If you do not tell the sponsor which year it is for, the sponsor can assume, and report to the IRS, that the contribution is for the current year (the year the sponsor received it). Amend tax return Filing before a contribution is made. Amend tax return    You can file your return claiming a traditional IRA contribution before the contribution is actually made. Amend tax return Generally, the contribution must be made by the due date of your return, not including extensions. Amend tax return Contributions not required. Amend tax return   You do not have to contribute to your traditional IRA for every tax year, even if you can. Amend tax return How Much Can You Deduct? Generally, you can deduct the lesser of: The contributions to your traditional IRA for the year, or The general limit (or the Kay Bailey Hutchison Spousal IRA limit, if applicable) explained earlier under How Much Can Be Contributed . Amend tax return However, if you or your spouse was covered by an employer retirement plan, you may not be able to deduct this amount. Amend tax return See Limit if Covered by Employer Plan , later. Amend tax return You may be able to claim a credit for contributions to your traditional IRA. Amend tax return For more information, see chapter 4. Amend tax return Trustees' fees. Amend tax return   Trustees' administrative fees that are billed separately and paid in connection with your traditional IRA are not deductible as IRA contributions. Amend tax return However, they may be deductible as a miscellaneous itemized deduction on Schedule A (Form 1040). Amend tax return For information about miscellaneous itemized deductions, see Publication 529, Miscellaneous Deductions. Amend tax return Brokers' commissions. Amend tax return   These commissions are part of your IRA contribution and, as such, are deductible subject to the limits. Amend tax return Full deduction. Amend tax return   If neither you nor your spouse was covered for any part of the year by an employer retirement plan, you can take a deduction for total contributions to one or more of your traditional IRAs of up to the lesser of: $5,500 ($6,500 if you are age 50 or older), or 100% of your compensation. Amend tax return   This limit is reduced by any contributions made to a 501(c)(18) plan on your behalf. Amend tax return Kay Bailey Hutchison Spousal IRA. Amend tax return   In the case of a married couple with unequal compensation who file a joint return, the deduction for contributions to the traditional IRA of the spouse with less compensation is limited to the lesser of: $5,500 ($6,500 if the spouse with the lower compensation is age 50 or older), or The total compensation includible in the gross income of both spouses for the year reduced by the following three amounts. Amend tax return The IRA deduction for the year of the spouse with the greater compensation. Amend tax return Any designated nondeductible contribution for the year made on behalf of the spouse with the greater compensation. Amend tax return Any contributions for the year to a Roth IRA on behalf of the spouse with the greater compensation. Amend tax return   This limit is reduced by any contributions to a section 501(c)(18) plan on behalf of the spouse with the lesser compensation. Amend tax return Note. Amend tax return If you were divorced or legally separated (and did not remarry) before the end of the year, you cannot deduct any contributions to your spouse's IRA. Amend tax return After a divorce or legal separation, you can deduct only the contributions to your own IRA. Amend tax return Your deductions are subject to the rules for single individuals. Amend tax return Covered by an employer retirement plan. Amend tax return   If you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, your deduction may be further limited. Amend tax return This is discussed later under Limit if Covered by Employer Plan . Amend tax return Limits on the amount you can deduct do not affect the amount that can be contributed. Amend tax return Are You Covered by an Employer Plan? The Form W-2 you receive from your employer has a box used to indicate whether you were covered for the year. Amend tax return The “Retirement Plan” box should be checked if you were covered. Amend tax return Reservists and volunteer firefighters should also see Situations in Which You Are Not Covered , later. Amend tax return If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer. Amend tax return Federal judges. Amend tax return   For purposes of the IRA deduction, federal judges are covered by an employer plan. Amend tax return For Which Year(s) Are You Covered? Special rules apply to determine the tax years for which you are covered by an employer plan. Amend tax return These rules differ depending on whether the plan is a defined contribution plan or a defined benefit plan. Amend tax return Tax year. Amend tax return   Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. Amend tax return For almost all people, the tax year is the calendar year. Amend tax return Defined contribution plan. Amend tax return   Generally, you are covered by a defined contribution plan for a tax year if amounts are contributed or allocated to your account for the plan year that ends with or within that tax year. Amend tax return However, also see Situations in Which You Are Not Covered , later. Amend tax return   A defined contribution plan is a plan that provides for a separate account for each person covered by the plan. Amend tax return In a defined contribution plan, the amount to be contributed to each participant's account is spelled out in the plan. Amend tax return The level of benefits actually provided to a participant depends on the total amount contributed to that participant's account and any earnings and losses on those contributions. Amend tax return Types of defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans. Amend tax return Example. Amend tax return Company A has a money purchase pension plan. Amend tax return Its plan year is from July 1 to June 30. Amend tax return The plan provides that contributions must be allocated as of June 30. Amend tax return Bob, an employee, leaves Company A on December 31, 2012. Amend tax return The contribution for the plan year ending on June 30, 2013, is made February 15, 2014. Amend tax return Because an amount is contributed to Bob's account for the plan year, Bob is covered by the plan for his 2013 tax year. Amend tax return   A special rule applies to certain plans in which it is not possible to determine if an amount will be contributed to your account for a given plan year. Amend tax return If, for a plan year, no amounts have been allocated to your account that are attributable to employer contributions, employee contributions, or forfeitures, by the last day of the plan year, and contributions are discretionary for the plan year, you are not covered for the tax year in which the plan year ends. Amend tax return