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Efile 2012 6. Efile 2012 Catch-Up Contributions Table of Contents The most that can be contributed to your 403(b) account is the lesser of your limit on annual additions or your limit on elective deferrals. Efile 2012 If you will be age 50 or older by the end of the year, you may also be able to make additional catch-up contributions. Efile 2012 These additional contributions cannot be made with after-tax employee contributions. Efile 2012 You are eligible to make catch-up contributions if: You will have reached age 50 by the end of the year, and The maximum amount of elective deferrals that can be made to your 403(b) account have been made for the plan year. Efile 2012 The maximum amount of catch-up contributions is the lesser of: $5,500 for 2013 and unchanged for 2014, or The excess of your compensation for the year, over the elective deferrals that are not catch-up contributions. Efile 2012 Figuring catch-up contributions. Efile 2012 When figuring allowable catch-up contributions, combine all catch-up contributions made by your employer on your behalf to the following plans. Efile 2012 Qualified retirement plans. Efile 2012 (To determine if your plan is a qualified plan, ask your plan administrator. Efile 2012 ) 403(b) plans. Efile 2012 Simplified employee pension (SEP) plans. Efile 2012 SIMPLE plans. Efile 2012 The total amount of the catch-up contributions on your behalf to all plans maintained by your employer cannot be more than the annual limit. Efile 2012 For 2013 the limit is $5,500, unchanged for 2014. Efile 2012 If you are eligible for both the 15-year rule increase in elective deferrals and the age 50 catch-up, allocate amounts first under the 15-year rule and next as an age 50 catch-up. Efile 2012 Catch-up contributions do not affect your MAC. Efile 2012 Therefore, the maximum amount that you are allowed to have contributed to your 403(b) account is your MAC plus your allowable catch-up contribution. Efile 2012 You can use Worksheet C in chapter 9 to figure your limit on catch-up contributions. Efile 2012 Prev Up Next Home More Online Publications
Tax Information For Corporations
Abusive Tax Shelters and Transactions
The Internal Revenue Service has a comprehensive strategy in place to combat abusive tax shelters and transactions. This strategy includes guidance on abusive transactions, regulations governing tax shelters, a hotline for taxpayers to use to report abusive technical transactions, and enforcement activity against abusive tax shelter promoters and investors.
Additional Guidance on IRC Section 168(k)(4) Election to Accelerate Research Credits
A taxpayer with a taxable year end of June 30, is allowed the option provided by section 3.02(1)(a)(i)(I) and (II) of Rev. Proc. 2009-16 if such taxpayer files its original federal income tax return for such taxable year on or before March 11, 2009, consistent with the option available to a taxpayer who files its original federal income tax return after March 11, 2009.
Alternative Motor Vehicle Credit
The Alternative Fuel Motor Vehicle Credit was enacted by the Energy Policy Act of 2005 and includes separate credits for four distinct categories of vehicles: Hybrid vehicles, Fuel Cell vehicles, Qualified Alternative Fuel Motor vehicles (QAFMV) and Advanced Lean Burn Technology vehicles. The amount of the potential credit varies by type of vehicle and which of the four credits applies.
Corporate Executive Compliance
The Internal Revenue Service is taking steps to improve tax compliance by corporations and their executive employees. One area of emphasis is executive compensation, for which audit technique guides have been developed for use by agents in examining tax returns filed by corporations and executives.
e-file for Large Business and International (LB&I)
Certain large business and International (LB&I) corporations are required to electronically file their Forms 1120 and 1120S. Other corporations may do so voluntarily. This site provides e-file information for corporations that prepare and transmit their own electronic corporate income tax returns and those that use the services of third party tax professionals.
FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes"
FIN 48 is intended to eliminate inconsistency in accounting for uncertain tax positions in financial statements certified in accordance with U.S. GAAP and mandates new rules for recognition, de-recognition, measurement, and disclosure of tax positions.
