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Filing 2012 Taxes In 2014

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Filing 2012 Taxes In 2014

Filing 2012 taxes in 2014 9. Filing 2012 taxes in 2014   Education Exception to Additional Tax on Early IRA Distributions Table of Contents Introduction Who Is Eligible Figuring the Amount Not Subject to the 10% Tax Reporting Early Distributions Introduction Generally, if you take a distribution from your IRA before you reach age 59½, you must pay a 10% additional tax on the early distribution. Filing 2012 taxes in 2014 This applies to any IRA you own, whether it is a traditional IRA (including a SEP-IRA), a Roth IRA, or a SIMPLE IRA. Filing 2012 taxes in 2014 The additional tax on an early distribution from a SIMPLE IRA may be as high as 25%. Filing 2012 taxes in 2014 See Publication 560, Retirement Plans for Small Business, for information on SEP-IRAs, and Publication 590, for information about all other IRAs. Filing 2012 taxes in 2014 However, you can take distributions from your IRAs for qualified higher education expenses without having to pay the 10% additional tax. Filing 2012 taxes in 2014 You may owe income tax on at least part of the amount distributed, but you may not have to pay the 10% additional tax. Filing 2012 taxes in 2014 Generally, if the taxable part of the distribution is less than or equal to the adjusted qualified education expenses (AQEE), none of the distribution is subject to the additional tax. Filing 2012 taxes in 2014 If the taxable part of the distribution is more than the AQEE, only the excess is subject to the additional tax. Filing 2012 taxes in 2014 Who Is Eligible You can take a distribution from your IRA before you reach age 59½ and not have to pay the 10% additional tax if, for the year of the distribution, you pay qualified education expenses for: yourself, your spouse, or your or your spouse's child, foster child, adopted child, or descendant of any of them. Filing 2012 taxes in 2014 Qualified education expenses. Filing 2012 taxes in 2014   For purposes of the 10% additional tax, these expenses are tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. Filing 2012 taxes in 2014 They also include expenses for special needs services incurred by or for special needs students in connection with their enrollment or attendance. Filing 2012 taxes in 2014   In addition, if the student is at least a half-time student, room and board are qualified education expenses. Filing 2012 taxes in 2014   The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. Filing 2012 taxes in 2014 The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. Filing 2012 taxes in 2014 The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Filing 2012 taxes in 2014 You will need to contact the eligible educational institution for qualified room and board costs. Filing 2012 taxes in 2014 Eligible educational institution. Filing 2012 taxes in 2014   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Filing 2012 taxes in 2014 S. Filing 2012 taxes in 2014 Department of Education. Filing 2012 taxes in 2014 It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Filing 2012 taxes in 2014 The educational institution should be able to tell you if it is an eligible educational institution. Filing 2012 taxes in 2014   Certain educational institutions located outside the United States also participate in the U. Filing 2012 taxes in 2014 S. Filing 2012 taxes in 2014 Department of Education's Federal Student Aid (FSA) programs. Filing 2012 taxes in 2014 Half-time student. Filing 2012 taxes in 2014   A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic work load for the course of study the student is pursuing as determined under the standards of the school where the student is enrolled. Filing 2012 taxes in 2014 Figuring the Amount Not Subject to the 10% Tax To determine the amount of your distribution that is not subject to the 10% additional tax, first figure your adjusted qualified education expenses. Filing 2012 taxes in 2014 You do this by reducing your total qualified education expenses by any tax-free educational assistance, which includes: Expenses used to figure the tax-free portion of distributions from a Coverdell education savings account (ESA) (see Distributions in chapter 7, Coverdell Education Savings Account), The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Filing 2012 taxes in 2014 Do not reduce the qualified education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance given to either the student or the individual making the withdrawal, or A withdrawal from personal savings (including savings from a qualified tuition program (QTP)). Filing 2012 taxes in 2014 If your IRA distribution is equal to or less than your adjusted qualified education expenses, you are not subject to the 10% additional tax. Filing 2012 taxes in 2014 Example 1. Filing 2012 taxes in 2014 In 2013, Erin (age 32) took a year off from teaching to attend graduate school full-time. Filing 2012 taxes in 2014 She paid $5,800 of qualified education expenses from the following sources. Filing 2012 taxes in 2014   Employer-provided educational assistance  (tax free) $5,000     Early distribution from IRA (includes $500 taxable earnings) 3,200           Before Erin can determine if she must pay the 10% additional tax on her IRA distribution, she must reduce her total qualified education expenses. Filing 2012 taxes in 2014   Total qualified education expenses $5,800     Minus: Tax-free educational assistance −5,000     Equals: Adjusted qualified  education expenses (AQEE) $ 800   Because Erin's AQEE ($800) are more than the taxable portion of her IRA distribution ($500), she does not have to pay the 10% additional tax on any part of this distribution. Filing 2012 taxes in 2014 However, she must include the $500 taxable earnings in her gross income subject to income tax. Filing 2012 taxes in 2014 Example 2. Filing 2012 taxes in 2014 Assume the same facts as in Example 1 , except that Erin deducted some of the contributions to her IRA, so the taxable part of her early distribution is higher by $1,000. Filing 2012 taxes in 2014 This must be included in her income subject to income tax. Filing 2012 taxes in 2014 The taxable part of Erin's IRA distribution ($1,000) is larger than her $800 AQEE. Filing 2012 taxes in 2014 Therefore, she must pay the 10% additional tax on $200, the taxable part of her distribution ($1,000) that is more than her qualified education expenses ($800). Filing 2012 taxes in 2014 She does not have to pay the 10% additional tax on the remaining $800 of her taxable distribution. Filing 2012 taxes in 2014 Reporting Early Distributions By January 31, 2014, the payer of your IRA distribution should send you Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Filing 2012 taxes in 2014 The information on this form will help you determine how much of your distribution is taxable for income tax purposes and how much is subject to the 10% additional tax. Filing 2012 taxes in 2014 If you received an early distribution from your IRA, you must report the taxable earnings on Form 1040, line 15b (Form 1040NR, line 16b). Filing 2012 taxes in 2014 Then, if you qualify for an exception for qualified higher education expenses, you must file Form 5329 to show how much, if any, of your early distribution is subject to the 10% additional tax. Filing 2012 taxes in 2014 See the Instructions for Form 5329, Part I, for help in completing the form and entering the results on Form 1040 or 1040NR. Filing 2012 taxes in 2014 There are many other situations in which Form 5329 is required. Filing 2012 taxes in 2014 If, during 2013, you had other distributions from IRAs or qualified retirement plans, or have made excess contributions to certain tax-favored accounts, see the instructions for line 58 (Form 1040) or line 56 (Form 1040NR) to determine if you must file Form 5329. Filing 2012 taxes in 2014 Prev  Up  Next   Home   More Online Publications
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Understanding your CP71C Notice