If, after the plan year ends, the employer makes a contribution for that plan year, you are covered for the tax year in which the contribution is made. Amend tax return Example. Amend tax return Mickey was covered by a profit-sharing plan and left the company on December 31, 2012. Amend tax return The plan year runs from July 1 to June 30. Amend tax return Under the terms of the plan, employer contributions do not have to be made, but if they are made, they are contributed to the plan before the due date for filing the company's tax return. Amend tax return Such contributions are allocated as of the last day of the plan year, and allocations are made to the accounts of individuals who have any service during the plan year. Amend tax return As of June 30, 2013, no contributions were made that were allocated to the June 30, 2013, plan year, and no forfeitures had been allocated within the plan year. Amend tax return In addition, as of that date, the company was not obligated to make a contribution for such plan year and it was impossible to determine whether or not a contribution would be made for the plan year. Amend tax return On December 31, 2013, the company decided to contribute to the plan for the plan year ending June 30, 2013. Amend tax return That contribution was made on February 15, 2014. Amend tax return Mickey is an active participant in the plan for his 2014 tax year but not for his 2013 tax year. Amend tax return No vested interest. Amend tax return   If an amount is allocated to your account for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the account. Amend tax return Defined benefit plan. Amend tax return   If you are eligible to participate in your employer's defined benefit plan for the plan year that ends within your tax year, you are covered by the plan. Amend tax return This rule applies even if you: Declined to participate in the plan, Did not make a required contribution, or Did not perform the minimum service required to accrue a benefit for the year. Amend tax return   A defined benefit plan is any plan that is not a defined contribution plan. Amend tax return In a defined benefit plan, the level of benefits to be provided to each participant is spelled out in the plan. Amend tax return The plan administrator figures the amount needed to provide those benefits and those amounts are contributed to the plan. Amend tax return Defined benefit plans include pension plans and annuity plans. Amend tax return Example. Amend tax return Nick, an employee of Company B, is eligible to participate in Company B's defined benefit plan, which has a July 1 to June 30 plan year. Amend tax return Nick leaves Company B on December 31, 2012. Amend tax return Because Nick is eligible to participate in the plan for its year ending June 30, 2013, he is covered by the plan for his 2013 tax year. Amend tax return No vested interest. Amend tax return   If you accrue a benefit for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the accrual. Amend tax return Situations in Which You Are Not Covered Unless you are covered by another employer plan, you are not covered by an employer plan if you are in one of the situations described below. Amend tax return Social security or railroad retirement. Amend tax return   Coverage under social security or railroad retirement is not coverage under an employer retirement plan. Amend tax return Benefits from previous employer's plan. Amend tax return   If you receive retirement benefits from a previous employer's plan, you are not covered by that plan. Amend tax return Reservists. Amend tax return   If the only reason you participate in a plan is because you are a member of a reserve unit of the Armed Forces, you may not be covered by the plan. Amend tax return You are not covered by the plan if both of the following conditions are met. Amend tax return The plan you participate in is established for its employees by: The United States, A state or political subdivision of a state, or An instrumentality of either (a) or (b) above. Amend tax return You did not serve more than 90 days on active duty during the year (not counting duty for training). Amend tax return Volunteer firefighters. Amend tax return   If the only reason you participate in a plan is because you are a volunteer firefighter, you may not be covered by the plan. Amend tax return You are not covered by the plan if both of the following conditions are met. Amend tax return The plan you participate in is established for its employees by: The United States, A state or political subdivision of a state, or An instrumentality of either (a) or (b) above. Amend tax return Your accrued retirement benefits at the beginning of the year will not provide more than $1,800 per year at retirement. Amend tax return Limit if Covered by Employer Plan As discussed earlier, the deduction you can take for contributions made to your traditional IRA depends on whether you or your spouse was covered for any part of the year by an employer retirement plan. Amend tax return Your deduction is also affected by how much income you had and by your filing status. Amend tax return Your deduction may also be affected by social security benefits you received. Amend tax return Reduced or no deduction. Amend tax return   If either you or your spouse was covered by an employer retirement plan, you may be entitled to only a partial (reduced) deduction or no deduction at all, depending on your income and your filing status. Amend tax return   Your deduction begins to decrease (phase out) when your income rises above a certain amount and is eliminated altogether when it reaches a higher amount. Amend tax return These amounts vary depending on your filing status. Amend tax return   To determine if your deduction is subject to the phaseout, you must determine your modified adjusted gross income (AGI) and your filing status, as explained later under Deduction Phaseout . Amend tax return Once you have determined your modified AGI and your filing status, you can use Table 1-2 or Table 1-3 to determine if the phaseout applies. Amend tax return Social Security Recipients Instead of using Table 1-2 or Table 1-3 and Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, later, complete the worksheets in Appendix B of this publication if, for the year, all of the following apply. Amend tax return You received social security benefits. Amend tax return You received taxable compensation. Amend tax return Contributions were made to your traditional IRA. Amend tax return You or your spouse was covered by an employer retirement plan. Amend tax return Use the worksheets in Appendix B to figure your IRA deduction, your nondeductible contribution, and the taxable portion, if any, of your social security benefits. Amend tax return Appendix B includes an example with filled-in worksheets to assist you. Amend tax return Table 1-2. Amend tax return Effect of Modified AGI1 on Deduction if You Are Covered