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Filing 1040ez Electronically

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Filing 1040ez Electronically

Filing 1040ez electronically 4. Filing 1040ez electronically   Qualified Plans Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Kinds of PlansDefined Contribution Plan Defined Benefit Plan Qualification RulesEarly retirement. Filing 1040ez electronically Loan secured by benefits. Filing 1040ez electronically Waiver of survivor benefits. Filing 1040ez electronically Waiver of 30-day waiting period before annuity starting date. Filing 1040ez electronically Involuntary cash-out of benefits not more than dollar limit. Filing 1040ez electronically Exception for certain loans. Filing 1040ez electronically Exception for QDRO. Filing 1040ez electronically SIMPLE and safe harbor 401(k) plan exception. Filing 1040ez electronically Setting Up a Qualified PlanAdopting a Written Plan Investing Plan Assets Minimum Funding RequirementDue dates. Filing 1040ez electronically Installment percentage. Filing 1040ez electronically Extended period for making contributions. Filing 1040ez electronically ContributionsEmployer Contributions Employee Contributions When Contributions Are Considered Made Employer DeductionDeduction Limits Deduction Limit for Self-Employed Individuals Where To Deduct Contributions Carryover of Excess Contributions Excise Tax for Nondeductible (Excess) Contributions Elective Deferrals (401(k) Plans)Limit on Elective Deferrals Automatic Enrollment Treatment of Excess Deferrals Qualified Roth Contribution ProgramElective Deferrals Qualified Distributions Reporting Requirements DistributionsRequired Distributions Distributions From 401(k) Plans Tax Treatment of Distributions Tax on Early Distributions Tax on Excess Benefits Excise Tax on Reversion of Plan Assets Notification of Significant Benefit Accrual Reduction Prohibited TransactionsTax on Prohibited Transactions Reporting RequirementsOne-participant plan. Filing 1040ez electronically Caution: Form 5500-EZ not required. Filing 1040ez electronically Form 5500. Filing 1040ez electronically Electronic filing of Forms 5500 and 5500-SF. Filing 1040ez electronically Topics - This chapter discusses: Kinds of plans Qualification rules Setting up a qualified plan Minimum funding requirement Contributions Employer deduction Elective deferrals (401(k) plans) Qualified Roth contribution program Distributions Prohibited transactions Reporting requirements Useful Items - You may want to see: Publications 575 Pension and Annuity Income 590 Individual Retirement Arrangements (IRAs) 3066 Have you had your Check-up this year? for Retirement Plans 3998 Choosing A Retirement Solution for Your Small Business 4222 401(k) Plans for Small Businesses 4530 Designated Roth Accounts under a 401(k), 403(b), or governmental 457(b) plans 4531 401(k) Plan Checklist 4674 Automatic Enrollment 401(k) Plans for Small Businesses 4806 Profit Sharing Plans for Small Businesses Forms (and Instructions) www. Filing 1040ez electronically dol. Filing 1040ez electronically gov/ebsa/pdf/2013-5500. Filing 1040ez electronically pdf www. Filing 1040ez electronically dol. Filing 1040ez electronically gov/ebsa/pdf/2013-5500-SF. Filing 1040ez electronically pdf W-2 Wage and Tax Statement Schedule K-1 (Form 1065) Partner's Share of Income, Deductions, Credits, etc. Filing 1040ez electronically 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Filing 1040ez electronically 1040 U. Filing 1040ez electronically S. Filing 1040ez electronically Individual Income Tax Return Schedule C (Form 1040) Profit or Loss From Business Schedule F (Form 1040) Profit or Loss From Farming 5300 Application for Determination for Employee Benefit Plan 5310 Application for Determination for Terminating Plan 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts 5330 Return of Excise Taxes Related to Employee Benefit Plans 5500 Annual Return/Report of Employee Benefit Plan. Filing 1040ez electronically For copies of this form, go to: 5500-EZ Annual Return of One-Participant (Owners and Their Spouses) Retirement Plan 5500-SF Short Form Annual Return/Report of Small Employee Benefit Plan. Filing 1040ez electronically For copies of this form, go to: 8717 User Fee for Employee Plan Determination Letter Request 8880 Credit for Qualified Retirement Savings Contributions 8881 Credit for Small Employer Pension Plan Startup Costs 8955-SSA Annual Registration Statement Identifying Separated Participants With Deferred Vested Benefits These qualified retirement plans set up by self-employed individuals are sometimes called Keogh or H. Filing 1040ez electronically R. Filing 1040ez electronically 10 plans. Filing 1040ez electronically A sole proprietor or a partnership can set up one of these plans. Filing 1040ez electronically A common-law employee or a partner cannot set up one of these plans. Filing 1040ez electronically The plans described here can also be set up and maintained by employers that are corporations. Filing 1040ez electronically All the rules discussed here apply to corporations except where specifically limited to the self-employed. Filing 1040ez electronically The plan must be for the exclusive benefit of employees or their beneficiaries. Filing 1040ez electronically These qualified plans can include coverage for a self-employed individual. Filing 1040ez electronically As an employer, you can usually deduct, subject to limits, contributions you make to a qualified plan, including those made for your own retirement. Filing 1040ez electronically The contributions (and earnings and gains on them) are generally tax free until distributed by the plan. Filing 1040ez electronically Kinds of Plans There are two basic kinds of qualified plans—defined contribution plans and defined benefit plans—and different rules apply to each. Filing 1040ez electronically You can have more than one qualified plan, but your contributions to all the plans must not total more than the overall limits discussed under Contributions and Employer Deduction, later. Filing 1040ez electronically Defined Contribution Plan A defined contribution plan provides an individual account for each participant in the plan. Filing 1040ez electronically It provides benefits to a participant largely based on the amount contributed to that participant's account. Filing 1040ez electronically Benefits are also affected by any income, expenses, gains, losses, and forfeitures of other accounts that may be allocated to an account. Filing 1040ez electronically A defined contribution plan can be either a profit-sharing plan or a money purchase pension plan. Filing 1040ez electronically Profit-sharing plan. Filing 1040ez electronically   Although it is called a “profit-sharing plan,” you do not actually have to make a business profit for the year in order to make a contribution (except for yourself if you are self-employed as discussed under Self-employed Individual, later). Filing 1040ez electronically A profit-sharing plan can be set up to allow for discretionary employer contributions, meaning the amount contributed each year to the plan is not fixed. Filing 1040ez electronically An employer may even make no contribution to the plan for a given year. Filing 1040ez electronically   The plan must provide a definite formula for allocating the contribution among the participants and for distributing the accumulated funds to the employees after they reach a certain age, after a fixed number of years, or upon certain other occurrences. Filing 1040ez electronically   In general, you can be more flexible in making contributions to a profit-sharing plan than to a money purchase pension plan (discussed next) or a defined benefit plan (discussed later). Filing 1040ez electronically Money purchase pension plan. Filing 1040ez electronically   Contributions to a money purchase pension plan are fixed and are not based on your business profits. Filing 1040ez electronically For example, if the plan requires that contributions be 10% of the participants' compensation without regard to whether you have profits (or the self-employed person has earned income), the plan is a money purchase pension plan. Filing 1040ez electronically This applies even though the compensation of a self-employed individual as a participant is based on earned income derived from business profits. Filing 1040ez electronically Defined Benefit Plan A defined benefit plan is any plan that is not a defined contribution plan. Filing 1040ez electronically Contributions to a defined benefit plan are based on what is needed to provide definitely determinable benefits to plan participants. Filing 1040ez electronically Actuarial assumptions and computations are required to figure these contributions. Filing 1040ez electronically Generally, you will need continuing professional help to have a defined benefit plan. Filing 1040ez electronically Qualification Rules To qualify for the tax benefits available to qualified plans, a plan must meet certain requirements (qualification rules) of the tax law. Filing 1040ez electronically Generally, unless you write your own plan, the financial institution that provided your plan will take the continuing responsibility for meeting qualification rules that are later changed. Filing 1040ez electronically The following is a brief overview of important qualification rules that generally have not yet been discussed. Filing 1040ez electronically It is not intended to be all-inclusive. Filing 1040ez electronically See Setting Up a Qualified Plan , later. Filing 1040ez electronically Generally, the following qualification rules also apply to a SIMPLE 401(k) retirement plan. Filing 1040ez electronically A SIMPLE 401(k) plan is, however, not subject to the top-heavy plan rules and nondiscrimination rules if the plan satisfies the provisions discussed in chapter 3 under SIMPLE 401(k) Plan. Filing 1040ez electronically Plan assets must not be diverted. Filing 1040ez electronically   Your plan must make it impossible for its assets to be used for, or diverted to, purposes other than the benefit of employees and their beneficiaries. Filing 1040ez electronically As a general rule, the assets cannot be diverted to the employer. Filing 1040ez electronically Minimum coverage requirement must be met. Filing 1040ez electronically   To be a qualified plan, a defined benefit plan must benefit at least the lesser of the following. Filing 1040ez electronically 50 employees, or The greater of: 40% of all employees, or Two employees. Filing 1040ez electronically If there is only one employee, the plan must benefit that employee. Filing 1040ez electronically Contributions or benefits must not discriminate. Filing 1040ez electronically   Under the plan, contributions or benefits to be provided must not discriminate in favor of highly compensated employees. Filing 1040ez electronically Contributions and benefits must not be more than certain limits. Filing 1040ez electronically   Your plan must not provide for contributions or benefits that are more than certain limits. Filing 1040ez electronically The limits apply to the annual contributions and other additions to the account of a participant in a defined contribution plan and to the annual benefit payable to a participant in a defined benefit plan. Filing 1040ez electronically These limits are discussed later in this chapter under Contributions. Filing 1040ez electronically Minimum vesting standard must be met. Filing 1040ez electronically   Your plan must satisfy certain requirements regarding when benefits vest. Filing 1040ez electronically A benefit is vested (you have a fixed right to it) when it becomes nonforfeitable. Filing 1040ez electronically A benefit is nonforfeitable if it cannot be lost upon the happening, or failure to happen, of any event. Filing 1040ez electronically Special rules apply to forfeited benefit amounts. Filing 1040ez electronically In defined contribution plans, forfeitures can be allocated to the accounts of remaining participants in a nondiscriminatory way, or they can be used to reduce your contributions. Filing 1040ez electronically   Forfeitures under a defined benefit plan cannot be used to increase the benefits any employee would otherwise receive under the plan. Filing 1040ez electronically Forfeitures