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Federal Tax Form 1040x

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Federal Tax Form 1040x

Federal tax form 1040x 2. Federal tax form 1040x   Taxable and Nontaxable Income Table of Contents Compensation for Services Retirement Plan DistributionsIndividual Retirement Arrangements (IRAs) Pensions and Annuities Social Security and Equivalent Railroad Retirement BenefitsAre Any of Your Benefits Taxable? How Much Is Taxable? How To Report Your Benefits Lump-Sum Election Repayments More Than Gross Benefits Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits Life Insurance ProceedsInstallments for life. Federal tax form 1040x Surviving spouse. Federal tax form 1040x Endowment Contract Proceeds Accelerated Death Benefits Sale of HomeMaximum Amount of Exclusion Ownership and Use Tests Married Persons Business Use or Rental of Home Reporting the Sale Reverse Mortgages Other ItemsWelfare benefits. Federal tax form 1040x Payments from a state fund for victims of crime. Federal tax form 1040x Home Affordable Modification Program (HAMP). Federal tax form 1040x Mortgage assistance payments. Federal tax form 1040x Payments to reduce cost of winter energy use. Federal tax form 1040x Nutrition Program for the Elderly. Federal tax form 1040x Reemployment Trade Adjustment Assistance (RTAA). Federal tax form 1040x Generally, income is taxable unless it is specifically exempt (not taxed) by law. Federal tax form 1040x Your taxable income may include compensation for services, interest, dividends, rents, royalties, income from partnerships, estate or trust income, gain from sales or exchanges of property, and business income of all kinds. Federal tax form 1040x Under special provisions of the law, certain items are partially or fully exempt from tax. Federal tax form 1040x Provisions that are of special interest to older taxpayers are discussed in this chapter. Federal tax form 1040x Compensation for Services Generally, you must include in gross income everything you receive in payment for personal services. Federal tax form 1040x In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options. Federal tax form 1040x You need not receive the compensation in cash for it to be taxable. Federal tax form 1040x Payments you receive in the form of goods or services generally must be included in gross income at their fair market value. Federal tax form 1040x Volunteer work. Federal tax form 1040x   Do not include in your gross income amounts you receive for supportive services or reimbursements for out-of-pocket expenses under any of the following volunteer programs. Federal tax form 1040x Retired Senior Volunteer Program (RSVP). Federal tax form 1040x Foster Grandparent Program. Federal tax form 1040x Senior Companion Program. Federal tax form 1040x Service Corps of Retired Executives (SCORE). Federal tax form 1040x Unemployment compensation. Federal tax form 1040x   You must include in income all unemployment compensation you or your spouse (if married filing jointly) received. Federal tax form 1040x More information. Federal tax form 1040x   See Publication 525, Taxable and Nontaxable Income, for more detailed information on specific types of income. Federal tax form 1040x Retirement Plan Distributions This section summarizes the tax treatment of amounts you receive from traditional individual retirement arrangements (IRA), employee pensions or annuities, and disability pensions or annuities. Federal tax form 1040x A traditional IRA is any IRA that is not a Roth or SIMPLE IRA. Federal tax form 1040x A Roth IRA is an individual retirement plan that can be either an account or an annuity and features nondeductible contributions and tax-free distributions. Federal tax form 1040x A SIMPLE IRA is a tax-favored retirement plan that certain small employers (including self-employed individuals) can set up for the benefit of their employees. Federal tax form 1040x More detailed information can be found in Publication 590, Individual Retirement Arrangements (IRAs), and Publication 575, Pension and Annuity Income. Federal tax form 1040x Individual Retirement Arrangements (IRAs) In general, distributions from a traditional IRA are taxable in the year you receive them. Federal tax form 1040x Exceptions to the general rule are rollovers, tax-free withdrawals of contributions, and the return of nondeductible contributions. Federal tax form 1040x These are discussed in Publication 590. Federal tax form 1040x If you made nondeductible contributions to a traditional IRA, you must file Form 8606, Nondeductible IRAs. Federal tax form 1040x If you do not file Form 8606 with your return, you may have to pay a $50 penalty. Federal tax form 1040x Also, when you receive distributions from your traditional IRA, the amounts will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. Federal tax form 1040x Early distributions. Federal tax form 1040x   Generally, early distributions are amounts distributed from your traditional IRA account or annuity before you are age 59½, or amounts you receive when you cash in retirement bonds before you are age  59½. Federal tax form 1040x You must include early distributions of taxable amounts in your gross income. Federal tax form 1040x These taxable amounts are also subject to an additional 10% tax unless the distribution qualifies for an exception. Federal tax form 1040x For purposes of the additional 10% tax, an IRA is a qualified retirement plan. Federal tax form 1040x For more information about this tax, see Tax on Early Distributions under Pensions and Annuities, later. Federal tax form 1040x After age 59½ and before age 70½. Federal tax form 1040x   After you reach age 59½, you can receive distributions from your traditional IRA without having to pay the 10% additional tax. Federal tax form 1040x Even though you can receive distributions after you reach age 59½, distributions are not required until you reach  age 70½. Federal tax form 1040x Required distributions. Federal tax form 1040x   If you are the owner of a traditional IRA, you generally must receive the entire balance in your IRA or start receiving periodic distributions from your IRA by April 1 of the year following the year in which you reach age 70½. Federal tax form 1040x See When Must You Withdraw Assets? (Required Minimum Distributions) in Publication 590. Federal tax form 1040x If distributions from your traditional IRA(s) are less than the required minimum distribution for the year, you may have to pay a 50% excise tax for that year on the amount not distributed as required. Federal tax form 1040x For purposes of the 50% excise tax, an IRA is a qualified retirement plan. Federal tax form 1040x For more information about this tax, see Tax on Excess Accumulation under Pensions and Annuities, later. Federal tax form 1040x See also Excess Accumulations (Insufficient Distributions) in Publication 590. Federal tax form 1040x Pensions and Annuities Generally, if you did not pay any part of the cost of your employee pension or annuity, and your employer did not withhold part of the cost of the contract from your pay while you worked, the amounts you receive each year are fully taxable. Federal tax form 1040x However, see Insurance Premiums for Retired Public Safety Officers , later. Federal tax form 1040x If you paid part of the cost of your pension or annuity plan (see Cost , later), you can exclude part of each annuity payment from income as a recovery of your cost (investment in the contract). Federal tax form 1040x This tax-free part of the payment is figured when your annuity starts and remains the same each year, even if the amount of the payment changes. Federal tax form 1040x The rest of each payment is taxable. Federal tax form 1040x However, see Insurance Premiums for Retired Public Safety Officers , later. Federal tax form 1040x You figure the tax-free part of the payment using one of the following methods. Federal tax form 1040x Simplified Method. Federal tax form 1040x You generally must use this method if your annuity is paid under a qualified plan (a qualified employee plan, a qualified employee annuity, or a tax-sheltered annuity plan or contract). Federal tax form 1040x You cannot use this method if your annuity is paid under a nonqualified plan. Federal tax form 1040x General Rule. Federal tax form 1040x You must use this method if your annuity is paid under a nonqualified plan. Federal tax form 1040x You generally cannot use this method if your annuity is paid under a qualified plan. Federal tax form 1040x Contact your employer or plan administrator to find out if your pension or annuity is paid under a qualified or nonqualified plan. Federal tax form 1040x You determine which method to use when you first begin receiving your annuity, and you continue using it each year that you recover part of your cost. Federal tax form 1040x Exclusion limit. Federal tax form 1040x   If your annuity starting date is after 1986, the total amount of annuity income you can exclude over the years as a recovery of the cost cannot exceed your total cost. Federal tax form 1040x Any unrecovered cost at your (or the last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. Federal tax form 1040x This deduction is not subject to the 2%-of-adjusted-gross-income limit on miscellaneous deductions. Federal tax form 1040x   If you contributed to your pension or annuity and your annuity starting date is before 1987, you can continue to take your monthly exclusion for as long as you receive your annuity. Federal tax form 1040x If you chose a joint and survivor annuity, your survivor can continue to take the survivor's exclusion figured as of the annuity starting date. Federal tax form 1040x The total exclusion may be more than your cost. Federal tax form 1040x Cost. Federal tax form 1040x   Before you can figure how much, if any, of your pension or annuity benefits are taxable, you must determine your cost in the plan (your investment in the contract). Federal tax form 1040x Your total cost in the plan includes everything that you paid. Federal tax form 1040x It also includes amounts your employer contributed that were taxable to you when paid. Federal tax form 1040x However, see Foreign employment contributions , later. Federal tax form 1040x   From this total cost, subtract any refunded premiums, rebates, dividends, unrepaid loans, or other tax-free amounts you received by the later of the annuity starting date or the date on which you received your first payment. Federal tax form 1040x   The annuity starting date is the later of the first day of the first period for which you received a payment from the plan or the date on which the plan's obligations became fixed. Federal tax form 1040x    The amount of your contributions to the plan may be shown in box 9b of any Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Federal tax form 1040x , that you receive. Federal tax form 1040x Foreign employment contributions. Federal tax form 1040x   If you worked abroad, certain amounts your employer paid into your retirement plan that were not includible in your gross income may be considered part of your cost. Federal tax form 1040x For details, see Foreign employment contributions in Publication 575. Federal tax form 1040x Withholding. Federal tax form 1040x   The payer of your pension, profit-sharing, stock bonus, annuity, or deferred compensation plan will withhold income tax on the taxable part of amounts paid to you. Federal tax form 1040x However, you can choose not to have tax withheld on the payments you receive, unless they are eligible rollover distributions. Federal tax form 1040x (These are distributions that are eligible for rollover treatment but are not paid directly to another qualified retirement plan or to a traditional IRA. Federal tax form 1040x ) See Withholding Tax and Estimated Tax and Rollovers in Publication 575 for more information. Federal tax form 1040x   For payments other than eligible rollover distributions, you can tell the payer how much to withhold by filing a Form W-4P, Withholding Certificate for Pension or Annuity Payments. Federal tax form 1040x Simplified Method. Federal tax form 1040x   Under the Simplified Method, you figure the tax-free part of each annuity payment by dividing your cost by the total number of anticipated monthly payments. Federal tax form 1040x For an annuity that is payable over the lives of the annuitants, this number is based on the annuitants' ages on the annuity starting date and is determined from a table. Federal tax form 1040x For any other annuity, this number is the number of monthly annuity payments under the contract. Federal tax form 1040x Who must use the Simplified Method. Federal tax form 1040x   You must use the Simplified Method if your annuity starting date is after November 18, 1996, and you receive your pension or annuity payments from a qualified plan or annuity, unless you were at least 75 years old and entitled to at least 5 years of guaranteed payments (defined next). Federal tax form 1040x   In addition, if your annuity starting date is after July 1, 1986, and before November 19, 1996, you could have chosen to use the Simplified Method for payments from a qualified plan, unless you were at least 75 years old and entitled to at least 5 years of guaranteed payments. Federal tax form 1040x If you chose to use the Simplified Method, you must continue to use it each year that you recover part of your cost. Federal tax form 1040x Guaranteed payments. Federal tax form 1040x   Your annuity contract provides guaranteed payments if a minimum number of payments or a minimum amount (for example, the amount of your investment) is payable even if you and any survivor annuitant do not live to receive the minimum. Federal tax form 1040x If the minimum amount is less than the total amount of the payments you are to receive, barring death, during the first 5 years after payments begin (figured by ignoring any payment increases), you are entitled to less than 5 years of guaranteed payments. Federal tax form 1040x Who cannot use the Simplified Method. Federal tax form 1040x   You cannot use the Simplified Method and must use the General Rule if you receive pension or annuity payments from: A nonqualified plan, such as a private annuity, a purchased commercial annuity, or a nonqualified employee plan, or A qualified plan if you are age 75 or older on your annuity starting date and you are entitled to at least 5 years of guaranteed payments (defined above). Federal tax form 1040x   In addition, you had to use the General Rule for either circumstance described above if your annuity starting date is after July 1, 1986, and before November 19, 1996. Federal tax form 1040x If you did not have to use the General Rule, you could have chosen to use it. Federal tax form 1040x You also had to use the General Rule for payments from a qualified plan if your annuity starting date is before July 2, 1986, and you did not qualify to use the Three-Year Rule. Federal tax form 1040x   If you had to use the General Rule (or chose to use it), you must continue to use it each year that you recover your cost. Federal tax form 1040x   Unless your annuity starting date was before 1987, once you have recovered all of your non-taxable investment, all of each remaining payment you receive is fully taxable. Federal tax form 1040x Once your remaining payments are fully taxable, there is no longer a concern with the General Rule or Simplified Method. Federal tax form 1040x   Complete information on the General Rule, including the actuarial tables you need, is contained in Publication 939, General Rule for Pensions and Annuities. Federal tax form 1040x How to use the Simplified Method. Federal tax form 1040x   Complete the Simplified Method Worksheet in the Form 1040, Form 1040A, or Form 1040NR instructions or in Publication 575 to figure your taxable annuity for 2013. Federal tax form 1040x Be sure to keep the completed worksheet; it will help you figure your taxable annuity next year. Federal tax form 1040x   To complete line 3 of the worksheet, you must determine the total number of expected monthly payments for your annuity. Federal tax form 1040x How you do this depends on whether the annuity is for a single life, multiple lives, or a fixed period. Federal tax form 1040x For this purpose, treat an annuity that is payable over the life of an annuitant as payable for that annuitant's life even if the annuity has a fixed-period feature or also provides a temporary annuity payable to the annuitant's child under age 25. Federal tax form 1040x    You do not need to complete line 3 of the worksheet or make the computation on line 4 if you received annuity payments last year and used last year's worksheet to figure your taxable annuity. Federal tax form 