by a Retirement Plan at Work If you are covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. Amend tax return IF your filing status is . Amend tax return . Amend tax return . Amend tax return AND your modified adjusted gross income (modified AGI) is . Amend tax return . Amend tax return . Amend tax return THEN you can take . Amend tax return . Amend tax return . Amend tax return single or head of household $59,000 or less a full deduction. Amend tax return more than $59,000 but less than $69,000 a partial deduction. Amend tax return $69,000 or more no deduction. Amend tax return married filing jointly or  qualifying widow(er) $95,000 or less a full deduction. Amend tax return more than $95,000 but less than $115,000 a partial deduction. Amend tax return $115,000 or more no deduction. Amend tax return married filing separately2 less than $10,000 a partial deduction. Amend tax return $10,000 or more no deduction. Amend tax return 1 Modified AGI (adjusted gross income). Amend tax return See Modified adjusted gross income (AGI) , later. Amend tax return  2 If you did not live with your spouse at any time during the year, your filing status is considered Single for this purpose (therefore, your IRA deduction is determined under the “Single” filing status). Amend tax return Table 1-3. Amend tax return Effect of Modified AGI1 on Deduction if You Are NOT Covered by a Retirement Plan at Work If you are not covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. Amend tax return IF your filing status is . Amend tax return . Amend tax return . Amend tax return AND your modified adjusted gross income (modified AGI) is . Amend tax return . Amend tax return . Amend tax return THEN you can take . Amend tax return . Amend tax return . Amend tax return single, head of household, or qualifying widow(er) any amount a full deduction. Amend tax return married filing jointly or separately with a spouse who is not covered by a plan at work any amount a full deduction. Amend tax return married filing jointly with a spouse who is covered by a plan at work $178,000 or less a full deduction. Amend tax return more than $178,000 but less than $188,000 a partial deduction. Amend tax return $188,000 or more no deduction. Amend tax return married filing separately with a spouse who is covered by a plan at work2 less than $10,000 a partial deduction. Amend tax return $10,000 or more no deduction. Amend tax return 1 Modified AGI (adjusted gross income). Amend tax return See Modified adjusted gross income (AGI) , later. Amend tax return  2 You are entitled to the full deduction if you did not live with your spouse at any time during the year. Amend tax return For 2014, if you are not covered by a retirement plan at work and you are married filing jointly with a spouse who is covered by a plan at work, your deduction is phased out if your modified AGI is more than $181,000 but less than $191,000. Amend tax return If your AGI is $191,000 or more, you cannot take a deduction for a contribution to a traditional IRA. Amend tax return Deduction Phaseout The amount of any reduction in the limit on your IRA deduction (phaseout) depends on whether you or your spouse was covered by an employer retirement plan. Amend tax return Covered by a retirement plan. Amend tax return   If you are covered by an employer retirement plan and you did not receive any social security retirement benefits, your IRA deduction may be reduced or eliminated depending on your filing status and modified AGI, as shown in Table 1-2. Amend tax return For 2014, if you are covered by a retirement plan at work, your IRA deduction will not be reduced (phased out) unless your modified AGI is: More than $60,000 but less than $70,000 for a single individual (or head of household), More than $96,000 but less than $116,000 for a married couple filing a joint return (or a qualifying widow(er)), or Less than $10,000 for a married individual filing a separate return. Amend tax return If your spouse is covered. Amend tax return   If you are not covered by an employer retirement plan, but your spouse is, and you did not receive any social security benefits, your IRA deduction may be reduced or eliminated entirely depending on your filing status and modified AGI as shown in Table 1-3. Amend tax return Filing status. Amend tax return   Your filing status depends primarily on your marital status. Amend tax return For this purpose, you need to know if your filing status is single or head of household, married filing jointly or qualifying widow(er), or married filing separately. Amend tax return If you need more information on filing status, see Publication 501, Exemptions, Standard Deduction, and Filing Information. Amend tax return Lived apart from spouse. Amend tax return   If you did not live with your spouse at any time during the year and you file a separate return, your filing status, for this purpose, is single. Amend tax return Modified adjusted gross income (AGI). Amend tax return   You can use Worksheet 1-1 to figure your modified AGI. Amend tax return If you made contributions to your IRA for 2013 and received a distribution from your IRA in 2013, see Both contributions for 2013 and distributions in 2013 , later. Amend tax return    Do not assume that your modified AGI is the same as your compensation. Amend tax return Your modified AGI may include income in addition to your compensation (discussed earlier) such as interest, dividends, and income from IRA distributions. Amend tax return Form 1040. Amend tax return   If you file Form 1040, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. Amend tax return IRA deduction. Amend tax return Student loan interest deduction. Amend tax return Tuition and fees deduction. Amend tax return Domestic production activities deduction. Amend tax return Foreign earned income exclusion. Amend tax return Foreign housing exclusion or deduction. Amend tax return Exclusion of qualified savings bond interest shown on Form 8815. Amend tax return Exclusion of employer-provided adoption benefits shown on Form 8839. Amend tax return This is your modified AGI. Amend tax return Form 1040A. Amend tax return   If you file Form 1040A, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. Amend tax return IRA deduction. Amend tax return Student loan interest deduction. Amend tax return Tuition and fees deduction. Amend tax return Exclusion of qualified savings bond interest shown on Form 8815. Amend tax return This is your modified AGI. Amend tax return Form 1040NR. Amend tax return   If you file Form 1040NR, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. Amend tax return IRA deduction. Amend tax return Student loan interest deduction. Amend tax return Domestic production activities deduction. Amend tax return Exclusion of qualified savings bond interest shown on Form 8815. Amend tax return Exclusion of employer-provided adoption benefits shown on Form 8839. Amend tax return This is