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Filing A Tax Amendment Online

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Filing A Tax Amendment Online

Filing a tax amendment online Publication 575 - Main Content Table of Contents General InformationPension. Filing a tax amendment online Annuity. Filing a tax amendment online Qualified employee plan. Filing a tax amendment online Qualified employee annuity. Filing a tax amendment online Designated Roth account. Filing a tax amendment online Tax-sheltered annuity plan. Filing a tax amendment online Fixed-period annuities. Filing a tax amendment online Annuities for a single life. Filing a tax amendment online Joint and survivor annuities. Filing a tax amendment online Variable annuities. Filing a tax amendment online Disability pensions. Filing a tax amendment online Variable Annuities Section 457 Deferred Compensation Plans Disability Pensions Insurance Premiums for Retired Public Safety Officers Railroad Retirement Benefits Withholding Tax and Estimated Tax Cost (Investment in the Contract)Foreign employment contributions while a nonresident alien. Filing a tax amendment online Taxation of Periodic PaymentsPeriod of participation. Filing a tax amendment online Fully Taxable Payments Partly Taxable Payments Taxation of Nonperiodic PaymentsFiguring the Taxable Amount Loans Treated as Distributions Transfers of Annuity Contracts Lump-Sum Distributions RolloversExceptions. Filing a tax amendment online No tax withheld. Filing a tax amendment online Partial rollovers. Filing a tax amendment online Frozen deposits. Filing a tax amendment online Reasonable period of time. Filing a tax amendment online 20% Mandatory withholding. Filing a tax amendment online How to report. Filing a tax amendment online How to report. Filing a tax amendment online Special rule for Roth IRAs and designated Roth accounts. Filing a tax amendment online Special Additional TaxesTax on Early Distributions Tax on Excess Accumulation Survivors and BeneficiariesGuaranteed payments. Filing a tax amendment online How To Get Tax HelpLow Income Taxpayer Clinics General Information Definitions. Filing a tax amendment online   Some of the terms used in this publication are defined in the following paragraphs. Filing a tax amendment online Pension. Filing a tax amendment online   A pension is generally a series of definitely determinable payments made to you after you retire from work. Filing a tax amendment online Pension payments are made regularly and are based on such factors as years of service and prior compensation. Filing a tax amendment online Annuity. Filing a tax amendment online   An annuity is a series of payments under a contract made at regular intervals over a period of more than one full year. Filing a tax amendment online They can be either fixed (under which you receive a definite amount) or variable (not fixed). Filing a tax amendment online You can buy the contract alone or with the help of your employer. Filing a tax amendment online Qualified employee plan. Filing a tax amendment online   A qualified employee plan is an employer's stock bonus, pension, or profit-sharing plan that is for the exclusive benefit of employees or their beneficiaries and that meets Internal Revenue Code requirements. Filing a tax amendment online It qualifies for special tax benefits, such as tax deferral for employer contributions and capital gain treatment or the 10-year tax option for lump-sum distributions (if participants qualify). Filing a tax amendment online To determine whether your plan is a qualified plan, check with your employer or the plan administrator. Filing a tax amendment online Qualified employee annuity. Filing a tax amendment online   A qualified employee annuity is a retirement annuity purchased by an employer for an employee under a plan that meets Internal Revenue Code requirements. Filing a tax amendment online Designated Roth account. Filing a tax amendment online   A designated Roth account is a separate account created under a qualified Roth contribution program to which participants may elect to have part or all of their elective deferrals to a 401(k), 403(b), or 457(b) plan designated as Roth contributions. Filing a tax amendment online Elective deferrals that are designated as Roth contributions are included in your income. Filing a tax amendment online However, qualified distributions (explained later) are not included in your income. Filing a tax amendment online You should check with your plan administrator to determine if your plan will accept designated Roth contributions. Filing a tax amendment online Tax-sheltered annuity plan. Filing a tax amendment online   A tax-sheltered annuity plan (often referred to as a 403(b) plan or a tax-deferred annuity plan) is a retirement plan for employees of public schools and certain tax-exempt organizations. Filing a tax amendment online Generally, a tax-sheltered annuity plan provides retirement benefits by purchasing annuity contracts for its participants. Filing a tax amendment online Types of pensions and annuities. Filing a tax amendment online   Pensions and annuities include the following types. Filing a tax amendment online Fixed-period annuities. Filing a tax amendment online   You receive definite amounts at regular intervals for a specified length of time. Filing a tax amendment online Annuities for a single life. Filing a tax amendment online   You receive definite amounts at regular intervals for life. Filing a tax amendment online The payments end at death. Filing a tax amendment online Joint and survivor annuities. Filing a tax amendment online   The first annuitant receives a definite amount at regular intervals for life. Filing a tax amendment online After he or she dies, a second annuitant receives a definite amount at regular intervals for life. Filing a tax amendment online The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant. Filing a tax amendment online Variable annuities. Filing a tax amendment online   You receive payments that may vary in amount for a specified length of time or for life. Filing a tax amendment online The amounts you receive may depend upon such variables as profits earned by the pension or annuity funds, cost-of-living indexes, or earnings from a mutual fund. Filing a tax amendment online Disability pensions. Filing a tax amendment online   You receive disability payments because you retired on disability and have not reached minimum retirement age. Filing a tax amendment online More than one program. Filing a tax amendment online   You may receive employee plan benefits from more than one program under a single trust or plan of your employer. Filing a tax amendment online If you participate in more than one program, you may have to treat each as a separate pension or annuity contract, depending upon the facts in each case. Filing a tax amendment online Also, you may be considered to have received more than one pension or annuity. Filing a tax amendment online Your former employer or the plan administrator should be able to tell you if you have more than one contract. Filing a tax amendment online Example. Filing a tax amendment online Your employer set up a noncontributory profit-sharing plan for its employees. Filing a tax amendment online The plan provides that the amount held in the account of each participant will be paid when that participant retires. Filing a tax amendment online Your employer also set up a contributory defined benefit pension plan for its employees providing for the payment of a lifetime pension to each participant after retirement. Filing a tax amendment online The amount of any distribution from the profit-sharing plan depends on the contributions (including allocated forfeitures) made for the participant and the earnings from those contributions. Filing a tax amendment online Under the pension plan, however, a formula determines the amount of the pension benefits. Filing a tax amendment online The amount of contributions is the amount necessary to provide that pension. Filing a tax amendment online Each plan is a separate program and a separate contract. Filing a tax amendment online If you get benefits from these plans, you must account for each separately, even though the benefits from both may be included in the same check. Filing a tax amendment online Distributions from a designated Roth account are treated separately from other distributions from the plan. Filing a tax amendment online Qualified domestic relations order (QDRO). Filing a tax amendment online   A QDRO is a judgment, decree, or order relating to payment of child support, alimony, or marital property rights to a spouse, former spouse, child, or other dependent of a participant in a retirement plan. Filing a tax amendment online The QDRO must contain certain specific information, such as the name and last known mailing address of the participant and each alternate payee, and the amount or percentage of the participant's benefits to be paid to each alternate payee. Filing a tax amendment online A QDRO may not award an amount or form of benefit that is not available under the plan. Filing a tax amendment online   A spouse or former spouse who receives part of the benefits from a retirement plan under a QDRO reports the payments received as if he or she were a plan participant. Filing a tax amendment online The spouse or former spouse is allocated a share of the participant's cost (investment in the contract) equal to the cost times a fraction. Filing a tax amendment online The numerator of the fraction is the present value of the benefits payable to the spouse or former spouse. Filing a tax amendment online The denominator is the present value of all benefits payable to the participant. Filing a tax amendment online   A distribution that is paid to a child or other dependent under a QDRO is taxed to the plan participant. Filing a tax amendment online Variable Annuities The tax rules in this publication apply both to annuities that provide fixed payments and to annuities that provide payments that vary in amount based on investment results or other factors. Filing a tax amendment online For example, they apply to commercial variable annuity contracts, whether bought by an employee retirement plan for its participants or bought directly from the issuer by an individual investor. Filing a tax amendment online Under these contracts, the owner can generally allocate the purchase payments among several types of investment portfolios or mutual funds and the contract value is determined by the performance of those investments. Filing a tax amendment online The earnings are not taxed until distributed either in a withdrawal or in annuity payments. Filing a tax amendment online The taxable part of a distribution is treated as ordinary income. Filing a tax amendment online Net investment income tax. Filing a tax amendment online   Beginning in 2013, annuities under a nonqualified plan are included in calculating your net investment income for the net investment income tax (NIIT). Filing a tax amendment online For information see the Instructions for Form 8960, Net Investment Income Tax — Individuals, Estates and Trusts. Filing a tax amendment online For information on the tax treatment of a transfer or exchange of a variable annuity contract, see Transfers of Annuity Contracts under Taxation of Nonperiodic Payments, later. Filing a tax amendment online Withdrawals. Filing a tax amendment online   If you withdraw funds before your annuity starting date and your annuity is under a qualified retirement plan, a ratable part of the amount withdrawn is tax free. Filing a tax amendment online The tax-free part is based on the ratio of your cost (investment in the contract) to your account balance under the plan. Filing a tax amendment online   If your annuity is under a nonqualified plan (including a contract you bought directly from the issuer), the amount withdrawn is allocated first to earnings (the taxable part) and then to your cost (the tax-free part). Filing a tax amendment online However, if you bought your annuity contract before August 14, 1982, a different allocation applies to the investment before that date and the earnings on that investment. Filing a tax amendment online To the extent the amount withdrawn does not exceed that investment and earnings, it is allocated first to your cost (the tax-free part) and then to earnings (the taxable part). Filing a tax amendment online   If you withdraw funds (other than as an annuity) on or after your annuity starting date, the entire amount withdrawn is generally taxable. Filing a tax amendment online   The amount you receive in a full surrender of your annuity contract at any time is tax free to the extent of any cost that you have not previously recovered tax free. Filing a tax amendment online The rest is taxable. Filing a tax amendment online   For more information on the tax treatment of withdrawals, see Taxation of Nonperiodic Payments , later. Filing a tax amendment online If you withdraw funds from your annuity before you reach age 59½, also see Tax on Early Distributions under Special Additional Taxes, later. Filing a tax amendment online Annuity payments. Filing a tax amendment online   If you receive annuity payments under a variable annuity plan or contract, you recover your cost tax free under either the Simplified Method or the General Rule, as explained under Taxation of Periodic Payments , later. Filing a tax amendment online For a variable annuity paid under a qualified plan, you generally must use the Simplified Method. Filing a tax amendment online For a variable annuity paid under a nonqualified plan (including a contract you bought directly from the issuer), you must use a special computation under the General Rule. Filing a tax amendment online For more information, see Variable annuities in Publication 939 under Computation Under the General Rule. Filing a tax amendment online Death benefits. Filing a tax amendment online    If you receive a single-sum distribution from a variable annuity contract because of the death of the owner or annuitant, the distribution is generally taxable only to the extent it is more than the unrecovered cost of the contract. Filing a tax amendment online If you choose to receive an annuity, the payments are subject to tax as described above. Filing a tax amendment online If the contract provides a joint and survivor annuity and the primary annuitant had received annuity payments before death, you figure the tax-free part of annuity payments you receive as the survivor in the same way the primary annuitant did. Filing a tax amendment online See Survivors and Beneficiaries , later. Filing a tax amendment online Section 457 Deferred Compensation Plans If you work for a state or local government or for a tax-exempt organization, you may be able to participate in a section 457 deferred compensation plan. Filing a tax amendment online If your plan is an eligible plan, you are not taxed currently on pay that is deferred under the plan or on any earnings from the plan's investment of the deferred pay. Filing a tax amendment online You are generally taxed on amounts deferred in an eligible state or local government plan only when they are distributed from the plan. Filing a tax amendment online You are taxed on amounts deferred in an eligible tax-exempt organization plan when they are distributed or otherwise made available to you. Filing a tax amendment online Your 457(b) plan may have a designated Roth account option. Filing a tax amendment online If so, you may be able to roll over amounts to the designated Roth account or make contributions. Filing a tax amendment online Elective deferrals to a designated Roth account are included in your income. Filing a tax amendment online Qualified distributions (explained later) are not included in your income. Filing a tax amendment online See the Designated Roth accounts discussion under Taxation of Periodic Payments, later. Filing a tax amendment online This publication covers the tax treatment of benefits under eligible section 457 plans, but it does not cover the treatment of deferrals. Filing a tax amendment online For information on deferrals under section 457 plans, see Retirement Plan Contributions under Employee Compensation in Publication 525. Filing a tax amendment online Is your plan eligible?   