Fast Track Settlement
The LB&I / Appeals Fast Track Settlement program is a joint effort between the Large Business and International (LB&I) Division and Appeals to use the mediation skills and delegated settlement authority of Appeals to resolve issues while still under LB&I jurisdiction.
Filing Requirements for Filing Status Change (revised 11-15-11)
Guidance for taxpayers requesting to change their filing status from a C Corporation (filing Form 1120) to an S Corporation (filing Form 1120S).
Foreign Account Tax Compliance Act
FATCA will increase information reporting by foreign financial institutions, non-financial foreign entities, and certain U.S. persons holding financial assets outside the United States.
Forms 5471 - Automatic Assessment of Penalties under IRC Section 6038(b)(1)
Beginning January 1, 2009, the Internal Revenue Service Center will automatically assert appropriate penalties on late filed Forms 1120 with Forms 5471 attached. Taxpayers are encouraged to submit delinquent Forms 5471 prior to January 1, 2009.
Form 8806 - Information Return for Acquisition of Control or Substantial Change in Capital Structure
Pursuant to the provisions of Temporary Regulation § 1.6043-4T(a), requiring reporting of certain acquisitions of control and substantial changes in capital structure, corporations can consent to the publication by the IRS of the information from their Form 8806.
Income from Abroad is Taxable
There have been recent reports about the interest of the Internal Revenue Service (IRS) in taxpayers with bank accounts in Liechtenstein. The IRS' interest, however, extends beyond bank accounts in Liechtenstein to financial accounts anywhere in the world. The IRS reminds you to report your worldwide income on your U.S. tax return and lists the possible consequences of hiding income overseas.
Index of Large Business and International (LB&I) Division Industry Overviews
The LB&I Industry Overview Series, designed to provide LB&I employees greater awareness of various industries, contain information on industry background, trends, and terms, accounting principles, information systems, industry operating procedures, government regulatory requirements, significant law and important issues and industry resources.
Industry Issue Resolution Program
The Industry Issue Resolution (IIR) Program resolves frequently disputed or burdensome tax issues. IRS solicits suggestions for issues for the program from taxpayers, representatives and associations.
Provides links to information on a variety of International topics including Tax Treaties, Know-Your-Customer (KYC) Rules, Transfer Pricing and Qualified Intermediaries (QI).
The International Tax Gap
Find resources on this page pertaining to the international tax gap — the difference between the amount of tax that taxpayers should pay and the amount that is paid voluntarily and on time. The tax gap can also be thought of as the sum of non-compliance with the tax law.
Limited Issue Focused Examination (LIFE)
The IRS Large Business and International (LB&I) Division is implementing a new streamlined examination process.
LB&I Technical Resources and Guidance
Coordinated issue papers, Industry Director guidance, audit technique guides and other documents provide technical information and guidance on complex tax law and administrative issues affecting the LB&I division and LB&I taxpayers.
New Identification Number Implemented for Certain Foreign Information Returns
New Identification Number Implemented for Certain Foreign Information Returns
Pre-Filing Agreement Program
The Pre-Filing Agreement Program is expected to reduce taxpayer burden and make more effective use of IRS resources by resolving or eliminating tax controversy earlier in the examination process.
Quality Examination Process
The Quality Examination Process (QEP) is a systematic approach for engaging and involving Large Business and International (LB&I) taxpayers in the tax examination process, from the earliest planning stages through resolution of all issues and completion of the case.
Report of Foreign Bank and Financial Accounts (FBAR)
If you own a foreign bank account, brokerage account, mutual fund, unit trust, or other financial account, then you may be required to report the account yearly to the Internal Revenue Service.
An eligible domestic corporation can avoid double taxation (once to the shareholders and again to the corporation) by electing to be treated as an S corporation.