1040x Instead, enter the amount from line 4 of last year's worksheet on line 4 of this year's worksheet. Federal tax form 1040x Single-life annuity. Federal tax form 1040x   If your annuity is payable for your life alone, use Table 1 at the bottom of the worksheet to determine the total number of expected monthly payments. Federal tax form 1040x Enter on line 3 the number shown for your age on your annuity starting date. Federal tax form 1040x This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. Federal tax form 1040x Multiple-lives annuity. Federal tax form 1040x   If your annuity is payable for the lives of more than one annuitant, use Table 2 at the bottom of the worksheet to determine the total number of expected monthly payments. Federal tax form 1040x Enter on line 3 the number shown for the annuitants' combined ages on the annuity starting date. Federal tax form 1040x For an annuity payable to you as the primary annuitant and to more than one survivor annuitant, combine your age and the age of the youngest survivor annuitant. Federal tax form 1040x For an annuity that has no primary annuitant and is payable to you and others as survivor annuitants, combine the ages of the oldest and youngest annuitants. Federal tax form 1040x Do not treat as a survivor annuitant anyone whose entitlement to payments depends on an event other than the primary annuitant's death. Federal tax form 1040x   However, if your annuity starting date is before 1998, do not use Table 2 and do not combine the annuitants' ages. Federal tax form 1040x Instead, you must use Table 1 at the bottom of the worksheet and enter on line 3 the number shown for the primary annuitant's age on the annuity starting date. Federal tax form 1040x This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. Federal tax form 1040x Fixed-period annuities. Federal tax form 1040x   If your annuity does not depend in whole or in part on anyone's life expectancy, the total number of expected monthly payments to enter on line 3 of the worksheet is the number of monthly annuity payments under the contract. Federal tax form 1040x Line 6. Federal tax form 1040x   The amount on line 6 should include all amounts that could have been recovered in prior years. Federal tax form 1040x If you did not recover an amount in a prior year, you may be able to amend your returns for the affected years. Federal tax form 1040x    Be sure to keep a copy of the completed worksheet; it will help you figure your taxable annuity in later years. Federal tax form 1040x Example. Federal tax form 1040x Bill Smith, age 65, began receiving retirement benefits in 2013, under a joint and survivor annuity. Federal tax form 1040x Bill's annuity starting date is January 1, 2013. Federal tax form 1040x The benefits are to be paid over the joint lives of Bill and his wife, Kathy, age 65. Federal tax form 1040x Bill had contributed $31,000 to a qualified plan and had received no distributions before the annuity starting date. Federal tax form 1040x Bill is to receive a retirement benefit of $1,200 a month, and Kathy is to receive a monthly survivor benefit of $600 upon Bill's death. Federal tax form 1040x Bill must use the Simplified Method to figure his taxable annuity because his payments are from a qualified plan and he is under age 75. Federal tax form 1040x See the illustrated Worksheet 2-A, Simplified Method Worksheet, later. Federal tax form 1040x You can find a blank version of this worksheet in Publication 575. Federal tax form 1040x (The references in the illustrated worksheet are to sections in Publication 575). Federal tax form 1040x His annuity is payable over the lives of more than one annuitant, so Bill uses his and Kathy's combined ages, 130 (65 + 65), and Table 2 at the bottom of the worksheet in completing line 3 of the worksheet and finds the line 3 amount to be 310. Federal tax form 1040x Bill's tax-free monthly amount is $100 ($31,000 ÷ 310 as shown on line 4 of the worksheet). Federal tax form 1040x Upon Bill's death, if Bill has not recovered the full $31,000 investment, Kathy will also exclude $100 from her $600 monthly payment. Federal tax form 1040x The full amount of any annuity payments received after 310 payments are paid must generally be included in gross income. Federal tax form 1040x If Bill and Kathy die before 310 payments are made, a miscellaneous itemized deduction will be allowed for the unrecovered cost on the final income tax return of the last to die. Federal tax form 1040x This deduction is not subject to the 2%-of-adjusted-gross-income limit. Federal tax form 1040x Worksheet 2-A. Federal tax form 1040x Simplified Method Worksheet—Illustrated 1. Federal tax form 1040x Enter the total pension or annuity payments received this year. Federal tax form 1040x Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a 1. Federal tax form 1040x $ 14,400 2. Federal tax form 1040x Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion* See Cost (Investment in the Contract), earlier 2. Federal tax form 1040x 31,000   Note. Federal tax form 1040x If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year's worksheet on line 4 below (even if the amount of your pension or annuity has changed). Federal tax form 1040x Otherwise, go to line 3. Federal tax form 1040x     3. Federal tax form 1040x Enter the appropriate number from Table 1 below. Federal tax form 1040x But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, enter the appropriate number from Table 2 below 3. Federal tax form 1040x 310 4. Federal tax form 1040x Divide line 2 by the number on line 3 4. Federal tax form 1040x 100 5. Federal tax form 1040x Multiply line 4 by the number of months for which this year's payments were made. Federal tax form 1040x If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. Federal tax form 1040x Otherwise, go to line 6 5. Federal tax form 1040x 1,200 6. Federal tax form 1040x Enter any amount previously recovered tax free in years after 1986. Federal tax form 1040x This is the amount shown on line 10 of your worksheet for last year 6. Federal tax form 1040x 0 7. Federal tax form 1040x Subtract line 6 from line 2 7. Federal tax form 1040x 31,000 8. Federal tax form 1040x Enter the smaller of line 5 or line 7 8. Federal tax form 1040x 1,200 9. Federal tax form 1040x Taxable amount for year. Federal tax form 1040x Subtract line 8 from line 1. Federal tax form 1040x Enter the result, but not less than zero. Federal tax form 1040x Also, add this amount to the total for Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Federal tax form 1040x Note. Federal tax form 1040x If your Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. Federal tax form 1040x If you are a retired public safety officer, see Insurance Premiums for Retired Public Safety Officers, earlier, before entering an amount on your tax return. Federal tax form 1040x 9. Federal tax form 1040x $ 13,200 10. Federal tax form 1040x Was your annuity starting date before 1987? □ Yes. Federal tax form 1040x STOP. Federal tax form 1040x Do not complete the rest of this worksheet. Federal tax form 1040x  ☑ No. Federal tax form 1040x Add lines 6 and 8. Federal tax form 1040x This is the amount you have recovered tax free through 2013. Federal tax form 1040x You will need this number if you need to fill out this worksheet next year. Federal tax form 1040x 10. Federal tax form 1040x 1,200 11. Federal tax form 1040x Balance of cost to be recovered. Federal tax form 1040x Subtract line 10 from line 2. Federal tax form 1040x If zero, you will not have to complete this worksheet next year. Federal tax form 1040x The payments you receive next year will generally be fully taxable 11. Federal tax form 1040x $ 29,800 * A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996. Federal tax form 1040x   Table 1 for Line 3 Above       AND your annuity starting date was—   IF your age on your annuity starting date was . Federal tax form 1040x . Federal tax form 1040x . Federal tax form 1040x   BEFORE November 19, 1996, enter on line 3 . Federal tax form 1040x . Federal tax form 1040x . Federal tax form 1040x AFTER November 18, 1996, enter on line 3 . Federal tax form 1040x . Federal tax form 1040x . Federal tax form 1040x   55 or under 300 360   56-60 260 310   61-65 240 260   66-70 170 210   71 or over 120 160 Table 2 for Line 3 Above   IF the annuitants' combined ages on your annuity starting date were . Federal tax form 1040x . Federal tax form 1040x . Federal tax form 1040x   THEN enter on line 3 . Federal tax form 1040x . Federal tax form 1040x . Federal tax form 1040x         110 or under   410         111-120   360         121-130   310         131-140   260         141 or over   210       Survivors of retirees. Federal tax form 1040x   Benefits paid to you as a survivor under a joint and survivor annuity must be included in your gross income in the same way the retiree would have included them in gross income. Federal tax form 1040x   If you receive a survivor annuity because of the death of a retiree who had reported the annuity under the Three-Year Rule, include the total received in your income. Federal tax form 1040x The retiree's cost has already been recovered tax free. Federal tax form 1040x   If the retiree was reporting the annuity payments under the General Rule, you must apply the same exclusion percentage the retiree used to your initial payment called for in the contract. Federal tax form 1040x The resulting tax-free amount will then remain fixed. Federal tax form 1040x Any increases in the survivor annuity are fully taxable. Federal tax form 1040x   If the retiree was reporting the annuity payments under the Simplified Method, the part of each payment that is tax free is the same as the tax-free amount figured by the retiree at the annuity starting date. Federal tax form 1040x See Simplified Method , earlier. Federal tax form 1040x How to report. Federal tax form 1040x   If you file Form 1040, report your total annuity on line 16a, and the taxable part on line 16b. Federal tax form 1040x If your pension or annuity is fully taxable, enter it on line 16b. Federal tax form 1040x Do not make an entry on line 16a. Federal tax form 1040x   If you file Form 1040A, report your total annuity on line 12a, and the taxable part on line 12b. Federal tax form 1040x If your pension or annuity is fully taxable, enter it on line 12b. Federal tax form 1040x Do not make an entry on line 12a. Federal tax form 1040x   If you file Form 1040NR, report your total annuity on line 17a, and the taxable part on line 17b. Federal tax form 1040x If your pension or annuity is fully taxable, enter it on line 17b. Federal tax form 1040x Do not make an entry on line 17a. Federal tax form 1040x Example. Federal tax form 1040x You are a Form 1040 filer and you received monthly payments totaling $1,200 (12 months x $100) during 2013 from a pension plan that was completely financed by your employer. Federal tax form 1040x You had paid no tax on the payments that your employer made to the plan, and the payments were not used to pay for accident, health, or long-term care insurance premiums (as discussed later under Insurance Premiums for Retired Public Safety Officers ). Federal tax form 1040x The entire $1,200 is taxable. Federal tax form 1040x You include $1,200 only on Form 1040, line 16b. Federal tax form 1040x Joint return. Federal tax form 1040x   If you file a joint return and you and your spouse each receive one or more pensions or annuities, report the total of the pensions and annuities on line 16a of Form 1040, line 12a of Form 1040A, or line 17a of Form 1040NR. Federal tax form 1040x Report the total of the taxable parts on line 16b of Form 1040, line 12b of Form 1040A, or line 17b of Form 1040NR. Federal tax form 1040x Form 1099-R. Federal tax form 1040x   You should receive a Form 1099-R for your pension or annuity. Federal tax form 1040x Form 1099-R shows your pension or annuity for the year and any income tax withheld. Federal tax form 1040x You should receive a Form W-2 if you receive distributions from certain nonqualified plans. Federal tax form 1040x You must attach Forms 1099-R or Forms W-2 to your 2013 tax return if federal income tax was withheld. Federal tax form 1040x Generally, you should be sent these forms by January 31, 2014. Federal tax form 1040x Nonperiodic Distributions If you receive a nonperiodic distribution from your retirement plan, you may be able to exclude all or part of it from your income as a recovery of your cost. Federal tax form 1040x Nonperiodic distributions include cash withdrawals, distributions of current earnings (dividends) on your investment, and certain loans. Federal tax form 1040x For information on how to figure the taxable amount of a nonperiodic distribution, see Taxation of Nonperiodic Payments in Publication 575. Federal tax form 1040x The taxable part of a nonperiodic distribution may be subject to an additional 10% tax. Federal tax form 1040x See Tax on Early Distributions, later. Federal tax form 1040x Lump-sum distributions. Federal tax form 1040x   If you receive a lump-sum distribution from a qualified employee plan or qualified employee annuity and the plan participant was born before January 2, 1936, you may be able to elect optional methods of figuring the tax on the distribution. Federal tax form 1040x The part from active participation in the plan before 1974 may qualify as capital gain subject to a 20% tax rate. Federal tax form 1040x The part from participation after 1973 (and any part from participation before 1974 that you do not report as capital gain) is ordinary income. Federal tax form 1040x You may be able to use the 10-year tax option to figure tax on the ordinary income part. Federal tax form 1040x Form 1099-R. Federal tax form 1040x   If you receive a total distribution from a plan, you should receive a Form 1099-R. Federal tax form 1040x If the distribution qualifies as a lump-sum distribution, box 3 shows the capital gain part of the distribution. Federal tax form 1040x The amount in box 2a, Taxable amount, minus the amount in box 3, Capital gain, is the ordinary income part. Federal tax form 1040x More information. Federal tax form 1040x   For more detailed information on lump-sum distributions, see Publication 575 or Form 4972, Tax on Lump-Sum Distributions. Federal tax form 1040x Tax on Early Distributions Most distributions you receive from your qualified retirement plan and nonqualified annuity contracts before you reach age 59½ are subject to an additional tax of 10%. Federal tax form 1040x The tax applies to the taxable part of the distribution. Federal tax form 1040x For this purpose, a qualified retirement plan is: A qualified employee plan (including a qualified cash or deferred arrangement (CODA) under Internal Revenue Code section 401(k)), A qualified employee annuity plan, A tax-sheltered annuity plan (403(b) plan), or An eligible state or local government section 457 deferred compensation plan (to the extent that any distribution is attributable to amounts the plan received in a direct transfer or rollover from one of the other plans listed here or an IRA). Federal tax form 1040x  An IRA is also a qualified retirement plan for purposes of this tax. Federal tax form 1040x General exceptions to tax. Federal tax form 1040x   The early distribution tax does not apply to any distributions that are: Made as part of a series of substantially equal periodic payments (made at least annually) for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary (if from a qualified retirement plan, the payments must begin after separation from service), Made because you are totally and permanently disabled, or Made on or after the death of the plan participant or contract holder. Federal tax form 1040x Additional exceptions. Federal tax form 1040x   There are additional exceptions to the early distribution tax for certain distributions from qualified retirement plans and nonqualified annuity contracts. Federal tax form 1040x See Publication 575 for details. Federal tax form 1040x Reporting tax. Federal tax form 1040x   If you owe only the tax on early distributions and distribution code 1 (early distribution, no known exception) is correctly shown in Form 1099-R, box 7, multiply the taxable part of the early distribution by 10% (. Federal tax form 1040x 10) and enter the result on Form 1040, line 58, or Form 1040NR, line 56. Federal tax form 1040x See the instructions for line 58 of Form 1040 or line 56 of Form 1040NR for more information about reporting the early distribution tax. Federal tax form 1040x Tax on Excess Accumulation To make sure that most of your retirement benefits are paid to you during your lifetime, rather than to your beneficiaries after your death, the payments that you receive from qualified retirement plans must begin