To find out if your plan is an eligible plan, check with your employer. Filing a tax amendment online Plans that are not eligible section 457 plans include the following: Bona fide vacation leave, sick leave, compensatory time, severance pay, disability pay, or death benefit plans. Filing a tax amendment online Nonelective deferred compensation plans for nonemployees (independent contractors). Filing a tax amendment online Deferred compensation plans maintained by churches. Filing a tax amendment online Length of service award plans for bona fide volunteer firefighters and emergency medical personnel. Filing a tax amendment online An exception applies if the total amount paid to a volunteer exceeds $3,000 for any year of service. Filing a tax amendment online Disability Pensions If you retired on disability, you generally must include in income any disability pension you receive under a plan that is paid for by your employer. Filing a tax amendment online You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A or on line 8 of Form 1040NR until you reach minimum retirement age. Filing a tax amendment online Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. Filing a tax amendment online You may be entitled to a tax credit if you were permanently and totally disabled when you retired. Filing a tax amendment online For information on this credit, see Publication 524. Filing a tax amendment online Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. Filing a tax amendment online Report the payments on Form 1040, lines 16a and 16b; Form 1040A, lines 12a and 12b; or on Form 1040NR, lines 17a and 17b. Filing a tax amendment online Disability payments for injuries incurred as a direct result of a terrorist attack directed against the United States (or its allies) are not included in income. Filing a tax amendment online For more information about payments to survivors of terrorist attacks, see Publication 3920, Tax Relief for Victims of Terrorist Attacks. Filing a tax amendment online Insurance Premiums for Retired Public Safety Officers If you are an eligible retired public safety officer (law enforcement officer, firefighter, chaplain, or member of a rescue squad or ambulance crew), you can elect to exclude from income distributions made from your eligible retirement plan that are used to pay the premiums for accident or health insurance or long-term care insurance. Filing a tax amendment online The premiums can be for coverage for you, your spouse, or dependents. Filing a tax amendment online The distribution must be made directly from the plan to the insurance provider. Filing a tax amendment online You can exclude from income the smaller of the amount of the insurance premiums or $3,000. Filing a tax amendment online You can only make this election for amounts that would otherwise be included in your income. Filing a tax amendment online The amount excluded from your income cannot be used to claim a medical expense deduction. Filing a tax amendment online An eligible retirement plan is a governmental plan that is: a qualified trust, a section 403(a) plan, a section 403(b) annuity, or a section 457(b) plan. Filing a tax amendment online If you make this election, reduce the otherwise taxable amount of your pension or annuity by the amount excluded. Filing a tax amendment online The amount shown in box 2a of Form 1099-R does not reflect this exclusion. Filing a tax amendment online Report your total distributions on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. Filing a tax amendment online Report the taxable amount on Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Filing a tax amendment online Enter “PSO” next to the appropriate line on which you report the taxable amount. Filing a tax amendment online If you are retired on disability and reporting your disability pension on line 7 of Form 1040 or Form 1040A, or line 8 of Form 1040NR, include only the taxable amount on that line and enter “PSO” and the amount excluded on the dotted line next to the applicable line. Filing a tax amendment online Railroad Retirement Benefits Benefits paid under the Railroad Retirement Act fall into two categories. Filing a tax amendment online These categories are treated differently for income tax purposes. Filing a tax amendment online The first category is the amount of tier 1 railroad retirement benefits that equals the social security benefit that a railroad employee or beneficiary would have been entitled to receive under the social security system. Filing a tax amendment online This part of the tier 1 benefit is the social security equivalent benefit (SSEB) and you treat it for tax purposes like social security benefits. Filing a tax amendment online If you received, repaid, or had tax withheld from the SSEB portion of tier 1 benefits during 2013, you will receive Form RRB-1099, Payments by the Railroad Retirement Board (or Form RRB-1042S, Statement for Nonresident Alien Recipients of Payments by the Railroad Retirement Board, if you are a nonresident alien) from the U. Filing a tax amendment online S. Filing a tax amendment online Railroad Retirement Board (RRB). Filing a tax amendment online For more information about the tax treatment of the SSEB portion of tier 1 benefits and Forms RRB-1099 and RRB-1042S, see Publication 915. Filing a tax amendment online The second category contains the rest of the tier 1 railroad retirement benefits, called the non-social security equivalent benefit (NSSEB). Filing a tax amendment online It also contains any tier 2 benefit, vested dual benefit (VDB), and supplemental annuity benefit. Filing a tax amendment online Treat this category of benefits, shown on Form RRB-1099-R, as an amount received from a qualified employee plan. Filing a tax amendment online This allows for the tax-free (nontaxable) recovery of employee contributions from the tier 2 benefits and the NSSEB part of the tier 1 benefits. Filing a tax amendment online (The NSSEB and tier 2 benefits, less certain repayments, are combined into one amount called the Contributory Amount Paid on Form RRB-1099-R. Filing a tax amendment online ) Vested dual benefits and supplemental annuity benefits are non-contributory pensions and are fully taxable. Filing a tax amendment online See Taxation of Periodic Payments , later, for information on how to report your benefits and how to recover the employee contributions tax free. Filing a tax amendment online Form RRB-1099-R is used for U. Filing a tax amendment online S. Filing a tax amendment online citizens, resident aliens, and nonresident aliens. Filing a tax amendment online Nonresident aliens. Filing a tax amendment online   A nonresident alien is an individual who is not a citizen or a resident alien of the United States. Filing a tax amendment online Nonresident aliens are subject to mandatory U. Filing a tax amendment online S. Filing a tax amendment online tax withholding unless exempt under a tax treaty between the United States and their country of legal residency. Filing a tax amendment online A tax treaty exemption may reduce or eliminate tax withholding from railroad retirement benefits. Filing a tax amendment online See Tax withholding next for more information. Filing a tax amendment online   If you are a nonresident alien and your tax withholding rate changed or your country of legal residence changed during the year, you may receive more than one Form RRB-1042S or Form RRB-1099-R. Filing a tax amendment online To determine your total benefits paid or repaid and total tax withheld for the year, you should add the amounts shown on all forms you received for that year. Filing a tax amendment online For information on filing requirements for aliens, see Publication 519, U. Filing a tax amendment online S. Filing a tax amendment online Tax Guide for Aliens. Filing a tax amendment online For information on tax treaties between the United States and other countries that may reduce or eliminate U. Filing a tax amendment online S. Filing a tax amendment online tax on your benefits, see Publication 901, U. Filing a tax amendment online S. Filing a tax amendment online Tax Treaties. Filing a tax amendment online Tax withholding. Filing a tax amendment online   To request or change your income tax withholding from SSEB payments, U. Filing a tax amendment online S. Filing a tax amendment online citizens should contact the IRS for Form W-4V, Voluntary Withholding Request, and file it with the RRB. Filing a tax amendment online To elect, revoke, or change your income tax withholding from NSSEB, tier 2, VDB, and supplemental annuity payments received, use Form RRB W-4P, Withholding Certificate for Railroad Retirement Payments. Filing a tax amendment online If you are a nonresident alien or a U. Filing a tax amendment online S. Filing a tax amendment online citizen living abroad, you should provide Form RRB-1001, Nonresident Questionnaire, to the RRB to furnish citizenship and residency information and to claim any treaty exemption from U. Filing a tax amendment online S. Filing a tax amendment online tax withholding. Filing a tax amendment online Nonresident U. Filing a tax amendment online S. Filing a tax amendment online citizens cannot elect to be exempt from withholding on payments delivered outside of the U. Filing a tax amendment online S. Filing a tax amendment online Help from the RRB. Filing a tax amendment online   To request an RRB form or to get help with questions about an RRB benefit, you should contact your nearest RRB field office if you reside in the United States (call 1-877-772-5772 for the nearest field office) or U. Filing a tax amendment online S. Filing a tax amendment online consulate/Embassy if you reside outside the United States. Filing a tax amendment online You can visit the RRB on the Internet at www. Filing a tax amendment online rrb. Filing a tax amendment online gov. Filing a tax amendment online Form RRB-1099-R. Filing a tax amendment online   The following discussion explains the items shown on Form RRB-1099-R. Filing a tax amendment online The amounts shown on this form are before any deduction for: Federal income tax withholding, Medicare premiums, Legal process garnishment payments, Recovery of a prior year overpayment of an NSSEB, tier 2 benefit, VDB, or supplemental annuity benefit, or Recovery of Railroad Unemployment Insurance Act benefits received while awaiting payment of your railroad retirement annuity. Filing a tax amendment online   The amounts shown on this form are after any offset for: Social Security benefits, Age reduction, Public Service pensions or public disability benefits, Dual railroad retirement entitlement under another RRB claim number, Work deductions, Legal process partition deductions, Actuarial adjustment, Annuity waiver, or Recovery of a current-year overpayment of NSSEB, tier 2, VDB, or supplemental annuity benefits. Filing a tax amendment online   The amounts shown on Form RRB-1099-R do not reflect any special rules, such as capital gain treatment or the special 10-year tax option for lump-sum payments, or tax-free rollovers. Filing a tax amendment online To determine if any of these rules apply to your benefits, see the discussions about them later. Filing a tax amendment online   Generally, amounts shown on your Form RRB-1099-R are considered a normal distribution. Filing a tax amendment online Use distribution code “7” if you are asked for a distribution code. Filing a tax amendment online Distribution codes are not shown on Form RRB-1099-R. Filing a tax amendment online   There are three copies of this form. Filing a tax amendment online Copy B is to be included with your income tax return if federal income tax is withheld. Filing a tax amendment online Copy C is for your own records. Filing a tax amendment online Copy 2 is filed with your state, city, or local income tax return, when required. Filing a tax amendment online See the illustrated Copy B (Form RRB-1099-R) above. Filing a tax amendment online       Each beneficiary will receive his or her own Form RRB-1099-R. Filing a tax amendment online If you receive benefits on more than one railroad retirement record, you may get more than one Form RRB-1099-R. Filing a tax amendment online So that you get your form timely, make sure the RRB always has your current mailing address. Filing a tax amendment online Please click here for the text description of the image. Filing a tax amendment online Form RRB-1099-R Box 1—Claim Number and Payee Code. Filing a tax amendment online   Your claim number is a six- or nine-digit number preceded by an alphabetical prefix. Filing a tax amendment online This is the number under which the RRB paid your benefits. Filing a tax amendment online Your payee code follows your claim number and is the last number in this box. Filing a tax amendment online It is used by the RRB to identify you under your claim number. Filing a tax amendment online In all your correspondence with the RRB, be sure to use the claim number and payee code shown in this box. Filing a tax amendment online Box 2—Recipient's Identification Number. Filing a tax amendment online   This is the recipient's U. Filing a tax amendment online S. Filing a tax amendment online taxpayer identification number. Filing a tax amendment online It is the social security number (SSN), individual taxpayer identification number (ITIN), or employer identification number (EIN), if known, for the person or estate listed as the recipient. Filing a tax amendment online If you are a resident or nonresident alien who must furnish a taxpayer identification number to the IRS and are not eligible to obtain an SSN, use Form W-7, Application for IRS Individual Taxpayer Identification Number, to apply for an ITIN. Filing a tax amendment online The Instructions for Form W-7 explain how and when to apply. Filing a tax amendment online Box 3—Employee Contributions. Filing a tax amendment online   This is the amount of taxes withheld from the railroad employee's earnings that exceeds the amount of taxes that would have been withheld had the earnings been covered under the social security system. Filing a tax amendment online This amount is the employee's cost that you use to figure the tax-free part of the NSSEB and tier 2 benefit you received (the amount shown in box 4). Filing a tax amendment online (For information on how to figure the tax-free part, see Partly Taxable Payments under Taxation of Periodic Payments, later. Filing a tax amendment online ) The amount shown is the total employee contribution amount, not reduced by any amounts that the RRB calculated as previously recovered. Filing a tax amendment online It is the latest amount reported for 2013 and may have increased or decreased from a previous Form RRB-1099-R. Filing a tax amendment online If this amount has changed, the change is retroactive. Filing a tax amendment online You may need to refigure the tax-free part of your NSSEB/tier 2 benefit for 2013 and prior tax years. Filing a tax amendment online If this box is blank, it means that the amount of your NSSEB and tier 2 payments shown in box 4 is fully taxable. Filing a tax amendment online    If you had a previous annuity entitlement that ended and you are figuring the tax-free part of your NSSEB/tier 2 benefit for your current annuity entitlement, you should contact the RRB for confirmation of your correct employee contribution amount. Filing a tax amendment online Box 4—Contributory Amount Paid. Filing a tax amendment online   This is the gross amount of the NSSEB and tier 2 benefit you received in 2013, less any 2013 benefits you repaid in 2013. Filing a tax amendment online (Any benefits you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. Filing a tax amendment online ) This amount is the total contributory pension paid in 2013. Filing a tax amendment online It may be partly taxable and partly tax free or fully taxable. Filing a tax amendment online If you determine you are eligible to compute a tax-free part as explained later in Partly Taxable Payments under Taxation of Periodic Payments, use the latest reported employee contribution amount shown in box 3 as the cost. Filing a tax amendment online Box 5—Vested Dual Benefit. Filing a tax amendment online   This is the gross amount of vested dual benefit (VDB) payments paid in 2013, less any 2013 VDB payments you repaid in 2013. Filing a tax amendment online It is fully taxable. Filing a tax amendment online VDB payments you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. Filing a tax amendment online Note. Filing a tax amendment online The amounts shown in boxes 4 and 5 may represent payments for 2013 and/or other years after 1983. Filing a tax amendment online Box 6—Supplemental Annuity. Filing a tax amendment online   This is the gross amount of supplemental annuity benefits paid in 2013, less any 2013 supplemental annuity benefits you repaid in 2013. Filing