Schedule M-3 for Large Business & International (LB&I)
Schedule M-3 is used by certain corporations and partnerships to reconcile financial accounting net income and taxable income. Affected corporations and partnerships are those with assets of $10 million or more that file Form 1120, 1120-PC, 1120-L, 1120S, or 1065. Certain other partnerships filing Form 1065 are also required to use the Schedule M-3.
2008 Changes to Form 1065 - Frequently Asked Questions
Form 1065 has a number of changes for 2008. For example, Schedule B and Schedule K-1 require reporting of ownership percentages. The FAQ page on Form 1065 changes offers helpful examples.
U.S./Germany Tax Treaty Modified to Include Mandatory Arbitration in Certain Circumstances
A new Protocol modifying certain provisions of the income tax treaty between the U.S. and Germany came into force on Dec. 28, 2007. It modifies Article 25 Mutual Agreement Procedure (MAP) to provide for mandatory arbitration of certain cases in the MAP. This announcement provides interim guidance for the “commencement date” for MAP case arbitration until a formal mutual agreement is published.
Uncertain Tax Positions - Schedule UTP
IRS finalized Schedule UTP & instructions for reporting uncertain tax positions by certain corporations.
Page Last Reviewed or Updated: 30-Mar-2014
The Efile 2012
Efile 2012 3. Efile 2012 SIMPLE Plans Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: SIMPLE IRA PlanWho Can Set Up a SIMPLE IRA Plan? Who Can Participate in a SIMPLE IRA Plan? How To Set Up a SIMPLE IRA Plan Notification Requirement Contribution Limits When To Deduct Contributions Where To Deduct Contributions Tax Treatment of Contributions Distributions (Withdrawals) More Information on SIMPLE IRA Plans SIMPLE 401(k) Plan Topics - This chapter discusses: SIMPLE IRA plan SIMPLE 401(k) plan Useful Items - You may want to see: Publications 590 Individual Retirement Arrangements (IRAs) 3998 Choosing A Retirement Solution for Your Small Business 4284 SIMPLE IRA Plan Checklist 4334 SIMPLE IRA Plans for Small Businesses Forms (and Instructions) W-2 Wage and Tax Statement 5304-SIMPLE Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)–Not for Use With a Designated Financial Institution 5305-SIMPLE Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)–for Use With a Designated Financial Institution 8880 Credit for Qualified Retirement Savings Contributions 8881 Credit for Small Employer Pension Plan Startup Costs A savings incentive match plan for employees (SIMPLE plan) is a written arrangement that provides you and your employees with a simplified way to make contributions to provide retirement income. Efile 2012 Under a SIMPLE plan, employees can choose to make salary reduction contributions to the plan rather than receiving these amounts as part of their regular pay. Efile 2012 In addition, you will contribute matching or nonelective contributions. Efile 2012 SIMPLE plans can only be maintained on a calendar-year basis. Efile 2012 A SIMPLE plan can be set up in either of the following ways. Efile 2012 Using SIMPLE IRAs (SIMPLE IRA plan). Efile 2012 As part of a 401(k) plan (SIMPLE 401(k) plan). Efile 2012 Many financial institutions will help you set up a SIMPLE plan. Efile 2012 SIMPLE IRA Plan A SIMPLE IRA plan is a retirement plan that uses SIMPLE IRAs for each eligible employee. Efile 2012 Under a SIMPLE IRA plan, a SIMPLE IRA must be set up for each eligible employee. Efile 2012 For the definition of an eligible employee, see Who Can Participate in a SIMPLE IRA Plan , later. Efile 2012 Who Can Set Up a SIMPLE IRA Plan? You can set up a SIMPLE IRA plan if you meet both the following requirements. Efile 2012 You meet the employee limit. Efile 2012 You do not maintain another qualified plan unless the other plan is for collective bargaining employees. Efile 2012 Employee limit. Efile 2012 You can set up a SIMPLE IRA plan only if you had 100 or fewer employees who received $5,000 or more in compensation from you for the preceding year. Efile 2012 Under this rule, you must take into account all employees employed at any time during the calendar year regardless of whether they are eligible to participate. Efile 2012 Employees include