must be used instead to reduce employer contributions. Filing 1040ez electronically Participation. Filing 1040ez electronically   In general, an employee must be allowed to participate in your plan if he or she meets both the following requirements. Filing 1040ez electronically Has reached age 21. Filing 1040ez electronically Has at least 1 year of service (2 years if the plan is not a 401(k) plan and provides that after not more than 2 years of service the employee has a nonforfeitable right to all his or her accrued benefit). Filing 1040ez electronically A plan cannot exclude an employee because he or she has reached a specified age. Filing 1040ez electronically Leased employee. Filing 1040ez electronically   A leased employee, defined in chapter 1, who performs services for you (recipient of the services) is treated as your employee for certain plan qualification rules. Filing 1040ez electronically These rules include those in all the following areas. Filing 1040ez electronically Nondiscrimination in coverage, contributions, and benefits. Filing 1040ez electronically Minimum age and service requirements. Filing 1040ez electronically Vesting. Filing 1040ez electronically Limits on contributions and benefits. Filing 1040ez electronically Top-heavy plan requirements. Filing 1040ez electronically Contributions or benefits provided by the leasing organization for services performed for you are treated as provided by you. Filing 1040ez electronically Benefit payment must begin when required. Filing 1040ez electronically   Your plan must provide that, unless the participant chooses otherwise, the payment of benefits to the participant must begin within 60 days after the close of the latest of the following periods. Filing 1040ez electronically The plan year in which the participant reaches the earlier of age 65 or the normal retirement age specified in the plan. Filing 1040ez electronically The plan year in which the 10th anniversary of the year in which the participant began participating in the plan occurs. Filing 1040ez electronically The plan year in which the participant separates from service. Filing 1040ez electronically Early retirement. Filing 1040ez electronically   Your plan can provide for payment of retirement benefits before the normal retirement age. Filing 1040ez electronically If your plan offers an early retirement benefit, a participant who separates from service before satisfying the early retirement age requirement is entitled to that benefit if he or she meets both the following requirements. Filing 1040ez electronically Satisfies the service requirement for the early retirement benefit. Filing 1040ez electronically Separates from service with a nonforfeitable right to an accrued benefit. Filing 1040ez electronically The benefit, which may be actuarially reduced, is payable when the early retirement age requirement is met. Filing 1040ez electronically Required minimum distributions. Filing 1040ez electronically   Special rules require minimum annual distributions from qualified plans, generally beginning after age  70½. Filing 1040ez electronically See Required Distributions , under Distributions, later. Filing 1040ez electronically Survivor benefits. Filing 1040ez electronically   Defined benefit and money purchase pension plans must provide automatic survivor benefits in both the following forms. Filing 1040ez electronically A qualified joint and survivor annuity for a vested participant who does not die before the annuity starting date. Filing 1040ez electronically A qualified pre-retirement survivor annuity for a vested participant who dies before the annuity starting date and who has a surviving spouse. Filing 1040ez electronically   The automatic survivor benefit also applies to any participant under a profit-sharing plan unless all the following conditions are met. Filing 1040ez electronically The participant does not choose benefits in the form of a life annuity. Filing 1040ez electronically The plan pays the full vested account balance to the participant's surviving spouse (or other beneficiary if the surviving spouse consents or if there is no surviving spouse) if the participant dies. Filing 1040ez electronically The plan is not a direct or indirect transferee of a plan that must provide automatic survivor benefits. Filing 1040ez electronically Loan secured by benefits. Filing 1040ez electronically   If automatic survivor benefits are required for a spouse under a plan, he or she must consent to a loan that uses as security the accrued benefits in the plan. Filing 1040ez electronically Waiver of survivor benefits. Filing 1040ez electronically   Each plan participant may be permitted to waive the joint and survivor annuity or the pre-retirement survivor annuity (or both), but only if the participant has the written consent of the spouse. Filing 1040ez electronically The plan also must allow the participant to withdraw the waiver. Filing 1040ez electronically The spouse's consent must be witnessed by a plan representative or notary public. Filing 1040ez electronically Waiver of 30-day waiting period before annuity starting date. Filing 1040ez electronically    A plan may permit a participant to waive (with spousal consent) the 30-day minimum waiting period after a written explanation of the terms and conditions of a joint and survivor annuity is provided to each participant. Filing 1040ez electronically   The waiver is allowed only if the distribution begins more than 7 days after the written explanation is provided. Filing 1040ez electronically Involuntary cash-out of benefits not more than dollar limit. Filing 1040ez electronically   A plan may provide for the immediate distribution of the participant's benefit under the plan if the present value of the benefit is not greater than $5,000. Filing 1040ez electronically   However, the distribution cannot be made after the annuity starting date unless the participant and the spouse or surviving spouse of a participant who died (if automatic survivor benefits are required for a spouse under the plan) consents in writing to the distribution. Filing 1040ez electronically If the present value is greater than $5,000, the plan must have the written consent of the participant and the spouse or surviving spouse (if automatic survivor benefits are required for a spouse under the plan) for any immediate distribution of the benefit. Filing 1040ez electronically   Benefits attributable to rollover contributions and earnings on them can be ignored in determining the present value of these benefits. Filing 1040ez electronically   A plan must provide for the automatic rollover of any cash-out distribution of more than $1,000 to an individual retirement account or annuity, unless the participant chooses otherwise. Filing 1040ez electronically A section 402(f) notice must be sent prior to an involuntary cash-out of an eligible rollover distribution. Filing 1040ez electronically See Section 402(f) Notice under Distributions, later, for more details. Filing 1040ez electronically Consolidation, merger, or transfer of assets or liabilities. Filing 1040ez electronically   Your plan must provide that, in the case of any merger or consolidation with, or transfer of assets or liabilities to, any other plan, each participant would (if the plan then terminated) receive a benefit equal to or more than the benefit he or she would have been entitled to just before the merger, etc. Filing 1040ez electronically (if the plan had then terminated). Filing 1040ez electronically Benefits must not be assigned or alienated. Filing 1040ez electronically   Your plan must provide that a participant's or beneficiary's benefits under the plan cannot be taken away by any legal or equitable proceeding except as provided below or pursuant to certain judgements or settlements against the participant for violations of plan rules. Filing 1040ez electronically Exception for certain loans. Filing 1040ez electronically   A loan from the plan (not from a third party) to a participant or beneficiary is not treated as an assignment or alienation if the loan is secured by the participant's accrued nonforfeitable benefit and is exempt from the tax on prohibited transactions under section 4975(d)(1) or would be exempt if the participant were a disqualified person. Filing 1040ez electronically A disqualified person is defined later in this chapter under Prohibited Transactions. Filing 1040ez electronically Exception for QDRO. Filing 1040ez electronically   Compliance with a QDRO (qualified domestic relations order) does not result in a prohibited assignment or alienation of benefits. Filing 1040ez electronically   Payments to an alternate payee under a QDRO before the participant attains age 59½ are not subject to the 10% additional tax that would otherwise apply under certain circumstances. Filing 1040ez electronically Benefits distributed to an alternate payee under a QDRO can be rolled over tax free to an individual retirement account or to an individual retirement annuity. Filing 1040ez electronically No benefit reduction for social security increases. Filing 1040ez electronically   Your plan must not permit a benefit reduction for a post-separation increase in the social security benefit level or wage base for any participant or beneficiary who is receiving benefits under your plan, or who is separated from service and has nonforfeitable rights to benefits. Filing 1040ez electronically This rule also applies to plans supplementing the benefits provided by other federal or state laws. Filing 1040ez electronically Elective deferrals must be limited. Filing 1040ez electronically   If your plan provides for elective deferrals, it must limit those deferrals to the amount in effect for that particular year. Filing 1040ez electronically See Limit on Elective Deferrals later in this chapter. Filing 1040ez electronically Top-heavy plan requirements. Filing 1040ez electronically   A top-heavy plan is one that mainly favors partners, sole proprietors, and other key employees. Filing 1040ez electronically   A plan is top-heavy for a plan year if, for the preceding plan year, the total value of accrued benefits or account balances of key employees is more than 60% of the total value of accrued benefits or account balances of all employees. Filing 1040ez electronically Additional requirements apply to a top-heavy plan primarily to provide minimum benefits or contributions for non-key employees covered by the plan. Filing 1040ez electronically   Most qualified plans, whether or not top-heavy, must contain provisions that meet the top-heavy requirements and will take effect in plan years in which the plans are top-heavy. Filing 1040ez electronically These qualification requirements for top-heavy plans are explained in section 416 and its regulations. Filing 1040ez electronically SIMPLE and safe harbor 401(k) plan exception. Filing 1040ez electronically   The top-heavy plan requirements do not apply to SIMPLE 401(k) plans, discussed earlier in chapter 3, or to safe harbor 401(k) plans that consist solely of safe harbor contributions, discussed later in this chapter. Filing 1040ez electronically QACAs (discussed later) also are not subject to top-heavy requirements. Filing 1040ez electronically Setting Up a Qualified Plan There are two basic steps in setting up a qualified plan. Filing 1040ez electronically First you adopt a written plan. Filing 1040ez electronically Then you invest the plan assets. Filing 1040ez electronically You, the employer, are responsible for setting up and maintaining the plan. Filing 1040ez electronically If you are self-employed, it is not necessary to have employees besides yourself to sponsor and set up a qualified plan. Filing 1040ez electronically If you have employees, see Participation, under Qualification Rules, earlier. Filing 1040ez electronically Set-up deadline. Filing 1040ez electronically   To take a deduction for contributions for a tax year, your plan must be set up (adopted) by the last day of that year (December 31 for calendar-year employers). Filing 1040ez electronically Credit for startup costs. Filing 1040ez electronically   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a qualified plan that first became effective in 2013. Filing 1040ez electronically For more information, see Credit