your modified AGI. Amend tax return Income from IRA distributions. Amend tax return   If you received distributions in 2013 from one or more traditional IRAs and your traditional IRAs include only deductible contributions, the distributions are fully taxable and are included in your modified AGI. Amend tax return Both contributions for 2013 and distributions in 2013. Amend tax return   If all three of the following apply, any IRA distributions you received in 2013 may be partly tax free and partly taxable. Amend tax return You received distributions in 2013 from one or more traditional IRAs, You made contributions to a traditional IRA for 2013, and Some of those contributions may be nondeductible contributions. Amend tax return (See Nondeductible Contributions and Worksheet 1-2, later. Amend tax return ) If this is your situation, you must figure the taxable part of the traditional IRA distribution before you can figure your modified AGI. Amend tax return To do this, you can use Worksheet 1-5, later. Amend tax return   If at least one of the above does not apply, figure your modified AGI using Worksheet 1-1, later. Amend tax return How To Figure Your Reduced IRA Deduction If you or your spouse is covered by an employer retirement plan and you did not receive any social security benefits, you can figure your reduced IRA deduction by using Worksheet 1-2. Amend tax return Figuring Your Reduced IRA Deduction for 2013. Amend tax return The Instructions for Form 1040, Form 1040A, and Form 1040NR include similar worksheets that you can use instead of the worksheet in this publication. Amend tax return If you or your spouse is covered by an employer retirement plan, and you received any social security benefits, see Social Security Recipients , earlier. Amend tax return Note. Amend tax return If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Amend tax return Worksheet 1-1. Amend tax return Figuring Your Modified AGI Use this worksheet to figure your modified AGI for traditional IRA purposes. Amend tax return 1. Amend tax return Enter your adjusted gross income (AGI) from Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37, figured without taking into account the amount from Form 1040, line 32; Form 1040A, line 17; or Form 1040NR, line 32 1. Amend tax return   2. Amend tax return Enter any student loan interest deduction from Form 1040, line 33; Form 1040A, line 18; or Form 1040NR, line 33 2. Amend tax return   3. Amend tax return Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 3. Amend tax return   4. Amend tax return Enter any domestic production activities deduction from Form 1040, line 35, or Form 1040NR, line 34 4. Amend tax return   5. Amend tax return Enter any foreign earned income exclusion and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 5. Amend tax return   6. Amend tax return Enter any foreign housing deduction from Form 2555, line 50 6. Amend tax return   7. Amend tax return Enter any excludable savings bond interest from Form 8815, line 14 7. Amend tax return   8. Amend tax return Enter any excluded employer-provided adoption benefits from Form 8839, line 28 8. Amend tax return   9. Amend tax return Add lines 1 through 8. Amend tax return This is your Modified AGI for traditional IRA purposes 9. Amend tax return   Reporting Deductible Contributions If you file Form 1040, enter your IRA deduction on line 32 of that form. Amend tax return If you file Form 1040A, enter your IRA deduction on line 17 of that form. Amend tax return If you file Form 1040NR, enter your IRA deduction on line 32 of that form. Amend tax return You cannot deduct IRA contributions on Form 1040EZ or Form 1040NR-EZ. Amend tax return Self-employed. Amend tax return   If you are self-employed (a sole proprietor or partner) and have a SIMPLE IRA, enter your deduction for allowable plan contributions on Form 1040, line 28. Amend tax return If you file Form 1040NR, enter your deduction on line 28 of that form. Amend tax return Nondeductible Contributions Although your deduction for IRA contributions may be reduced or eliminated, contributions can be made to your IRA of up to the general limit or, if it applies, the Kay Bailey Hutchison Spousal IRA limit. Amend tax return The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. Amend tax return Example. Amend tax return Tony is 29 years old and single. Amend tax return In 2013, he was covered by a retirement plan at work. Amend tax return His salary is $62,000. Amend tax return His modified AGI is $70,000. Amend tax return Tony makes a $5,500 IRA contribution for 2013. Amend tax return Because he was covered by a retirement plan and his modified AGI is above $69,000, he cannot deduct his $5,500 IRA contribution. Amend tax return He must designate this contribution as a nondeductible contribution by reporting it on Form 8606. Amend tax return Repayment of reservist distributions. Amend tax return   Nondeductible contributions may include repayments of qualified reservist distributions. Amend tax return For more information, see Qualified reservist repayments under How Much Can Be Contributed, earlier. Amend tax return Form 8606. Amend tax return   To designate contributions as nondeductible, you must file Form 8606. Amend tax return (See the filled-in Forms 8606 in this chapter. Amend tax return )   You do not have to designate a contribution as nondeductible until you file your tax return. Amend tax return When you file, you can even designate otherwise deductible contributions as nondeductible contributions. Amend tax return   You must file Form 8606 to report nondeductible contributions even if you do not have to file a tax return for the year. Amend tax return    A Form 8606 is not used for the year that you make a rollover from a qualified retirement plan to a traditional IRA and the rollover includes nontaxable amounts. Amend tax return In those situations, a Form 8606 is completed for the year you take a distribution from that IRA. Amend tax return See Form 8606 under Distributions Fully or Partly Taxable, later. Amend tax return Failure to report nondeductible contributions. Amend tax return   If you do not report nondeductible contributions, all of the contributions to your traditional IRA will be treated like deductible contributions when withdrawn. Amend tax return All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. Amend tax return Penalty for overstatement. Amend tax return   If you overstate the amount of nondeductible contributions on your Form 8606 for any tax year, you must pay a penalty of $100 for each overstatement, unless it was due to reasonable cause. Amend tax return Penalty for failure to file Form 8606. Amend tax return   You will have to pay a $50 penalty if you do not file a required Form 8606, unless you can prove that the failure was due to reasonable cause. Amend tax return Tax on earnings on nondeductible contributions. Amend tax return   As long as contributions are