no later than your required beginning date. Federal tax form 1040x Unless the rule for 5% owners applies, this is generally April 1 of the year that follows the later of: The calendar year in which you reach age 70½, or The calendar year in which you retire from employment with the employer maintaining the plan. Federal tax form 1040x However, your plan may require you to begin to receive payments by April 1 of the year that follows the year in which you reach 70½, even if you have not retired. Federal tax form 1040x For this purpose, a qualified retirement plan includes: A qualified employee plan, A qualified employee annuity plan, An eligible section 457 deferred compensation plan, or A tax-sheltered annuity plan (403(b) plan) (for benefits accruing after 1986). Federal tax form 1040x  An IRA is also a qualified retirement plan for purposes of this tax. Federal tax form 1040x An excess accumulation is the undistributed remainder of the required minimum distribution that was left in your qualified retirement plan. Federal tax form 1040x 5% owners. Federal tax form 1040x   If you own (or are considered to own under section 318 of the Internal Revenue Code) more than 5% of the company maintaining your qualified retirement plan, you must begin to receive distributions from the plan by April 1 of the year after the calendar year in which you reach age 70½. Federal tax form 1040x See Publication 575 for more information. Federal tax form 1040x Amount of tax. Federal tax form 1040x   If you do not receive the required minimum distribution, you are subject to an additional tax. Federal tax form 1040x The tax equals 50% of the difference between the amount that must be distributed and the amount that was distributed during the tax year. Federal tax form 1040x You can get this excise tax excused if you establish that the shortfall in distributions was due to reasonable error and that you are taking reasonable steps to remedy the shortfall. Federal tax form 1040x Form 5329. Federal tax form 1040x   You must file a Form 5329 if you owe a tax because you did not receive a minimum required distribution from your qualified retirement plan. Federal tax form 1040x Additional information. Federal tax form 1040x   For more detailed information on the tax on excess accumulation, see Publication 575. Federal tax form 1040x Insurance Premiums for Retired Public Safety Officers If you are an eligible retired public safety officer (law enforcement officer, firefighter, chaplain, or member of a rescue squad or ambulance crew), you can elect to exclude from income distributions made from your eligible retirement plan that are used to pay the premiums for accident or health insurance or long-term care insurance. Federal tax form 1040x The premiums can be for coverage for you, your spouse, or dependent(s). Federal tax form 1040x The distribution must be made directly from the plan to the insurance provider. Federal tax form 1040x You can exclude from income the smaller of the amount of the insurance premiums or $3,000. Federal tax form 1040x You can only make this election for amounts that would otherwise be included in your income. Federal tax form 1040x The amount excluded from your income cannot be used to claim a medical expense deduction. Federal tax form 1040x An eligible retirement plan is a governmental plan that is a: Qualified trust, Section 403(a) plan, Section 403(b) annuity, or Section 457(b) plan. Federal tax form 1040x If you make this election, reduce the otherwise taxable amount of your pension or annuity by the amount excluded. Federal tax form 1040x The taxable amount shown in box 2a of any Form 1099-R that you receive does not reflect the exclusion. Federal tax form 1040x Report your total distributions on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. Federal tax form 1040x Report the taxable amount on Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Federal tax form 1040x Enter “PSO” next to the appropriate line on which you report the taxable amount. Federal tax form 1040x Railroad Retirement Benefits Benefits paid under the Railroad Retirement Act fall into two categories. Federal tax form 1040x These categories are treated differently for income tax purposes. Federal tax form 1040x Social security equivalent benefits. Federal tax form 1040x   The first category is the amount of tier 1 railroad retirement benefits that equals the social security benefit that a railroad employee or beneficiary would have been entitled to receive under the social security system. Federal tax form 1040x This part of the tier 1 benefit is the social security equivalent benefit (SSEB) and is treated for tax purposes like social security benefits. Federal tax form 1040x (See Social Security and Equivalent Railroad Retirement Benefits , later. Federal tax form 1040x ) Non-social security equivalent benefits. Federal tax form 1040x   The second category contains the rest of the tier 1 benefits, called the non-social security equivalent benefit (NSSEB). Federal tax form 1040x It also contains any tier 2 benefit, vested dual benefit (VDB), and supplemental annuity benefit. Federal tax form 1040x This category of benefits is treated as an amount received from a qualified employee plan. Federal tax form 1040x This allows for the tax-free (nontaxable) recovery of employee contributions from the tier 2 benefits and the NSSEB part of the tier 1 benefits. Federal tax form 1040x Vested dual benefits and supplemental annuity benefits are non-contributory pensions and are fully taxable. Federal tax form 1040x More information. Federal tax form 1040x   For more information about railroad retirement benefits, see Publication 575. Federal tax form 1040x Military Retirement Pay Military retirement pay based on age or length of service is taxable and must be included in income as a pension on Form 1040, lines 16a and 16b; on Form 1040A, lines 12a and 12b; or on Form 1040NR, lines 17a and 17b. Federal tax form 1040x But, certain military and government disability pensions that are based on a percentage of disability from active service in the Armed Forces of any country generally are not taxable. Federal tax form 1040x For more information, including information about veterans' benefits and insurance, see Publication 525. Federal tax form 1040x Social Security and Equivalent Railroad Retirement Benefits This discussion explains the federal income tax rules for social security benefits and equivalent tier 1 railroad retirement benefits. Federal tax form 1040x Social security benefits include monthly retirement, survivor, and disability benefits. Federal tax form 1040x They do not include supplemental security income (SSI) payments, which are not taxable. Federal tax form 1040x Equivalent tier 1 railroad retirement benefits are the part of tier 1 benefits that a railroad employee or beneficiary would have been entitled to receive under the social security system. Federal tax form 1040x They commonly are called the social security equivalent benefit (SSEB) portion of tier 1 benefits. Federal tax form 1040x If you received these benefits during 2013, you should have received a Form SSA-1099 or Form RRB-1099 (Form SSA-1042S or Form RRB-1042S if you are a nonresident alien), showing the amount of the benefits. Federal tax form 1040x Are Any of Your Benefits Taxable? Note. Federal tax form 1040x When the term “benefits” is used in this section, it applies to both social security benefits and the SSEB portion of tier 1 railroad retirement benefits. Federal tax form 1040x  To find out whether any of your benefits may be taxable, compare the base amount for your filing status (explained later) with the total of: One-half of your benefits, plus All your other income, including tax-exempt interest. Federal tax form 1040x When making this comparison, do not reduce your other income by any exclusions for: Interest from qualified U. Federal tax form 1040x S. Federal tax form 1040x savings bonds, Employer-provided adoption benefits, Foreign earned income or foreign housing, or Income earned in American Samoa or Puerto Rico by bona fide residents. Federal tax form 1040x Figuring total income. Federal tax form 1040x   To figure the total of one-half of your benefits plus your other income, use Worksheet 2-B. Federal tax form 1040x If that total amount is more than your base amount, part of your benefits may be taxable. Federal tax form 1040x If you are married and file a joint return for 2013, you and your spouse must combine your incomes and your benefits to figure whether any of your combined benefits are taxable. Federal tax form 1040x Even if your spouse did not receive any benefits, you must add your spouse's income to yours to figure whether any of your benefits are taxable. Federal tax form 1040x If the only income you received during 2013 was your social security or the SSEB portion of tier 1 railroad retirement benefits, your benefits generally are not taxable and you probably do not have to file a return. Federal tax form 1040x If you have income in addition to your benefits, you may have to file a return even if none of your benefits are taxable. Federal tax form 1040x Worksheet 2-B. Federal tax form 1040x A Quick Way To Check if Your Benefits May Be Taxable A. Federal tax form 1040x Enter the amount from box 5 of all your Forms SSA-1099 and RRB-1099. Federal tax form 1040x Include  the full amount of any lump-sum benefit payments received in 2013, for 2013 and  earlier years. Federal tax form 1040x (If you received more than one form, combine the amounts from box 5  and enter the total. Federal tax form 1040x ) A. Federal tax form 1040x     Note. Federal tax form 1040x If the amount on line A is zero or less, stop here; none of your benefits are  taxable this year. Federal tax form 1040x     B. Federal tax form 1040x Enter one-half of the amount on line A B. Federal tax form 1040x   C. Federal tax form 1040x Enter your taxable pensions, wages, interest, dividends, and other taxable income C. Federal tax form 1040x   D. Federal tax form 1040x Enter any tax-exempt interest income (such as interest on municipal bonds) plus any exclusions from income for: •Interest from qualified U. Federal tax form 1040x S. Federal tax form 1040x savings bonds, •Employer-provided adoption benefits, •Foreign earned income or foreign housing, or •Income earned in American Samoa or Puerto Rico by bona fide residents D. Federal tax form 1040x   E. Federal tax form 1040x Add lines B, C, and D and enter the total E. Federal tax form 1040x   F. Federal tax form 1040x If you are: •Married filing jointly, enter $32,000 •Single, head of household, qualifying widow(er), or married filing separately and you  lived apart from your spouse for all of 2013, enter $25,000 •Married filing separately and you lived with your spouse at any time during 2013,  enter -0- F. Federal tax form 1040x   G. Federal tax form 1040x Is the amount on line F less than or equal to the amount on line E? □ No. Federal tax form 1040x None of your benefits are taxable this year. Federal tax form 1040x  □ Yes. Federal tax form 1040x Some of your benefits may be taxable. Federal tax form 1040x To figure how much of your benefits  are taxable, see Which worksheet to use under How Much Is Taxable. Federal tax form 1040x     Base Amount Your base amount is: $25,000 if you are single, head of household, or qualifying widow(er) with dependent child, $25,000 if you are married filing separately and lived apart from your spouse for all of 2013, $32,000 if you are married filing jointly, or $0 if you are married filing separately and lived with your spouse at any time during 2013. Federal tax form 1040x Repayment of Benefits Any repayment of benefits you made during 2013 must be subtracted from the gross benefits you received in 2013. Federal tax form 1040x It does not matter whether the repayment was for a benefit you received in 2013 or in an earlier year. Federal tax form 1040x If you repaid more than the gross benefits you received in 2013, see Repayments More Than Gross Benefits , later. Federal tax form 1040x Your gross benefits are shown in box 3 of Form SSA-1099 or Form RRB-1099. Federal tax form 1040x Your repayments are shown in box 4. Federal tax form 1040x The amount in box 5 shows your net benefits for 2013 (box 3 minus box 4). Federal tax form 1040x Use the amount in box 5 to figure whether any of your benefits are taxable. Federal tax form 1040x Tax Withholding and Estimated Tax You can choose to have federal income tax withheld from your social security and/or the SSEB portion of your tier 1 railroad retirement benefits. Federal tax form 1040x If you choose to do this, you must complete a Form W-4V, Voluntary Withholding Request. Federal tax form 1040x If you do not choose to have income tax withheld, you may have to request additional withholding from other income, or pay estimated tax during the year. Federal tax form 1040x For details, see Publication 505, Tax Withholding and Estimated Tax, or the instructions for Form 1040-ES, Estimated Tax for Individuals. Federal tax form 1040x How Much Is Taxable? If part of your benefits is taxable, how much is taxable depends on the total amount of your benefits and other income. Federal tax form 1040x Generally, the higher that total amount, the greater the taxable part of your benefits. Federal tax form 1040x Maximum taxable part. Federal tax form 1040x   The taxable part of your benefits usually cannot be more than 50%. Federal tax form 1040x However, up to 85% of your benefits can be taxable if either of the following situations applies to you. Federal tax form 1040x The total of one-half of your benefits and all your other income is more than $34,000 ($44,000 if you are married filing jointly). Federal tax form 1040x You are married filing separately and lived with your spouse at any time during 2013. Federal tax form 1040x   If you are a nonresident alien, 85% of your benefits are taxable. Federal tax form 1040x However, this income is exempt under some tax treaties. Federal tax form 1040x Which worksheet to use. Federal tax form 1040x   A worksheet to figure your taxable benefits is in the instructions for your Form 1040 or 1040A. Federal tax form 1040x However, you will need to use a different worksheet(s) if any of the following situations applies to you. Federal tax form 1040x You contributed to a traditional individual retirement arrangement (IRA) and you or your spouse were covered by a retirement plan at work. Federal tax form 1040x In this situation, you must use the special worksheets in Appendix B of Publication 590 to figure both your IRA deduction and your taxable benefits. Federal tax form 1040x Situation (1) does not apply and you take one or more of the following exclusions. Federal tax form 1040x Interest from qualified U. Federal tax form 1040x S. Federal tax form 1040x savings bonds (Form 8815). Federal tax form 1040x Employer-provided adoption benefits (Form 8839). Federal tax form 1040x Foreign earned income or housing (Form 2555 or Form 2555-EZ). Federal tax form 1040x Income earned in American Samoa (Form 4563) or Puerto Rico by bona fide residents. Federal tax form 1040x In these situations, you must use Worksheet 1 in Publication 915, Social Security and Equivalent Railroad Retirement Benefits, to figure your taxable benefits. Federal tax form 1040x You received a lump-sum payment for an earlier year. Federal tax form 1040x In this situation, also complete Worksheet 2 or 3 and Worksheet 4 in Publication 915. Federal tax form 1040x See Lump-Sum Election , later. Federal tax form 1040x How To Report Your Benefits If part of your benefits are taxable, you must use Form 1040, Form 1040A, or Form 1040NR. Federal tax form 1040x You cannot use Form 1040EZ. Federal tax form 1040x Reporting on Form 1040. Federal tax form 1040x   Report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on line 20a and the taxable part on line 20b. Federal tax form 1040x If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on line 20a. Federal tax form 1040x Reporting on Form 1040A. Federal tax form 1040x   Report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on line 14a and the taxable part on line 14b. Federal tax form 1040x If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on line 14a. Federal tax form 1040x Reporting on Form 1040NR. Federal tax form 1040x   Report 85% of the total amount of your benefits (box 5 of your Form SSA-1042S or Form RRB-1042S) in the appropriate column of Form 1040NR, Schedule NEC, line 8. Federal tax form 1040x Benefits not taxable. Federal tax form 1040x   If you are filing Form 1040EZ, do not report any benefits on your tax return. Federal tax form 1040x If you are filing Form 1040 or Form 1040A, report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on Form 1040, line 20a, or