for startup costs under Reminders, earlier. Filing 1040ez electronically Adopting a Written Plan You must adopt a written plan. Filing 1040ez electronically The plan can be an IRS-approved master or prototype plan offered by a sponsoring organization. Filing 1040ez electronically Or it can be an individually designed plan. Filing 1040ez electronically Written plan requirement. Filing 1040ez electronically   To qualify, the plan you set up must be in writing and must be communicated to your employees. Filing 1040ez electronically The plan's provisions must be stated in the plan. Filing 1040ez electronically It is not sufficient for the plan to merely refer to a requirement of the Internal Revenue Code. Filing 1040ez electronically Master or prototype plans. Filing 1040ez electronically   Most qualified plans follow a standard form of plan (a master or prototype plan) approved by the IRS. Filing 1040ez electronically Master and prototype plans are plans made available by plan providers for adoption by employers (including self-employed individuals). Filing 1040ez electronically Under a master plan, a single trust or custodial account is established, as part of the plan, for the joint use of all adopting employers. Filing 1040ez electronically Under a prototype plan, a separate trust or custodial account is established for each employer. Filing 1040ez electronically Plan providers. Filing 1040ez electronically   The following organizations generally can provide IRS-approved master or prototype plans. Filing 1040ez electronically Banks (including some savings and loan associations and federally insured credit unions). Filing 1040ez electronically Trade or professional organizations. Filing 1040ez electronically Insurance companies. Filing 1040ez electronically Mutual funds. Filing 1040ez electronically Individually designed plan. Filing 1040ez electronically   If you prefer, you can set up an individually designed plan to meet specific needs. Filing 1040ez electronically Although advance IRS approval is not required, you can apply for approval by paying a fee and requesting a determination letter. Filing 1040ez electronically You may need professional help for this. Filing 1040ez electronically See Rev. Filing 1040ez electronically Proc. Filing 1040ez electronically 2014-6, 2014-1 I. Filing 1040ez electronically R. Filing 1040ez electronically B. Filing 1040ez electronically 198, available at www. Filing 1040ez electronically irs. Filing 1040ez electronically gov/irb/2014-1_IRB/ar10. Filing 1040ez electronically html, as annually updated, that may help you decide whether to apply for approval. Filing 1040ez electronically Internal Revenue Bulletins are available on the IRS website at IRS. Filing 1040ez electronically gov They are also available at most IRS offices and at certain libraries. Filing 1040ez electronically User fee. Filing 1040ez electronically   The fee mentioned earlier for requesting a determination letter does not apply to employers who have 100 or fewer employees who received at least $5,000 of compensation from the employer for the preceding year. Filing 1040ez electronically At least one of them must be a non-highly compensated employee participating in the plan. Filing 1040ez electronically The fee does not apply to requests made by the later of the following dates. Filing 1040ez electronically The end of the 5th plan year the plan is in effect. Filing 1040ez electronically The end of any remedial amendment period for the plan that begins within the first 5 plan years. Filing 1040ez electronically The request cannot be made by the sponsor of a prototype or similar plan the sponsor intends to market to participating employers. Filing 1040ez electronically   For more information about whether the user fee applies, see Rev. Filing 1040ez electronically Proc. Filing 1040ez electronically 2014-8, 2014-1 I. Filing 1040ez electronically R. Filing 1040ez electronically B. Filing 1040ez electronically 242, available at www. Filing 1040ez electronically irs. Filing 1040ez electronically gov/irb/2014-1_IRB/ar12. Filing 1040ez electronically html, as may be annually updated; Notice 2003-49, 2003-32 I. Filing 1040ez electronically R. Filing 1040ez electronically B. Filing 1040ez electronically 294, available at www. Filing 1040ez electronically irs. Filing 1040ez electronically gov/irb/2003-32_IRB/ar13. Filing 1040ez electronically html; and Notice 2011-86, 2011-45 I. Filing 1040ez electronically R. Filing 1040ez electronically B. Filing 1040ez electronically 698, available at www. Filing 1040ez electronically irs. Filing 1040ez electronically gov/irb/2011-45_IRB/ar11. Filing 1040ez electronically html. Filing 1040ez electronically Investing Plan Assets In setting up a qualified plan, you arrange how the plan's funds will be used to build its assets. Filing 1040ez electronically You can establish a trust or custodial account to invest the funds. Filing 1040ez electronically You, the trust, or the custodial account can buy an annuity contract from an insurance company. Filing 1040ez electronically Life insurance can be included only if it is incidental to the retirement benefits. Filing 1040ez electronically You set up a trust by a legal instrument (written document). Filing 1040ez electronically You may need professional help to do this. Filing 1040ez electronically You can set up a custodial account with a bank, savings and loan association, credit union, or other person who can act as the plan trustee. Filing 1040ez electronically You do not need a trust or custodial account, although you can have one, to invest the plan's funds in annuity contracts or face-amount certificates. Filing 1040ez electronically If anyone other than a trustee holds them, however, the contracts or certificates must state they are not transferable. Filing 1040ez electronically Other plan requirements. Filing 1040ez electronically   For information on other important plan requirements, see Qualification Rules , earlier in this chapter. Filing 1040ez electronically Minimum Funding Requirement In general, if your plan is a money purchase pension plan or a defined benefit plan, you must actually pay enough into the plan to satisfy the minimum funding standard for each year. Filing 1040ez electronically Determining the amount needed to satisfy the minimum funding standard for a defined benefit plan is complicated, and you should seek professional help in order to meet these contribution requirements. Filing 1040ez electronically For information on this funding requirement, see section 412 and its regulations. Filing 1040ez electronically Quarterly installments of required contributions. Filing 1040ez electronically   If your plan is a defined benefit plan subject to the minimum funding requirements, you generally must make quarterly installment payments of the required contributions. Filing 1040ez electronically If you do not pay the full installments timely, you may have to pay interest on any underpayment for the period of the underpayment. Filing 1040ez electronically Due dates. Filing 1040ez electronically   The due dates for the installments are 15 days after the end of each quarter. Filing 1040ez electronically For a calendar-year plan, the installments are due April 15, July 15, October 15, and January 15 (of the following year). Filing 1040ez electronically Installment percentage. Filing 1040ez electronically   Each quarterly installment must be 25% of the required annual payment. Filing 1040ez electronically Extended period for making contributions. Filing 1040ez electronically   Additional contributions required to satisfy the minimum funding requirement for a plan year will be considered timely if made by 8½ months after the end of that year. Filing 1040ez electronically Contributions A qualified plan is generally funded by your contributions. Filing 1040ez electronically However, employees participating in the plan may be permitted to make contributions, and you may be permitted to make contributions on your own behalf. Filing 1040ez electronically See Employee Contributions and Elective Deferrals later. Filing 1040ez electronically Contributions deadline. Filing 1040ez electronically   You can make deductible contributions for a tax year up to the due date of your return (plus extensions) for that year. Filing 1040ez electronically Self-employed individual. Filing 1040ez electronically   You can make contributions on behalf of yourself only if you have net earnings (compensation) from self-employment in the trade or business for which the plan was set up. Filing 1040ez electronically Your net earnings must be from your personal services, not from your investments. Filing 1040ez electronically If you have a net loss from self-employment, you cannot make contributions for yourself for the year, even if you can contribute for common-law employees based on their compensation. Filing 1040ez electronically Employer Contributions There are certain limits on the contributions and other annual additions you can make each year for plan participants. Filing 1040ez electronically There are also limits on the amount you can deduct. Filing 1040ez electronically See Deduction Limits , later. Filing 1040ez electronically Limits on Contributions and Benefits Your plan must provide that contributions or benefits cannot exceed certain limits. Filing 1040ez electronically The limits differ depending on whether your plan is a defined contribution plan or a defined benefit plan. Filing 1040ez electronically Defined benefit plan. Filing 1040ez electronically   For 2013, the annual benefit for a participant under a defined benefit plan cannot exceed the lesser of the following amounts. Filing 1040ez electronically 100% of the participant's average compensation for his or her highest 3 consecutive calendar years. Filing 1040ez electronically $205,000 ($210,000 for 2014). Filing 1040ez electronically Defined contribution plan. Filing 1040ez electronically   For 2013, a defined contribution plan's annual contributions and other additions (excluding earnings) to the account of a participant cannot exceed the lesser of the following amounts. Filing 1040ez electronically 100% of the participant's compensation. Filing 1040ez electronically $51,000 ($52,000 for 2014). Filing 1040ez electronically   Catch-up contributions (discussed later under Limit on Elective Deferrals) are not subject to the above limit. Filing 1040ez electronically Employee Contributions Participants may be permitted to make nondeductible contributions to a plan in addition to your contributions. Filing 1040ez electronically Even though these employee contributions are not deductible, the earnings on them are tax free until distributed in later years. Filing 1040ez electronically Also, these contributions must satisfy the actual contribution percentage (ACP) test of section 401(m)(2), a nondiscrimination test that applies to employee contributions and matching contributions. Filing 1040ez electronically See Regulations sections 1. Filing 1040ez electronically 401(k)-2 and 1. Filing 1040ez electronically 401(m)-2 for further guidance relating to the nondiscrimination rules under sections 401(k) and 401(m). Filing 1040ez electronically When Contributions Are Considered Made You generally apply your plan contributions to the year in which you make them. Filing 1040ez electronically But you can apply them to the previous year if all the following requirements are met. Filing 1040ez electronically You make them by the due date of your tax return for the previous year (plus extensions). Filing 1040ez electronically The plan was established by the end of the previous year. Filing 1040ez electronically The plan treats the contributions as though it had received them on the last day of the previous year. Filing 1040ez electronically You do either of the following. Filing 1040ez electronically You specify in writing to the plan administrator or trustee that the contributions apply to the previous year. Filing 1040ez electronically You deduct the contributions on your tax return for the previous year. Filing 1040ez electronically A partnership shows contributions for partners on Form 1065. Filing 1040ez electronically Employer's promissory note. Filing 1040ez electronically   Your promissory note made out to the plan is not