self-employed individuals who received earned income and leased employees (defined in chapter 1). Efile 2012 Once you set up a SIMPLE IRA plan, you must continue to meet the 100-employee limit each year you maintain the plan. Efile 2012 Grace period for employers who cease to meet the 100-employee limit. Efile 2012 If you maintain the SIMPLE IRA plan for at least 1 year and you cease to meet the 100-employee limit in a later year, you will be treated as meeting it for the 2 calendar years immediately following the calendar year for which you last met it. Efile 2012 A different rule applies if you do not meet the 100-employee limit because of an acquisition, disposition, or similar transaction. Efile 2012 Under this rule, the SIMPLE IRA plan will be treated as meeting the 100-employee limit for the year of the transaction and the 2 following years if both the following conditions are satisfied. Efile 2012 Coverage under the plan has not significantly changed during the grace period. Efile 2012 The SIMPLE IRA plan would have continued to qualify after the transaction if you had remained a separate employer. Efile 2012 The grace period for acquisitions, dispositions, and similar transactions also applies if, because of these types of transactions, you do not meet the rules explained under Other qualified plan or Who Can Participate in a SIMPLE IRA Plan, below. Efile 2012 Other qualified plan. Efile 2012 The SIMPLE IRA plan generally must be the only retirement plan to which you make contributions, or to which benefits accrue, for service in any year beginning with the year the SIMPLE IRA plan becomes effective. Efile 2012 Exception. Efile 2012 If you maintain a qualified plan for collective bargaining employees, you are permitted to maintain a SIMPLE IRA plan for other employees. Efile 2012 Who Can Participate in a SIMPLE IRA Plan? Eligible employee. Efile 2012 Any employee who received at least $5,000 in compensation during any 2 years preceding the current calendar year and is reasonably expected to receive at least $5,000 during the current calendar year is eligible to participate. Efile 2012 The term “employee” includes a self-employed individual who received earned income. Efile 2012 You can use less restrictive eligibility requirements (but not more restrictive ones) by eliminating or reducing the prior year compensation requirements, the current year compensation requirements, or both. Efile 2012 For example, you can allow participation for employees who received at least $3,000 in compensation during any preceding calendar year. Efile 2012 However, you cannot impose any other conditions for participating in a SIMPLE IRA plan. Efile 2012 Excludable employees. Efile 2012 The following employees do not need to be covered under a SIMPLE IRA plan. Efile 2012 Employees who are covered by a union agreement and whose retirement benefits were bargained for in good faith by the employees' union and you. Efile 2012 Nonresident alien employees who have received no U. Efile 2012 S. Efile 2012 source wages, salaries, or other personal services compensation from you. Efile 2012 Compensation. Efile 2012 Compensation for employees is the total wages, tips, and other compensation from the employer subject to federal income tax withholding and the amounts paid for domestic service in a private home, local college club, or local chapter of a college fraternity or sorority. Efile 2012 Compensation also includes the employee's salary reduction contributions made under this plan and, if applicable, elective deferrals under a section 401(k) plan, a SARSEP, or a section 403(b) annuity contract and compensation deferred under a section 457 plan required to be reported by the employer on Form W-2. Efile 2012 If you are self-employed, compensation is your net earnings from self-employment (line 4 of Short Schedule SE or line 6 of Long Schedule SE (Form 1040)) before subtracting any contributions made to the SIMPLE IRA plan for yourself. Efile 2012 How To Set Up a SIMPLE IRA Plan You can use Form 5304-SIMPLE or Form 5305-SIMPLE to set up a SIMPLE IRA plan. Efile 2012 Each form is a model savings incentive match plan for employees (SIMPLE) plan document. Efile 2012 Which form you