Form 1040A, line 14a. Federal tax form 1040x Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Federal tax form 1040x If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Federal tax form 1040x Lump-Sum Election You must include the taxable part of a lump-sum (retroactive) payment of benefits received in 2013 in your 2013 income, even if the payment includes benefits for an earlier year. Federal tax form 1040x This type of lump-sum benefit payment should not be confused with the lump-sum death benefit that both the SSA and RRB pay to many of their beneficiaries. Federal tax form 1040x No part of the lump-sum death benefit is subject to tax. Federal tax form 1040x For more information about the lump-sum death benefit, visit the Social Security Administration website at www. Federal tax form 1040x SSA. Federal tax form 1040x gov, and use keyword: death benefit. Federal tax form 1040x Generally, you use your 2013 income to figure the taxable part of the total benefits received in 2013. Federal tax form 1040x However, you may be able to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year. Federal tax form 1040x You can elect this method if it lowers your taxable benefits. Federal tax form 1040x See Publication 915 for more information. Federal tax form 1040x Repayments More Than Gross Benefits In some situations, your Form SSA-1099 or Form RRB-1099 will show that the total benefits you repaid (box 4) are more than the gross benefits (box 3) you received. Federal tax form 1040x If this occurred, your net benefits in box 5 will be a negative figure (a figure in parentheses) and none of your benefits will be taxable. Federal tax form 1040x If you receive more than one form, a negative figure in box 5 of one form is used to offset a positive figure in box 5 of another form for that same year. Federal tax form 1040x If you have any questions about this negative figure, contact your local Social Security Administration office or your local U. Federal tax form 1040x S. Federal tax form 1040x Railroad Retirement Board field office. Federal tax form 1040x Joint return. Federal tax form 1040x   If you and your spouse file a joint return, and your Form SSA-1099 or RRB-1099 has a negative figure in box 5 but your spouse's does not, subtract the box 5 amount on your form from the box 5 amount on your spouse's form. Federal tax form 1040x You do this to get your net benefits when figuring if your combined benefits are taxable. Federal tax form 1040x Repayment of benefits received in an earlier year. Federal tax form 1040x   If the total amount shown in box 5 of all of your Forms SSA-1099 and RRB-1099 is a negative figure, you can take an itemized deduction for the part of this negative figure that represents benefits you included in gross income in an earlier year. Federal tax form 1040x   If this deduction is $3,000 or less, it is subject to the 2%-of-adjusted-gross-income limit that applies to certain miscellaneous itemized deductions. Federal tax form 1040x Claim it on Schedule A (Form 1040), line 23. Federal tax form 1040x   If this deduction is more than $3,000, you have to follow some special instructions. Federal tax form 1040x See Publication 915 for those instructions. Federal tax form 1040x Sickness and Injury Benefits Generally, you must report as income any amount you receive for personal injury or sickness through an accident or health plan that is paid for by your employer. Federal tax form 1040x If both you and your employer pay for the plan, only the amount you receive that is due to your employer's payments is reported as income. Federal tax form 1040x However, certain payments may not be taxable to you. Federal tax form 1040x Some of these payments are discussed later in this section. Federal tax form 1040x Also, see Military and Government Disability Pensions and Other Sickness and Injury Benefits in Publication 525. Federal tax form 1040x Cost paid by you. Federal tax form 1040x   If you pay the entire cost of an accident or health plan, do not include any amounts you receive from the plan for personal injury or sickness as income on your tax return. Federal tax form 1040x If your plan reimbursed you for medical expenses you deducted in an earlier year, you may have to include some, or all, of the reimbursement in your income. Federal tax form 1040x Disability Pensions If you retired on disability, you must include in income any disability pension you receive under a plan that is paid for by your employer. Federal tax form 1040x You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A or on line 8 of Form 1040NR until you reach minimum retirement age. Federal tax form 1040x Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. Federal tax form 1040x If you were 65 or older by the end of 2013 or you were retired on permanent and total disability and received taxable disability income, you may be able to claim the credit for the elderly or the disabled. Federal tax form 1040x See Credit for the Elderly or the Disabled, later. Federal tax form 1040x For more information on this credit, see Publication 524, Credit for the Elderly or the Disabled. Federal tax form 1040x Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. Federal tax form 1040x Report the payments on lines 16a and 16b of Form 1040, on lines 12a and 12b of Form 1040A, or on lines 17a and 17b of Form 1040NR. Federal tax form 1040x For more information on pensions and annuities, see Publication 575. Federal tax form 1040x Retirement and profit-sharing plans. Federal tax form 1040x   If you receive payments from a retirement or profit-sharing plan that does not provide for disability retirement, do not treat the payments as a disability pension. Federal tax form 1040x The payments must be reported as a pension or annuity. Federal tax form 1040x Accrued leave payment. Federal tax form 1040x   If you retire on disability, any lump-sum payment you receive for accrued annual leave is a salary payment. Federal tax form 1040x The payment is not a disability payment. Federal tax form 1040x Include it in your income in the tax year you receive it. Federal tax form 1040x Long-Term Care Insurance Contracts In most cases, long-term care insurance contracts generally are treated as accident and health insurance contracts. Federal tax form 1040x Amounts you receive from them (other than policyholder dividends or premium refunds) generally are excludable from income as amounts received for personal injury or sickness. Federal tax form 1040x However, the amount you can exclude may be limited. Federal tax form 1040x Long-term care insurance contracts are discussed in more detail in Publication 525. Federal tax form 1040x Workers' Compensation Amounts you receive as workers' compensation for an occupational sickness or injury are fully exempt from tax if they are paid under a workers' compensation act or a statute in the nature of a workers' compensation act. Federal tax form 1040x The exemption also applies to your survivors. Federal tax form 1040x The exemption, however, does not apply to retirement plan benefits you receive based on your age, length of service, or prior contributions to the plan, even if you retired because of an occupational sickness or injury. Federal tax form 1040x If part of your workers' compensation reduces your social security or equivalent railroad retirement benefits, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. Federal tax form 1040x For a discussion of the taxability of these benefits, see Social Security and Equivalent Railroad Retirement Benefits, earlier. Federal tax form 1040x Return to work. Federal tax form 1040x   If you return to work after qualifying for workers' compensation, salary payments you receive for performing light duties are taxable as wages. Federal tax form 1040x Other Sickness and Injury Benefits In addition to disability pensions and annuities, you may receive other payments for sickness or injury. Federal tax form 1040x Federal Employees' Compensation Act (FECA). Federal tax form 1040x   Payments received under this Act for personal injury or sickness, including payments to beneficiaries in case of death, are not taxable. Federal tax form 1040x However, you are taxed on amounts you receive under this Act as continuation of pay for up to 45 days while a claim is being decided. Federal tax form 1040x Report this income on Form 1040, line 7; Form 1040A, line 7; on Form 1040EZ, line 1; or Form 1040NR, line 8. Federal tax form 1040x Also, pay for sick leave while a claim is being processed is taxable and must be included in your income as wages. Federal tax form 1040x    If part of the payments you receive under FECA reduces your social security or equivalent railroad retirement benefits, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. Federal tax form 1040x For a discussion of the taxability of these benefits, see Social Security and Equivalent Railroad Retirement Benefits, earlier. Federal tax form 1040x Other compensation. Federal tax form 1040x   Many other amounts you receive as compensation for sickness or injury are not taxable. Federal tax form 1040x These include the following amounts. Federal tax form 1040x Benefits you receive under an accident or health insurance policy on which either you paid the premiums or your employer paid the premiums but you had to include them in your income. Federal tax form 1040x Disability benefits you receive for loss of income or earning capacity as a result of injuries under a no-fault car insurance policy. Federal tax form 1040x Compensation you receive for permanent loss or loss of use of a part or function of your body, for your permanent disfigurement, or for such loss or disfigurement suffered by your spouse or dependent(s). Federal tax form 1040x This compensation must be based only on the injury and not on the period of your absence from work. Federal tax form 1040x These benefits are not taxable even if your employer pays for the accident and health plan that provides these benefits. Federal tax form 1040x Life Insurance Proceeds Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price. Federal tax form 1040x This is true even if the proceeds were paid under an accident or health insurance policy or an endowment contract. Federal tax form 1040x Proceeds not received in installments. Federal tax form 1040x   If death benefits are paid to you in a lump sum or other than at regular intervals, include in your income only the benefits that are more than the amount payable to you at the time of the insured person's death. Federal tax form 1040x If the benefit payable at death is not specified, you include in your income the benefit payments that are more than the present value of the payments at the time of death. Federal tax form 1040x Proceeds received in installments. Federal tax form 1040x   If you receive life insurance proceeds in installments, you can exclude part of each installment from your income. Federal tax form 1040x   To determine the excluded part, divide the amount held by the insurance company (generally the total lump sum payable at the death of the insured person) by the number of installments to be paid. Federal tax form 1040x Include anything over this excluded part in your income as interest. Federal tax form 1040x Installments for life. Federal tax form 1040x   If, as the beneficiary under an insurance contract, you are entitled to receive the proceeds in installments for the rest of your life without a refund or period-certain guarantee, you figure the excluded part of each installment by dividing the amount held by the insurance company by your life expectancy. Federal tax form 1040x If there is a refund or period-certain guarantee, the amount held by the insurance company for this purpose is reduced by the actuarial value of the guarantee. Federal tax form 1040x Surviving spouse. Federal tax form 1040x   If your spouse died before October 23, 1986, and insurance proceeds paid to you because of the death of your spouse are received in installments, you can exclude, in any year, up to $1,000 of the interest included in the installments. Federal tax form 1040x If you remarry, you can continue to take the exclusion. Federal tax form 1040x Surrender of policy for cash. Federal tax form 1040x   If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Federal tax form 1040x In general, your cost (or investment in the contract) is the total of premiums that you paid for the life insurance policy, less any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income. Federal tax form 1040x You should receive a Form 1099-R showing the total proceeds and the taxable part. Federal tax form 1040x Report these amounts on Form 1040, lines 16a and 16b; Form 1040A, lines 12a and 12b; or Form 1040NR, lines 17a and 17b. Federal tax form 1040x Endowment Contract Proceeds An endowment contract is a policy that pays over to you a specified amount of money on a certain date unless you die before that date, in which case, the money is paid to your designated beneficiary. Federal tax form 1040x Endowment proceeds paid in a lump sum to you at maturity are taxable only if the proceeds are more than the cost of the policy. Federal tax form 1040x To determine your cost, subtract from the total premiums (or other consideration) paid for the contract any amount that you previously received under the contract and excluded from your income. Federal tax form 1040x Include in your income the part of the lump-sum payment that is more than your cost. Federal tax form 1040x Endowment proceeds that you choose to receive in installments instead of a lump-sum payment at the maturity of the policy are taxed as an annuity. Federal tax form 1040x The tax treatment of an annuity is explained in Publication 575. Federal tax form 1040x For this treatment to apply, you must choose to receive the proceeds in installments before receiving any part of the lump sum. Federal tax form 1040x This election must be made within 60 days after the lump-sum payment first becomes payable to you. Federal tax form 1040x Accelerated Death Benefits Certain amounts paid as accelerated death benefits under a life insurance contract or viatical settlement before the insured's death are generally excluded from income if the insured is terminally or chronically ill. Federal tax form 1040x However, see Exception , later. Federal tax form 1040x For a chronically ill individual, accelerated death benefits paid on the basis of costs incurred for qualified long-term care services are fully excludable. Federal tax form 1040x Accelerated death benefits paid on a per diem or other periodic basis without regard to the costs are excludable up to a limit. Federal tax form 1040x In addition, if any portion of a death benefit under a life insurance contract on the life of a terminally or chronically ill individual is sold or assigned to a viatical settlement provider, the amount received also is excluded from income. Federal tax form 1040x Generally, a viatical settlement provider is one who regularly engages in the business of buying or taking assignment of life insurance contracts on the lives of insured individuals who are terminally or chronically ill. Federal tax form 1040x To report taxable accelerated death benefits made on a per diem or other periodic basis, you must file Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, with your return. Federal tax form 1040x Terminally or chronically ill defined. Federal tax form 1040x   A terminally ill person is one who has been certified by a physician as having an illness or physical condition that reasonably can be expected to result in death within 24 months from the date of the certification. Federal tax form 1040x A chronically ill person is one who is not terminally ill but has been certified (within the previous 12 months) by a licensed health care practitioner as meeting either of the following conditions. Federal tax form 1040x The person is unable to perform (without substantial help) at least two activities of daily living (eating, toileting, transferring, bathing, dressing, and continence) for a period of 90 days or more because of a loss of functional capacity. Federal tax form 1040x The person requires substantial supervision to protect himself or herself from threats to health and safety due to severe cognitive impairment. Federal tax form 1040x Exception. Federal tax form 1040x   The exclusion does not apply to any amount paid to a person other than the insured if that other person has an insurable interest in the life of the insured because the insured: Is a director, officer, or employee of the other person, or Has a financial interest in the business of the other person. Federal tax form 1040x Sale of Home You may be able to exclude from income any gain up to $250,000 ($500,000 on a joint return in