within the contribution limits, none of the earnings or gains on contributions (deductible or nondeductible) will be taxed until they are distributed. Amend tax return Cost basis. Amend tax return   You will have a cost basis in your traditional IRA if you made any nondeductible contributions. Amend tax return Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions. Amend tax return    Commonly, distributions from your traditional IRAs will include both taxable and nontaxable (cost basis) amounts. Amend tax return See Are Distributions Taxable, later, for more information. Amend tax return Recordkeeping. Amend tax return There is a recordkeeping worksheet, Appendix A. Amend tax return Summary Record of Traditional IRA(s) for 2013 , that you can use to keep a record of deductible and nondeductible IRA contributions. Amend tax return Examples — Worksheet for Reduced IRA Deduction for 2013 The following examples illustrate the use of Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013. Amend tax return Example 1. Amend tax return For 2013, Tom and Betty file a joint return on Form 1040. Amend tax return They are both 39 years old. Amend tax return They are both employed and Tom is covered by his employer's retirement plan. Amend tax return Tom's salary is $59,000 and Betty's is $32,555. Amend tax return They each have a traditional IRA and their combined modified AGI, which includes $5,000 interest and dividend income, is $96,555. Amend tax return Because their modified AGI is between $95,000 and $115,000 and Tom is covered by an employer plan, Tom is subject to the deduction phaseout discussed earlier under Limit if Covered by Employer Plan . Amend tax return For 2013, Tom contributed $5,500 to his IRA and Betty contributed $5,500 to hers. Amend tax return Even though they file a joint return, they must use separate worksheets to figure the IRA deduction for each of them. Amend tax return Tom can take a deduction of only $5,080. Amend tax return He can choose to treat the $5,080 as either deductible or nondeductible contributions. Amend tax return He can either leave the $420 ($5,500 − $5,080) of nondeductible contributions in his IRA or withdraw them by April 15, 2014. Amend tax return He decides to treat the $5,080 as deductible contributions and leave the $420 of nondeductible contributions in his IRA. Amend tax return Using Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, Tom figures his deductible and nondeductible amounts as shown on Worksheet 1-2. Amend tax return Figuring Your Reduced IRA Deduction for 2013—Example 1 Illustrated. Amend tax return Betty figures her IRA deduction as follows. Amend tax return Betty can treat all or part of her contributions as either deductible or nondeductible. Amend tax return This is because her $5,500 contribution for 2013 is not subject to the deduction phaseout discussed earlier under Limit if Covered by Employer Plan . Amend tax return She does not need to use Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, because their modified AGI is not within the phaseout range that applies. Amend tax return Betty decides to treat her $5,500 IRA contributions as deductible. Amend tax return The IRA deductions of $5,080 and $5,500 on the joint return for Tom and Betty total $10,580. Amend tax return Example 2. Amend tax return For 2013, Ed and Sue file a joint return on Form 1040. Amend tax return They are both 39 years old. Amend tax return Ed is covered by his employer's retirement plan. Amend tax return Ed's salary is $45,000. Amend tax return Sue had no compensation for the year and did not contribute to an IRA. Amend tax return Sue is not covered by an employer plan. Amend tax return Ed contributed $5,500 to his traditional IRA and $5,500 to a traditional IRA for Sue (a Kay Bailey Hutchison Spousal IRA). Amend tax return Their combined modified AGI, which includes $2,000 interest and dividend income and a large capital gain from the sale of stock, is $180,555. Amend tax return Because the combined modified AGI is $115,000 or more, Ed cannot deduct any of the contribution to his traditional IRA. Amend tax return He can either leave the $5,500 of nondeductible contributions in his IRA or withdraw them by April 15, 2014. Amend tax return Sue figures her IRA deduction as shown on Worksheet 1-2. Amend tax return Figuring Your Reduced IRA Deduction for 2013—Example 2 Illustrated. Amend tax return Worksheet 1-2. Amend tax return Figuring Your Reduced IRA Deduction for 2013 (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. Amend tax return ) Note. Amend tax return If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Amend tax return IF you . Amend tax return . Amend tax return . Amend tax return AND your  filing status is . Amend tax return . Amend tax return . Amend tax return AND your modified AGI is over . Amend tax return . Amend tax return . Amend tax return THEN enter on  line 1 below . Amend tax return . Amend tax return . Amend tax return       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. Amend tax return Enter applicable amount from table above 1. Amend tax return   2. Amend tax return Enter your modified AGI (that of both spouses, if married filing jointly) 2. Amend tax return     Note. Amend tax return If line 2 is equal to or more than the amount on line 1, stop here. Amend tax return  Your IRA contributions are not deductible. Amend tax return See Nondeductible Contributions , earlier. Amend tax return     3. Amend tax return Subtract line 2 from line 1. Amend tax return If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. Amend tax return You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. Amend tax return   4. Amend tax return Multiply line 3 by the percentage below that applies to you. Amend tax return If the result is not a multiple of $10, round it to the next highest multiple of $10. Amend tax return (For example, $611. Amend tax return 40 is rounded to $620. Amend tax return ) However, if the result is less than $200, enter $200. Amend tax return         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Amend tax return 5% (. Amend tax return 275) (by 32. Amend tax return 5% (. Amend tax return 325) if you are age 50 or older). Amend tax return All others, multiply line 3 by 55% (. Amend tax return 55) (by 65% (. Amend tax return 65) if you are age 50 or older). Amend tax return 4. Amend tax return   5. Amend tax return Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). Amend tax return If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. Amend tax return If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Amend tax return   6. Amend tax return Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). Amend tax return If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Amend tax return 6. Amend tax return   7. Amend tax return IRA deduction. Amend tax return Compare lines 4, 5, and 6. Amend tax return Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. Amend