use depends on whether you select a financial institution or your employees select the institution that will receive the contributions. Efile 2012 Use Form 5304-SIMPLE if you allow each plan participant to select the financial institution for receiving his or her SIMPLE IRA plan contributions. Efile 2012 Use Form 5305-SIMPLE if you require that all contributions under the SIMPLE IRA plan be deposited initially at a designated financial institution. Efile 2012 The SIMPLE IRA plan is adopted when you have completed all appropriate boxes and blanks on the form and you (and the designated financial institution, if any) have signed it. Efile 2012 Keep the original form. Efile 2012 Do not file it with the IRS. Efile 2012 Other uses of the forms. Efile 2012 If you set up a SIMPLE IRA plan using Form 5304-SIMPLE or Form 5305-SIMPLE, you can use the form to satisfy other requirements, including the following. Efile 2012 Meeting employer notification requirements for the SIMPLE IRA plan. Efile 2012 Form 5304-SIMPLE and Form 5305-SIMPLE contain a Model Notification to Eligible Employees that provides the necessary information to the employee. Efile 2012 Maintaining the SIMPLE IRA plan records and proving you set up a SIMPLE IRA plan for employees. Efile 2012 Deadline for setting up a SIMPLE IRA plan. Efile 2012 You can set up a SIMPLE IRA plan effective on any date from January 1 through October 1 of a year, provided you did not previously maintain a SIMPLE IRA plan. Efile 2012 This requirement does not apply if you are a new employer that comes into existence after October 1 of the year the SIMPLE IRA plan is set up and you set up a SIMPLE IRA plan as soon as administratively feasible after your business comes into existence. Efile 2012 If you previously maintained a SIMPLE IRA plan, you can set up a SIMPLE IRA plan effective only on January 1 of a year. Efile 2012 A SIMPLE IRA plan cannot have an effective date that is before the date you actually adopt the plan. Efile 2012 Setting up a SIMPLE IRA. Efile 2012 SIMPLE IRAs are the individual retirement accounts or annuities into which the contributions are deposited. Efile 2012 A SIMPLE IRA must be set up for each eligible employee. Efile 2012 Forms 5305-S, SIMPLE Individual Retirement Trust Account, and 5305-SA, SIMPLE Individual Retirement Custodial Account, are model trust and custodial account documents the participant and the trustee (or custodian) can use for this purpose. Efile 2012 A SIMPLE IRA cannot be a Roth IRA. Efile 2012 Contributions to a SIMPLE IRA will not affect the amount an individual can contribute to a Roth or traditional IRA. Efile 2012 Deadline for setting up a SIMPLE IRA. Efile 2012 A SIMPLE IRA must be set up for an employee before the first date by which a contribution is required to be deposited into the employee's IRA. Efile 2012 See Time limits for contributing funds , later, under Contribution Limits. Efile 2012 Credit for startup costs. Efile 2012 You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SIMPLE IRA plan that first became effective in 2013. Efile 2012 For more information, see Credit for startup costs under Reminders, earlier. Efile 2012 Notification Requirement If you adopt a SIMPLE IRA plan, you must notify each employee of the following information before the beginning of the election period. Efile 2012 The employee's opportunity to make or change a salary reduction choice under a SIMPLE IRA plan. Efile 2012 Your decision to make either matching contributions or nonelective contributions (discussed later). Efile 2012 A summary description provided by the financial institution. Efile 2012 Written notice that his or her balance can be transferred without cost or penalty if they use a designated financial institution. Efile 2012 Election period. Efile 2012 The election period is generally the 60-day period immediately preceding January 1 of a calendar year (November 2 to December 31 of the preceding calendar year). Efile 2012 However, the dates of this period are modified if you set up a SIMPLE IRA plan in mid-year (for example, on July 1) or if the 60-day period falls before the first day an employee becomes eligible to participate in the SIMPLE IRA plan. Efile 2012 