most cases) on the sale of your main home. Federal tax form 1040x Generally, if you can exclude all of the gain, you do not need to report the sale on your tax return. Federal tax form 1040x You can choose not to take the exclusion by including the gain from the sale in your gross income on your tax return for the year of the sale. Federal tax form 1040x Main home. Federal tax form 1040x   Usually, your main home is the home you live in most of the time and can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. Federal tax form 1040x Repaying the first-time homebuyer credit because you sold your home. Federal tax form 1040x   If you claimed a first-time homebuyer credit for your main home and you sell it, you may have to repay the credit. Federal tax form 1040x For a home purchased in 2008 and used as your main home until sold in 2013, you must file Form 5405 and repay the balance of the unpaid credit on your 2013 tax return. Federal tax form 1040x   For a home purchased after 2008, you generally must repay the entire credit if the home was sold (or otherwise ceased to be your main home) within 36 months of the purchase date. Federal tax form 1040x If you purchased your home in 2009 and used it as your main home until sold in 2013, you do not have to repay the credit or file Form 5405. Federal tax form 1040x If you purchased your home in 2010 and used it as your main home until sold in 2013, you may have to file Form 5405 and repay the entire credit on your 2013 tax return. Federal tax form 1040x   See the Instructions for Form 5405 for more information about repaying the credit and exceptions to repayment that may apply to you. Federal tax form 1040x Maximum Amount of Exclusion You can generally exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true. Federal tax form 1040x You meet the ownership test. Federal tax form 1040x You meet the use test. Federal tax form 1040x During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home. Federal tax form 1040x You may be able to exclude up to $500,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if you are married and file a joint return and meet the requirements listed in the discussion of the special rules for joint returns, later, under Married Persons . Federal tax form 1040x Ownership and Use Tests To claim the exclusion, you must meet the ownership and use tests. Federal tax form 1040x This means that during the 5-year period ending on the date of the sale, you must have: Owned the home for at least 2 years (the ownership test), and Lived in the home as your main home for at least 2 years (the use test). Federal tax form 1040x Exception to ownership and use tests. Federal tax form 1040x   If you owned and lived in the property as your main home for less than 2 years, you still can claim an exclusion in some cases. Federal tax form 1040x Generally, you must have sold the home due to a change in place of employment, health, or unforeseen circumstances. Federal tax form 1040x The maximum amount you can exclude will be reduced. Federal tax form 1040x See Publication 523, Selling Your Home, for more information. Federal tax form 1040x Exception to use test for individuals with a disability. Federal tax form 1040x   There is an exception to the use test if, during the 5-year period before the sale of your home: You become physically or mentally unable to care for yourself, and You owned and lived in your home as your main home for a total of at least 1 year. Federal tax form 1040x Under this exception, you are considered to live in your home during any time that you own the home and live in a facility (including a nursing home) that is licensed by a state or political subdivision to care for persons in your condition. Federal tax form 1040x   If you meet this exception to the use test, you still have to meet the 2-out-of-5-year ownership test to claim the exclusion. Federal tax form 1040x Exception to ownership test for property acquired in a like-kind exchange. Federal tax form 1040x   You must have owned your main home for at least 5 years to qualify for the exclusion if you acquired your main home in a like-kind exchange. Federal tax form 1040x This special 5-year ownership rule continues to apply to a home you acquired in a like-kind exchange and gave to another person. Federal tax form 1040x A like-kind exchange is an exchange of property held for productive use in a trade or business or for investment. Federal tax form 1040x See Publication 523 for more information. Federal tax form 1040x Period of nonqualified use. Federal tax form 1040x   Generally, the gain from the sale or exchange of your main home will not qualify for the exclusion to the extent that the gain is allocated to periods of nonqualified use. Federal tax form 1040x Nonqualified use is any period after December 31, 2008, during which the property is not used as the main home. Federal tax form 1040x See Publication 523 for more information. Federal tax form 1040x Married Persons In the special situations discussed below, if you and your spouse file a joint return for the year of sale and one spouse meets the ownership and use test, you can exclude up to $250,000 of gain. Federal tax form 1040x However, see Special rules for joint returns , next. Federal tax form 1040x Special rules for joint returns. Federal tax form 1040x   You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true. Federal tax form 1040x You are married and file a joint return for the year. Federal tax form 1040x Either you or your spouse meets the ownership test. Federal tax form 1040x Both you and your spouse meet the use test. Federal tax form 1040x During the 2-year period ending on the date of the sale, neither you nor your spouse exclude gain from the sale of another home. Federal tax form 1040x Sale of home by surviving spouse. Federal tax form 1040x   If your spouse died and you did not remarry before the date of sale, you are considered to have owned and lived in the property as your main home during any period of time when your spouse owned and lived in it as a main home. Federal tax form 1040x   If you meet all of the following requirements, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home in 2013. Federal tax form 1040x The sale or exchange took place no more than 2 years after the date of death of your spouse. Federal tax form 1040x You have not remarried. Federal tax form 1040x You and your spouse met the use test at the time of your spouse's death. Federal tax form 1040x You or your spouse met the ownership test at the time of your spouse's death. Federal tax form 1040x Neither you nor your spouse excluded gain from the sale of another home during the last 2 years. Federal tax form 1040x Home transferred from spouse. Federal tax form 1040x   If your home was transferred to you by your spouse (or former spouse if the transfer was incident to divorce), you are considered to have owned it during any period of time when your spouse owned it. Federal tax form 1040x Use of home after divorce. Federal tax form 1040x   You are considered to have used property as your main home during any period when: You owned it, and Your spouse or former spouse is allowed to live in it under a divorce or separation instrument and uses it as his or her main home. Federal tax form 1040x Business Use or Rental of Home You may be able to exclude gain from the sale of a home that you have used for business or to produce rental income. Federal tax form 1040x However, you must meet the ownership and use tests. Federal tax form 1040x See Publication 523 for more information. Federal tax form 1040x Depreciation after May 6, 1997. Federal tax form 1040x   If you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997. Federal tax form 1040x See Publication 523 for more information. Federal tax form 1040x Reporting the Sale Do not report the 2013 sale of your main home on your tax return unless: You have a gain and you do not qualify to exclude all of it, You have a gain and you choose not to exclude it, or You received Form 1099-S. Federal tax form 1040x If you have a gain that you cannot or choose not to exclude, if you received a Form 1099-S, or if you have a deductible loss, report the sale on your tax return. Federal tax form 1040x Report the sale on Part I or Part II of Form 8949 as a short-term or long-term transaction, depending on how long you owned the home. Federal tax form 1040x If you used your home for business or to produce rental income, you may have to use Form 4797, Sales of Business Property, to report the sale of the business or rental part. Federal tax form 1040x See Publication 523 for more information. Federal tax form 1040x Reverse Mortgages A revers
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The Federal Tax Form 1040x

Federal tax form 1040x 1. Federal tax form 1040x   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. Federal tax form 1040x When repayment contributions can be made. Federal tax form 1040x No deduction. Federal tax form 1040x Reserve component. Federal tax form 1040x Figuring your IRA deduction. Federal tax form 1040x Reporting the repayment. Federal tax form 1040x Example. Federal tax form 1040x 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. Federal tax form 1040x 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. Federal tax form 1040x Can You Move Retirement Plan Assets?Transfers to Roth IRAs from other retirement plans. Federal tax form 1040x 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. Federal tax form 1040x 2013 Reporting. Federal tax form 1040x Additional reporting requirements if you made the election to treat a January 2013 QCD as made in 2012. Federal tax form 1040x One-time transfer. Federal tax form 1040x Testing period rules apply. Federal tax form 1040x More information. Federal tax form 1040x 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. Federal tax form 1040x  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. Federal tax form 1040x 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. Federal tax form 1040x For more information, see How Much Can Be Contributed? in this chapter. Federal tax form 1040x Modified AGI limit for traditional IRA contributions increased. Federal tax form 1040x  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. Federal tax form 1040x 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. Federal tax form 1040x If your modified AGI is $188,000 or more, you cannot take a deduction for contributions to a traditional IRA. Federal tax form 1040x See How Much Can You Deduct? in this chapter. Federal tax form 1040x Net Investment Income Tax. Federal tax form 1040x  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). Federal tax form 1040x However, these distributions are taken into account when determining the modified adjusted gross income threshold. Federal tax form 1040x Distributions from a nonqualified retirement plan are included in net investment income. Federal tax form 1040x See Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions for more information. Federal tax form 1040x What's New for 2014 Modified AGI limit for traditional IRA contributions increased. Federal tax form 1040x  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. Federal tax form 1040x 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. Federal tax form 1040x If your modified AGI is $191,000 or more, you cannot take a deduction for contributions to a traditional IRA. Federal tax form 1040x Introduction This chapter discusses the original IRA. Federal tax form 1040x In this publication the original IRA (sometimes called an ordinary or regular IRA) is referred to as a “traditional IRA. Federal tax form 1040x ” A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA. Federal tax form 1040x 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. Federal tax form 1040x Generally, amounts in your IRA, including earnings and gains, are not taxed until they are distributed. Federal tax form 1040x 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. Federal tax form 1040x You can have a traditional IRA whether or not you are covered by any other retirement plan. Federal tax form 1040x However, you may not be able to deduct all of your contributions if you or your spouse is covered by an employer retirement plan. Federal tax form 1040x See How Much Can You Deduct , later. Federal tax form 1040x Both spouses have compensation. Federal tax form 1040x   If both you and your spouse have compensation and are under age 70½, each of you can open an IRA. Federal tax form 1040x You cannot both participate in the same IRA. Federal tax form 1040x If you file a joint return, only one of you needs to have compensation. Federal tax form 1040x What Is Compensation? Generally, compensation is what you earn from working. Federal tax form 1040x For a summary of what compensation does and does not include, see Table 1-1. Federal tax form 1040x Compensation includes all of the items discussed next (even if you have more than one type). Federal tax form 1040x Wages, salaries, etc. Federal tax form 1040x   Wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services are compensation. Federal tax form 1040x 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). Federal tax form 1040x Scholarship and fellowship payments are compensation for IRA purposes only if shown in box 1 of Form W-2. Federal tax form 1040x Commissions. Federal tax form 1040x   An amount you receive that is a percentage of profits or sales price is compensation. Federal tax form 1040x Self-employment income. Federal tax form 1040x   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. Federal tax form 1040x   Compensation includes earnings from self-employment even if they are not subject to self-employment tax because of your religious beliefs. Federal tax form 1040x Self-employment loss. Federal tax form 1040x   If you have a net loss from self-employment, do not subtract the loss from your salaries or wages when figuring your total compensation. Federal tax form 1040x Alimony and separate maintenance. Federal tax form 1040x   For IRA purposes, compensation includes any taxable alimony and separate maintenance payments you receive under a decree of divorce or separate maintenance. Federal tax form 1040x Nontaxable combat pay. Federal tax form 1040x   If you were a member of the U. Federal tax form 1040x S. Federal tax form 1040x Armed Forces, compensation includes any nontaxable combat pay you received. Federal tax form 1040x This amount should be reported in box 12 of your 2013 Form W-2 with code Q. Federal tax form 1040x Table 1-1. Federal tax form 1040x Compensation for Purposes of an IRA Includes . Federal tax form 1040x . Federal tax form 1040x . Federal tax form 1040x Does not include . Federal tax form 1040x . Federal tax form 1040x . Federal tax form 1040x   earnings and profits from property. Federal tax form 1040x wages, salaries, etc. Federal tax form 1040x     interest and dividend income. Federal tax form 1040x commissions. Federal tax form 1040x     pension or annuity income. Federal tax form 1040x self-employment income. Federal tax form 1040x     deferred compensation. Federal tax form 1040x alimony and separate maintenance. Federal tax form 1040x     income from certain  partnerships. Federal tax form 1040x nontaxable combat pay. Federal tax form 1040x     any amounts you exclude from income. Federal tax form 1040x     What Is Not Compensation? Compensation does not include any of the following items. Federal tax form 1040x Earnings and profits from property, such as rental income, interest income, and dividend income. Federal tax form 1040x Pension or annuity income. Federal tax form 1040x Deferred compensation received (compensation payments postponed from a past year). Federal tax form 1040x Income from a partnership for which you do not provide services that are a material income-producing factor. Federal tax form 1040x Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b. Federal tax form 1040x Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs. Federal tax form 1040x When Can a Traditional IRA Be Opened? You can open a traditional IRA at any time. Federal tax form 1040x However, the time for making contributions for any year is limited. Federal tax form 1040x See When Can Contributions Be Made , later. Federal tax form 1040x How Can a Traditional IRA Be Opened? You can open different kinds of IRAs with a variety of organizations. Federal tax form 1040x You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. Federal tax form 1040x You can also open an IRA through your stockbroker. Federal tax form 1040x Any IRA must meet Internal Revenue Code requirements. Federal tax form 1040x The requirements for the various arrangements are discussed below. Federal tax form 1040x Kinds of traditional IRAs. Federal