a tax amendment online It is fully taxable. Filing a tax amendment online Supplemental annuity benefits you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. Filing a tax amendment online Box 7—Total Gross Paid. Filing a tax amendment online   This is the sum of boxes 4, 5, and 6. Filing a tax amendment online The amount represents the total pension paid in 2013. Filing a tax amendment online Include this amount on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. Filing a tax amendment online Box 8—Repayments. Filing a tax amendment online   This amount represents any NSSEB, tier 2 benefit, VDB, and supplemental annuity benefit you repaid to the RRB in 2013 for years before 2013 or for unknown years. Filing a tax amendment online The amount shown in this box has not been deducted from the amounts shown in boxes 4, 5, and 6. Filing a tax amendment online It only includes repayments of benefits that were taxable to you. Filing a tax amendment online This means it only includes repayments in 2013 of NSSEB benefits paid after 1985, tier 2 and VDB benefits paid after 1983, and supplemental annuity benefits paid in any year. Filing a tax amendment online If you included the benefits in your income in the year you received them, you may be able to deduct the repaid amount. Filing a tax amendment online For more information about repayments, see Repayment of benefits received in an earlier year , later. Filing a tax amendment online    You may have repaid an overpayment of benefits by returning a payment, by making a payment, or by having an amount withheld from your railroad retirement annuity payment. Filing a tax amendment online Box 9—Federal Income Tax Withheld. Filing a tax amendment online   This is the total federal income tax withheld from your NSSEB, tier 2 benefit, VDB, and supplemental annuity benefit. Filing a tax amendment online Include this on your income tax return as tax withheld. Filing a tax amendment online If you are a nonresident alien and your tax withholding rate and/or country of legal residence changed during 2013, you will receive more than one Form RRB-1099-R for 2013. Filing a tax amendment online Determine the total amount of U. Filing a tax amendment online S. Filing a tax amendment online federal income tax withheld from your 2013 RRB NSSEB, tier 2, VDB, and supplemental annuity payments by adding the amounts in box 9 of all original 2013 Forms RRB-1099-R, or the latest corrected or duplicate Forms RRB-1099-R you receive. Filing a tax amendment online Box 10—Rate of Tax. Filing a tax amendment online   If you are taxed as a U. Filing a tax amendment online S. Filing a tax amendment online citizen or resident alien, this box does not apply to you. Filing a tax amendment online If you are a nonresident alien, an entry in this box indicates the rate at which tax was withheld on the NSSEB, tier 2, VDB, and supplemental annuity payments that were paid to you in 2013. Filing a tax amendment online If you are a nonresident alien whose tax was withheld at more than one rate during 2013, you will receive a separate Form RRB-1099-R for each rate change during 2013. Filing a tax amendment online Box 11—Country. Filing a tax amendment online   If you are taxed as a U. Filing a tax amendment online S. Filing a tax amendment online citizen or resident alien, this box does not apply to you. Filing a tax amendment online If you are a nonresident alien, an entry in this box indicates the country of which you were a resident for tax purposes at the time you received railroad retirement payments in 2013. Filing a tax amendment online If you are a nonresident alien who was a resident of more than one country during 2013, you will receive a separate Form RRB-1099-R for each country of residence during 2013. Filing a tax amendment online Box 12—Medicare Premium Total. Filing a tax amendment online   This is for information purposes only. Filing a tax amendment online The amount shown in this box represents the total amount of Part B Medicare premiums deducted from your railroad retirement annuity payments in 2013. Filing a tax amendment online Medicare premium refunds are not included in the Medicare total. Filing a tax amendment online The Medicare total is normally shown on Form RRB-1099 (if you are a citizen or resident alien of the United States) or Form RRB-1042S (if you are a nonresident alien). Filing a tax amendment online However, if Form RRB-1099 or Form RRB-1042S is not required for 2013, then this total will be shown on Form RRB-1099-R. Filing a tax amendment online If your Medicare premiums were deducted from your social security benefits, paid by a third party, refunded to you, and/or you paid the premiums by direct billing, your Medicare total will not be shown in this box. Filing a tax amendment online Repayment of benefits received in an earlier year. Filing a tax amendment online   If you had to repay any railroad retirement benefits that you had included in your income in an earlier year because at that time you thought you had an unrestricted right to it, you can deduct the amount you repaid in the year in which you repaid it. Filing a tax amendment online   If you repaid $3,000 or less in 2013, deduct it on Schedule A (Form 1040), line 23. Filing a tax amendment online The 2%-of-adjusted-gross-income limit applies to this deduction. Filing a tax amendment online You cannot take this deduction if you file Form 1040A. Filing a tax amendment online    If you repaid more than $3,000 in 2013, you can either take a deduction for the amount repaid on Schedule A (Form 1040), line 28 or you can take a credit against your tax. Filing a tax amendment online For more information, see Repayments in Publication 525. Filing a tax amendment online Withholding Tax and Estimated Tax Your retirement plan distributions are subject to federal income tax withholding. Filing a tax amendment online However, you can choose not to have tax withheld on payments you receive unless they are eligible rollover distributions. Filing a tax amendment online (These are distributions, described later under Rollovers, that are eligible for rollover treatment but are not paid directly to another qualified retirement plan or to a traditional IRA. Filing a tax amendment online ) If you choose not to have tax withheld or if you do not have enough tax withheld, you may have to make estimated tax payments. Filing a tax amendment online See Estimated tax , later. Filing a tax amendment online The withholding rules apply to the taxable part of payments you receive from: An employer pension, annuity, profit-sharing, or stock bonus plan, Any other deferred compensation plan, A traditional individual retirement arrangement (IRA), or A commercial annuity. Filing a tax amendment online For this purpose, a commercial annuity means an annuity, endowment, or life insurance contract issued by an insurance company. Filing a tax amendment online There will be no withholding on any part of a distribution where it is reasonable to believe that it will not be includible in gross income. Filing a tax amendment online Choosing no withholding. Filing a tax amendment online   You can choose not to have income tax withheld from retirement plan payments unless they are eligible rollover distributions. Filing a tax amendment online You can make this choice on Form W-4P for periodic and nonperiodic payments. Filing a tax amendment online This choice generally remains in effect until you revoke it. Filing a tax amendment online   The payer will ignore your choice not to have tax withheld if: You do not give the payer your social security number (in the required manner), or The IRS notifies the payer, before the payment is made, that you gave an incorrect social security number. Filing a tax amendment online   To choose not to have tax withheld, a U. Filing a tax amendment online S. Filing a tax amendment online citizen or resident alien must give the payer a home address in the United States or its possessions. Filing a tax amendment online Without that address, the payer must withhold tax. Filing a tax amendment online For example, the payer has to withhold tax if the recipient has provided a U. Filing a tax amendment online S. Filing a tax amendment online address for a nominee, trustee, or agent to whom the benefits are delivered, but has not provided his or her own U. Filing a tax amendment online S. Filing a tax amendment online home address. Filing a tax amendment online   If you do not give the payer a home address in the United States or its possessions, you can choose not to have tax withheld only if you certify to the payer that you are not a U. Filing a tax amendment online S. Filing a tax amendment online citizen, a U. Filing a tax amendment online S. Filing a tax amendment online resident alien, or someone who left the country to avoid tax. Filing a tax amendment online But if you so certify, you may be subject to the 30% flat rate withholding that applies to nonresident aliens. Filing a tax amendment online This 30% rate will not apply if you are exempt or subject to a reduced rate by treaty. Filing a tax amendment online For details, get Publication 519. Filing a tax amendment online Periodic payments. Filing a tax amendment online   Unless you choose no withholding, your annuity or similar periodic payments (other than eligible rollover distributions) will be treated like wages for withholding purposes. Filing a tax amendment online Periodic payments are amounts paid at regular intervals (such as weekly, monthly, or yearly) for a period of time greater than one year (such as for 15 years or for life). Filing a tax amendment online You should give the payer a completed withholding certificate (Form W-4P or a similar form provided by the payer). Filing a tax amendment online If you do not, tax will be withheld as if you were married and claiming three withholding allowances. Filing a tax amendment online   Tax will be withheld as if you were single and were claiming no withholding allowances if: You do not give the payer your social security number (in the required manner), or The IRS notifies the payer (before any payment is made) that you gave an incorrect social security number. Filing a tax amendment online   You must file a new withholding certificate to change the amount of withholding. Filing a tax amendment online Nonperiodic distributions. Filing a tax amendment online    Unless you choose no withholding, the withholding rate for a nonperiodic distribution (a payment other than a periodic payment) that is not an eligible rollover distribution is 10% of the distribution. Filing a tax amendment online You can also ask the payer to withhold an additional amount using Form W-4P. Filing a tax amendment online The part of any loan treated as a distribution (except an offset amount to repay the loan), explained later, is subject to withholding under this rule. Filing a tax amendment online Eligible rollover distribution. Filing a tax amendment online    If you receive an eligible rollover distribution, 20% of it generally will be withheld for income tax. Filing a tax amendment online You cannot choose not to have tax withheld from an eligible rollover distribution. Filing a tax amendment online However, tax will not be withheld if you have the plan administrator pay the eligible rollover distribution directly to another qualified plan or an IRA in a direct rollover. Filing a tax amendment online For more information about eligible rollover distributions, see Rollovers , later. Filing a tax amendment online Estimated tax. Filing a tax amendment online   Your estimated tax is the total of your expected income tax, self-employment tax, and certain other taxes for the year, minus your expected credits and withheld tax. Filing a tax amendment online Generally, you must make estimated tax payments for 2014 if you expect to owe at least $1,000 in tax (after subtracting your withholding and credits) and you expect your withholding and credits to be less than the smaller of: 90% of the tax to be shown on your 2014 return, or 100% of the tax shown on your 2013 return. Filing a tax amendment online If your adjusted gross income for 2013 was more than $150,000 ($75,000 if your filing status for 2014 is married filing separately), substitute 110% for 100% in (2) above. Filing a tax amendment online For more information, get Publication 505, Tax Withholding and Estimated Tax. Filing a tax amendment online In figuring your withholding or estimated tax, remember that a part of your monthly social security or equivalent tier 1 railroad retirement benefits may be taxable. Filing a tax amendment online See Publication 915. Filing a tax amendment online You can choose to have income tax withheld from those benefits. Filing a tax amendment online Use Form W-4V to make this choice. Filing a tax amendment online Cost (Investment in the Contract) Distributions from your pension or annuity plan may include amounts treated as a recovery of your cost (investment in the contract). Filing a tax amendment online If any part of a distribution is treated as a recovery of your cost under the rules explained in this publication, that part is tax free. Filing a tax amendment online Therefore, the first step in figuring how much of a distribution is taxable is to determine the cost of your pension or annuity. Filing a tax amendment online In general, your cost is your net investment in the contract as of the annuity starting date (or the date of the distribution, if earlier). Filing a tax amendment online To find this amount, you must first figure the total premiums, contributions, or other amounts you paid. Filing a tax amendment online This includes the amounts your employer contributed that were taxable to you when paid. Filing a tax amendment online (However, see Foreign employment contributions , later. Filing a tax amendment online ) It does not include amounts withheld from your pay on a tax-deferred basis (money that was taken out of your gross pay before taxes were deducted). Filing a tax amendment online It also does not include amounts you contributed for health and accident benefits (including any additional premiums paid for double indemnity or disability benefits). Filing a tax amendment online From this total cost you must subtract the following amounts. Filing a tax amendment online Any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income and that you received by the later of the annuity starting date or the date on which you received your first payment. Filing a tax amendment online Any other tax-free amounts you received under the contract or plan by the later of the dates in (1). Filing a tax amendment online If you must use the Simplified Method for your annuity payments, the tax-free part of any single-sum payment received in connection with the start of the annuity payments, regardless of when you received it. Filing a tax amendment online (See Simplified Method , later, for information on its required use. Filing a tax amendment online ) If you use the General Rule for your annuity payments, the value of the refund feature in your annuity contract. Filing a tax amendment online (See General Rule , later, for information on its use. Filing a tax amendment online ) Your annuity contract has a refund feature if the annuity payments are for your life (or the lives of you and your survivor) and payments in the nature of a refund of the annuity's cost will be made to your beneficiary or estate if all annuitants die before a stated amount or a stated number of payments are made. Filing a tax amendment online For more information, see Publication 939. Filing a tax amendment online The tax treatment of the items described in (1) through (3) is discussed later under Taxation of Nonperiodic Payments . Filing a tax amendment online Form 1099-R. Filing a tax amendment online If you began receiving periodic payments of a life annuity in 2013, the payer should show your total contributions to the plan in box 9b of your 2013 Form 1099-R. Filing a tax amendment online Annuity starting date defined. Filing a tax amendment online   Your annuity starting date is the later of the first day of the first period for which you received a payment or the date the plan's obligations became fixed. Filing a tax amendment online Example. Filing a tax amendment online On January 1, you completed all your payments required under an annuity contract providing for monthly payments starting on August 1 for the period beginning July 1. Filing a tax amendment online The annuity starting date is July 1. Filing a tax amendment online This is the date you use in figuring the cost