a payment that qualifies for the deduction. Filing 1040ez electronically Also, issuing this note is a prohibited transaction subject to tax. Filing 1040ez electronically See Prohibited Transactions , later. Filing 1040ez electronically Employer Deduction You can usually deduct, subject to limits, contributions you make to a qualified plan, including those made for your own retirement. Filing 1040ez electronically The contributions (and earnings and gains on them) are generally tax free until distributed by the plan. Filing 1040ez electronically Deduction Limits The deduction limit for your contributions to a qualified plan depends on the kind of plan you have. Filing 1040ez electronically Defined contribution plans. Filing 1040ez electronically   The deduction for contributions to a defined contribution plan (profit-sharing plan or money purchase pension plan) cannot be more than 25% of the compensation paid (or accrued) during the year to your eligible employees participating in the plan. Filing 1040ez electronically If you are self-employed, you must reduce this limit in figuring the deduction for contributions you make for your own account. Filing 1040ez electronically See Deduction Limit for Self-Employed Individuals , later. Filing 1040ez electronically   When figuring the deduction limit, the following rules apply. Filing 1040ez electronically Elective deferrals (discussed later) are not subject to the limit. Filing 1040ez electronically Compensation includes elective deferrals. Filing 1040ez electronically The maximum compensation that can be taken into account for each employee in 2013 is $255,000 ($260,000 for 2014). Filing 1040ez electronically Defined benefit plans. Filing 1040ez electronically   The deduction for contributions to a defined benefit plan is based on actuarial assumptions and computations. Filing 1040ez electronically Consequently, an actuary must figure your deduction limit. Filing 1040ez electronically    In figuring the deduction for contributions, you cannot take into account any contributions or benefits that are more than the limits discussed earlier under Limits on Contributions and Benefits, earlier. Filing 1040ez electronically Table 4–1. Filing 1040ez electronically Carryover of Excess Contributions Illustrated—Profit-Sharing Plan (000's omitted) Year Participants' compensation Participants' share of required contribution (10% of annual profit) Deductible  limit for current year (25% of compensation) Contribution Excess contribution carryover used1 Total  deduction including carryovers Excess contribution carryover available at end of year 2010 $1,000 $100 $250 $100 $ 0 $100 $ 0 2011 400 165 100 165 0 100 65 2012 500 100 125 100 25 125 40 2013 600 100 150 100 40 140 0  1There were no carryovers from years before 2010. Filing 1040ez electronically Deduction Limit for Self-Employed Individuals If you make contributions for yourself, you need to make a special computation to figure your maximum deduction for these contributions. Filing 1040ez electronically Compensation is your net earnings from self-employment, defined in chapter 1. Filing 1040ez electronically This definition takes into account both the following items. Filing 1040ez electronically The deduction for the deductible part of your self-employment tax. Filing 1040ez electronically The deduction for contributions on your behalf to the plan. Filing 1040ez electronically The deduction for your own contributions and your net earnings depend on each other. Filing 1040ez electronically For this reason, you determine the deduction for your own contributions indirectly by reducing the contribution rate called for in your plan. Filing 1040ez electronically To do this, use either the Rate Table for Self-Employed or the Rate Worksheet for Self-Employed in chapter 5. Filing 1040ez electronically Then figure your maximum deduction by using the Deduction Worksheet for Self-Employed in chapter 5. Filing 1040ez electronically Where To Deduct Contributions Deduct the contributions you make for your common-law employees on your tax return. Filing 1040ez electronically For example, sole proprietors deduct them on Schedule C (Form 1040) or Schedule F (Form 1040); partnerships deduct them on Form 1065; and corporations deduct them on Form 1120, or Form 1120S. Filing 1040ez electronically Sole proprietors and partners deduct contributions for themselves on line 28 of Form 1040. Filing 1040ez electronically (If you are a partner, contributions for yourself are shown on the Schedule K-1 (Form 1065) you get from the partnership. Filing 1040ez electronically ) Carryover of Excess Contributions If you contribute more to the plans than you can deduct for the year, you can carry over and deduct the difference in later years, combined with your contributions for those years. Filing 1040ez electronically Your combined deduction in a later year is limited to 25% of the participating employees' compensation for that year. Filing 1040ez electronically For purposes of this limit, a SEP is treated as a profit-sharing (defined contribution) plan. Filing 1040ez electronically However, this percentage limit must be reduced to figure your maximum deduction for contributions you make for yourself. Filing 1040ez electronically See Deduction Limit for Self-Employed Individuals, earlier. Filing 1040ez electronically The amount you carry over and deduct may be subject to the excise tax discussed next. Filing 1040ez electronically Table 4-1, earlier, illustrates the carryover of excess contributions to a profit-sharing plan. Filing 1040ez electronically Excise Tax for Nondeductible (Excess) Contributions If you contribute more than your deduction limit to a retirement plan, you have made nondeductible contributions and you may be liable for an excise tax. Filing 1040ez electronically In general, a 10% excise tax applies to nondeductible contributions made to qualified pension and profit-sharing plans and to SEPs. Filing 1040ez electronically Special rule for self-employed individuals. Filing 1040ez electronically   The 10% excise tax does not apply to any contribution made to meet the minimum funding requirements in a money purchase pension plan or a defined benefit plan. Filing 1040ez electronically Even if that contribution is more than your earned income from the trade or business for which the plan is set up, the difference is not subject to this excise tax. Filing 1040ez electronically See Minimum Funding Requirement , earlier. Filing 1040ez electronically Reporting the tax. Filing 1040ez electronically   You must report the tax on your nondeductible contributions on Form 5330. Filing 1040ez electronically Form 5330 includes a computation of the tax. Filing 1040ez electronically See the separate instructions for completing the form. Filing 1040ez electronically Elective Deferrals (401(k) Plans) Your qualified plan can include a cash or deferred arrangement under which participants can choose to have you contribute part of their before-tax compensation to the plan rather than receive the compensation in cash. Filing 1040ez electronically A plan with this type of arrangement is popularly known as a “401(k) plan. Filing 1040ez electronically ” (As a self-employed individual participating in the plan, you can contribute part of your before-tax net earnings from the business. Filing 1040ez electronically ) This contribution is called an “elective deferral” because participants choose (elect) to defer receipt of the money. Filing 1040ez electronically In general, a qualified plan can include a cash or deferred arrangement only if the qualified plan is one of the following plans. Filing 1040ez electronically A profit-sharing plan. Filing 1040ez electronically A money purchase pension plan in existence on June 27, 1974, that included a salary reduction arrangement on that date. Filing 1040ez electronically Partnership. Filing 1040ez electronically   A partnership can have a 401(k) plan. Filing 1040ez electronically Restriction on conditions of participation. Filing 1040ez electronically   The plan cannot require, as a condition of participation, that an employee complete more than 1 year of service. Filing 1040ez electronically Matching contributions. Filing 1040ez electronically   If your plan permits, you can make matching contributions for an employee who makes an elective deferral to your 401(k) plan. Filing 1040ez electronically For example, the plan might provide that you will contribute 50 cents for each dollar your participating employees choose to defer under your 401(k) plan. Filing 1040ez electronically Matching contributions are generally subject to the ACP test discussed earlier under Employee Contributions. Filing 1040ez electronically Nonelective contributions. Filing 1040ez electronically   You can also make contributions (other than matching contributions) for your participating employees without giving them the choice to take cash instead. Filing 1040ez electronically These are called nonelective contributions. Filing 1040ez electronically Employee compensation limit. Filing 1040ez electronically   No more than $255,000 of the employee's compensation can be taken into account when figuring contributions other than elective deferrals in 2013. Filing 1040ez electronically This limit is $260,000 in 2014. Filing 1040ez electronically SIMPLE 401(k) plan. Filing 1040ez electronically   If you had 100 or fewer employees who earned $5,000 or more in compensation during the preceding year, you may be able to set up a SIMPLE 401(k) plan. Filing 1040ez electronically A SIMPLE 401(k) plan is not subject to the nondiscrimination and top-heavy plan requirements discussed earlier under Qualification Rules. Filing 1040ez electronically For details about SIMPLE 401(k) plans, see SIMPLE 401(k) Plan in chapter 3. Filing 1040ez electronically Distributions. Filing 1040ez electronically   Certain rules apply to distributions from 401(k) plans. Filing 1040ez electronically See Distributions From 401(k) Plans , later. Filing 1040ez electronically Limit on Elective Deferrals There is a limit on the amount an employee can defer each year under these plans. Filing 1040ez electronically This limit applies without regard to community property laws. Filing 1040ez electronically Your plan must provide that your employees cannot defer more than the limit that applies for a particular year. Filing 1040ez electronically For 2013 and 2014, the basic limit on elective deferrals is $17,500. Filing 1040ez electronically This limit applies to all salary reduction contributions and elective deferrals. Filing 1040ez electronically If, in conjunction with other plans, the deferral limit is exceeded, the difference is included in the employee's gross income. Filing 1040ez electronically Catch-up contributions. Filing 1040ez electronically   A 401(k) plan can permit participants who are age 50 or over at the end of the calendar year to also make catch-up contributions. Filing 1040ez electronically The catch-up contribution limit for 2013 and 2014 is $5,500. Filing 1040ez electronically Elective deferrals are not treated as catch-up contributions for 2013 until they exceed the $17,500 limit, the actual deferral percentage (ADP) test limit of section 401(k)(3), or the plan limit (if any). Filing 1040ez electronically However, the catch-up contribution a participant can make for a year cannot exceed the lesser of the following amounts. Filing 1040ez electronically The catch-up contribution limit. Filing 1040ez electronically The excess of the participant's compensation over the elective deferrals that are not catch-up contributions. Filing 1040ez electronically Treatment of contributions. Filing 1040ez electronically   Your contributions to your own 401(k) plan are generally deductible by you for the year they are contributed to the plan. Filing 1040ez electronically Matching or nonelective contributions made to the plan are also deductible by you in the year of contribution. Filing 1040ez electronically Your employees' elective deferrals other than designated Roth contributions are tax free until distributed from the plan. Filing 1040ez electronically Elective deferrals are included in wages for social security, Medicare, and federal unemployment (FUTA) tax. Filing 1040ez electronically Forfeiture. Filing 1040ez