tax form 1040x   Your traditional IRA can be an individual retirement account or annuity. Federal tax form 1040x It can be part of either a simplified employee pension (SEP) or an employer or employee association trust account. Federal tax form 1040x 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. Federal tax form 1040x The account is created by a written document. Federal tax form 1040x The document must show that the account meets all of the following requirements. Federal tax form 1040x 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. Federal tax form 1040x The trustee or custodian generally cannot accept contributions of more than the deductible amount for the year. Federal tax form 1040x However, rollover contributions and employer contributions to a simplified employee pension (SEP) can be more than this amount. Federal tax form 1040x Contributions, except for rollover contributions, must be in cash. Federal tax form 1040x See Rollovers , later. Federal tax form 1040x You must have a nonforfeitable right to the amount at all times. Federal tax form 1040x Money in your account cannot be used to buy a life insurance policy. Federal tax form 1040x Assets in your account cannot be combined with other property, except in a common trust fund or common investment fund. Federal tax form 1040x You must start receiving distributions by April 1 of the year following the year in which you reach age 70½. Federal tax form 1040x See When Must You Withdraw Assets? (Required Minimum Distributions) , later. Federal tax form 1040x Individual Retirement Annuity You can open an individual retirement annuity by purchasing an annuity contract or an endowment contract from a life insurance company. Federal tax form 1040x 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. Federal tax form 1040x An individual retirement annuity must meet all the following requirements. Federal tax form 1040x Your entire interest in the contract must be nonforfeitable. Federal tax form 1040x The contract must provide that you cannot transfer any portion of it to any person other than the issuer. Federal tax form 1040x There must be flexible premiums so that if your compensation changes, your payment can also change. Federal tax form 1040x This provision applies to contracts issued after November 6, 1978. Federal tax form 1040x 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. Federal tax form 1040x Distributions must begin by April 1 of the year following the year in which you reach age 70½. Federal tax form 1040x See When Must You Withdraw Assets? (Required Minimum Distributions) , later. Federal tax form 1040x Individual Retirement Bonds The sale of individual retirement bonds issued by the federal government was suspended after April 30, 1982. Federal tax form 1040x The bonds have the following features. Federal tax form 1040x They stop earning interest when you reach age 70½. Federal tax form 1040x If you die, interest will stop 5 years after your death, or on the date you would have reached age 70½, whichever is earlier. Federal tax form 1040x You cannot transfer the bonds. Federal tax form 1040x If you cash (redeem) the bonds before the year in which you reach age 59½, you may be subject to a 10% additional tax. Federal tax form 1040x See Age 59½ Rule under Early Distributions, later. Federal tax form 1040x You can roll over redemption proceeds into IRAs. Federal tax form 1040x 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. Federal tax form 1040x Generally, distributions from SEP IRAs are subject to the withdrawal and tax rules that apply to traditional IRAs. Federal tax form 1040x See Publication 560 for more information about SEPs. Federal tax form 1040x 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. Federal tax form 1040x The requirements for individual retirement accounts apply to these traditional IRAs. Federal tax form 1040x 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. Federal tax form 1040x 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. Federal tax form 1040x The disclosure statement must explain certain items in plain language. Federal tax form 1040x 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. Federal tax form 1040x This explanation must appear at the beginning of the disclosure statement. Federal tax form 1040x If you revoke your IRA within the revocation period, the sponsor must return to you the entire amount you paid. Federal tax form 1040x 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. Federal tax form 1040x These requirements apply to all sponsors. Federal tax form 1040x How Much Can Be Contributed? There are limits and other rules that affect the amount that can be contributed to a traditional IRA. Federal tax form 1040x These limits and rules are explained below. Federal tax form 1040x Community property laws. Federal tax form 1040x   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. Federal tax form 1040x This is the rule even in states with community property laws. Federal tax form 1040x Brokers' commissions. Federal tax form 1040x   Brokers' commissions paid in connection with your traditional IRA are subject to the contribution limit. Federal tax form 1040x For information about whether you can deduct brokers' commissions, see Brokers' commissions , later, under How Much Can You Deduct. Federal tax form 1040x Trustees' fees. Federal tax form 1040x   Trustees' administrative fees are not subject to the contribution limit. Federal tax form 1040x For information about whether you can deduct trustees' fees, see Trustees' fees , later, under How Much Can You Deduct. Federal tax form 1040x Qualified reservist repayments. Federal tax form 1040x   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. Federal tax form 1040x 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. Federal tax form 1040x 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. Federal tax form 1040x Limit. Federal tax form 1040x   Your qualified reservist repayments cannot be more than your qualified reservist distributions, explained under Early Distributions , later. Federal tax form 1040x When repayment contributions can be made. Federal tax form 1040x   You cannot make these repayment contributions later than the date that is 2 years after your active duty period ends. Federal tax form 1040x No deduction. Federal tax form 1040x   You cannot deduct qualified reservist repayments. Federal tax form 1040x Reserve component. Federal tax form 1040x   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. Federal tax form 1040x Figuring your IRA deduction. Federal tax form 1040x   The repayment of qualified reservist distributions does not affect the amount you can deduct as an IRA contribution. Federal tax form 1040x Reporting the repayment. Federal tax form 1040x   If you repay a qualified reservist distribution, include the amount of the repayment with nondeductible contributions on line 1 of Form 8606. Federal tax form 1040x Example. Federal tax form 1040x   In 2013, your IRA contribution limit is $5,500. Federal tax form 1040x However, because of your filing status and AGI, the limit on the amount you can deduct is $3,500. Federal tax form 1040x You can make a nondeductible contribution of $2,000 ($5,500 - $3,500). Federal tax form 1040x In an earlier year you received a $3,000 qualified reservist distribution, which you would like to repay this year. Federal tax form 1040x   For 2013, you can contribute a total of $8,500 to your IRA. Federal tax form 1040x 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. Federal tax form 1040x You contribute the maximum allowable for the year. Federal tax form 1040x 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. Federal tax form 1040x The qualified reservist repayment is not deductible. Federal tax form 1040x Contributions on your behalf to a traditional IRA reduce your limit for contributions to a Roth IRA. Federal tax form 1040x See chapter 2 for information about Roth IRAs. Federal tax form 1040x 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. Federal tax form 1040x Note. Federal tax form 1040x 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). Federal tax form 1040x 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. Federal tax form 1040x (See Nondeductible Contributions , later. Federal tax form 1040x ) Qualified reservist repayments do not affect this limit. Federal tax form 1040x Examples. Federal tax form 1040x George, who is 34 years old and single, earns $24,000 in 2013. Federal tax form 1040x His IRA contributions for 2013 are limited to $5,500. Federal tax form 1040x Danny, an unmarried college student working part time, earns $3,500 in 2013. Federal tax form 1040x His IRA contributions for 2013 are limited to $3,500, the amount of his compensation. Federal tax form 1040x More than one IRA. Federal tax form 1040x   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. Federal tax form 1040x Annuity or endowment contracts. Federal tax form 1040x   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. Federal tax form 1040x If more than this amount is contributed, the annuity or endowment contract is disqualified. Federal tax form 1040x 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. Federal tax form 1040x Your spouse's IRA contribution for the year to a traditional IRA. Federal tax form 1040x Any contributions for the year to a Roth IRA on behalf of your spouse. Federal tax form 1040x 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). Federal tax form 1040x Note. Federal tax form 1040x 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). Federal tax form 1040x Example. Federal tax form 1040x Kristin, a full-time student with no taxable compensation, marries Carl during the year. Federal tax form 1040x Neither of them was age 50 by the end of 2013. Federal tax form 1040x For the year, Carl has taxable compensation of $30,000. Federal tax form 1040x He plans to contribute (and deduct) $5,500 to a traditional IRA. Federal tax form 1040x If he and Kristin file a joint return, each can contribute $5,500 to a traditional IRA. Federal tax form 1040x 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. Federal tax form 1040x 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). Federal tax form 1040x 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. Federal tax form 1040x 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. Federal tax form 1040x See How Much Can You Deduct , later. Federal tax form 1040x Example. Federal tax form 1040x Tom and Darcy are married and both are 53. Federal tax form 1040x They both work and each has a traditional IRA. Federal tax form 1040x Tom earned $3,800 and Darcy earned $48,000 in 2013. Federal tax form 1040x 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. Federal tax form 1040x They can contribute up to $6,500 to Darcy's IRA. Federal tax form 1040x If they file separate returns, the amount that can be contributed to Tom's IRA is limited by his earned income, $3,800. Federal tax form 1040x 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. Federal tax form 1040x Example. Federal tax form 1040x Rafael, who is 40, earns $30,000 in 2013. Federal tax form 1040x Although he can contribute up to $5,500 for 2013, he contributes only $3,000. Federal tax form 1040x After April 15, 2014, Rafael cannot make up the difference between his actual contributions for 2013 ($3,000) and his 2013 limit ($5,500). Federal tax form 1040x He cannot contribute $2,500 more than the limit for any later year. Federal tax form 1040x 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. Federal tax form 1040x However, a penalty or additional tax may apply. Federal tax form 1040x See Excess Contributions , later, under What Acts Result in Penalties or Additional Taxes. Federal tax form 1040x 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). Federal tax form 1040x Contributions must be in the form of money (cash, check, or money order). Federal tax form 1040x Property cannot be contributed. Federal tax form 1040x Although property cannot be contributed, your IRA may invest in certain property. Federal tax form 1040x For example, your IRA may purchase shares of stock. Federal tax form 1040x For other restrictions on the use of funds in your IRA, see Prohibited Transactions , later in this chapter. Federal tax form 1040x You may be able to transfer or roll over certain property from one retirement plan to another. Federal tax form 1040x See the discussion of rollovers and other transfers later in this chapter under Can You Move Retirement Plan Assets . Federal tax form 1040x 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. Federal tax form 1040x For details, see the instructions for your income tax return or Form 8888, Allocation of Refund (Including Savings Bond Purchases). Federal tax form 1040x Contributions can be made to your traditional IRA for each year that you receive compensation and have not reached age 70½. Federal tax form 1040x 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. Federal tax form 1040x See Who Can Open a Traditional IRA , earlier. Federal tax form 1040x 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. Federal tax form 1040x Contributions can resume for any years that you qualify. Federal tax form 1040x Contributions must be made by due date. Federal tax form 1040x   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. Federal tax form 1040x 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. Federal tax form 1040x Age 70½ rule. Federal tax form 1040x   Contributions cannot be made to your traditional IRA for the year in which you reach age 70½ or for any later year. Federal tax form 1040x   You attain age 70½ on the date that is 6 calendar months after the 70th anniversary of your birth. Federal tax form 1040x If you were born on or before June 30, 1943, you cannot contribute for 2013 or any later year. Federal tax form 1040x Designating year for which contribution is made. Federal tax form 1040x   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. Federal tax form 1040x 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). Federal tax form 1040x Filing before a contribution is made. Federal tax form 1040x    You can file your return claiming a traditional IRA contribution before the contribution is actually made. Federal tax form 1040x Generally, the contribution must be made by the due date of your return, not including extensions. Federal tax form 1040x Contributions not required. Federal tax form 1040x   You do not have to contribute to your traditional IRA for every tax year, even if you can. Federal tax form 1040x 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 . Federal tax form 1040x However, if you or your spouse was covered by an employer retirement plan, you may not be able to deduct this amount. Federal tax form 1040x See Limit if Covered by Employer Plan , later. Federal tax form 1040x You may be able to claim a credit for contributions to your traditional IRA. Federal tax form 1040x For more information, see chapter 4. Federal tax form 1040x Trustees' fees. Federal tax form 1040x   Trustees' administrative fees that are billed separately and paid in connection with your traditional IRA are not deductible as IRA contributions. Federal tax form 1040x However, they may be deductible as a miscellaneous itemized deduction on Schedule A (Form 1040). Federal tax form 1040x For information about miscellaneous itemized deductions, see Publication 529, Miscellaneous Deductions. Federal tax form 1040x Brokers' commissions. Federal tax form 1040x   These commissions are part of your IRA contribution and, as such, are deductible subject to the limits. Federal tax form 1040x Full deduction. Federal tax form 1040x   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. Federal tax form 1040x   This limit is reduced by any contributions made to a 501(c)(18) plan on your behalf. Federal tax form 1040x Kay Bailey Hutchison Spousal IRA. Federal tax form 1040x   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. Federal tax form 1040x The IRA deduction for the year of the spouse with the greater compensation. Federal tax form 1040x Any designated nondeductible contribution for the year made on behalf of the spouse with the greater compensation. Federal tax form 1040x Any contributions for the year to a Roth IRA on behalf of the spouse with the greater compensation. Federal tax form 1040x   This limit is reduced by any contributions to a section 501(c)(18) plan on behalf of the spouse with the lesser compensation. Federal tax form 1040x Note. Federal tax form 1040x 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. Federal tax form 1040x After a divorce or legal separation, you can deduct only the contributions to your own IRA. Federal tax form 1040x Your deductions