of the contract and selecting the appropriate number from Table 1 for line 3 of the Simplified Method Worksheet. Filing a tax amendment online Designated Roth accounts. Filing a tax amendment online   Your cost in these accounts is your designated Roth contributions that were included in your income as wages subject to applicable withholding requirements. Filing a tax amendment online Your cost will also include any in-plan Roth rollovers you included in income. Filing a tax amendment online Foreign employment contributions. Filing a tax amendment online   If you worked abroad, your cost may include contributions by your employer to the retirement plan, but only if those contributions would be excludible from your gross income had they been paid directly to you as compensation. Filing a tax amendment online The contributions that apply are: Contributions before 1963 by your employer, Contributions after 1962 by your employer if the contributions would be excludible from your gross income (not including the foreign earned income exclusion) had they been paid directly to you, or Contributions after 1996 by your employer if you performed the services of a foreign missionary (a duly ordained, commissioned, or licensed minister of a church or a lay person) but only if the contributions would be excludible from your gross income had they been paid directly to you. Filing a tax amendment online Foreign employment contributions while a nonresident alien. Filing a tax amendment online   In determining your cost, special rules apply if you are a U. Filing a tax amendment online S. Filing a tax amendment online citizen or resident alien who received distributions in 2013 from a plan to which contributions were made while you were a nonresident alien. Filing a tax amendment online Your contributions and your employer's contributions are not included in your cost if the contribution: Was made based on compensation which was for services performed outside the United States while you were a nonresident alien, and Was not subject to income tax under the laws of the United States or any foreign country, but only if the contribution would have been subject to income tax if paid as cash compensation when the services were performed. Filing a tax amendment online Taxation of Periodic Payments This section explains how the periodic payments you receive from a pension or annuity plan are taxed. Filing a tax amendment online Periodic payments are amounts paid at regular intervals (such as weekly, monthly, or yearly) for a period of time greater than one year (such as for 15 years or for life). Filing a tax amendment online These payments are also known as amounts received as an annuity. Filing a tax amendment online If you receive an amount from your plan that is not a periodic payment, see Taxation of Nonperiodic Payments , later. Filing a tax amendment online In general, you can recover the cost of your pension or annuity tax free over the period you are to receive the payments. Filing a tax amendment online The amount of each payment that is more than the part that represents your cost is taxable (however, see Insurance Premiums for Retired Public Safety Officers , earlier). Filing a tax amendment online Designated Roth accounts. Filing a tax amendment online   If you receive a qualified distribution from a designated Roth account, the distribution is not included in your gross income. Filing a tax amendment online This applies to both your cost in the account and income earned on that account. Filing a tax amendment online A qualified distribution is generally a distribution that is: Made after a 5-tax-year period of participation, and Made on or after the date you reach age 59½, made to a beneficiary or your estate on or after your death, or attributable to your being disabled. Filing a tax amendment online   If the distribution is not a qualified distribution, the rules discussed in this section apply. Filing a tax amendment online The designated Roth account is treated as a separate contract. Filing a tax amendment online Period of participation. Filing a tax amendment online   The 5-tax-year period of participation is the 5-tax-year period beginning with the first tax year for which the participant made a designated Roth contribution to the plan. Filing a tax amendment online Therefore, for designated Roth contributions made for 2013, the first year for which a qualified distribution can be made is 2018. Filing a tax amendment online   However, if a direct rollover is made to the plan from a designated Roth account under another plan, the 5-tax-year period for the recipient plan begins with the first tax year for which the participant first had designated Roth contributions made to the other plan. Filing a tax amendment online   Your 401(k), 403(b), or 457(b) plan may permit you to roll over amounts from those plans to a designated Roth account within the same plan. Filing a tax amendment online This is known as an in-plan Roth rollover. Filing a tax amendment online For more details, see In-plan Roth rollovers , later. Filing a tax amendment online Fully Taxable Payments The pension or annuity payments that you receive are fully taxable if you have no cost in the contract because any of the following situations applies to you (however, see Insurance Premiums for Retired Public Safety Officers , earlier). Filing a tax amendment online You did not pay anything or are not considered to have paid anything for your pension or annuity. Filing a tax amendment online Amounts withheld from your pay on a tax-deferred basis are not considered part of the cost of the pension or annuity payment. Filing a tax amendment online Your employer did not withhold contributions from your salary. Filing a tax amendment online You got back all of your contributions tax free in prior years (however, see Exclusion not limited to cost under Partly Taxable Payments, later). Filing a tax amendment online Report the total amount you got on Form 1040, line 16b; Form 1040A, line 12b; or on Form 1040NR, line 17b. Filing a tax amendment online You should make no entry on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. Filing a tax amendment online Deductible voluntary employee contributions. Filing a tax amendment online   Distributions you receive that are based on your accumulated deductible voluntary employee contributions are generally fully taxable in the year distributed to you. Filing a tax amendment online Accumulated deductible voluntary employee contributions include net earnings on the contributions. Filing a tax amendment online If distributed as part of a lump sum, they do not qualify for the 10-year tax option or capital gain treatment, explained later. Filing a tax amendment online Partly Taxable Payments If you have a cost to recover from your pension or annuity plan (see Cost (Investment in the Contract) , earlier), you can exclude part of each annuity payment from income as a recovery of your cost. Filing a tax amendment online This tax-free part of the payment is figured when your annuity starts and remains the same each year, even if the amount of the payment changes. Filing a tax amendment online The rest of each payment is taxable (however, see Insurance Premiums for Retired Public Safety Officers , earlier). Filing a tax amendment online You figure the tax-free part of the payment using one of the following methods. Filing a tax amendment online Simplified Method. Filing a tax amendment online You generally must use this method if your annuity is paid under a qualified plan (a qualified employee plan, a qualified employee annuity, or a tax-sheltered annuity plan or contract). Filing a tax amendment online You cannot use this method if your annuity is paid under a nonqualified plan. Filing a tax amendment online General Rule. Filing a tax amendment online You must use this method if your annuity is paid under a nonqualified plan. Filing a tax amendment online You generally cannot use this method if your annuity is paid under a qualified plan. Filing a tax amendment online You determine which method to use when you first begin receiving your annuity, and you continue using it each year that you recover part of your cost. Filing a tax amendment online If you had more than one partly taxable pension or annuity, figure the tax-free part and the taxable part of each separately. Filing a tax amendment online Qualified plan annuity starting before November 19, 1996. Filing a tax amendment online   If your annuity is paid under a qualified plan and your annuity starting date (defined earlier under Cost (Investment in the Contract) ) is after July 1, 1986, and before November 19, 1996, you could have chosen to use either the Simplified Method or the General Rule. Filing a tax amendment online If your annuity starting date is before July 2, 1986, you use the General Rule unless your annuity qualified for the Three-Year Rule. Filing a tax amendment online If you used the Three-Year Rule (which was repealed for annuities starting after July 1, 1986), your annuity payments are generally now fully taxable. Filing a tax amendment online Exclusion limit. Filing a tax amendment online   Your annuity starting date determines the total amount of annuity payments that you can exclude from income over the years. Filing a tax amendment online Once your annuity starting date is determined, it does not change. Filing a tax amendment online If you calculate the taxable portion of your annuity payments using the simplified method worksheet, the annuity starting date determines the recovery period for your cost. Filing a tax amendment online That recovery period begins on your annuity starting date and is not affected by the date you first complete the worksheet. Filing a tax amendment online Exclusion limited to cost. Filing a tax amendment online   If your annuity starting date is after 1986, the total amount of annuity income that you can exclude over the years as a recovery of the cost cannot exceed your total cost. Filing a tax amendment online Any unrecovered cost at your (or the last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. Filing a tax amendment online This deduction is not subject to the 2%-of-adjusted-gross-income limit. Filing a tax amendment online Example 1. Filing a tax amendment online Your annuity starting date is after 1986, and you exclude $100 a month ($1,200 a year) under the Simplified Method. Filing a tax amendment online The total cost of your annuity is $12,000. Filing a tax amendment online Your exclusion ends when you have recovered your cost tax free, that is, after 10 years (120 months). Filing a tax amendment online After that, your annuity payments are generally fully taxable. Filing a tax amendment online Example 2. Filing a tax amendment online The facts are the same as in Example 1, except you die (with no surviving annuitant) after the eighth year of retirement. Filing a tax amendment online You have recovered tax free only $9,600 (8 × $1,200) of your cost. Filing a tax amendment online An itemized deduction for your unrecovered cost of $2,400 ($12,000 – $9,600) can be taken on your final return. Filing a tax amendment online Exclusion not limited to cost. Filing a tax amendment online   If your annuity starting date is before 1987, you can continue to take your monthly exclusion for as long as you receive your annuity. Filing a tax amendment online If you chose a joint and survivor annuity, your survivor can continue to take the survivor's exclusion figured as of the annuity starting date. Filing a tax amendment online The total exclusion may be more than your cost. Filing a tax amendment online Simplified Method Under the Simplified Method, you figure the tax-free part of each annuity payment by dividing your cost by the total number of anticipated monthly payments. Filing a tax amendment online For an annuity that is payable for the lives of the annuitants, this number is based on the annuitants' ages on the annuity starting date and is determined from a table. Filing a tax amendment online For any other annuity, this number is the number of monthly annuity payments under the contract. Filing a tax amendment online Who must use the Simplified Method. Filing a tax amendment online   You must use the Simplified Method if your annuity starting date is after November 18, 1996, and you meet both of the following conditions. Filing a tax amendment online You receive your pension or annuity payments from any of the following plans. Filing a tax amendment online A qualified employee plan. Filing a tax amendment online A qualified employee annuity. Filing a tax amendment online A tax-sheltered annuity plan (403(b) plan). Filing a tax amendment online On your annuity starting date, at least one of the following conditions applies to you. Filing a tax amendment online You are under age 75. Filing a tax amendment online You are entitled to less than 5 years of guaranteed payments. Filing a tax amendment online Guaranteed payments. Filing a tax amendment online   Your annuity contract provides guaranteed payments if a minimum number of payments or a minimum amount (for example, the amount of your investment) is payable even if you and any survivor annuitant do not live to receive the minimum. Filing a tax amendment online If the minimum amount is less than the total amount of the payments you are to receive, barring death, during the first 5 years after payments begin (figured by ignoring any payment increases), you are entitled to less than 5 years of guaranteed payments. Filing a tax amendment online Annuity starting before November 19, 1996. Filing a tax amendment online   If your annuity starting date is after July 1, 1986, and before November 19, 1996, and you chose to use the Simplified Method, you must continue to use it each year that you recover part of your cost. Filing a tax amendment online You could have chosen to use the Simplified Method if your annuity is payable for your life (or the lives of you and your survivor annuitant) and you met both of the conditions listed earlier under Who must use the Simplified Method . Filing a tax amendment online Who cannot use the Simplified Method. Filing a tax amendment online   You cannot use the Simplified Method if you receive your pension or annuity from a nonqualified plan or otherwise do not meet the conditions described in the preceding discussion. Filing a tax amendment online See General Rule , later. Filing a tax amendment online How to use the Simplified Method. Filing a tax amendment online    Complete Worksheet A in the back of this publication to figure your taxable annuity for 2013. Filing a tax amendment online Be sure to keep the completed worksheet; it will help you figure your taxable annuity next year. Filing a tax amendment online   To complete line 3 of the worksheet, you must determine the total number of expected monthly payments for your annuity. Filing a tax amendment online How you do this depends on whether the annuity is for a single life, multiple lives, or a fixed period. Filing a tax amendment online For this purpose, treat an annuity that is payable over the life of an annuitant as payable for that annuitant's life even if the annuity has a fixed-period feature or also provides a temporary annuity payable to the annuitant's child under age 25. Filing a tax amendment online    You do not need to complete line 3 of the worksheet or make the computation on line 4 if you received annuity payments last year and used last year's worksheet to figure your taxable annuity. Filing a tax amendment online Instead, enter the amount from line 4 of last year's worksheet on line 4 of this year's worksheet. Filing a tax amendment online Single-life annuity. Filing a tax amendment online   If your annuity is payable for your life alone, use Table 1 at the bottom of the worksheet to determine the total number of expected monthly payments. Filing a tax amendment online Enter on line 3 the number shown for your age on your annuity starting date. Filing a tax amendment online This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. Filing a tax amendment online Multiple-lives annuity. Filing a tax amendment online   If your annuity is payable for the lives of more than one annuitant, use Table 2 at the bottom of the worksheet to determine the total number of expected monthly payments. Filing a tax amendment online Enter on line 3 the number shown for the annuitants' combined ages on the annuity starting date. Filing a tax amendment online For an annuity payable to you as the primary annuitant and to more than one survivor annuitant, combine your age and the age of