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Am I charged interest on the money I owe?
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Do I receive a penalty if I cannot pay the full amount?
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Tips for next year

Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions that you may qualify for. In many cases you can file for free. Learn more about e-file.

 

Page Last Reviewed or Updated: 06-Mar-2014

The Filing 2012 Taxes In 2014

Filing 2012 taxes in 2014 9. Filing 2012 taxes in 2014   Figuring Net Profit or Loss Table of Contents Introduction Net Operating Losses (NOLs) Not-for-Profit Activities Introduction After figuring your business income and expenses, you are ready to figure the net profit or net loss from your business. Filing 2012 taxes in 2014 You do this by subtracting business expenses from business income. Filing 2012 taxes in 2014 If your expenses are less than your income, the difference is net profit and becomes part of your income on page 1 of Form 1040. Filing 2012 taxes in 2014 If your expenses are more than your income, the difference is a net loss. Filing 2012 taxes in 2014 You usually can deduct it from gross income on page 1 of Form 1040. Filing 2012 taxes in 2014 But in some situations your loss is limited. Filing 2012 taxes in 2014 This chapter briefly explains two of those situations. Filing 2012 taxes in 2014 Other situations that may limit your loss are explained in the Instructions for Schedule C, line G and line 32. Filing 2012 taxes in 2014 If you have more than one business, you must figure your net profit or loss for each business on a separate Schedule C. Filing 2012 taxes in 2014 Net Operating Losses (NOLs) If your deductions for the year are more than your income for the year (line 41 of your Form 1040 is a negative number), you may have a net operating loss (NOL). Filing 2012 taxes in 2014 You can use an NOL by deducting it from your income in another year or years. Filing 2012 taxes in 2014 Examples of typical losses that may produce an NOL include, but are not limited to, losses incurred from the following. Filing 2012 taxes in 2014 Your trade or business. Filing 2012 taxes in 2014 Your work as an employee (unreimbursed employee business expenses). Filing 2012 taxes in 2014 A casualty or theft. Filing 2012 taxes in 2014 Moving expenses. Filing 2012 taxes in 2014 Rental property. Filing 2012 taxes in 2014 A loss from operating a business is the most common reason for an NOL. Filing 2012 taxes in 2014 For details about NOLs, see Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts. Filing 2012 taxes in 2014 It explains how to figure an NOL, when to use it, how to claim an NOL deduction, and how to figure an NOL carryover. Filing 2012 taxes in 2014 Not-for-Profit Activities If you do not carry on your business to make a profit, there is a limit on the deductions you can take. Filing 2012 taxes in 2014 You cannot use a loss from the activity to offset other income. Filing 2012 taxes in 2014 Activities you do as a hobby, or mainly for sport or recreation, come under this limit. Filing 2012 taxes in 2014 For details about not-for-profit activities, see chapter 1 in Publication 535, Business Expenses. Filing 2012 taxes in 2014 That chapter explains how to determine whether your activity is carried on to make a profit and how to figure the amount of loss you can deduct. Filing 2012 taxes in 2014 Prev  Up  Next   Home   More Online Publications