tax return If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Amend tax return   8. Amend tax return Nondeductible contribution. Amend tax return Subtract line 7 from line 5 or 6, whichever is smaller. Amend tax return  Enter the result here and on line 1 of your Form 8606 8. Amend tax return   Worksheet 1-2. Amend tax return Figuring Your Reduced IRA Deduction for 2013—Example 1 Illustrated (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. Amend tax return ) Note. Amend tax return If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Amend tax return IF you . Amend tax return . Amend tax return . Amend tax return AND your  filing status is . Amend tax return . Amend tax return . Amend tax return AND your modified AGI is over . Amend tax return . Amend tax return . Amend tax return THEN enter on  line 1 below . Amend tax return . Amend tax return . Amend tax return       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. Amend tax return Enter applicable amount from table above 1. Amend tax return 115,000 2. Amend tax return Enter your modified AGI (that of both spouses, if married filing jointly) 2. Amend tax return 96,555   Note. Amend tax return If line 2 is equal to or more than the amount on line 1, stop here. Amend tax return  Your IRA contributions are not deductible. Amend tax return See Nondeductible Contributions , earlier. Amend tax return     3. Amend tax return Subtract line 2 from line 1. Amend tax return If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. Amend tax return You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. Amend tax return 18,445 4. Amend tax return Multiply line 3 by the percentage below that applies to you. Amend tax return If the result is not a multiple of $10, round it to the next highest multiple of $10. Amend tax return (For example, $611. Amend tax return 40 is rounded to $620. Amend tax return ) However, if the result is less than $200, enter $200. Amend tax return         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Amend tax return 5% (. Amend tax return 275) (by 32. Amend tax return 5% (. Amend tax return 325) if you are age 50 or older). Amend tax return All others, multiply line 3 by 55% (. Amend tax return 55) (by 65% (. Amend tax return 65) if you are age 50 or older). Amend tax return 4. Amend tax return 5,080 5. Amend tax return Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). Amend tax return If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. Amend tax return If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Amend tax return 59,000 6. Amend tax return Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). Amend tax return If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Amend tax return 6. Amend tax return 5,500 7. Amend tax return IRA deduction. Amend tax return Compare lines 4, 5, and 6. Amend tax return Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. Amend tax return If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Amend tax return 5,080 8. Amend tax return Nondeductible contribution. Amend tax return Subtract line 7 from line 5 or 6, whichever is smaller. Amend tax return  Enter the result here and on line 1 of your Form 8606 8. Amend tax return 420 Worksheet 1-2. Amend tax return Figuring Your Reduced IRA Deduction for 2013—Example 2 Illustrated (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. Amend tax return ) Note. Amend tax return If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Amend tax return IF you . Amend tax return . Amend tax return . Amend tax return AND your  filing status is . Amend tax return . Amend tax return . Amend tax return AND your modified AGI is over . Amend tax return . Amend tax return . Amend tax return THEN enter on  line 1 below . Amend tax return . Amend tax return . Amend tax return       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. Amend tax return Enter applicable amount from table above 1. Amend tax return 188,000 2. Amend tax return Enter your modified AGI (that of both spouses, if married filing jointly) 2. Amend tax return 180,555   Note. Amend tax return If line 2 is equal to or more than the amount on line 1, stop here. Amend tax return  Your IRA contributions are not deductible. Amend tax return See Nondeductible Contributions , earlier. Amend tax return     3. Amend tax return Subtract line 2 from line 1. Amend tax return If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. Amend tax return You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. Amend tax return 7,445 4. Amend tax return Multiply line 3 by the percentage below that applies to you. Amend tax return If the result is not a multiple of $10, round it to the next highest multiple of $10. Amend tax return (For example, $611. Amend tax return 40 is rounded to $620. Amend tax return ) However, if the result is less than $200, enter $200. Amend tax return         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Amend tax return 5% (. Amend tax return 275) (by 32. Amend tax return 5% (. Amend tax return 325) if you are age 50 or older). Amend tax return All others, multiply line 3 by 55% (. Amend tax return 55) (by 65% (. Amend tax return 65) if you are age 50 or older). Amend tax return 4. Amend tax return 4,100 5. Amend tax return Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). Amend tax return If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. Amend tax return If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Amend tax return 39,500 6. Amend tax return Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). Amend tax return If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Amend tax return 6. Amend tax return 5,500 7. Amend tax return IRA deduction. Amend tax return Compare lines 4, 5, and 6. Amend tax return Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. Amend tax return If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Amend tax return 4,100 8. Amend tax return Nondeductible contribution. Amend tax return Subtract line 7 from line 5 or 6, whichever is smaller. Amend tax return  Enter the result here and on line 1 of your Form 8606 8. Amend tax return 1,400 What if You Inherit an IRA? If you inherit a traditional IRA, you are called a beneficiary. Amend tax return A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. Amend tax return Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive. Amend tax return Inherited from spouse. Amend tax return   If you inherit a traditional IRA from your spouse, you generally have the following three choices. Amend tax return You can: Treat it as your own IRA by designating yourself as the account owner. Amend tax return Treat it as your own by rolling it over into your IRA, or to the extent it is taxable, into a: Qualified employer plan, Qualified employee annuity plan (section 403(a) plan), Tax-sheltered annuity plan (s
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Managing Household Records