A SIMPLE IRA plan can provide longer periods for permitting employees to enter into salary reduction agreements or to modify prior agreements. Efile 2012 For example, a SIMPLE IRA plan can provide a 90-day election period instead of the 60-day period. Efile 2012 Similarly, in addition to the 60-day period, a SIMPLE IRA plan can provide quarterly election periods during the 30 days before each calendar quarter, other than the first quarter of each year. Efile 2012 Contribution Limits Contributions are made up of salary reduction contributions and employer contributions. Efile 2012 You, as the employer, must make either matching contributions or nonelective contributions, defined later. Efile 2012 No other contributions can be made to the SIMPLE IRA plan. Efile 2012 These contributions, which you can deduct, must be made timely. Efile 2012 See Time limits for contributing funds , later. Efile 2012 Salary reduction contributions. Efile 2012 The amount the employee chooses to have you contribute to a SIMPLE IRA on his or her behalf cannot be more than $12,000 for 2013 and 2014. Efile 2012 These contributions must be expressed as a percentage of the employee's compensation unless you permit the employee to express them as a specific dollar amount. Efile 2012 You cannot place restrictions on the contribution amount (such as limiting the contribution percentage), except to comply with the $12,000 limit. Efile 2012 If you or an employee participates in any other qualified plan during the year and you or your employee have salary reduction contributions (elective deferrals) under those plans, the salary reduction contributions under a SIMPLE IRA plan also count toward the overall annual limit ($17,500 for 2013 and 2014) on exclusion of salary reduction contributions and other elective deferrals. Efile 2012 Catch-up contributions. Efile 2012 A SIMPLE IRA plan can permit participants who are age 50 or over at the end of the calendar year to also make catch-up contributions. Efile 2012 The catch-up contribution limit for 2013 and 2014 for SIMPLE IRA plans is $2,500. Efile 2012 Salary reduction contributions are not treated as catch-up contributions for 2013 or 2014 until they exceed $12,000. Efile 2012 However, the catch-up contribution a participant can make for a year cannot exceed the lesser of the following amounts. Efile 2012 The catch-up contribution limit. Efile 2012 The excess of the participant's compensation over the salary reduction contributions that are not catch-up contributions. Efile 2012 Employer matching contributions. Efile 2012 You are generally required to match each employee's salary reduction contributions on a dollar-for-dollar basis up to 3% of the employee's compensation. Efile 2012 This requirement does not apply if you make nonelective contributions as discussed later. Efile 2012 Example. Efile 2012 In 2013, your employee, John Rose, earned $25,000 and chose to defer 5% of his salary. Efile 2012 Your net earnings from self-employment are $40,000, and you choose to contribute 10% of your earnings to your SIMPLE IRA. Efile 2012 You make 3% matching contributions. Efile 2012 The total contribution you make for John is $2,000, figured as follows. Efile 2012 Salary reduction contributions ($25,000 × . Efile 2012 05) $1,250 Employer matching contribution ($25,000 × . Efile 2012 03) 750 Total contributions $2,000 The total contribution you make for yourself is $5,200, figured as follows. Efile 2012 Salary reduction contributions ($40,000 × . Efile 2012 10) $4,000 Employer matching contribution ($40,000 × . Efile 2012 03) 1,200 Total contributions $5,200 Lower percentage. Efile 2012 If you choose a matching contribution less than 3%, the percentage must be at least 1%. Efile 2012 You must notify the employees of the lower match within a reasonable period of time before the 60-day election period (discussed earlier) for the calendar year. Efile 2012 You cannot choose a percentage less than 3% for more than 2 years during the 5-year period that ends with (and includes) the year for which the choice is effective. Efile 2012 Nonelective contributions. Efile 2012 Instead of matching contributions, you can choose to make nonelective contributions of 