the youngest survivor annuitant. Filing a tax amendment online For an annuity that has no primary annuitant and is payable to you and others as survivor annuitants, combine the ages of the oldest and youngest annuitants. Filing a tax amendment online Do not treat as a survivor annuitant anyone whose entitlement to payments depends on an event other than the primary annuitant's death. Filing a tax amendment online   However, if your annuity starting date is before 1998, do not use Table 2 and do not combine the annuitants' ages. Filing a tax amendment online Instead, you must use Table 1 at the bottom of the worksheet and enter on line 3 the number shown for the primary annuitant's age on the annuity starting date. Filing a tax amendment online This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. Filing a tax amendment online Fixed-period annuity. Filing a tax amendment online   If your annuity does not depend in whole or in part on anyone's life expectancy, the total number of expected monthly payments to enter on line 3 of the worksheet is the number of monthly annuity payments under the contract. Filing a tax amendment online Line 6. Filing a tax amendment online   The amount on line 6 should include all amounts that could have been recovered in prior years. Filing a tax amendment online If you did not recover an amount in a prior year, you may be able to amend your returns for the affected years. Filing a tax amendment online Example. Filing a tax amendment online Bill Smith, age 65, began receiving retirement benefits in 2013 under a joint and survivor annuity. Filing a tax amendment online Bill's annuity starting date is January 1, 2013. Filing a tax amendment online The benefits are to be paid for the joint lives of Bill and his wife, Kathy, age 65. Filing a tax amendment online Bill had contributed $31,000 to a qualified plan and had received no distributions before the annuity starting date. Filing a tax amendment online Bill is to receive a retirement benefit of $1,200 a month, and Kathy is to receive a monthly survivor benefit of $600 upon Bill's death. Filing a tax amendment online Bill must use the Simplified Method to figure his taxable annuity because his payments are from a qualified plan and he is under age 75. Filing a tax amendment online Because his annuity is payable over the lives of more than one annuitant, he uses his and Kathy's combined ages and Table 2 at the bottom of Worksheet A in completing line 3 of the worksheet. Filing a tax amendment online His completed worksheet is shown later. Filing a tax amendment online Bill's tax-free monthly amount is $100 ($31,000 ÷ 310) as shown on line 4 of the worksheet. Filing a tax amendment online Upon Bill's death, if Bill has not recovered the full $31,000 investment, Kathy will also exclude $100 from her $600 monthly payment. Filing a tax amendment online The full amount of any annuity payments received after 310 payments are paid must be included in gross income. Filing a tax amendment online If Bill and Kathy die before 310 payments are made, a miscellaneous itemized deduction will be allowed for the unrecovered cost on the final income tax return of the last to die. Filing a tax amendment online This deduction is not subject to the 2%-of-adjusted-gross-income limit. Filing a tax amendment online Worksheet A. Filing a tax amendment online Simplified Method Worksheet for Bill Smith 1. Filing a tax amendment online Enter the total pension or annuity payments received this year. Filing a tax amendment online Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a 1. Filing a tax amendment online $14,400 2. Filing a tax amendment online Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion. Filing a tax amendment online * See Cost (Investment in the Contract) , earlier 2. Filing a tax amendment online 31,000   Note. Filing a tax amendment online If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year's worksheet on line 4 below (even if the amount of your pension or annuity has changed). Filing a tax amendment online Otherwise, go to line 3. Filing a tax amendment online     3. Filing a tax amendment online Enter the appropriate number from Table 1 below. Filing a tax amendment online But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, enter the appropriate number from Table 2 below 3. Filing a tax amendment online 310 4. Filing a tax amendment online Divide line 2 by the number on line 3 4. Filing a tax amendment online 100 5. Filing a tax amendment online Multiply line 4 by the number of months for which this year's payments were made. Filing a tax amendment online If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. Filing a tax amendment online Otherwise, go to line 6 5. Filing a tax amendment online 1,200 6. Filing a tax amendment online Enter any amount previously recovered tax free in years after 1986. Filing a tax amendment online This is the amount shown on line 10 of your worksheet for last year 6. Filing a tax amendment online -0- 7. Filing a tax amendment online Subtract line 6 from line 2 7. Filing a tax amendment online 31,000 8. Filing a tax amendment online Enter the smaller of line 5 or line 7 8. Filing a tax amendment online 1,200 9. Filing a tax amendment online Taxable amount for year. Filing a tax amendment online Subtract line 8 from line 1. Filing a tax amendment online Enter the result, but not less than zero. Filing a tax amendment online Also, add this amount to the total for Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Filing a tax amendment online Note: If your Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. Filing a tax amendment online If you are a retired public safety officer, see Insurance Premiums for Retired Public Safety Officers , earlier, before entering an amount on your tax return 9. Filing a tax amendment online $13,200 10. Filing a tax amendment online Was your annuity starting date before 1987? □ Yes. Filing a tax amendment online STOP. Filing a tax amendment online Do not complete the rest of this worksheet. Filing a tax amendment online  ☑ No. Filing a tax amendment online Add lines 6 and 8. Filing a tax amendment online This is the amount you have recovered tax free through 2013. Filing a tax amendment online You will need this number if you need to fill out this worksheet next year 10. Filing a tax amendment online 1,200 11. Filing a tax amendment online Balance of cost to be recovered. Filing a tax amendment online Subtract line 10 from line 2. Filing a tax amendment online If zero, you will not have to complete this worksheet next year. Filing a tax amendment online The payments you receive next year will generally be fully taxable 11. Filing a tax amendment online $29,800         * A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996. Filing a tax amendment online           Table 1 for Line 3 Above       AND your annuity starting date was—     IF the age at annuity starting date was. Filing a tax amendment online . Filing a tax amendment online . Filing a tax amendment online BEFORE November 19, 1996, enter on line 3. Filing a tax amendment online . Filing a tax amendment online . Filing a tax amendment online AFTER November 18, 1996, enter on line 3. Filing a tax amendment online . Filing a tax amendment online . Filing a tax amendment online     55 or under 300 360     56-60 260 310     61-65 240 260     66-70 170 210     71 or older 120 160     Table 2 for Line 3 Above     IF the combined ages at  annuity starting date were. Filing a tax amendment online . Filing a tax amendment online . Filing a tax amendment online THEN enter on line 3. Filing a tax amendment online . Filing a tax amendment online . Filing a tax amendment online     110 or under   410     111-120   360     121-130   310     131-140   260     141 or older   210   Multiple annuitants. Filing a tax amendment online   If you and one or more other annuitants receive payments at the same time, you exclude from each annuity payment a pro rata share of the monthly tax-free amount. Filing a tax amendment online Figure your share by taking the following steps. Filing a tax amendment online Complete your worksheet through line 4 to figure the monthly tax-free amount. Filing a tax amendment online Divide the amount of your monthly payment by the total amount of the monthly payments to all annuitants. Filing a tax amendment online Multiply the amount on line 4 of your worksheet by the amount figured in (2) above. Filing a tax amendment online The result is your share of the monthly tax-free amount. Filing a tax amendment online   Replace the amount on line 4 of the worksheet with the result in (3) above. Filing a tax amendment online Enter that amount on line 4 of your worksheet each year. Filing a tax amendment online General Rule Under the General Rule, you determine the tax-free part of each annuity payment based on the ratio of the cost of the contract to the total expected return. Filing a tax amendment online Expected return is the total amount you and other eligible annuitants can expect to receive under the contract. Filing a tax amendment online To figure it, you must use life expectancy (actuarial) tables prescribed by the IRS. Filing a tax amendment online Who must use the General Rule. Filing a tax amendment online   You must use the General Rule if you receive pension or annuity payments from: A nonqualified plan (such as a private annuity, a purchased commercial annuity, or a nonqualified employee plan), or A qualified plan if you are age 75 or older on your annuity starting date and your annuity payments are guaranteed for at least 5 years. Filing a tax amendment online Annuity starting before November 19, 1996. Filing a tax amendment online   If your annuity starting date is after July 1, 1986, and before November 19, 1996, you had to use the General Rule for either circumstance just described. Filing a tax amendment online You also had to use it for any fixed-period annuity. Filing a tax amendment online If you did not have to use the General Rule, you could have chosen to use it. Filing a tax amendment online If your annuity starting date is before July 2, 1986, you had to use the General Rule unless you could use the Three-Year Rule. Filing a tax amendment online   If you had to use the General Rule (or chose to use it), you must continue to use it each year that you recover your cost. Filing a tax amendment online Who cannot use the General Rule. Filing a tax amendment online   You cannot use the General Rule if you receive your pension or annuity from a qualified plan and none of the circumstances described in the preceding discussions apply to you. Filing a tax amendment online See Simplified Method , earlier. Filing a tax amendment online More information. Filing a tax amendment online   For complete information on using the General Rule, including the actuarial tables you need, see Publication 939. Filing a tax amendment online Taxation of Nonperiodic Payments This section of the publication explains how any nonperiodic distributions you receive under a pension or annuity plan are taxed. Filing a tax amendment online Nonperiodic distributions are also known as amounts not received as an annuity. Filing a tax amendment online They include all payments other than periodic payments and corrective distributions. Filing a tax amendment online For example, the following items are treated as nonperiodic distributions. Filing a tax amendment online Cash withdrawals. Filing a tax amendment online Distributions of current earnings (dividends) on your investment. Filing a tax amendment online However, do not include these distributions in your income to the extent the insurer keeps them to pay premiums or other consideration for the contract. Filing a tax amendment online Certain loans. Filing a tax amendment online See Loans Treated as Distributions , later. Filing a tax amendment online The value of annuity contracts transferred without full and adequate consideration. Filing a tax amendment online See Transfers of Annuity Contracts , later. Filing a tax amendment online Corrective distributions of excess plan contributions. Filing a tax amendment online   Generally, if the contributions made for you during the year to certain retirement plans exceed certain limits, the excess is taxable to you. Filing a tax amendment online To correct an excess, your plan may distribute it to you (along with any income earned on the excess). Filing a tax amendment online Although the plan reports the corrective distributions on Form 1099-R, the distribution is not treated as a nonperiodic distribution from the plan. Filing a tax amendment online It is not subject to the allocation rules explained in the following discussion, it cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. Filing a tax amendment online    If your retirement plan made a corrective distribution of excess amounts (excess deferrals, excess contributions, or excess annual additions), your Form 1099-R should have the code “8,” “B,” “P,” or “E” in box 7. Filing a tax amendment online   For information on plan contribution limits and how to report corrective distributions of excess contributions, see Retirement Plan Contributions under Employee Compensation in Publication 525. Filing a tax amendment online Figuring the Taxable Amount How you figure the taxable amount of a nonperiodic distribution depends on whether it is made before the annuity starting date, or on or after the annuity starting date. Filing a tax amendment online If it is made before the annuity starting date, its tax treatment also depends on whether it is made under a qualified or nonqualified plan. Filing a tax amendment online If it is made under a nonqualified plan, its tax treatment depends on whether it fully discharges the contract, is received under certain life insurance or endowment contracts, or is allocable to an investment you made before August 14, 1982. Filing a tax amendment online You may be able to roll over the taxable amount of a nonperiodic distribution from a qualified retirement plan into another qualified retirement plan or a traditional IRA tax free. Filing a tax amendment online See Rollovers, later. Filing a tax amendment online If you do not make a tax-free rollover and the distribution qualifies as a lump-sum distribution, you may be able to elect an optional method of figuring the tax on the taxable amount. Filing a tax amendment online See Lump-Sum Distributions, later. Filing a tax amendment online Annuity starting date. Filing a tax amendment online   The annuity starting date is either the first day of the first period for which you receive an annuity payment under the contract or the date on which the obligation under the contract becomes fixed, whichever is later. Filing a tax amendment online Distributions of employer securities. Filing a tax amendment online    If you receive a distribution of employer securities from a qualified retirement plan, you may be able to defer the tax on the net unrealized appreciation (NUA) in the securities. Filing a tax amendment online The NUA is the net increase in the securities' value while they were in the trust. Filing a tax amendment online This tax deferral applies to distributions of the employer corporation's stocks, bonds, registered debentures, and debentures with interest coupons attached. Filing a tax amendment online   If the distribution is a lump-sum distribution, tax is deferred on all of the NUA unless you choose to include it in your income for the year of the distribution. Filing a tax amendment online    A lump-sum distribution for this purpose is the distribution or payment of a plan participant's entire balance (within a single tax year) from all of the employer's qualified plans of one kind (pension, profit-sharing, or stock bonus plans), but only if paid: Because of the plan participant's death, After the participant reaches age 59½, Because the participant, if an employee, separates from service, or After the participant, if a self-employed individual, becomes totally and permanently disabled. Filing a tax amendment online    If you choose to include NUA in your income for the year of the distribution and the participant was born before January 2, 1936, you may be able to figure the tax on the NUA using the optional methods described und
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The Agency, its Mission and Statutory Authority

The Agency
The IRS is a bureau of the Department of the Treasury and one of the world's most efficient tax administrators. In fiscal year 2012, the IRS collected more than $2.5 trillion in revenue and processed more than 237 million tax returns.