electronically   Employees have a nonforfeitable right at all times to their accrued benefit attributable to elective deferrals. Filing 1040ez electronically Reporting on Form W-2. Filing 1040ez electronically   Do not include elective deferrals in the “Wages, tips, other compensation” box of Form W-2. Filing 1040ez electronically You must, however, include them in the “Social security wages” and “Medicare wages and tips” boxes. Filing 1040ez electronically You must also include them in box 12. Filing 1040ez electronically Mark the “Retirement plan” checkbox in box 13. Filing 1040ez electronically For more information, see the Form W-2 instructions. Filing 1040ez electronically Automatic Enrollment Your 401(k) plan can have an automatic enrollment feature. Filing 1040ez electronically Under this feature, you can automatically reduce an employee's pay by a fixed percentage and contribute that amount to the 401(k) plan on his or her behalf unless the employee affirmatively chooses not to have his or her pay reduced or chooses to have it reduced by a different percentage. Filing 1040ez electronically These contributions are elective deferrals. Filing 1040ez electronically An automatic enrollment feature will encourage employees' saving for retirement and will help your plan pass nondiscrimination testing (if applicable). Filing 1040ez electronically For more information, see Publication 4674, Automatic Enrollment 401(k) Plans for Small Businesses. Filing 1040ez electronically Eligible automatic contribution arrangement. Filing 1040ez electronically   Under an eligible automatic contribution arrangement (EACA), a participant is treated as having elected to have the employer make contributions in an amount equal to a uniform percentage of compensation. Filing 1040ez electronically This automatic election will remain in place until the participant specifically elects not to have such deferral percentage made (or elects a different percentage). Filing 1040ez electronically There is no required deferral percentage. Filing 1040ez electronically Withdrawals. Filing 1040ez electronically   Under an EACA, you may allow participants to withdraw their automatic contributions to the plan if certain conditions are met. Filing 1040ez electronically The participant must elect the withdrawal no later than 90 days after the date of the first elective contributions under the EACA. Filing 1040ez electronically The participant must withdraw the entire amount of EACA default contributions, including any earnings thereon. Filing 1040ez electronically   If the plan allows withdrawals under the EACA, the amount of the withdrawal other than the amount of any designated Roth contributions must be included in the employee's gross income for the tax year in which the distribution is made. Filing 1040ez electronically The additional 10% tax on early distributions will not apply to the distribution. Filing 1040ez electronically Notice requirement. Filing 1040ez electronically   Under an EACA, employees must be given written notice of the terms of the EACA within a reasonable period of time before each plan year. Filing 1040ez electronically The notice must be written in a manner calculated to be understood by the average employee and be sufficiently accurate and comprehensive in order to apprise the employee of his or her rights and obligations under the EACA. Filing 1040ez electronically The notice must include an explanation of the employee's right to elect not to have elective contributions made on his or her behalf, or to elect a different percentage, and the employee must be given a reasonable period of time after receipt of the notice before the first elective contribution is made. Filing 1040ez electronically The notice also must explain how contributions will be invested in the absence of an investment election by the employee. Filing 1040ez electronically Qualified automatic contribution arrangement. Filing 1040ez electronically    A qualified automatic contribution arrangement (QACA) is a type of safe harbor plan. Filing 1040ez electronically It contains an automatic enrollment feature, and mandatory employer contributions are required. Filing 1040ez electronically If your plan includes a QACA, it will not be subject to the ADP test (discussed later) nor the top-heavy requirements (discussed earlier). Filing 1040ez electronically Additionally, your plan will not be subject to the actual contribution percentage (ACP) test if certain additional requirements are met. Filing 1040ez electronically Under a QACA, each employee who is eligible to participate in the plan will be treated as having elected to make elective deferral contributions equal to a certain default percentage of compensation. Filing 1040ez electronically In order to not have default elective deferrals made, an employee must make an affirmative election specifying a deferral percentage (including zero, if desired). Filing 1040ez electronically If an employee does not make an affirmative election, the default deferral percentage must meet the following conditions. Filing 1040ez electronically It must be applied uniformly. Filing 1040ez electronically It must not exceed 10%. Filing 1040ez electronically It must be at least 3% in the first plan year it applies to an employee and through the end of the following year. Filing 1040ez electronically It must increase to at least 4% in the following plan year. Filing 1040ez electronically It must increase to at least 5% in the following plan year. Filing 1040ez electronically It must increase to at least 6% in subsequent plan years. Filing 1040ez electronically Matching or nonelective contributions. Filing 1040ez electronically   Under the terms of the QACA, you must make either matching or nonelective contributions according to the following terms. Filing 1040ez electronically Matching contributions. Filing 1040ez electronically You must make matching contributions on behalf of each non-highly compensated employee in the following amounts. Filing 1040ez electronically An amount equal to 100% of elective deferrals, up to 1% of compensation. Filing 1040ez electronically An amount equal to 50% of elective deferrals, from 1% up to 6% of compensation. Filing 1040ez electronically Other formulas may be used as long as they are at least as favorable to non-highly compensated employees. Filing 1040ez electronically The rate of matching contributions for highly compensated employees, including yourself, must not exceed the rates for non-highly compensated employees. Filing 1040ez electronically Nonelective contributions. Filing 1040ez electronically You must make nonelective contributions on behalf of every non-highly compensated employee eligible to participate in the plan, regardless of whether they elected to participate, in an amount equal to at least 3% of their compensation. Filing 1040ez electronically Vesting requirements. Filing 1040ez electronically   All accrued benefits attributed to matching or nonelective contributions under the QACA must be 100% vested for all employees who complete 2 years of service. Filing 1040ez electronically These contributions are subject to special withdrawal restrictions, discussed later. Filing 1040ez electronically Notice requirements. Filing 1040ez electronically   Each employee eligible to participate in the QACA must receive written notice of their rights and obligations under the QACA, within a reasonable period before each plan year. Filing 1040ez electronically The notice must be written in a manner calculated to be understood by the average employee, and it must be accurate and comprehensive. Filing 1040ez electronically The notice must explain their right to elect not to have elective contributions made on their behalf, or to have contributions made at a different percentage than the default percentage. Filing 1040ez electronically Additionally, the notice must explain how contributions will be invested in the absence of any investment election by the employee. Filing 1040ez electronically The employee must have a reasonable period of time after receiving the notice to make such contribution and investment elections prior to the first contributions under the QACA. Filing 1040ez electronically Treatment of Excess Deferrals If the total of an employee's deferrals is more than the limit for 2013, the employee can have the difference (called an excess deferral) paid out of any of the plans that permit these distributions. Filing 1040ez electronically He or she must notify the plan by April 15, 2014 (or an earlier date specified in the plan), of the amount to be paid from each plan. Filing 1040ez electronically The plan must then pay the employee that amount, plus earnings on the amount through the end of 2013, by April 15, 2014. Filing 1040ez electronically Excess withdrawn by April 15. Filing 1040ez electronically   If the employee takes out the excess deferral by April 15, 2014, it is not reported again by including it in the employee's gross income for 2014. Filing 1040ez electronically However, any income earned in 2013 on the excess deferral taken out is taxable in the tax year in which it is taken out. Filing 1040ez electronically The distribution is not subject to the additional 10% tax on early distributions. Filing 1040ez electronically   If the employee takes out part of the excess deferral and the income on it, the distribution is treated as made proportionately from the excess deferral and the income. Filing 1040ez electronically   Even if the employee takes out the excess deferral by April 15, the amount will be considered for purposes of nondiscrimination testing requirements of the plan, unless the distributed amount is for a non-highly compensated employee who participates in only one employer's 401(k) plan or plans. Filing 1040ez electronically Excess not withdrawn by April 15. Filing 1040ez electronically   If the employee does not take out the excess deferral by April 15, 2014, the excess, though taxable in 2013, is not included in the employee's cost basis in figuring the taxable amount of any eventual distributions under the plan. Filing 1040ez electronically In effect, an excess deferral left in the plan is taxed twice, once when contributed and again when distributed. Filing 1040ez electronically Also, if the employee's excess deferral is allowed to stay in the plan and the employee participates in no other employer's plan, the plan can be disqualified. Filing 1040ez electronically Reporting corrective distributions on Form 1099-R. Filing 1040ez electronically   Report corrective distributions of excess deferrals (including any earnings) on Form 1099-R. Filing 1040ez electronically For specific information about reporting corrective distributions, see the Instructions for Forms 1099-R and 5498. Filing 1040ez electronically Tax on excess contributions of highly compensated employees. Filing 1040ez electronically   The law provides tests to detect discrimination in a plan. Filing 1040ez electronically If tests, such as the actual deferral percentage test (ADP test) (see section 401(k)(3)) and the actual contribution percentage test (ACP test) (see section 401(m)(2)), show that contributions for highly compensated employees are more than the test limits for these contributions, the employer may have to pay a 10% excise tax. Filing 1040ez electronically Report the tax on Form 5330. Filing 1040ez electronically The ADP test does not apply to a safe harbor 401(k) plan (discussed next) nor to a QACA. Filing 1040ez electronically Also, the ACP test does not apply to these plans if certain additional requirements are met. Filing 1040ez electronically   The tax for the year is 10% of the excess contributions for the plan year ending in your tax year. Filing 1040ez electronically Excess contributions are elective deferrals, employee contributions, or employer matching or nonelective contributions that are more than the amount permitted under the ADP test or the ACP test. Filing 1040ez electronically   See Regulations sections 1. Filing 1040ez electronically 401(k)-2 and 1. Filing 1040ez electronically 401(m)-2 for further guidance relating to the nondiscrimination rules under sections 401(k) and 401(m). Filing 1040ez electronically    If the plan fails the ADP or ACP testing, and the failure is not corrected by the end