2% of compensation on behalf of each eligible employee who has at least $5,000 (or some lower amount you select) of compensation from you for the year. Efile 2012 If you make this choice, you must make nonelective contributions whether or not the employee chooses to make salary reduction contributions. Efile 2012 Only $255,000 of the employee's compensation can be taken into account to figure the contribution limit in 2013 ($260,000 in 2014). Efile 2012 If you choose this 2% contribution formula, you must notify the employees within a reasonable period of time before the 60-day election period (discussed earlier) for the calendar year. Efile 2012 Example 1. Efile 2012 In 2013, your employee, Jane Wood, earned $36,000 and chose to have you contribute 10% of her salary. Efile 2012 Your net earnings from self-employment are $50,000, and you choose to contribute 10% of your earnings to your SIMPLE IRA. Efile 2012 You make a 2% nonelective contribution. Efile 2012 Both of you are under age 50. Efile 2012 The total contribution you make for Jane is $4,320, figured as follows. Efile 2012 Salary reduction contributions ($36,000 × . Efile 2012 10) $3,600 2% nonelective contributions ($36,000 × . Efile 2012 02) 720 Total contributions $4,320 The total contribution you make for yourself is $6,000, figured as follows. Efile 2012 Salary reduction contributions ($50,000 × . Efile 2012 10) $5,000 2% nonelective contributions ($50,000 × . Efile 2012 02) 1,000 Total contributions $6,000 Example 2. Efile 2012 Using the same facts as in Example 1, above, the maximum contribution you make for Jane or for yourself if you each earned $75,000 is $13,500, figured as follows. Efile 2012 Salary reduction contributions (maximum amount allowed) $12,000 2% nonelective contributions ($75,000 × . Efile 2012 02) 1,500 Total contributions $13,500 Time limits for contributing funds. Efile 2012 You must make the salary reduction contributions to the SIMPLE IRA within 30 days after the end of the month in which the amounts would otherwise have been payable to the employee in cash. Efile 2012 You must make matching contributions or nonelective contributions by the due date (including extensions) for filing your federal income tax return for the year. Efile 2012 Certain plans subject to Department of Labor rules may have an earlier due date for salary reduction contributions. Efile 2012 When To Deduct Contributions You can deduct SIMPLE IRA contributions in the tax year within which the calendar year for which contributions were made ends. Efile 2012 You can deduct contributions for a particular tax year if they are made for that tax year and are made by the due date (including extensions) of your federal income tax return for that year. Efile 2012 Example 1. Efile 2012 Your tax year is the fiscal year ending June 30. Efile 2012 Contributions under a SIMPLE IRA plan for the calendar year 2013 (including contributions made in 2013 before July 1, 2013) are deductible in the tax year ending June 30, 2014. Efile 2012 Example 2. Efile 2012 You are a sole proprietor whose tax year is the calendar year. Efile 2012 Contributions under a SIMPLE IRA plan for the calendar year 2013 (including contributions made in 2014 by April 15, 2014) are deductible in the 2013 tax year. Efile 2012 Where To Deduct Contributions Deduct the contributions you make for your common-law employees on your tax return. Efile 2012 For example, sole proprietors deduct them on Schedule C (Form 1040) or Schedule F (Form 1040); partnerships deduct them on Form 1065; and corporations deduct them on Form 1120 or Form 1120S. Efile 2012 Sole proprietors and partners deduct contributions for themselves on line 28 of Form 1040. Efile 2012 (If you are a partner, contributions for yourself are shown on the Schedule K-1 (Form 1065) you receive from the partnership. Efile 2012 ) Tax Treatment of Contributions You can deduct your contributions and your employees can exclude these contributions from their gross income. Efile 2012 SIMPLE IRA plan contributions are not subject to federal income tax withholding. Efile 2012 However, salary reduction contributions are subject to social security, Medicare, and federal unemployment (FUTA) taxes. Efile 