When was the last time you couldn't find an important paper you knew you had carefully put away? How do people decide where to store and keep such records? And how do they know what to keep, what to throw away, and when? Do you have a simple system or roadmap for important papers (PDF |download Adobe Reader) to which you or a loved one can refer to in case of an emergency?

Every household must work out its own records management system, but some general guidelines can help. A good system will provide an overview of what happens to property after a major life event occurs.

Active File

First, gather your important papers and important documents from throughout your home. Put these documents into three piles: an active file, dead storage, and items to discard or shred. The active file should include documents and financial records you deal with on a regular basis and need to refer to. Keep these readily accessible at home:

  • Appliance manuals, warranties and service contracts
  • Bank statements
  • Bill payment receipts
  • Bills awaiting payment
  • Credit card information
  • Education records, diploma, transcripts, etc.
  • Employment records
  • Family health records, including vaccination histories
  • Health benefit information
  • Household inventory
  • Income tax working papers
  • Insurance policies
  • Loan statements and payment books
  • Password list
  • Receipts for items under warranty
  • Safe deposit box inventory (and key)
  • Tax receipts, such as those received for charitable deductions


Dead Storage

All active file papers over 3-years-old are considered dead storage. This may not necessarily apply to everything—for example, appliance manuals that you use frequently should stay in the active file.

Items to Discard

  • Cancelled checks for cash or nondeductible expenses
  • Expired warranties
  • Pay stubs, after reconciling with W-2
  • Other records no longer needed, such as those that were replaced by newer versions, manuals of appliances that you've replaced, etc.
How Long to Keep Documents
Document How Long to Keep It
Bank statements 1 year, unless needed to support tax filings
Birth certificates, marriage licenses, divorce decrees, passports, education records, military service records Forever
Contracts Until updated
Credit card records Until paid, unless needed to support tax filings
Home purchase and improvement records As long as you own the property
Household inventory Forever; update as needed
Insurance, life Forever
Insurance, car, home, etc. Until you renew the policy
Investment statements Shred your monthly statements; keep annual statements until you sell the investments
Investment certificates Until you cash or sell the item
Loan documents Until you sell the item the loan was for
Real estate deeds As long as you own the property
Receipts for large purchases Until you sell or discard the item
Service contracts and warranties Until you sell or discard the item
Social Security card Forever
Social Security statement When you get your new statement online, shred the old one
Tax records 7 years from the filing date
Vehicle titles Until you sell or dispose of the car
Will Until updated

Create Your Filing System

Generally, your home file should include all the items you refer to frequently including bills, warranties, bank statements, etc. You’ll also need a secondary storage location for your more important, difficult to replace papers, such as passports, vehicle titles, birth certificates, etc. A fireproof/waterproof safe may be one possibility, but it's better to store those records in a location away from home, such as a bank safe deposit box.

Organize your home filing system (PDF | download Adobe Reader) in a way that you can understand and manage. Choose one member of your household as file manager who will take responsibility for keeping the filing up-to-date and consistent. However, in case of an emergency, everyone in the household needs to be familiar with the system, including children old enough to understand how to use it. Develop and stick to a regular filing and paperwork schedule to avoid having to deal with backlogged papers. A few minutes once or twice a week should be sufficient.

Consider scanning and storing some documents electronically since it's best to save your important documents and files in a way that can easily be carried away and accessed later. Scanning will give you easy access to your documents and allow you to transfer them via e-mail and easily make back-up copies. Investing in an external hard drive for your computer and regularly backing up important documents will allow you to carry away the external hard drive at a moment's notice.

If you don’t have the time or the desire to take these steps, or have realized that the task is too much to handle, consider asking a friend or family member to help you focus and give a fresh perspective. Or, you may want to consider hiring a professional organizer to provide structure, solutions, and systems, and help you gain a sense of control.

Safe Deposit Box

Once you have organized your documents, you’ll want to consider getting an off-site storage location, such as a safe deposit box. Use the safe deposit box for originals, but remember, you'll still need copies at home if something tragic should happen to you and your safe deposit box gets sealed. Always seal documents stored in a safe deposit box in airtight waterproof containers (like Ziploc bags) to ensure they don’t get damaged. If you'd rather keep your records at home, then get a fireproof/waterproof safe. A good rule of thumb is: Put documents in the box if you can't easily replace them or if you don't know what might happen if you don't have them.

If applicable, you should have official or certified copies of documents for your safe deposit box. "Official" means an original copy with all required signatures. Select documents, such as birth certificates, must also be certified or notarized to be considered valid. You can get most government records for free or at low cost from a government office or online at a government agency's website. If you are unsure whether you need a certified copy, or want more information about which local government office can give you originals of these documents, contact your local consumer protection office. Consult your attorney before you put an original copy of your will in a safe deposit box—some states don’t permit access after a person dies.

If you need to obtain documents regarding birth, death, marriage, or divorce, check out Where to Write for Vital Records for guidance. Be wary of companies that offer to sell you copies of official papers; you should check with the appropriate government agency to see if they will provide the same information free or at a lower price.

Consider keeping copies of the following documents in a safe deposit box or locked in a fireproof/waterproof safe in your home:

  • Adoption papers
  • Advance directives*
  • Birth and death certificates
  • Citizenship papers
  • Contracts of importance
  • Deeds and property titles
  • Household inventory
  • Life insurance policies
  • Marriage licenses and divorce decrees
  • Military discharge papers
  • Passports
  • Powers of attorney*
  • Social Security cards
  • Stock and bond certificates
  • Wills*

*Since the safe deposit box will be sealed at your death, keep a copy of your will somewhere accessible. The same goes for the advance directive and powers of attorney since you may not be able to give others access to the safe deposit box.