are subject to the rules for single individuals. Federal tax form 1040x Covered by an employer retirement plan. Federal tax form 1040x   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. Federal tax form 1040x This is discussed later under Limit if Covered by Employer Plan . Federal tax form 1040x Limits on the amount you can deduct do not affect the amount that can be contributed. Federal tax form 1040x 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. Federal tax form 1040x The “Retirement Plan” box should be checked if you were covered. Federal tax form 1040x Reservists and volunteer firefighters should also see Situations in Which You Are Not Covered , later. Federal tax form 1040x If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer. Federal tax form 1040x Federal judges. Federal tax form 1040x   For purposes of the IRA deduction, federal judges are covered by an employer plan. Federal tax form 1040x For Which Year(s) Are You Covered? Special rules apply to determine the tax years for which you are covered by an employer plan. Federal tax form 1040x These rules differ depending on whether the plan is a defined contribution plan or a defined benefit plan. Federal tax form 1040x Tax year. Federal tax form 1040x   Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. Federal tax form 1040x For almost all people, the tax year is the calendar year. Federal tax form 1040x Defined contribution plan. Federal tax form 1040x   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. Federal tax form 1040x However, also see Situations in Which You Are Not Covered , later. Federal tax form 1040x   A defined contribution plan is a plan that provides for a separate account for each person covered by the plan. Federal tax form 1040x In a defined contribution plan, the amount to be contributed to each participant's account is spelled out in the plan. Federal tax form 1040x 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. Federal tax form 1040x Types of defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans. Federal tax form 1040x Example. Federal tax form 1040x Company A has a money purchase pension plan. Federal tax form 1040x Its plan year is from July 1 to June 30. Federal tax form 1040x The plan provides that contributions must be allocated as of June 30. Federal tax form 1040x Bob, an employee, leaves Company A on December 31, 2012. Federal tax form 1040x The contribution for the plan year ending on June 30, 2013, is made February 15, 2014. Federal tax form 1040x Because an amount is contributed to Bob's account for the plan year, Bob is covered by the plan for his 2013 tax year. Federal tax form 1040x   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. Federal tax form 1040x 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. Federal tax form 1040x 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. Federal tax form 1040x Example. Federal tax form 1040x Mickey was covered by a profit-sharing plan and left the company on December 31, 2012. Federal tax form 1040x The plan year runs from July 1 to June 30. Federal tax form 1040x 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. Federal tax form 1040x 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. Federal tax form 1040x 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. Federal tax form 1040x 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. Federal tax form 1040x On December 31, 2013, the company decided to contribute to the plan for the plan year ending June 30, 2013. Federal tax form 1040x That contribution was made on February 15, 2014. Federal tax form 1040x Mickey is an active participant in the plan for his 2014 tax year but not for his 2013 tax year. Federal tax form 1040x No vested interest. Federal tax form 1040x   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. Federal tax form 1040x Defined benefit plan. Federal tax form 1040x   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. Federal tax form 1040x 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. Federal tax form 1040x   A defined benefit plan is any plan that is not a defined contribution plan. Federal tax form 1040x In a defined benefit plan, the level of benefits to be provided to each participant is spelled out in the plan. Federal tax form 1040x The plan administrator figures the amount needed to provide those benefits and those amounts are contributed to the plan. Federal tax form 1040x Defined benefit plans include pension plans and annuity plans. Federal tax form 1040x Example. Federal tax form 1040x 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. Federal tax form 1040x Nick leaves Company B on December 31, 2012. Federal tax form 1040x 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. Federal tax form 1040x No vested interest. Federal tax form 1040x   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. Federal tax form 1040x 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. Federal tax form 1040x Social security or railroad retirement. Federal tax form 1040x   Coverage under social security or railroad retirement is not coverage under an employer retirement plan. Federal tax form 1040x Benefits from previous employer's plan. Federal tax form 1040x   If you receive retirement benefits from a previous employer's plan, you are not covered by that plan. Federal tax form 1040x Reservists. Federal tax form 1040x   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. Federal tax form 1040x You are not covered by the plan if both of the following conditions are met. Federal tax form 1040x 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. Federal tax form 1040x You did not serve more than 90 days on active duty during the year (not counting duty for training). Federal tax form 1040x Volunteer firefighters. Federal tax form 1040x   If the only reason you participate in a plan is because you are a volunteer firefighter, you may not be covered by the plan. Federal tax form 1040x You are not covered by the plan if both of the following conditions are met. Federal tax form 1040x 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. Federal tax form 1040x Your accrued retirement benefits at the beginning of the year will not provide more than $1,800 per year at retirement. Federal tax form 1040x 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. Federal tax form 1040x Your deduction is also affected by how much income you had and by your filing status. Federal tax form 1040x Your deduction may also be affected by social security benefits you received. Federal tax form 1040x Reduced or no deduction. Federal tax form 1040x   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. Federal tax form 1040x   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. Federal tax form 1040x These amounts vary depending on your filing status. Federal tax form 1040x   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 . Federal tax form 1040x 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. Federal tax form 1040x 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. Federal tax form 1040x You received social security benefits. Federal tax form 1040x You received taxable compensation. Federal tax form 1040x Contributions were made to your traditional IRA. Federal tax form 1040x You or your spouse was covered by an employer retirement plan. Federal tax form 1040x 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. Federal tax form 1040x Appendix B includes an example with filled-in worksheets to assist you. Federal tax form 1040x Table 1-2. Federal tax form 1040x 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. Federal tax form 1040x IF your filing status is . Federal tax form 1040x . Federal tax form 1040x . Federal tax form 1040x AND your modified adjusted gross income (modified AGI) is . Federal tax form 1040x . Federal tax form 1040x . Federal tax form 1040x THEN you can take . Federal tax form 1040x . Federal tax form 1040x . Federal tax form 1040x single or head of household $59,000 or less a full deduction. Federal tax form 1040x more than $59,000 but less than $69,000 a partial deduction. Federal tax form 1040x $69,000 or more no deduction. Federal tax form 1040x married filing jointly or  qualifying widow(er) $95,000 or less a full deduction. Federal tax form 1040x more than $95,000 but less than $115,000 a partial deduction. Federal tax form 1040x $115,000 or more no deduction. Federal tax form 1040x married filing separately2 less than $10,000 a partial deduction. Federal tax form 1040x $10,000 or more no deduction. Federal tax form 1040x 1 Modified AGI (adjusted gross income). Federal tax form 1040x See Modified adjusted gross income (AGI) , later. Federal tax form 1040x  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). Federal tax form 1040x Table 1-3. Federal tax form 1040x 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. Federal tax form 1040x IF your filing status is . Federal tax form 1040x . Federal tax form 1040x . Federal tax form 1040x AND your modified adjusted gross income (modified AGI) is . Federal tax form 1040x . Federal tax form 1040x . Federal tax form 1040x THEN you can take . Federal tax form 1040x . Federal tax form 1040x . Federal tax form 1040x single, head of household, or qualifying widow(er) any amount a full deduction. Federal tax form 1040x married filing jointly or separately with a spouse who is not covered by a plan at work any amount a full deduction. Federal tax form 1040x married filing jointly with a spouse who is covered by a plan at work $178,000 or less a full deduction. Federal tax form 1040x more than $178,000 but less than $188,000 a partial deduction. Federal tax form 1040x $188,000 or more no deduction. Federal tax form 1040x married filing separately with a spouse who is covered by a plan at work2 less than $10,000 a partial deduction. Federal tax form 1040x $10,000 or more no deduction. Federal tax form 1040x 1 Modified AGI (adjusted gross income). Federal tax form 1040x See Modified adjusted gross income (AGI) , later. Federal tax form 1040x  2 You are entitled to the full deduction if you did not live with your spouse at any time during the year. Federal tax form 1040x 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. Federal tax form 1040x If your AGI is $191,000 or more, you cannot take a deduction for a contribution to a traditional IRA. Federal tax form 1040x 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. Federal tax form 1040x Covered by a retirement plan. Federal tax form 1040x   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. Federal tax form 1040x 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. Federal tax form 1040x If your spouse is covered. Federal tax form 1040x   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. Federal tax form 1040x Filing status. Federal tax form 1040x   Your filing status depends primarily on your marital status. Federal tax form 1040x 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. Federal tax form 1040x If you need more information on filing status, see Publication 501, Exemptions, Standard Deduction, and Filing Information. Federal tax form 1040x Lived apart from spouse. Federal tax form 1040x   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. Federal tax form 1040x Modified adjusted gross income (AGI). Federal tax form 1040x   You can use Worksheet 1-1 to figure your modified AGI. Federal tax form 1040x 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. Federal tax form 1040x    Do not assume that your modified AGI is the same as your compensation. Federal tax form 1040x Your modified AGI may include income in addition to your compensation (discussed earlier) such as interest, dividends, and income from IRA distributions. Federal tax form 1040x Form 1040. Federal tax form 1040x   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. Federal tax form 1040x IRA deduction. Federal tax form 1040x Student loan interest deduction. Federal tax form 1040x Tuition and fees deduction. Federal tax form 1040x Domestic production activities deduction. Federal tax form 1040x Foreign earned income exclusion. Federal tax form 1040x Foreign housing exclusion or deduction. Federal tax form 1040x Exclusion of qualified savings bond interest shown on Form 8815. Federal tax form 1040x Exclusion of employer-provided adoption benefits shown on Form 8839. Federal tax form 1040x This is your modified AGI. Federal tax form 1040x Form 1040A. Federal tax form 1040x   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. Federal tax form 1040x IRA deduction. Federal tax form 1040x Student loan interest deduction. Federal tax form 1040x Tuition and fees deduction. Federal tax form 1040x Exclusion of qualified savings bond interest shown on Form 8815. Federal tax form 1040x This is your modified AGI. Federal tax form 1040x Form 1040NR. Federal tax form 1040x   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. Federal tax form 1040x IRA deduction. Federal tax form 1040x Student loan interest deduction. Federal tax form 1040x Domestic production activities deduction. Federal tax form 1040x Exclusion of qualified savings bond interest shown on Form 8815. Federal tax form 1040x Exclusion of employer-provided adoption benefits shown on Form 8839. Federal tax form 1040x This is your modified AGI. Federal tax form 1040x Income from IRA distributions. Federal tax form 1040x   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. Federal tax form 1040x Both contributions for 2013 and distributions in 2013. Federal tax form 1040x   If all three of the following apply, any IRA distributions you received in 2013 may be partly tax free and partly taxable. Federal tax form 1040x 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. Federal tax form 1040x (See Nondeductible Contributions and Worksheet 1-2, later. Federal tax form 1040x ) If this is your situation, you must figure the taxable part of the traditional IRA distribution before you can figure your modified AGI. Federal tax form 1040x To do this, you can use Worksheet 1-5, later. Federal tax form 1040x   If at least one of the above does not apply, figure your modified AGI using Worksheet 1-1, later. Federal tax form 1040x 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. Federal tax form 1040x Figuring Your Reduced IRA Deduction for 2013. Federal tax form 1040x The Instructions for Form 1040, Form 1040A, and Form 1040NR include similar worksheets that you can use instead of the worksheet in this publication. Federal tax form 1040x If you or your spouse is covered by an employer retirement plan, and you received any social security benefits, see Social Security Recipients , earlier. Federal tax form 1040x Note. Federal tax form 1040x If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Federal tax form 1040x Worksheet 1-1. Federal tax form 1040x Figuring Your Modified AGI Use this worksheet to figure your modified AGI for traditional IRA purposes. Federal tax form 1040x 1. Federal tax form 1040x 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. Federal tax form 1040x   2. Federal tax form 1040x Enter any student loan interest deduction from Form 1040, line 33; Form 1040A, line 18; or Form 1040NR, line 33 2. Federal tax form 1040x   3. Federal tax form 1040x Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 3. Federal tax form 1040x   4. Federal tax form 1040x Enter any domestic production activities deduction from Form 1040, line 35, or Form 1040NR, line 34 4. Federal tax form 1040x   5. Federal tax form 1040x Enter any foreign earned income exclusion and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 5. Federal tax form 1040x   6. Federal tax form 1040x Enter any foreign housing deduction from Form 2555, line 50 6. Federal tax form 1040x   7. Federal tax form 1040x Enter any excludable savings bond interest from Form 8815, line 14 7. Federal tax form 1040x   8. Federal tax form 1040x Enter any excluded employer-provided adoption benefits from Form 8839, line 28 8. Federal tax form 1040x   9. Federal tax form 1040x Add lines 1 through 8. Federal tax form 1040x This is your Modified AGI for traditional IRA purposes 9. Federal tax form 1040x   Reporting Deductible Contributions If you file Form 1040, enter your IRA deduction on line 32 of that form. Federal tax form 1040x If you file Form 1040A, enter your IRA deduction on line 17 of that form. Federal tax form 1040x If you file Form 1040NR, enter your IRA deduction on line 32 of that form. Federal tax form 1040x You cannot deduct IRA contributions on Form 1040EZ or Form 1040NR-EZ. Federal tax form 1040x Self-employed. Federal tax form 1040x   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. Federal tax form 1040x If you file Form 1040NR, enter your deduction on line 28 of that form. Federal tax form 1040x 