  • The IRS spent just 48 cents for each $100 it collected in FY 2012.
    (Source: Table 29, IRS 2012 Data Book.)

 


The IRS Mission
Provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.

This mission statement describes our role and the public’s expectation about how we should perform that role.

  • In the United States, the Congress passes tax laws and requires taxpayers to comply.
  • The taxpayer’s role is to understand and meet his or her tax obligations.
  • The IRS role is to help the large majority of compliant taxpayers with the tax law, while ensuring that the minority who are unwilling to comply pay their fair share.

 


Statutory Authority
The IRS is organized to carry out the responsibilities of the secretary of the Treasury under section 7801 of the Internal Revenue Code. The secretary has full authority to administer and enforce the internal revenue laws and has the power to create an agency to enforce these laws. The IRS was created based on this legislative grant.

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Page Last Reviewed or Updated: 12-Feb-2014

The Filing A Tax Amendment Online

Filing a tax amendment online 7. Filing a tax amendment online   Coverdell Education Savings Account (ESA) Table of Contents Introduction What Is a Coverdell ESAQualified Education Expenses ContributionsContribution Limits Additional Tax on Excess Contributions Rollovers and Other TransfersRollovers Changing the Designated Beneficiary Transfer Because of Divorce DistributionsTax-Free Distributions Taxable Distributions When Assets Must Be Distributed Introduction If your modified adjusted gross income (MAGI) is less than $110,000 ($220,000 if filing a joint return), you may be able to establish a Coverdell ESA to finance the qualified education expenses of a designated beneficiary. Filing a tax amendment online For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return. Filing a tax amendment online There is no limit on the number of separate Coverdell ESAs that can be established for a designated beneficiary. Filing a tax amendment online However, total contributions for the beneficiary in any year cannot be more than $2,000, no matter how many accounts have been established. Filing a tax amendment online See Contributions , later. Filing a tax amendment online This benefit applies not only to higher education expenses, but also to elementary and secondary education expenses. Filing a tax amendment online What is the tax benefit of the Coverdell ESA. Filing a tax amendment online   Contributions to a Coverdell ESA are not deductible, but amounts deposited in the account grow tax free until distributed. Filing a tax amendment online   If, for a year, distributions from an account are not more than a designated beneficiary's qualified education expenses at an eligible educational institution, the beneficiary will not owe tax on the distributions. Filing a tax amendment online See Tax-Free Distributions , later. Filing a tax amendment online    Table 7-1 summarizes the main features of the Coverdell ESA. Filing a tax amendment online Table 7-1. Filing a tax amendment online Coverdell ESA at a Glance Do not rely on this table alone. Filing a tax amendment online It provides only general highlights. Filing a tax amendment online See the text for definitions of terms in bold type and for more complete explanations. Filing a tax amendment online Question Answer What is a Coverdell ESA? A savings account that is set up to pay the qualified education expenses of a designated beneficiary. Filing a tax amendment online Where can it be established? It can be opened in the United States at any bank or other IRS-approved entity that offers Coverdell ESAs. Filing a tax amendment online Who can have a Coverdell ESA? Any beneficiary who is under age 18 or is a special needs beneficiary. Filing a tax amendment online Who can contribute to a Coverdell ESA? Generally, any individual (including the beneficiary) whose modified adjusted gross income for the year is less than $110,000 ($220,000 in the case of a joint return). Filing a tax amendment online Are distributions tax free? Yes, if the distributions are not more than the beneficiary's adjusted qualified education expenses for the year. Filing a tax amendment online What Is a Coverdell ESA A Coverdell ESA is a trust or custodial account created or organized in the United States only for the purpose of paying the qualified education expenses of the Designated beneficiary (defined later) of the account. Filing a tax amendment online When the account is established, the designated beneficiary must be under age 18 or a special needs beneficiary. Filing a tax amendment online To be treated as a Coverdell ESA, the account must be designated as a Coverdell ESA when it is created. Filing a tax amendment online The document creating and governing the account must be in writing and must satisfy the following requirements. Filing a tax amendment online The trustee or custodian must be a bank or an entity approved by the IRS. Filing a tax amendment online The document must provide that the trustee or custodian can only accept a contribution that meets all of the following conditions. Filing a tax amendment online The contribution is in cash. Filing a tax amendment online The contribution is made before the beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary. Filing a tax amendment online The contribution would not result in total contributions for the year (not including rollover contributions) being more than $2,000. Filing a tax amendment online Money in the account cannot be invested in life insurance contracts. Filing a tax amendment online Money in the account cannot be combined with other property except in a common trust fund or common investment fund. Filing a tax amendment online The balance in the account generally must be distributed within 30 days after the earlier of the following events. Filing a tax amendment online The beneficiary reaches age 30, unless the beneficiary is a special needs beneficiary. Filing a tax amendment online The beneficiary's death. Filing a tax amendment online Qualified Education Expenses Generally, these are expenses required for the enrollment or attendance of the designated beneficiary at an eligible educational institution. Filing a tax amendment online For purposes of Coverdell ESAs, the expenses can be either qualified higher education expenses or qualified elementary and secondary education expenses. Filing a tax amendment online Designated beneficiary. Filing a tax amendment online   This is the individual named in the document creating the trust or custodial account to receive the benefit of the funds in the account. Filing a tax amendment online Contributions to a qualified tuition program (QTP). Filing a tax amendment online   A contribution to a QTP is a qualified education expense if the contribution is on behalf of the designated beneficiary of the Coverdell ESA. Filing a tax amendment online In the case of a change in beneficiary, this is a qualified expense only if the new beneficiary is a family member of that designated beneficiary. Filing a tax amendment online See chapter 8, Qualified Tuition Program . Filing a tax amendment online Eligible Educational Institution For purposes of Coverdell ESAs, an eligible educational institution can be either an eligible postsecondary school or an eligible elementary or secondary school. Filing a tax amendment online Eligible postsecondary school. Filing a tax amendment online   This is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Filing a tax amendment online S. Filing a tax amendment online Department of Education. Filing a tax amendment online It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Filing a tax amendment online The educational institution should be able to tell you if it is an eligible educational institution. Filing a tax amendment online   Certain educational institutions located outside the United States also participate in the U. Filing a tax amendment online S. Filing a tax amendment online Department of Education's Federal Student Aid (FSA) programs. Filing a tax amendment online Eligible elementary or secondary school. Filing a tax amendment online   This is any public, private, or religious school that provides elementary or secondary education (kindergarten through grade 12), as determined under state law. Filing a tax amendment online Qualified Higher Education Expenses These are expenses related to enrollment or attendance at an eligible postsecondary school. Filing a tax amendment online As shown in the following list, to be qualified, some of the expenses must be required by the school and some must be incurred by students who are enrolled at least half-time. Filing a tax amendment online The following expenses must be required for enrollment or attendance of a designated beneficiary at an eligible postsecondary school. Filing a tax amendment online Tuition and fees. Filing a tax amendment online Books, supplies, and equipment. Filing a tax amendment online Expenses for special needs services needed by a special needs beneficiary must be incurred in connection with enrollment or attendance at an eligible postsecondary school. Filing a tax amendment online Expenses for room and board must be incurred by students who are enrolled at least half-time (defined below). Filing a tax amendment online 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 a tax amendment online The allowance for room and board, as determined by the school, 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 a tax amendment online The actual amount charged if the student is residing in housing owned or operated by the school. Filing a tax amendment online Half-time student. Filing a tax amendment online   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 a tax amendment online Qualified Elementary and Secondary Education Expenses These are expenses related to enrollment or attendance at an eligible elementary or secondary school. Filing a tax amendment online As shown in the following list, to be qualified, some of the expenses must be required or provided by the school. Filing a tax amendment online There are special rules for computer-related expenses. Filing a tax amendment online The following expenses must be incurred by a designated beneficiary in connection with enrollment or attendance at an eligible elementary or secondary school. Filing a tax amendment online Tuition and fees. Filing a tax amendment online Books, supplies, and equipment. Filing a tax amendment online Academic tutoring. Filing a tax amendment online Special needs services for a special needs beneficiary. Filing a tax amendment online The following expenses must be required or provided by an eligible elementary or secondary school in connection with attendance or enrollment at the school. Filing a tax amendment online Room and board. Filing a tax amendment online Uniforms. Filing a tax amendment online Transportation. Filing a tax amendment online Supplementary items and services (including extended day programs). Filing a tax amendment online The purchase of computer technology, equipment, or Internet access and related services is a qualified elementary and secondary education expense if it is to be used by the beneficiary and the beneficiary's family during any of the years the beneficiary is in elementary or secondary school. Filing a tax amendment online (This does not include expenses for computer software designed for sports, games, or hobbies unless the software is predominantly educational in nature. Filing a tax amendment online ) Contributions Any individual (including the designated beneficiary) can contribute to a Coverdell ESA if the individual's MAGI (defined later under Contribution Limits ) for the year is less than $110,000. Filing a tax amendment online For individuals filing joint returns, that amount is $220,000. Filing a tax amendment online Organizations, such as corporations and trusts, can also contribute to Coverdell ESAs. Filing a tax amendment online There is no requirement that an organization's income be below a certain level. Filing a tax amendment online Contributions must meet all of the following requirements. Filing a tax amendment online They must be in cash. Filing a tax amendment online They cannot be made after the beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary. Filing a tax amendment online They must be made by the due date of the contributor's tax return (not including extensions). Filing a tax amendment online Contributions can be made to one or several Coverdell ESAs for the same designated beneficiary provided that the total contributions are not more than the contribution limits (defined later) for a year. Filing a tax amendment online Contributions can be made, without penalty, to both a Coverdell ESA and a QTP in the same year for the same beneficiary. Filing a tax amendment online Table 7-2 summarizes many of the features of contributing to a Coverdell ESA. Filing a tax amendment online When contributions considered made. Filing a tax amendment online   Contributions made to a Coverdell ESA for the preceding tax year are considered to have been made on the last day of the preceding year. Filing a tax amendment online They must be made by the due date (not including extensions) for filing your return for the preceding year. Filing a tax amendment online   For example, if you make a contribution to a Coverdell ESA in February 2014, and you designate it as a contribution for 2013, you are considered to have made that contribution on December 31, 2013. Filing a tax amendment online Contribution Limits There are two yearly limits: One on the total amount that can be contributed for each designated beneficiary in any year, and One on the amount that any individual can contribute for any one designated beneficiary for a year. Filing a tax amendment online Limit for each designated beneficiary. Filing a tax amendment online   For 2013, the total of all contributions to all Coverdell ESAs set up for the benefit of any one designated beneficiary cannot be more than $2,000. Filing a tax amendment online This includes contributions (other than rollovers) to all the beneficiary's Coverdell ESAs from all sources. Filing a tax amendment online Rollovers are discussed under Rollovers and Other Transfers , later. Filing a tax amendment online Example. Filing a tax amendment online When Maria Luna was born in 2012, three separate Coverdell ESAs were set up for her, one by her parents, one by her grandfather, and one by her aunt. Filing a tax amendment online In 2013, the total of all contributions to Maria's three Coverdell ESAs cannot be more than $2,000. Filing a tax amendment online For example, if her grandfather contributed $2,000 to one of her Coverdell ESAs, no one else could contribute to any of her three accounts. Filing a tax amendment online Or, if her parents contributed $1,000 and her aunt $600, her grandfather or someone else could contribute no more than $400. Filing a tax amendment online These contributions could be put into any of Maria's Coverdell ESA accounts. Filing a tax amendment online Limit for each contributor. Filing a tax amendment online   Generally, you can contribute up to $2,000 for each designated beneficiary for 2013. Filing a tax amendment online This is the most you can contribute for the benefit of any one beneficiary for the year, regardless of the number of Coverdell ESAs set up for the beneficiary. Filing a tax amendment online Example. Filing a tax amendment online The facts are the same as