of the next plan year, the plan can be disqualified. Filing 1040ez electronically Safe harbor 401(k) plan. Filing 1040ez electronically If you meet the requirements for a safe harbor 401(k) plan, you do not have to satisfy the ADP test, nor the ACP test, if certain additional requirements are met. Filing 1040ez electronically For your plan to be a safe harbor plan, you must meet the following conditions. Filing 1040ez electronically Matching or nonelective contributions. Filing 1040ez electronically You must make matching or nonelective contributions according to one of the following formulas. Filing 1040ez electronically Matching contributions. Filing 1040ez electronically You must make matching contributions according to the following rules. Filing 1040ez electronically You must contribute an amount equal to 100% of each non-highly compensated employee's elective deferrals, up to 3% of compensation. Filing 1040ez electronically You must contribute an amount equal to 50% of each non-highly compensated employee's elective deferrals, from 3% up to 5% of compensation. Filing 1040ez electronically The rate of matching contributions for highly compensated employees, including yourself, must not exceed the rates for non-highly compensated employees. Filing 1040ez electronically Nonelective contributions. Filing 1040ez electronically You must make nonelective contributions, without regard to whether the employee made elective deferrals, on behalf of all non-highly compensated employees eligible to participate in the plan, equal to at least 3% of the employee's compensation. Filing 1040ez electronically These mandatory matching and nonelective contributions must be immediately 100% vested and are subject to special withdrawal restrictions. Filing 1040ez electronically Notice requirement. Filing 1040ez electronically You must give eligible employees written notice of their rights and obligations with regard to contributions under the plan, within a reasonable period before the plan year. Filing 1040ez electronically The other requirements for a 401(k) plan, including withdrawal and vesting rules, must also be met for your plan to qualify as a safe harbor 401(k) plan. Filing 1040ez electronically Qualified Roth Contribution Program Under this program an eligible employee can designate all or a portion of his or her elective deferrals as after-tax Roth contributions. Filing 1040ez electronically Elective deferrals designated as Roth contributions must be maintained in a separate Roth account. Filing 1040ez electronically However, unlike other elective deferrals, designated Roth contributions are not excluded from employees' gross income, but qualified distributions from a Roth account are excluded from employees' gross income. Filing 1040ez electronically Elective Deferrals Under a qualified Roth contribution program, the amount of elective deferrals that an employee may designate as a Roth contribution is limited to the maximum amount of elective deferrals excludable from gross income for the year (for 2013 and 2014, $17,500 if under age 50 and $23,000 if age 50 or over) less the total amount of the employee's elective deferrals not designated as Roth contributions. Filing 1040ez electronically Designated Roth deferrals are treated the same as pre-tax elective deferrals for most purposes, including: The annual individual elective deferral limit (total of all designated Roth contributions and traditional, pre-tax elective deferrals) of $17,500 for 2013 and 2014, with an additional $5,500 if age 50 or over for 2013 and 2014, Determining the maximum employee and employer annual contributions of the lesser of 100% of compensation or $51,000 for 2013 ($52,000 for 2014), Nondiscrimination testing, Required distributions, and Elective deferrals not taken into account for purposes of deduction limits. Filing 1040ez electronically Qualified Distributions A qualified distribution is a distribution that is made after the employee's nonexclusion period and: On or after the employee attains age   59½, On account of the employee's being disabled, or On or after the employee's death. Filing 1040ez electronically An employee's nonexclusion period for a plan is the 5-tax-year period beginning with the earlier of the following tax years. Filing 1040ez electronically The first tax year in which the employee made a contribution to his or her Roth account in the plan, or If a rollover contribution was made to the employee's designated Roth account from a designated Roth account previously established for the employee under another plan, then the first tax year the employee made a designated Roth contribution to the previously established account. Filing 1040ez electronically Rollover. Filing 1040ez electronically   Beginning September 28, 2010, a rollover from another account can be made to a designated Roth account in the same plan. Filing 1040ez electronically For additional information on these in-plan Roth rollovers, see Notice 2010-84, 2010-51 I. Filing 1040ez electronically R. Filing 1040ez electronically B. Filing 1040ez electronically 872, available at www. Filing 1040ez electronically irs. Filing 1040ez electronically gov/irb/2010-51_IRB/ar11. Filing 1040ez electronically html, and Notice 2013-74. Filing 1040ez electronically A distribution from a designated Roth account can only be rolled over to another designated Roth account or a Roth IRA. Filing 1040ez electronically Rollover amounts do not apply toward the annual deferral limit. Filing 1040ez electronically Reporting Requirements You must report a contribution to a Roth account on Form W-2 and a distribution from a Roth account on Form 1099-R. Filing 1040ez electronically See the Form W-2 and 1099-R instructions for detailed information. Filing 1040ez electronically Distributions Amounts paid to plan participants from a qualified plan are called distributions. Filing 1040ez electronically Distributions may be nonperiodic, such as lump-sum distributions, or periodic, such as annuity payments. Filing 1040ez electronically Also, certain loans may be treated as distributions. Filing 1040ez electronically See Loans Treated as Distributions in Publication 575. Filing 1040ez electronically Required Distributions A qualified plan must provide that each participant will either: Receive his or her entire interest (benefits) in the plan by the required beginning date (defined later), or Begin receiving regular periodic distributions by the required beginning date in annual amounts calculated to distribute the participant's entire interest (benefits) over his or her life expectancy or over the joint life expectancy of the participant and the designated beneficiary (or over a shorter period). Filing 1040ez electronically These distribution rules apply individually to each qualified plan. Filing 1040ez electronically You cannot satisfy the requirement for one plan by taking a distribution from another. Filing 1040ez electronically The plan must provide that these rules override any inconsistent distribution options previously offered. Filing 1040ez electronically Minimum distribution. Filing 1040ez electronically   If the account balance of a qualified plan participant is to be distributed (other than as an annuity), the plan administrator must figure the minimum amount required to be distributed each distribution calendar year. Filing 1040ez electronically This minimum is figured by dividing the account balance by the applicable life expectancy. Filing 1040ez electronically The plan administrator can use the life expectancy tables in Appendix C of Publication 590 for this purpose. Filing 1040ez electronically For more information on figuring the minimum distribution, see Tax on Excess Accumulation in Publication 575. Filing 1040ez electronically Required beginning date. Filing 1040ez electronically   Generally, each participant must receive his or her entire benefits in the plan or begin to receive periodic distributions of benefits from the plan by the required beginning date. Filing 1040ez electronically   A participant must begin to receive distributions from his or her qualified retirement plan by April 1 of the first year after the later of the following years. Filing 1040ez electronically Calendar year in which he or she reaches age 70½. Filing 1040ez electronically Calendar year in which he or she retires from employment with the employer maintaining the plan. Filing 1040ez electronically However, the plan may require the participant to begin receiving distributions by April 1 of the year after the participant reaches age 70½ even if the participant has not retired. Filing 1040ez electronically   If the participant is a 5% owner of the employer maintaining the plan, the participant must begin receiving distributions by April 1 of the first year after the calendar year in which the participant reached age 70½. Filing 1040ez electronically For more information, see Tax on Excess Accumulation in Publication 575. Filing 1040ez electronically Distributions after the starting year. Filing 1040ez electronically   The distribution required to be made by April 1 is treated as a distribution for the starting year. Filing 1040ez electronically (The starting year is the year in which the participant meets (1) or (2) above, whichever applies. Filing 1040ez electronically ) After the starting year, the participant must receive the required distribution for each year by December 31 of that year. Filing 1040ez electronically If no distribution is made in the starting year, required distributions for 2 years must be made in the next year (one by April 1 and one by December 31). Filing 1040ez electronically Distributions after participant's death. Filing 1040ez electronically   See Publication 575 for the special rules covering distributions made after the death of a participant. Filing 1040ez electronically Distributions From 401(k) Plans Generally, distributions cannot be made until one of the following occurs. Filing 1040ez electronically The employee retires, dies, becomes disabled, or otherwise severs employment. Filing 1040ez electronically The plan ends and no other defined contribution plan is established or continued. Filing 1040ez electronically In the case of a 401(k) plan that is part of a profit-sharing plan, the employee reaches age 59½ or suffers financial hardship. Filing 1040ez electronically For the rules on hardship distributions, including the limits on them, see Regulations section 1. Filing 1040ez electronically 401(k)-1(d). Filing 1040ez electronically The employee becomes eligible for a qualified reservist distribution (defined next). Filing 1040ez electronically Certain distributions listed above may be subject to the tax on early distributions discussed later. Filing 1040ez electronically Qualified reservist distributions. Filing 1040ez electronically   A qualified reservist distribution is a distribution from an IRA or an elective deferral account made after September 11, 2001, to a military reservist or a member of the National Guard who has been called to active duty for at least 180 days or for an indefinite period. Filing 1040ez electronically All or part of a qualified reservist distribution can be recontributed to an IRA. Filing 1040ez electronically The additional 10% tax on early distributions does not apply to a qualified reservist distribution. Filing 1040ez electronically Tax Treatment of Distributions Distributions from a qualified plan minus a prorated part of any cost basis are subject to income tax in the year they are distributed. Filing 1040ez electronically Since most recipients have no cost basis, a distribution is generally fully taxable. Filing 1040ez electronically An exception is a distribution that is properly rolled over as discussed under Rollover, next. Filing 1040ez electronically The tax treatment of distributions depends on whether they are made periodically over several years or life (periodic distributions) or are nonperiodic distributions. Filing 1040ez electronically See Taxation of Periodic Payments and Taxation of Nonperiodic Payments in Publication 575 for a detailed description of how distributions are taxed, including the 10-year tax option or capital gain treatment of a lump-sum distribution. Filing 1040ez electronically Note. Filing 1040ez electronically A recipient