Grab and Go Kit for Emergencies

Disasters like floods, fires, earthquakes, and tornadoes strike without warning and can affect anyone. Your number one priority in these situations is making sure your family is safe—not finding your most recent copies of insurance policies or bank statements. An easy-to-grab emergency financial records kit (PDF | download Adobe Reader) will make sure you have access to important documents in case the unexpected happens to you.

What Documents Should You Have Ready?

Store the documents in an accordion file and keep it in your emergency supply kit so that everything you need is together. Items you should put in the kit include originals or copies of:

  • Birth and marriage certificates, divorce decrees
  • Social Security cards of household members
  • Driver's license and other wallet cards
  • Will and/or trust documents; powers of attorney
  • Recent income tax return
  • Passports and/or other identity documents
  • Military discharge papers
  • A list of your prescriptions: name of medication, dosage, pharmacy

Other important papers include:

  • Contacts for family members, employer, financial advisors, attorney, accountant, and banker
  • Insurance policy information
  • Bank, credit union, and credit card account list
  • Summary of personal, financial, property, and other vital information

Other items to consider including:

  • Safe deposit box keys and/or safe combination
  • Computer user names and passwords; CD with relevant personal, financial, legal files
  • Some emergency cash

Remember that these documents contain personal information like social security numbers and bank account information that could be used against you if it fell into the wrong hands. Be sure your emergency financial records kit is stored in a secure location in your home so it is easy for you to carry away in a disaster not for a thief to carry away in a robbery.

The Amend Tax Return

Amend tax return 11. Amend tax return   Patient-Centered Outcomes Research Fee Table of Contents The patient-centered outcomes research fee is imposed on issuers of specified health insurance policies (section 4375) and plan sponsors of applicable self-insured health plans (section 4376) for policy and plan years ending on or after October 1, 2012. Amend tax return Generally, references to taxes on Form 720 include this fee. Amend tax return Specified health insurance policies. Amend tax return   For issuers of specified health insurance policies, the fee for a policy year ending before October 1, 2013, is $1. Amend tax return 00, multiplied by the average number of lives covered under the policy for that policy year. Amend tax return Generally, issuers of specified health insurance polices must use one of the following four alternative methods to determine the average number of lives covered under a policy for the policy year. Amend tax return The actual count method. Amend tax return For policy years that end on or after October 1, 2012, issuers using the actual count method may begin counting lives covered under a policy as of May 14, 2012, rather than the first day of the policy year, and divide by the appropriate number of days remaining in the policy year. Amend tax return The snapshot method. Amend tax return For policy years that end on or after October 1, 2012, but that began before May 14, 2012, issuers using the snapshot method may use counts from quarters beginning on or after May 14, 2012, to determine the average number of lives covered under the policy. Amend tax return The member months method. Amend tax return And, 4. Amend tax return The state form method. Amend tax return The member months data and the data reported on state forms are based on the calendar year. Amend tax return To adjust for 2012, issuers will use a pro rata approach for calculating the average number of lives covered using the member months method or the state form method for 2012. Amend tax return For example, issuers using the member months number for 2012 will divide the member months number by 12 and multiply the resulting number by one quarter to arrive at the average number of lives covered for October through December 2012. Amend tax return Applicable self-insured health plans. Amend tax return   For plan sponsors of applicable self-insured health plans, the fee for a plan year ending on or after October 1, 2012, and ending before October 1, 2013 is $1. Amend tax return 00, multiplied by the average number of lives covered under the plan for that plan year. Amend tax return Generally, plan sponsors of applicable self-insured health plans must use one of the following three alternative methods to determine the average number of lives covered under a plan for the plan year. Amend tax return Actual count method. Amend tax return Snapshot method. Amend tax return Form 5500 method. Amend tax return However, for plan years beginning before July 11, 2012, and ending on or after October 1, 2012, plan sponsors may determine the average number of lives covered under the plan for the plan year using any reasonable method. Amend tax return Reporting and paying the fee. Amend tax return   File Form 720 annually to report and pay the fee on the second quarter Form 720, no later than July 31 of the calendar year immediately following the last day of the policy year or plan year to which the fee applies. Amend tax return If you file Form 720 only to report the fee, do not file Form 720 for the 1st, 3rd, or 4th quarters of the year. Amend tax return If you file Form 720 to report quarterly excise tax liability for the 1st, 3rd, or 4th quarter of the year (for example, filers reporting the foreign insurance tax (IRS No. Amend tax return 30)), do not make an entry on the line for IRS No. Amend tax return 133 on those filings. Amend tax return   Deposits are not required for this fee, so issuers and plan sponsors are not required to pay the fee using Electronic Federal Tax Payment System (EFTPS). Amend tax return   However, if the fee is paid using EFTPS, the payment should be applied to the second quarter. Amend tax return See Electronic deposit requirement under How To Make Deposits in chapter 13, later. Amend tax return More information. Amend tax return   For more information, including methods for calculating the average number of lives covered, see sections 4375, 4376, and 4377; also see T. Amend tax return D. Amend tax return 9602, which is on page 746 of I. Amend tax return R. Amend tax return B. Amend tax return 2012-52 at www. Amend tax return irs. Amend tax return gov/pub/irs-irbs/irb12-52. Amend tax return pdf. Amend tax return Prev  Up  Next   Home   More Online Publications