in the previous example except that Maria Luna's older brother, Edgar, also has a Coverdell ESA. Filing a tax amendment online If their grandfather contributed $2,000 to Maria's Coverdell ESA in 2013, he could also contribute $2,000 to Edgar's Coverdell ESA. Filing a tax amendment online Reduced limit. Filing a tax amendment online   Your contribution limit may be reduced. Filing a tax amendment online If your MAGI (defined on this page) is between $95,000 and $110,000 (between $190,000 and $220,000 if filing a joint return), the $2,000 limit for each designated beneficiary is gradually reduced (see Figuring the limit , later). Filing a tax amendment online If your MAGI is $110,000 or more ($220,000 or more if filing a joint return), you cannot contribute to anyone's Coverdell ESA. Filing a tax amendment online Table 7-2. Filing a tax amendment online Coverdell ESA Contributions at a Glance Do not rely on this table alone. Filing a tax amendment online It provides only general highlights. Filing a tax amendment online See the text for more complete explanations. Filing a tax amendment online Question Answer Are contributions deductible? No. Filing a tax amendment online What is the annual contribution limit per designated beneficiary? $2,000 for each designated beneficiary. Filing a tax amendment online What if more than one Coverdell ESA has been opened for the same designated beneficiary? The annual contribution limit is $2,000 for each beneficiary, no matter how many Coverdell ESAs are set up for that beneficiary. Filing a tax amendment online What if more than one individual makes contributions for the same designated beneficiary? The annual contribution limit is $2,000 per beneficiary, no matter how many individuals contribute. Filing a tax amendment online Can contributions other than cash be made to a Coverdell ESA? No. Filing a tax amendment online When must contributions stop? No contributions can be made to a beneficiary's Coverdell ESA after he or she reaches age 18, unless the beneficiary is a special needs beneficiary. Filing a tax amendment online Modified adjusted gross income (MAGI). Filing a tax amendment online   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. Filing a tax amendment online MAGI when using Form 1040A. Filing a tax amendment online   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. Filing a tax amendment online MAGI when using Form 1040. Filing a tax amendment online   If you file Form 1040, your MAGI is the AGI on line 38 of that form, modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. Filing a tax amendment online MAGI when using Form 1040NR. Filing a tax amendment online   If you file Form 1040NR, your MAGI is the AGI on line 36 of that form. Filing a tax amendment online MAGI when using Form 1040NR-EZ. Filing a tax amendment online   If you file Form 1040NR-EZ, your MAGI is the AGI on line 10 of that form. Filing a tax amendment online   If you have any of these adjustments, you can use Worksheet 7-1. Filing a tax amendment online MAGI for a Coverdell ESA , later, to figure your MAGI for Form 1040. Filing a tax amendment online Worksheet 7-1. Filing a tax amendment online MAGI for a Coverdell ESA 1. Filing a tax amendment online Enter your adjusted gross income  (Form 1040, line 38)   1. Filing a tax amendment online   2. Filing a tax amendment online Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. Filing a tax amendment online       3. Filing a tax amendment online Enter your foreign housing deduction (Form 2555, line 50)   3. Filing a tax amendment online         4. Filing a tax amendment online Enter the amount of income from Puerto Rico you are excluding   4. Filing a tax amendment online       5. Filing a tax amendment online Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. Filing a tax amendment online       6. Filing a tax amendment online Add lines 2, 3, 4, and 5   6. Filing a tax amendment online   7. Filing a tax amendment online Add lines 1 and 6. Filing a tax amendment online This is your  modified adjusted gross income   7. Filing a tax amendment online   Figuring the limit. Filing a tax amendment online    To figure the limit on the amount you can contribute for each designated beneficiary, multiply $2,000 by a fraction. Filing a tax amendment online The numerator (top number) is your MAGI minus $95,000 ($190,000 if filing a joint return). Filing a tax amendment online The denominator (bottom number) is $15,000 ($30,000 if filing a joint return). Filing a tax amendment online Subtract the result from $2,000. Filing a tax amendment online This is the amount you can contribute for each beneficiary. Filing a tax amendment online You can use Worksheet 7-2. Filing a tax amendment online Coverdell ESA Contribution Limit to figure the limit on contributions. Filing a tax amendment online    Worksheet 7-2. Filing a tax amendment online Coverdell ESA Contribution Limit 1. Filing a tax amendment online Maximum contribution   1. Filing a tax amendment online $2,000 2. Filing a tax amendment online Enter your modified adjusted gross income (MAGI) for purposes of figuring the contribution limit to a Coverdell ESA (see definition or Worksheet 7-1, earlier)   2. Filing a tax amendment online   3. Filing a tax amendment online Enter $190,000 if married filing jointly; $95,000 for all other filers   3. Filing a tax amendment online   4. Filing a tax amendment online Subtract line 3 from line 2. Filing a tax amendment online If zero or less, enter -0- on line 4, skip lines 5 through 7, and enter $2,000 on line 8   4. Filing a tax amendment online   5. Filing a tax amendment online Enter $30,000 if married filing jointly; $15,000 for all other filers   5. Filing a tax amendment online     Note. Filing a tax amendment online If the amount on line 4 is greater than or equal to the amount on line 5, stop here. Filing a tax amendment online You are not allowed to contribute to a Coverdell ESA for 2013. Filing a tax amendment online       6. Filing a tax amendment online Divide line 4 by line 5 and enter the result as a decimal (rounded to at least 3 places)   6. Filing a tax amendment online . Filing a tax amendment online 7. Filing a tax amendment online Multiply line 1 by line 6   7. Filing a tax amendment online   8. Filing a tax amendment online Subtract line 7 from line 1   8. Filing a tax amendment online   Note: The total Coverdell ESA contributions from all sources for the designated beneficiary during the tax year may not exceed $2,000. Filing a tax amendment online Example. Filing a tax amendment online Paul, who is single, had a MAGI of $96,500 for 2013. Filing a tax amendment online Paul can contribute up to $1,800 in 2013 for each beneficiary, as shown in the illustrated Worksheet 7-2, Coverdell ESA Contribution Limit–Illustrated. Filing a tax amendment online Worksheet 7-2. Filing a tax amendment online Coverdell ESA Contribution Limit—Illustrated 1. Filing a tax amendment online Maximum contribution   1. Filing a tax amendment online $2,000 2. Filing a tax amendment online Enter your modified adjusted gross  income (MAGI) for purposes of figuring the contribution limit to a Coverdell ESA (see definition or Worksheet 7-1, earlier)   2. Filing a tax amendment online 96,500 3. Filing a tax amendment online Enter $190,000 if married filing jointly; $95,000 for all other filers   3. Filing a tax amendment online 95,000 4. Filing a tax amendment online Subtract line 3 from line 2. Filing a tax amendment online If zero or less, enter -0- on line 4, skip lines 5 through 7, and enter $2,000 on line 8   4. Filing a tax amendment online 1,500 5. Filing a tax amendment online Enter $30,000 if married filing jointly; $15,000 for all other filers   5. Filing a tax amendment online 15,000   Note. Filing a tax amendment online If the amount on line 4 is greater than or equal to the amount on line 5,  stop here. Filing a tax amendment online You are not allowed to  contribute to a Coverdell ESA for 2013. Filing a tax amendment online       6. Filing a tax amendment online Divide line 4 by line 5 and enter the result as a decimal (rounded to at least 3 places)   6. Filing a tax amendment online . Filing a tax amendment online 100 7. Filing a tax amendment online Multiply line 1 by line 6   7. Filing a tax amendment online 200 8. Filing a tax amendment online Subtract line 7 from line 1   8. Filing a tax amendment online 1,800 Note: The total Coverdell ESA contributions from all sources for the designated beneficiary during the tax year may not exceed $2,000. Filing a tax amendment online Additional Tax on Excess Contributions The beneficiary must pay a 6% excise tax each year on excess contributions that are in a Coverdell ESA at the end of the year. Filing a tax amendment online Excess contributions are the total of the following two amounts. Filing a tax amendment online Contributions to any designated beneficiary's Coverdell ESA for the year that are more than $2,000 (or, if less, the total of each contributor's limit for the year, as discussed earlier). Filing a tax amendment online Excess contributions for the preceding year, reduced by the total of the following two amounts: Distributions (other than those rolled over as discussed later) during the year, and The contribution limit for the current year minus the amount contributed for the current year. Filing a tax amendment online Exceptions. Filing a tax amendment online   The excise tax does not apply if excess contributions made during 2013 (and any earnings on them) are distributed before the first day of the sixth month of the following tax year (June 1, 2014, for a calendar year taxpayer). Filing a tax amendment online   However, you must include the distributed earnings in gross income for the year in which the excess contribution was made. Filing a tax amendment online You should receive Form 1099-Q, Payments From Qualified Education Programs, from each institution from which excess contributions were distributed. Filing a tax amendment online Box 2 of that form will show the amount of earnings on your excess contributions. Filing a tax amendment online Code “2” or “3” entered in the blank box below boxes 5 and 6 indicate the year in which the earnings are taxable. Filing a tax amendment online See Instructions for Recipient on the back of copy B of your Form 1099-Q. Filing a tax amendment online Enter the amount of earnings on line 21 of Form 1040 (or Form 1040NR) for the applicable tax year. Filing a tax amendment online For more information, see Taxable Distributions , later. Filing a tax amendment online   The excise tax does not apply to any rollover contribution. Filing a tax amendment online Note. Filing a tax amendment online Contributions made in one year for the preceding tax year are considered to have been made on the last day of the preceding year. Filing a tax amendment online Example. Filing a tax amendment online In 2012, Greta's parents and grandparents contributed a total of $2,300 to Greta's Coverdell ESA— an excess contribution of $300. Filing a tax amendment online Because Greta did not withdraw the excess before June 1, 2013, she had to pay an additional tax of $18 (6% × $300) when she filed her 2012 tax return. Filing a tax amendment online In 2013, excess contributions of $500 were made to Greta's account, however, she withdrew $250 from that account to use for qualified education expenses. Filing a tax amendment online Using the steps shown earlier under Additional Tax on Excess Contributions , Greta figures the excess contribution in her account at the end of 2013 as follows. Filing a tax amendment online (1)   $500 excess contributions made in 2013     + (2)   $300 excess contributions in ESA at end of 2012     − (2a)   $250 distribution during 2013         $550 excess at end of 2013   × 6%=$33           If Greta limits 2014 contributions to $1,450 ($2,000 maximum allowed − $550 excess contributions from 2013), she will not owe any additional tax in 2014 for excess contributions. Filing a tax amendment online Figuring and reporting the additional tax. Filing a tax amendment online   You figure this excise tax in Part V of Form 5329. Filing a tax amendment online Report the additional tax on Form 1040, line 58 (or Form 1040NR, line 56). Filing a tax amendment online Rollovers and Other Transfers Assets can be rolled over from one Coverdell ESA to another or the designated beneficiary can be changed. Filing a tax amendment online The beneficiary's interest can be transferred to a spouse or former spouse because of divorce. Filing a tax amendment online Rollovers Any amount distributed from a Coverdell ESA is not taxable if it is rolled over to another Coverdell ESA for the benefit of the same beneficiary or a member of the beneficiary's family (including the beneficiary's spouse) who is under age 30. Filing a tax amendment online This age limitation does not apply if the new beneficiary is a special needs beneficiary. Filing a tax amendment online An amount is rolled over if it is paid to another Coverdell ESA within 60 days after the date of the distribution. Filing a tax amendment online Do not report qualifying rollovers (those that meet the above criteria) anywhere on Form 1040 or 1040NR. Filing a tax amendment online These are not taxable distributions. Filing a tax amendment online Members of the beneficiary's family. Filing a tax amendment online   For these purposes, the beneficiary's family includes the beneficiary's spouse and the following other relatives of the beneficiary. Filing a tax amendment online Son, daughter, stepchild, foster child, adopted child, or a descendant of any of them. Filing a tax amendment online Brother, sister, stepbrother, or stepsister. Filing a tax amendment online Father or mother or ancestor of either. Filing a tax amendment online Stepfather or stepmother. Filing a tax amendment online Son or daughter of a brother or sister. Filing a tax amendment online Brother or sister of father or mother. Filing a tax amendment online Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. Filing a tax amendment online The spouse of any individual listed above. Filing a tax amendment online First cousin. Filing a tax amendment online Example. Filing a tax amendment online When Aaron graduated from college last year he had $5,000 left in his Coverdell ESA. Filing a tax amendment online He wanted to give this money to his younger sister, who was still in high school. Filing a tax amendment online In order to avoid paying tax on the distribution of the amount remaining in his account, Aaron contributed the same amount to his sister's Coverdell ESA within 60 days of the distribution. Filing a tax amendment online Only one rollover per Coverdell ESA is allowed during the 12-month period ending on the date of the payment or distribution. Filing a tax amendment online This rule does not apply to the rollover of a military death gratuity or payment from Servicemembers' Group Life Insurance (SGLI). Filing a tax amendment online Military death gratuity. Filing a tax amendment online   If you received a military death gratuity or a payment from Servicemembers' Group Life Insurance (SGLI), you may roll over all or part of the amount received to one or more Coverdell ESAs for the benefit of members of the beneficiary's family (see Members of the beneficiary's family , earlier). Filing a tax amendment online Such payments are made to an eligible survivor upon the death of a member of the armed forces. Filing a tax amendment online The contribution to a Coverdell ESA from survivor benefits received cannot be made later than 1 year after the date on which