of a distribution from a designated Roth account will have a cost basis since designated Roth contributions are made on an after-tax basis. Filing 1040ez electronically Also, a distribution from a designated Roth account is entirely tax-free if certain conditions are met. Filing 1040ez electronically See Qualified distributions under Qualified Roth Contribution Program, earlier. Filing 1040ez electronically Rollover. Filing 1040ez electronically   The recipient of an eligible rollover distribution from a qualified plan can defer the tax on it by rolling it over into a traditional IRA or another eligible retirement plan. Filing 1040ez electronically However, it may be subject to withholding as discussed under Withholding requirement, later. Filing 1040ez electronically A rollover can also be made to a Roth IRA, in which case, any previously untaxed amounts are includible in gross income unless the rollover is from a designated Roth account. Filing 1040ez electronically Eligible rollover distribution. Filing 1040ez electronically   This is a distribution of all or any part of an employee's balance in a qualified retirement plan that is not any of the following. Filing 1040ez electronically A required minimum distribution. Filing 1040ez electronically See Required Distributions , earlier. Filing 1040ez electronically Any of a series of substantially equal payments made at least once a year over any of the following periods. Filing 1040ez electronically The employee's life or life expectancy. Filing 1040ez electronically The joint lives or life expectancies of the employee and beneficiary. Filing 1040ez electronically A period of 10 years or longer. Filing 1040ez electronically A hardship distribution. Filing 1040ez electronically The portion of a distribution that represents the return of an employee's nondeductible contributions to the plan. Filing 1040ez electronically See Employee Contributions , earlier, and Rollover of nontaxable amounts, next. Filing 1040ez electronically Loans treated as distributions. Filing 1040ez electronically Dividends on employer securities. Filing 1040ez electronically The cost of any life insurance coverage provided under a qualified retirement plan. Filing 1040ez electronically Similar items designated by the IRS in published guidance. Filing 1040ez electronically See, for example, the Instructions for Forms 1099-R and 5498. Filing 1040ez electronically Rollover of nontaxable amounts. Filing 1040ez electronically   You may be able to roll over the nontaxable part of a distribution to another qualified retirement plan or a section 403(b) plan, or to an IRA. Filing 1040ez electronically If the rollover is to a qualified retirement plan or a section 403(b) plan that separately accounts for the taxable and nontaxable parts of the rollover, the transfer must be made through a direct (trustee-to-trustee) rollover. Filing 1040ez electronically If the rollover is to an IRA, the transfer can be made by any rollover method. Filing 1040ez electronically Note. Filing 1040ez electronically A distribution from a designated Roth account can be rolled over to another designated Roth account or to a Roth IRA. Filing 1040ez electronically If the rollover is to a Roth IRA, it can be rolled over by any rollover method, but if the rollover is to another designated Roth account, it must be rolled over directly (trustee-to-trustee). Filing 1040ez electronically More information. Filing 1040ez electronically   For more information about rollovers, see Rollovers in Pubs. Filing 1040ez electronically 575 and 590. Filing 1040ez electronically Withholding requirement. Filing 1040ez electronically   If, during a year, a qualified plan pays to a participant one or more eligible rollover distributions (defined earlier) that are reasonably expected to total $200 or more, the payor must withhold 20% of the taxable portion of each distribution for federal income tax. Filing 1040ez electronically Exceptions. Filing 1040ez electronically   If, instead of having the distribution paid to him or her, the participant chooses to have the plan pay it directly to an IRA or another eligible retirement plan (a direct rollover), no withholding is required. Filing 1040ez electronically   If the distribution is not an eligible rollover distribution, defined earlier, the 20% withholding requirement does not apply. Filing 1040ez electronically Other withholding rules apply to distributions that are not eligible rollover distributions, such as long-term periodic distributions and required distributions (periodic or nonperiodic). Filing 1040ez electronically However, the participant can choose not to have tax withheld from these distributions. Filing 1040ez electronically If the participant does not make this choice, the following withholding rules apply. Filing 1040ez electronically For periodic distributions, withholding is based on their treatment as wages. Filing 1040ez electronically For nonperiodic distributions, 10% of the taxable part is withheld. Filing 1040ez electronically Estimated tax payments. Filing 1040ez electronically   If no income tax is withheld or not enough tax is withheld, the recipient of a distribution may have to make estimated tax payments. Filing 1040ez electronically For more information, see Withholding Tax and Estimated Tax in Publication 575. Filing 1040ez electronically Section 402(f) Notice. Filing 1040ez electronically   If a distribution is an eligible rollover distribution, as defined earlier, you must provide a written notice to the recipient that explains the following rules regarding such distributions. Filing 1040ez electronically That the distribution may be directly transferred to an eligible retirement plan and information about which distributions are eligible for this direct transfer. Filing 1040ez electronically That tax will be withheld from the distribution if it is not directly transferred to an eligible retirement plan. Filing 1040ez electronically That the distribution will not be subject to tax if transferred to an eligible retirement plan within 60 days after the date the recipient receives the distribution. Filing 1040ez electronically Certain other rules that may be applicable. Filing 1040ez electronically   Notice 2009-68, 2009-39 I. Filing 1040ez electronically R. Filing 1040ez electronically B. Filing 1040ez electronically 423, available at www. Filing 1040ez electronically irs. Filing 1040ez electronically gov/irb/2009-39_IRB/ar14. Filing 1040ez electronically html, contains two updated safe harbor section 402(f) notices that plan administrators may provide recipients of eligible rollover distributions. Filing 1040ez electronically If the plan allows in-plan Roth rollovers, the 402(f) notice must be amended to reflect this. Filing 1040ez electronically Notice 2010-84 contains guidance on how to modify a 402(f) notice for in-plan Roth rollovers. Filing 1040ez electronically Timing of notice. Filing 1040ez electronically   The notice generally must be provided no less than 30 days and no more than 180 days before the date of a distribution. Filing 1040ez electronically Method of notice. Filing 1040ez electronically   The written notice must be provided individually to each distributee of an eligible rollover distribution. Filing 1040ez electronically Posting of the notice is not sufficient. Filing 1040ez electronically However, the written requirement may be satisfied through the use of electronic media if certain additional conditions are met. Filing 1040ez electronically See Regulations section 1. Filing 1040ez electronically 401(a)-21. Filing 1040ez electronically Tax on failure to give notice. Filing 1040ez electronically   Failure to give a 402(f) notice will result in a tax of $100 for each failure, with a total not exceeding $50,000 per calendar year. Filing 1040ez electronically The tax will not be imposed if it is shown that such failure is due to reasonable cause and not to willful neglect. Filing 1040ez electronically Tax on Early Distributions If a distribution is made to an employee under the plan before he or she reaches age 59½, the employee may have to pay a 10% additional tax on the distribution. Filing 1040ez electronically This tax applies to the amount received that the employee must include in income. Filing 1040ez electronically Exceptions. Filing 1040ez electronically   The 10% tax will not apply if distributions before age 59½ are made in any of the following circumstances. Filing 1040ez electronically Made to a beneficiary (or to the estate of the employee) on or after the death of the employee. Filing 1040ez electronically Made due to the employee having a qualifying disability. Filing 1040ez electronically Made as part of a series of substantially equal periodic payments beginning after separation from service and made at least annually for the life or life expectancy of the employee or the joint lives or life expectancies of the employee and his or her designated beneficiary. Filing 1040ez electronically (The payments under this exception, except in the case of death or disability, must continue for at least 5 years or until the employee reaches age 59½, whichever is the longer period. Filing 1040ez electronically ) Made to an employee after separation from service if the separation occurred during o
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Page Last Reviewed or Updated: 19-Mar-2014

The Filing 1040ez Electronically

Filing 1040ez electronically Internal Revenue Bulletin:  2010-9  March 1, 2010  Rev. Filing 1040ez electronically Proc. Filing 1040ez electronically 2010-18 Table of Contents SECTION 1. Filing 1040ez electronically PURPOSE SECTION 2. Filing 1040ez electronically BACKGROUND SECTION 3. Filing 1040ez electronically SCOPE SECTION 4. Filing 1040ez electronically APPLICATION SECTION 5. Filing 1040ez electronically EFFECTIVE DATE SECTION 6. Filing 1040ez electronically DRAFTING INFORMATION SECTION 1. Filing 1040ez electronically PURPOSE This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2010, including a separate table of limitations on depreciation deductions for trucks and vans; and (2) the amounts to be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2010, including a separate table of inclusion amounts for lessees of trucks and vans. Filing 1040ez electronically The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7) of the Internal Revenue Code. Filing 1040ez electronically SECTION 2. Filing 1040ez electronically BACKGROUND . Filing 1040ez electronically 01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year the taxpayer places the passenger automobile in service and for each succeeding year. Filing 1040ez electronically Section 280F(d)(7) requires the amounts allowable as depreciation deductions to be increased by a price inflation adjustment amount for passenger automobiles placed in service after 1988. Filing 1040ez electronically The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI “automobile component” (the “new trucks” component) than that used in the price inflation amount calculation for other passenger automobiles (the “new cars” component), resulting in somewhat higher depreciation deductions for trucks and vans. Filing 1040ez electronically This change reflects the higher rate of price inflation for trucks and vans since 1988. Filing 1040ez electronically . Filing 1040ez electronically 02 Section 280F(c) requires a reduction in the deduction allowed to the lessee of a leased passenger automobile. Filing 1040ez electronically The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. Filing 1040ez electronically Under § 1. Filing 1040ez electronically 280F-7(a) of the Income Tax Regulations, this reduction requires a lessee to include in gross income an inclusion amount determined by applying a formula to the amount obtained from a table. Filing 1040ez electronically One table applies to lessees of trucks and vans and another table applies to all other passenger automobiles. Filing 1040ez electronically Each table shows inclusion amounts for a range of fair market values for each taxable year after the passenger automobile is first leased. Filing 1040ez electronically SECTION 3. Filing 1040ez electronically SCOPE . Filing 1040ez electronically 01 The limitations on depreciation deductions in section 4. Filing 1040ez