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. Federal tax form 1040x The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. Federal tax form 1040x Example. Federal tax form 1040x Tony is 29 years old and single. Federal tax form 1040x In 2013, he was covered by a retirement plan at work. Federal tax form 1040x His salary is $62,000. Federal tax form 1040x His modified AGI is $70,000. Federal tax form 1040x Tony makes a $5,500 IRA contribution for 2013. Federal tax form 1040x Because he was covered by a retirement plan and his modified AGI is above $69,000, he cannot deduct his $5,500 IRA contribution. Federal tax form 1040x He must designate this contribution as a nondeductible contribution by reporting it on Form 8606. Federal tax form 1040x Repayment of reservist distributions. Federal tax form 1040x   Nondeductible contributions may include repayments of qualified reservist distributions. Federal tax form 1040x For more information, see Qualified reservist repayments under How Much Can Be Contributed, earlier. Federal tax form 1040x Form 8606. Federal tax form 1040x   To designate contributions as nondeductible, you must file Form 8606. Federal tax form 1040x (See the filled-in Forms 8606 in this chapter. Federal tax form 1040x )   You do not have to designate a contribution as nondeductible until you file your tax return. Federal tax form 1040x When you file, you can even designate otherwise deductible contributions as nondeductible contributions. Federal tax form 1040x   You must file Form 8606 to report nondeductible contributions even if you do not have to file a tax return for the year. Federal tax form 1040x    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. Federal tax form 1040x In those situations, a Form 8606 is completed for the year you take a distribution from that IRA. Federal tax form 1040x See Form 8606 under Distributions Fully or Partly Taxable, later. Federal tax form 1040x Failure to report nondeductible contributions. Federal tax form 1040x   If you do not report nondeductible contributions, all of the contributions to your traditional IRA will be treated like deductible contributions when withdrawn. Federal tax form 1040x All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. Federal tax form 1040x Penalty for overstatement. Federal tax form 1040x   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. Federal tax form 1040x Penalty for failure to file Form 8606. Federal tax form 1040x   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. Federal tax form 1040x Tax on earnings on nondeductible contributions. Federal tax form 1040x   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. Federal tax form 1040x Cost basis. Federal tax form 1040x   You will have a cost basis in your traditional IRA if you made any nondeductible contributions. Federal tax form 1040x Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions. Federal tax form 1040x    Commonly, distributions from your traditional IRAs will include both taxable and nontaxable (cost basis) amounts. Federal tax form 1040x See Are Distributions Taxable, later, for more information. Federal tax form 1040x Recordkeeping. Federal tax form 1040x There is a recordkeeping worksheet, Appendix A. Federal tax form 1040x Summary Record of Traditional IRA(s) for 2013 , that you can use to keep a record of deductible and nondeductible IRA contributions. Federal tax form 1040x 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. Federal tax form 1040x Example 1. Federal tax form 1040x For 2013, Tom and Betty file a joint return on Form 1040. Federal tax form 1040x They are both 39 years old. Federal tax form 1040x They are both employed and Tom is covered by his employer's retirement plan. Federal tax form 1040x Tom's salary is $59,000 and Betty's is $32,555. Federal tax form 1040x They each have a traditional IRA and their combined modified AGI, which includes $5,000 interest and dividend income, is $96,555. Federal tax form 1040x 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 . Federal tax form 1040x For 2013, Tom contributed $5,500 to his IRA and Betty contributed $5,500 to hers. Federal tax form 1040x Even though they file a joint return, they must use separate worksheets to figure the IRA deduction for each of them. Federal tax form 1040x Tom can take a deduction of only $5,080. Federal tax form 1040x He can choose to treat the $5,080 as either deductible or nondeductible contributions. Federal tax form 1040x He can either leave the $420 ($5,500 − $5,080) of nondeductible contributions in his IRA or withdraw them by April 15, 2014. Federal tax form 1040x He decides to treat the $5,080 as deductible contributions and leave the $420 of nondeductible contributions in his IRA. Federal tax form 1040x Using Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, Tom figures his deductible and nondeductible amounts as shown on Worksheet 1-2. Federal tax form 1040x Figuring Your Reduced IRA Deduction for 2013—Example 1 Illustrated. Federal tax form 1040x Betty figures her IRA deduction as follows. Federal tax form 1040x Betty can treat all or part of her contributions as either deductible or nondeductible. Federal tax form 1040x 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 . Federal tax form 1040x 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. Federal tax form 1040x Betty decides to treat her $5,500 IRA contributions as deductible. Federal tax form 1040x The IRA deductions of $5,080 and $5,500 on the joint return for Tom and Betty total $10,580. Federal tax form 1040x Example 2. Federal tax form 1040x For 2013, Ed and Sue file a joint return on Form 1040. Federal tax form 1040x They are both 39 years old. Federal tax form 1040x Ed is covered by his employer's retirement plan. Federal tax form 1040x Ed's salary is $45,000. Federal tax form 1040x Sue had no compensation for the year and did not contribute to an IRA. Federal tax form 1040x Sue is not covered by an employer plan. Federal tax form 1040x Ed contributed $5,500 to his traditional IRA and $5,500 to a traditional IRA for Sue (a Kay Bailey Hutchison Spousal IRA). Federal tax form 1040x 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. Federal tax form 1040x Because the combined modified AGI is $115,000 or more, Ed cannot deduct any of the contribution to his traditional IRA. Federal tax form 1040x He can either leave the $5,500 of nondeductible contributions in his IRA or withdraw them by April 15, 2014. Federal tax form 1040x Sue figures her IRA deduction as shown on Worksheet 1-2. Federal tax form 1040x Figuring Your Reduced IRA Deduction for 2013—Example 2 Illustrated. Federal tax form 1040x Worksheet 1-2. Federal tax form 1040x 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. Federal tax form 1040x ) Note. Federal tax form 1040x If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Federal tax form 1040x IF you . Federal tax form 1040x . Federal tax form 1040x . Federal tax form 1040x AND your  filing status is . Federal tax form 1040x . Federal tax form 1040x . Federal tax form 1040x AND your modified AGI is over . Federal tax form 1040x . Federal tax form 1040x . Federal tax form 1040x THEN enter on  line 1 below . Federal tax form 1040x . Federal tax form 1040x . Federal tax form 1040x       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. Federal tax form 1040x Enter applicable amount from table above 1. Federal tax form 1040x   2. Federal tax form 1040x Enter your modified AGI (that of both spouses, if married filing jointly) 2. Federal tax form 1040x     Note. Federal tax form 1040x If line 2 is equal to or more than the amount on line 1, stop here. Federal tax form 1040x  Your IRA contributions are not deductible. Federal tax form 1040x See Nondeductible Contributions , earlier. Federal tax form 1040x     3. Federal tax form 1040x Subtract line 2 from line 1. Federal tax form 1040x 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. Federal tax form 1040x 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. Federal tax form 1040x   4. Federal tax form 1040x Multiply line 3 by the percentage below that applies to you. Federal tax form 1040x If the result is not a multiple of $10, round it to the next highest multiple of $10. Federal tax form 1040x (For example, $611. Federal tax form 1040x 40 is rounded to $620. Federal tax form 1040x ) However, if the result is less than $200, enter $200. Federal tax form 1040x         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Federal tax form 1040x 5% (. Federal tax form 1040x 275) (by 32. Federal tax form 1040x 5% (. Federal tax form 1040x 325) if you are age 50 or older). Federal tax form 1040x All others, multiply line 3 by 55% (. Federal tax form 1040x 55) (by 65% (. Federal tax form 1040x 65) if you are age 50 or older). Federal tax form 1040x 4. Federal tax form 1040x   5. Federal tax form 1040x 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). Federal tax form 1040x 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. Federal tax form 1040x If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Federal tax form 1040x   6. Federal tax form 1040x 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). Federal tax form 1040x If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Federal tax form 1040x 6. Federal tax form 1040x   7. Federal tax form 1040x IRA deduction. Federal tax form 1040x Compare lines 4, 5, and 6. Federal tax form 1040x 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. Federal tax form 1040x If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Federal tax form 1040x   8. Federal tax form 1040x Nondeductible contribution. Federal tax form 1040x Subtract line 7 from line 5 or 6, whichever is smaller. Federal tax form 1040x  Enter the result here and on line 1 of your Form 8606 8. Federal tax form 1040x   Worksheet 1-2. Federal tax form 1040x 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. Federal tax form 1040x ) Note. Federal tax form 1040x If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Federal tax form 1040x IF you . Federal tax form 1040x . Federal tax form 1040x . Federal tax form 1040x AND your  filing status is . Federal tax form 1040x . Federal tax form 1040x . Federal tax form 1040x AND your modified AGI is over . Federal tax form 1040x . Federal tax form 1040x . Federal tax form 1040x THEN enter on  line 1 below . Federal tax form 1040x . Federal tax form 1040x . Federal tax form 1040x       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. Federal tax form 1040x Enter applicable amount from table above 1. Federal tax form 1040x 115,000 2. Federal tax form 1040x Enter your modified AGI (that of both spouses, if married filing jointly) 2. Federal tax form 1040x 96,555   Note. Federal tax form 1040x If line 2 is equal to or more than the amount on line 1, stop here. Federal tax form 1040x  Your IRA contributions are not deductible. Federal tax form 1040x See Nondeductible Contributions , earlier. Federal tax form 1040x     3. Federal tax form 1040x Subtract line 2 from line 1. Federal tax form 1040x 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. Federal tax form 1040x 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. Federal tax form 1040x 18,445 4. Federal tax form 1040x Multiply line 3 by the percentage below that applies to you. Federal tax form 1040x If the result is not a multiple of $10, round it to the next highest multiple of $10. Federal tax form 1040x (For example, $611. Federal tax form 1040x 40 is rounded to $620. Federal tax form 1040x ) However, if the result is less than $200, enter $200. Federal tax form 1040x         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Federal tax form 1040x 5% (. Federal tax form 1040x 275) (by 32. Federal tax form 1040x 5% (. Federal tax form 1040x 325) if you are age 50 or older). Federal tax form 1040x All others, multiply line 3 by 55% (. Federal tax form 1040x 55) (by 65% (. Federal tax form 1040x 65) if you are age 50 or older). Federal tax form 1040x 4. Federal tax form 1040x 5,080 5. Federal tax form 1040x 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). Federal tax form 1040x 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. Federal tax form 1040x If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Federal tax form 1040x 59,000 6. Federal tax form 1040x 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). Federal tax form 1040x If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Federal tax form 1040x 6. Federal tax form 1040x 5,500 7. Federal tax form 1040x IRA deduction. Federal tax form 1040x Compare lines 4, 5, and 6. Federal tax form 1040x 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. Federal tax form 1040x If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Federal tax form 1040x 5,080 8. Federal tax form 1040x Nondeductible contribution. Federal tax form 1040x Subtract line 7 from line 5 or 6, whichever is smaller. Federal tax form 1040x  Enter the result here and on line 1 of your Form 8606 8. Federal tax form 1040x 420 Worksheet 1-2. Federal tax form 1040x 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. Federal tax form 1040x ) Note. Federal tax form 1040x If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Federal tax form 1040x IF you . Federal tax form 1040x . Federal tax form 1040x . Federal tax form 1040x AND your  filing status is . Federal tax form 1040x . Federal tax form 1040x . Federal tax form 1040x AND your modified AGI is over . Federal tax form 1040x . Federal tax form 1040x . Federal tax form 1040x THEN enter on  line 1 below . Federal tax form 1040x . Federal tax form 1040x . Federal tax form 1040x       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. Federal tax form 1040x Enter applicable amount from table above 1. Federal tax form 1040x 188,000 2. Federal tax form 1040x Enter your modified AGI (that of both spouses, if married filing jointly) 2. Federal tax form 1040x 180,555   Note. Federal tax form 1040x If line 2 is equal to or more than the amount on line 1, stop here. Federal tax form 1040x  Your IRA contributions are not deductible. Federal tax form 1040x See Nondeductible Contributions , earlier. Federal tax form 1040x     3. Federal tax form 1040x Subtract line 2 from line 1. Federal tax form 1040x 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. Federal tax form 1040x 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. Federal tax form 1040x 7,445 4. Federal tax form 1040x Multiply line 3 by the percentage below that applies to you. Federal tax form 1040x If the result is not a multiple of $10, round it to the next highest multiple of $10. Federal tax form 1040x (For example, $611. Federal tax form 1040x 40 is rounded to $620. Federal tax form 1040x ) However, if the result is less than $200, enter $200. Federal tax form 1040x         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Federal tax form 1040x 5% (. Federal tax form 1040x 275) (by 32. Federal tax form 1040x 5% (. Federal tax form 1040x 325) if you are age 50 or older). Federal tax form 1040x All others, multiply line 3 by 55% (. Federal tax form 1040x 55) (by 65% (. Federal tax form 1040x 65) if you are age 50 or older). Federal tax form 1040x 4. Federal tax form 1040x 4,100 5. Federal tax form 1040x 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). Federal tax form 1040x 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. Federal tax form 1040x If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Federal tax form 1040x 39,500 6. Federal tax form 1040x 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). Federal tax form 1040x If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Federal tax form 1040x 6. Federal tax form 1040x 5,500 7. Federal tax form 1040x IRA deduction. Federal tax form 1040x Compare lines 4, 5, and 6. Federal tax form 1040x 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. Federal tax form 1040x If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Federal tax form 1040x 4,100 8. Federal tax form 1040x Nondeductible contribution. Federal tax form 1040x Subtract line 7 from line 5 or 6, whichever is smaller. Federal tax form 1040x  Enter the result here and on line 1 of your Form 8606 8. Federal tax form 1040x 1,400 What if You Inherit an IRA? If you inherit a traditional IRA, you are called a beneficiary. Federal tax form 1040x A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. Federal tax form 1040x Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive. Federal tax form 1040x Inherited from spouse. Federal tax form 1040x   If you inherit a traditional IRA from your spouse, you generally have the following three choices. Federal tax form 1040x You can: Treat it as your own IRA by designating yourself as the account owner. Federal tax form 1040x 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