2012 Matching and nonelective contributions are not subject to these taxes. Efile 2012 Reporting on Form W-2. Efile 2012 Do not include SIMPLE IRA plan contributions in the “Wages, tips, other compensation” box of Form W-2. Efile 2012 You must, however, include them in the “Social security wages” and “Medicare wages and tips” boxes. Efile 2012 You must also include them in box 12. Efile 2012 Mark the “Retirement plan” checkbox in box 13. Efile 2012 For more information, see the Form W-2 instructions. Efile 2012 Distributions (Withdrawals) Distributions from a SIMPLE IRA are subject to IRA rules and generally are includible in income for the year received. Efile 2012 Tax-free rollovers can be made from one SIMPLE IRA into another SIMPLE IRA. Efile 2012 However, a rollover from a SIMPLE IRA to a non-SIMPLE IRA can be made tax free only after a 2-year participation in the SIMPLE IRA plan. Efile 2012 Generally, you or your employee must begin to receive distributions from a SIMPLE IRA by April 1 of the first year after the calendar year in which you or your employee reaches age 70½. Efile 2012 Early withdrawals generally are subject to a 10% additional tax. Efile 2012 However, the additional tax is increased to 25% if funds are withdrawn within 2 years of beginning participation. Efile 2012 More information. Efile 2012 See Publication 590 for information about IRA rules, including those on the tax treatment of distributions, rollovers, required distributions, and income tax withholding. Efile 2012 More Information on SIMPLE IRA Plans If you need help to set up or maintain a SIMPLE IRA plan, go to the IRS website and search SIMPLE IRA Plan. Efile 2012 SIMPLE 401(k) Plan You can adopt a SIMPLE plan as part of a 401(k) plan if you meet the 100-employee limit as discussed earlier under SIMPLE IRA Plan. Efile 2012 A SIMPLE 401(k) plan is a qualified retirement plan and generally must satisfy the rules discussed under Qualification Rules in chapter 4, including the required distribution rules. Efile 2012 However, a SIMPLE 401(k) plan is not subject to the nondiscrimination and top-heavy rules discussed in chapter 4 if the plan meets the conditions listed below. Efile 2012 Under the plan, an employee can choose to have you make salary reduction contributions for the year to a trust in an amount expressed as a percentage of the employee's compensation, but not more than $12,000 for 2013 and 2014. Efile 2012 If permitted under the plan, an employee who is age 50 or over can also make a catch-up contribution of up to $2,500 for 2013 and 2014. Efile 2012 See Catch-up contributions , earlier under Contribution Limits. Efile 2012 You must make either: Matching contributions up to 3% of compensation for the year, or Nonelective contributions of 2% of compensation on behalf of each eligible employee who has at least $5,000 of compensation from you for the year. Efile 2012 No other contributions can be made to the trust. Efile 2012 No contributions are made, and no benefits accrue, for services during the year under any other qualified retirement plan sponsored by you on behalf of any employee eligible to participate in the SIMPLE 401(k) plan. Efile 2012 The employee's rights to any contributions are nonforfeitable. Efile 2012 No more than $255,000 of the employee's compensation can be taken into account in figuring matching contributions and nonelective contributions in 2013 ($260,000 in 2014). Efile 2012 Compensation is defined earlier in this chapter. Efile 2012 Employee notification. Efile 2012 The notification requirement that applies to SIMPLE IRA plans also applies to SIMPLE 401(k) plans. Efile 2012 See Notification Requirement in this chapter. Efile 2012 Credit for startup costs. Efile 2012 You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SIMPLE 401(k) plan that first became effective in 2013. Efile 2012 For more information, see Credit for startup costs under Reminders, earlier. Efile 2012 Note on Forms. Efile 2012 Please note that Forms 5304-SIMPLE and 5305-SIMPLE can not be used to establish a SIMPLE 401(k) plan. Efile 2012 To set up a SIMPLE 401(k) plan, see Adopting a Written Plan in chapter 4. Efile 2012 Prev Up Next Home More Online Publications