electronically 01(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2010, and continue to apply for each taxable year that the passenger automobile remains in service. Filing 1040ez electronically . Filing 1040ez electronically 02 The tables in section 4. Filing 1040ez electronically 02 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2010. Filing 1040ez electronically Lessees of these passenger automobiles must use these tables to determine the inclusion amount for each taxable year during which the passenger automobile is leased. Filing 1040ez electronically See Rev. Filing 1040ez electronically Proc. Filing 1040ez electronically 2005-13, 2005-1 C. Filing 1040ez electronically B. Filing 1040ez electronically 759, for passenger automobiles first leased before calendar year 2006; Rev. Filing 1040ez electronically Proc. Filing 1040ez electronically 2006-18, 2006-1 C. Filing 1040ez electronically B. Filing 1040ez electronically 645, for passenger automobiles first leased during calendar year 2006; Rev. Filing 1040ez electronically Proc. Filing 1040ez electronically 2007-30, 2007-1 C. Filing 1040ez electronically B. Filing 1040ez electronically 1104, for passenger automobiles first leased during calendar year 2007; Rev. Filing 1040ez electronically Proc. Filing 1040ez electronically 2008-22, 2008-12 I. Filing 1040ez electronically R. Filing 1040ez electronically B. Filing 1040ez electronically 658, for passenger automobiles first leased during calendar year 2008; and Rev. Filing 1040ez electronically Proc. Filing 1040ez electronically 2009-24, 2009-17 I. Filing 1040ez electronically R. Filing 1040ez electronically B. Filing 1040ez electronically 885, for passenger automobiles first leased during calendar year 2009. Filing 1040ez electronically SECTION 4. Filing 1040ez electronically APPLICATION . Filing 1040ez electronically 01 Limitations on Depreciation Deductions for Certain Automobiles. Filing 1040ez electronically (1) Amount of the inflation adjustment. Filing 1040ez electronically (a) Passenger automobiles (other than trucks or vans). Filing 1040ez electronically Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. Filing 1040ez electronically The term “CPI automobile component” is defined in § 280F(d)(7)(B)(ii) as the “automobile component” of the Consumer Price Index for all Urban Consumers published by the Department of Labor. Filing 1040ez electronically The new car component of the CPI was 115. Filing 1040ez electronically 2 for October 1987 and 137. Filing 1040ez electronically 851 for October 2009. Filing 1040ez electronically The October 2009 index exceeded the October 1987 index by 22. Filing 1040ez electronically 651. Filing 1040ez electronically Therefore, the automobile price inflation adjustment for 2010 for passenger automobiles (other than trucks and vans) is 19. Filing 1040ez electronically 66 percent (22. Filing 1040ez electronically 651/115. Filing 1040ez electronically 2 x 100%). Filing 1040ez electronically The dollar limitations in § 280F(a) are multiplied by a factor of 0. Filing 1040ez electronically 1966, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than trucks and vans) for calendar year 2010. Filing 1040ez electronically This adjustment applies to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2010. Filing 1040ez electronically (b) Trucks and vans. Filing 1040ez electronically To determine the dollar limitations for trucks and vans first placed in service during calendar year 2010, the new truck component of the CPI is used instead of the new car component. Filing 1040ez electronically The new truck component of the CPI was 112. Filing 1040ez electronically 4 for October 1987 and 140. Filing 1040ez electronically 897 for October 2009. Filing 1040ez electronically The October 2009 index exceeded the October 1987 index by 28. Filing 1040ez electronically 497. Filing 1040ez electronically Therefore, the automobile price inflation adjustment for 2010 for trucks and vans is 25. Filing 1040ez electronically 35 percent (28. Filing 1040ez electronically 497/112. Filing 1040ez electronically 4 x 100%). Filing 1040ez electronically The dollar limitations in § 280F(a) are multiplied by a factor of 0. Filing 1040ez electronically 2535, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations for trucks and vans. Filing 1040ez electronically This adjustment applies to all trucks and vans that are first placed in service in calendar year 2010. Filing 1040ez electronically (2) Amount of the limitation. Filing 1040ez electronically Tables 1 and 2 contain the dollar amount of the depreciation limitation for each taxable year for passenger automobiles a taxpayer places in service in calendar year 2010. Filing 1040ez electronically Use Table 1 for a passenger automobile (other than a truck or van) and Table 2 for a truck or van placed in service in calendar year 2010. Filing 1040ez electronically REV. Filing 1040ez electronically PROC. Filing 1040ez electronically 2010-18 TABLE 1 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE IN CALENDAR YEAR 2010 Tax Year Amount 1st Tax Year $3,060 2nd Tax Year $4,900 3rd Tax Year $2,950 Each Succeeding Year $1,775 REV. Filing 1040ez electronically PROC. Filing 1040ez electronically 2010-18 TABLE 2 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE IN CALENDAR YEAR 2010 Tax Year Amount 1st Tax Year $3,160 2nd Tax Year $5,100 3rd Tax Year $3,050 Each Succeeding Year $1,875 . Filing 1040ez electronically 02 Inclusions in Income of Lessees of Passenger Automobiles. Filing 1040ez electronically A taxpayer must follow the procedures in § 1. Filing 1040ez electronically 280F-7(a) for determining the inclusion amounts for passenger automobiles first leased in calendar year 2010. Filing 1040ez electronically In applying these procedures, lessees of passenger automobiles other than trucks and vans should use Table 3 of this revenue procedure, while lessees of trucks and vans should use Table 4 of this revenue procedure. Filing 1040ez electronically REV. Filing 1040ez electronically PROC. Filing 1040ez electronically 2010-18 TABLE 3 DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2010 Fair Market Value of Passenger Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & Later $16,700 $17,000 3 7 10 11 14 17,000 17,500 4 8 13 15 16 17,500 18,000 5 10 16 19 21 18,000 18,500 6 13 18 23 26 18,500 19,000 7 15 22 26 31 19,000 19,500 8 17 25 30 35 19,500 20,000 9 19 29 34 39 20,000 20,500 10 21 32 38 44 20,500 21,000 11 23 35 42 48 21,000 21,500 12 26 38 45 53 21,500 22,000 13 28 41 50 57 22,000 23,000 14 31 46 56 63 23,000 24,000 16 36 52 63 73 24,000 25,000 18 40 59 71 81 25,000 26,000 20 44 66 78 90 26,000 27,000 22 49 71 86 100 27,000 28,000 24 53 78 94 108 28,000 29,000 26 57 85 101 118 29,000 30,000 28 61 92 109 126 30,000 31,000 30 66 97 117 135 31,000 32,000 32 70 104 125 144 32,000 33,000 34 74 111 132 153 33,000 34,000 36 79 117 140 161 34,000 35,000 38 83 123 148 171 35,000 36,000 40 87 130 156 179 36,000 37,000 42 92 136 163 188 37,000 38,000 44 96 143 170 198 38,000 39,000 46 100 149 179 206 39,000 40,000 48 105 155 186 215 40,000 41,000 50 109 162 194 224 41,000 42,000 52 113 169 201 233 42,000 43,000 54 118 174 210 241 43,000 44,000 56 122 181 217 251 44,000 45,000 58 126 188 225 259 45,000 46,000 60 131 194 232 269 46,000 47,000 61 135 201 240 277 47,000 48,000 63 140 207 248 286 48,000 49,000 65 144 213 256 295 49,000 50,000 67 148 220 263 304 50,000 51,000 69 153 226 271 313 51,000 52,000 71 157 232 279 322 52,000 53,000 73 161 239 287 331 53,000 54,000 75 166 245 294 340 54,000 55,000 77 170 252 302 348 55,000 56,000 79 174 258 310 358 56,000 57,000 81 178 265 318 366 57,000 58,000 83 183 271 325 375 58,000 59,000 85 187 278 333 384 59,000 60,000 87 191 284 341 393 60,000 62,000 90 198 294 352 406 62,000 64,000 94 207 306 368 424 64,000 66,000 98 215 320 382 443 66,000 68,000 102 224 332 398 460 68,000 70,000 106 232 346 413 478 70,000 72,000 110 241 358 429 496 72,000 74,000 114 250 371 444 513 74,000 76,000 118 258 384 460 531 76,000 78,000 122 267 396 476 549 78,000 80,000 126 276 409 491 566 80,000 85,000 132 291 432 518 598 85,000 90,000 142 313 464 556 643 90,000 95,000 152 334 497 594 687 95,000 100,000 162 356 528 634 731 100,000 110,000 177 388 577 691 798 110,000 120,000 196 432 641 768 887 120,000 130,000 216 475 705 846 976 130,000 140,000 236 518 770 922 1,065 140,000 150,000 256 561 834 1,000 1,154 150,000 160,000 275 605 898 1,077 1,243 160,000 170,000 295 648 963 1,153 1,333 170,000 180,000 315 691 1,027 1,231 1,421 180,000 190,000 334 735 1,091 1,308 1,510 190,000 200,000 354 778 1,155 1,386 1,599 200,000 210,000 374 821 1,220 1,462 1,688 210,000 220,000 393 865 1,284 1,539 1,777 220,000 230,000 413 908 1,348 1,617 1,866 230,000 240,000 433 951 1,413 1,693 1,956 240,000 and up 453 995 1,476 1,771 2,044 REV. Filing 1040ez electronically PROC. Filing 1040ez electronically 2010-18 TABLE 4 DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2010 Fair Market Value of Passenger Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & Later 17,000 17,500 3 6 9 10 11 17,500 18,000 4 8 12 14 16 18,000 18,500 5 10 15 18 21 18,500 19,000 6 12 19 22 24 19,000 19,500 7 15 21 26 29 19,500 20,000 8 17 25 29 34 20,000 20,500 9 19 28 33 38 20,500 21,000 10 21 31 37 43 21,000 21,500 11 23 35 41 47 21,500 22,000 12 25 38 45 51 22,000 23,000 13 29 42 51 58 23,000 24,000 15 33 49 58 67 24,000 25,000 17 37 56 66 76 25,000 26,000 19 42 62 73 85 26,000 27,000 21 46 68 82 93 27,000 28,000 23 50 75 89 103 28,000 29,000 25 55 81 97 111 29,000 30,000 27 59 88 104 121 30,000 31,000 29 63 94 113 129 31,000 32,000 31 68 100 120 138 32,000 33,000 33 72 107 127 148 33,000 34,000 35 76 114 135 156 34,000 35,000 37 81 119 143 165 35,000 36,000 39 85 126 151 174 36,000 37,000 41 89 133 158 183 37,000 38,000 43 94 139 166 191 38,000 39,000 45 98 145 174 201 39,000 40,000 47 102 152 182 209 40,000 41,000 49 106 159 189 218 41,000 42,000 51 111 164 198 227 42,000 43,000 53 115 171 205 236 43,000 44,000 55 119 178 213 245 44,000 45,000 57 124 184 220 254 45,000 46,000 59 128 190 228 263 46,000 47,000 60 133 197 235 272 47,000 48,000 62 137 203 244 280 48,000 49,000 64 142 209 251 290 49,000 50,000 66 146 216 259 298 50,000 51,000 68 150 223 266 308 51,000 52,000 70 154 229 275 316 52,000 53,000 72 159 235 282 325 53,000 54,000 74 163 242 290 334 54,000 55,000 76 167 249 297 343 55,000 56,000 78 172 254 305 352 56,000 57,000 80 176 261 313 361 57,000 58,000 82 180 268 320 370 58,000 59,000 84 185 274 328 378 59,000 60,000 86 189 280 336 388 60,000 62,000 89 195 291 347 401 62,000 64,000 93 204 303 363 418 64,000 66,000 97 213 315 379 436 66,000 68,000 101 221 329 394 454 68,000 70,000 105 230 341 410 472 70,000 72,000 109 239 354 424 490 72,000 74,000 113 247 367 440 508 74,000 76,000 117 256 380 455 526 76,000 78,000 121 264 393 471 543 78,000 80,000 125 273 406 486 561 80,000 85,000 131 289 428 513 592 85,000 90,000 141 310 461 552 636 90,000 95,000 151 332 492 591 681 95,000 100,000 161 353 525 629 726 100,000 110,000 176 386 573 686 793 110,000 120,000 195 430 637 763 882 120,000 130,000 215 473 701 841 971 130,000 140,000 235 516 766 918 1,059 140,000 150,000 255 559 830 995 1,149 150,000 160,000 274 603 894 1,072 1,238 160,000 170,000 294 646 958 1,150 1,326 170,000 180,000 314 689 1,023 1,226 1,416 180,000 190,000 333 733 1,087 1,303 1,505 190,000 200,000 353 776 1,151 1,381 1,594 200,000 210,000 373 819 1,216 1,457 1,683 210,000 220,000 392 863 1,280 1,534 1,772 220,000 230,000 412 906 1,344 1,612 1,861 230,000 240,000 432 949 1,409 1,689 1,949 240,000 and up 452 992 1,473 1,766 2,039 SECTION 5. Filing 1040ez electronically EFFECTIVE DATE This revenue procedure applies to passenger automobiles that a taxpayer first places in service or first leases during calendar year 2010. Filing 1040ez electronically SECTION 6. Filing 1040ez electronically DRAFTING INFORMATION The principal author of this revenue procedure is Bernard P. Filing 1040ez electronically Harvey of the Office of Associate Chief Counsel (Income Tax & Accounting). Filing 1040ez electronically For further information regarding this revenue procedure, contact Mr. Filing 1040ez electronically Harvey at (202) 622-4930 (not a toll-free call). Filing 1040ez electronically Prev  Up  Next   Home   More Internal Revenue Bulletins