you receive the gratuity or SGLI payment. Filing a tax amendment online   This rollover contribution is not subject to (but is in addition to) the contribution limits discussed earlier under Contribution Limits . Filing a tax amendment online The amount you roll over cannot exceed the total survivor benefits you received, reduced by contributions from these benefits to a Roth IRA or other Coverdell ESAs. Filing a tax amendment online   The amount contributed from the survivor benefits is treated as part of your basis (cost) in the Coverdell ESA, and will not be taxed when distributed. Filing a tax amendment online See Distributions , later. Filing a tax amendment online The limit of one rollover per Coverdell ESA during a 12-month period does not apply to a military death gratuity or SGLI payment. Filing a tax amendment online Changing the Designated Beneficiary The designated beneficiary can be changed. Filing a tax amendment online See Members of the beneficiary's family , earlier. Filing a tax amendment online There are no tax consequences if, at the time of the change, the new beneficiary is under age 30 or is a special needs beneficiary. Filing a tax amendment online Example. Filing a tax amendment online Assume the same situation for Aaron as in the last example (see Rollovers , earlier). Filing a tax amendment online Instead of closing his Coverdell ESA and paying the distribution into his sister's Coverdell ESA, Aaron could have instructed the trustee of his account to simply change the name of the beneficiary on his account to that of his sister. Filing a tax amendment online Transfer Because of Divorce If a spouse or former spouse receives a Coverdell ESA under a divorce or separation instrument, it is not a taxable transfer. Filing a tax amendment online After the transfer, the spouse or former spouse treats the Coverdell ESA as his or her own. Filing a tax amendment online Example. Filing a tax amendment online In their divorce settlement, Peg received her ex-husband's Coverdell ESA. Filing a tax amendment online In this process, the account was transferred into her name. Filing a tax amendment online Peg now treats the funds in this Coverdell ESA as if she were the original owner. Filing a tax amendment online Distributions The designated beneficiary of a Coverdell ESA can take a distribution at any time. Filing a tax amendment online Whether the distributions are tax free depends, in part, on whether the distributions are equal to or less than the amount of Adjusted qualified education expenses (defined later) that the beneficiary has in the same tax year. Filing a tax amendment online See Table 7-3, Coverdell ESA Distributions at a Glance, for highlights. Filing a tax amendment online Table 7-3. Filing a tax amendment online Coverdell ESA Distributions at a Glance Do not rely on this table alone. Filing a tax amendment online It provides only general highlights. Filing a tax amendment online See the text for definitions of terms in bold type and for more complete explanations. Filing a tax amendment online Question Answer Is a distribution from a Coverdell ESA to pay for a designated beneficiary's qualified education expenses tax free? Generally, yes, to the extent the amount of the distribution is not more than the designated beneficiary's adjusted qualified education expenses. Filing a tax amendment online After the designated beneficiary completes his or her education at an eligible educational institution, can amounts remaining in the Coverdell ESA be distributed? Yes. Filing a tax amendment online Amounts must be distributed when the designated beneficiary reaches age 30, unless he or she is a special needs beneficiary. Filing a tax amendment online Also, certain transfers to members of the beneficiary's family are permitted. Filing a tax amendment online Does the designated beneficiary need to be enrolled for a minimum number of courses to take a tax-free distribution? No. Filing a tax amendment online Adjusted qualified education expenses. Filing a tax amendment online   To determine if total distributions for the year are more than the amount of qualified education expenses, reduce total qualified education expenses by any tax-free educational assistance. Filing a tax amendment online Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits 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), 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 a tax amendment online The amount you get by subtracting tax-free educational assistance from your total qualified education expenses is your adjusted qualified education expenses. Filing a tax amendment online Tax-Free Distributions Generally, distributions are tax free if they are not more than the beneficiary's adjusted qualified education expenses for the year. Filing a tax amendment online Do not report tax-free distributions (including qualifying rollovers) on your tax return. Filing a tax amendment online Taxable Distributions A portion of the distributions is generally taxable to the beneficiary if the total distributions are more than the beneficiary's adjusted qualified education expenses for the year. Filing a tax amendment online Excess distribution. Filing a tax amendment online   This is the part of the total distribution that is more than the beneficiary's adjusted qualified education expenses for the year. Filing a tax amendment online Earnings and basis. Filing a tax amendment online   You will receive a Form 1099-Q for each of the Coverdell ESAs from which money was distributed in 2013. Filing a tax amendment online The amount of your gross distribution will be shown in box 1. Filing a tax amendment online For 2013, instead of dividing the gross distribution between your earnings (box 2) and your basis (already-taxed amount) (box 3), the payer or trustee may report the fair market value (account balance) of the Coverdell ESA as of December 31, 2013. Filing a tax amendment online This will be shown in the blank box below boxes 5 and 6. Filing a tax amendment online   The amount contributed from survivor benefits (see Military death gratuity , earlier) is treated as part of your basis and will not be taxed when distributed. Filing a tax amendment online Figuring the Taxable Portion of a Distribution The taxable portion is the amount of the excess distribution that represents earnings that have accumulated tax free in the account. Filing a tax amendment online Figure the taxable portion for 2013 as shown in the following steps. Filing a tax amendment online Multiply the total amount distributed by a fraction. Filing a tax amendment online The numerator is the basis (contributions not previously distributed) at the end of 2012 plus total contributions for 2013 and the denominator is the value (balance) of the account at the end of 2013 plus the amount distributed during 2013. Filing a tax amendment online Subtract the amount figured in (1) from the total amount distributed during 2013. Filing a tax amendment online The result is the amount of earnings included in the distribution(s). Filing a tax amendment online Multiply the amount of earnings figured in (2) by a fraction. Filing a tax amendment online The numerator is the adjusted qualified education expenses paid during 2013 and the denominator is the total amount distributed during 2013. Filing a tax amendment online Subtract the amount figured in (3) from the amount figured in (2). Filing a tax amendment online The result is the amount the beneficiary must include in income. Filing a tax amendment online The taxable amount must be reported on Form 1040 or Form 1040NR, line 21. Filing a tax amendment online Example. Filing a tax amendment online You received an $850 distribution from your Coverdell ESA, to which $1,500 had been contributed before 2013. Filing a tax amendment online There were no contributions in 2013. Filing a tax amendment online This is your first distribution from the account, so your basis in the account on December 31, 2012, was $1,500. Filing a tax amendment online The value (balance) of your account on December 31, 2013, was $950. Filing a tax amendment online You had $700 of adjusted qualified education expenses (AQEE) for the year. Filing a tax amendment online Using the steps in Figuring the Taxable Portion of a Distribution , earlier, figure the taxable portion of your distribution as follows. Filing a tax amendment online   1. Filing a tax amendment online $850 (distribution) × $1,500 basis + $0 contributions  $950 value + $850 distribution       =$708 (basis portion of distribution)     2. Filing a tax amendment online $850 (distribution)−$708 (basis portion of distribution)     =$142 (earnings included in distribution)   3. Filing a tax amendment online $142 (earnings) × $700 AQEE  $850 distribution           =$117 (tax-free earnings)     4. Filing a tax amendment online $142 (earnings)−$117 (tax-free earnings)=$25 (taxable earnings)                 You must include $25 in income as distributed earnings not used for qualified education expenses. Filing a tax amendment online Report this amount on Form 1040, line 21, listing the type and amount of income on the dotted line. Filing a tax amendment online Worksheet 7-3, Coverdell ESA–Taxable Distributions and Basis , at the end of this chapter, can help you figure your adjusted qualified education expenses, how much of your distribution must be included in income, and the remaining basis in your Coverdell ESA(s). Filing a tax amendment online Coordination With American Opportunity and Lifetime Learning Credits The American opportunity or lifetime learning credit can be claimed in the same year the beneficiary takes a tax-free distribution from a Coverdell ESA, as long as the same expenses are not used for both benefits. Filing a tax amendment online This means the beneficiary must reduce qualified higher education expenses by tax-free educational assistance, and then further reduce them by any expenses taken into account in determining an American opportunity or lifetime learning credit. Filing a tax amendment online Example. Filing a tax amendment online Derek Green had $5,800 of qualified higher education expenses for 2013, his first year in college. Filing a tax amendment online He paid his college expenses from the following sources. Filing a tax amendment online     Partial tuition scholarship (tax free) $1,500     Coverdell ESA distribution 1,000     Gift from parents 2,100     Earnings from part-time job 1,200           Of his $5,800 of qualified higher education expenses, $4,000 was tuition and related expenses that also qualified for an American opportunity credit. Filing a tax amendment online Derek's parents claimed a $2,500 American opportunity credit (based on $4,000 expenses) on their tax return. Filing a tax amendment online Before Derek can determine the taxable portion of his Coverdell ESA distribution, he must reduce his total qualified higher education expenses. Filing a tax amendment online     Total qualified higher education expenses $5,800     Minus: Tax-free educational assistance −1,500     Minus: Expenses taken into account in  figuring American opportunity credit − 4,000     Equals: Adjusted qualified higher education  expenses (AQHEE) $ 300           Since the adjusted qualified higher education expenses ($300) are less than the Coverdell ESA distribution ($1,000), part of the distribution will be taxable. Filing a tax amendment online The balance in Derek's account was $1,800 on December 31, 2013. Filing a tax amendment online Prior to 2013, $2,100 had been contributed to this account. Filing a tax amendment online Contributions for 2013 totaled $400. Filing a tax amendment online Using the four steps outlined earlier, Derek figures the taxable portion of his distribution as shown below. Filing a tax amendment online   1. Filing a tax amendment online $1,000 (distribution) × $2,100 basis + $400 contributions  $1,800 value + $1,000 distribution           =$893 (basis portion of distribution)     2. Filing a tax amendment online $1,000 (distribution)−$893 (basis portion of distribution)     = $107 (earnings included in distribution)   3. Filing a tax amendment online $107 (earnings) × $300 AQHEE  $1,000 distribution       =$32 (tax-free earnings)     4. Filing a tax amendment online $107 (earnings)−$32 (tax-free earnings)=$75 (taxable earnings)                 Derek must include $75 in income (Form 1040, line 21). Filing a tax amendment online This is the amount of distributed earnings not used for adjusted qualified higher education expenses. Filing a tax amendment online Coordination With Qualified Tuition Program (QTP) Distributions If a designated beneficiary receives distributions from both a Coverdell ESA and a QTP in the same year, and the total distribution is more than the beneficiary's adjusted qualified higher education expenses, those expenses must be allocated between the distribution from the Coverdell ESA and the distribution from the QTP before figuring how much of each distribution is taxable. Filing a tax amendment online The following two examples illustrate possible allocations. Filing a tax amendment online Example 1. Filing a tax amendment online In 2013, Beatrice graduated from high school and began her first semester of college. Filing a tax amendment online That year, she had $1,000 of qualified elementary and secondary education expenses (QESEE) for high school and $3,000 of qualified higher education expenses (QHEE) for college. Filing a tax amendment online To pay these expenses, Beatrice withdrew $800 from her Coverdell ESA and $4,200 from her QTP. Filing a tax amendment online No one claimed Beatrice as a dependent, nor was she eligible for an education credit. Filing a tax amendment online She did not receive any tax-free educational assistance in 2013. Filing a tax amendment online Beatrice must allocate her total qualified education expenses between the two distributions. Filing a tax amendment online Beatrice knows that tax-free treatment will be available if she applies her $800 Coverdell ESA distribution toward her $1,000 of qualified education expenses for high school. Filing a tax amendment online The qualified expenses are greater than the distribution, making the $800 Coverdell ESA distribution tax free. Filing a tax amendment online Next, Beatrice matches her $4,200 QTP distribution to her $3,000 of QHEE, and finds she has an excess QTP distribution of $1,200 ($4,200 QTP − $3,000 QHEE). Filing a tax amendment online She cannot use the extra $200 of high school expenses (from (1) above) against the QTP distribution because those expenses do not qualify a QTP for tax-free treatment. Filing a tax amendment online Finally, Beatrice figures the taxable and tax-free portions of her QTP distribution based on her $3,000 of QHEE. Filing a tax amendment online (See Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program for more information. Filing a tax amendment online ) Example 2. Filing a tax amendment online Assume the same facts as in Example 1 , except that Beatrice withdrew $1,800 from her Coverdell ESA and $3,200 from her QTP. Filing a tax amendment online In this case, she allocates her qualified education expenses as follows. Filing a tax amendment online Using the same reasoning as in Example 1, Beatrice matches $1,000 of her Coverdell ESA distribution to her $1,000 of QESEE—she has $800 of her distribution remaining. Filing a tax amendment online Because higher education expenses can also qualify a Coverdell ESA distribution for tax-free treatment, Beatrice allocates her $3,000 of QHEE between the remaining $800 Coverdell ESA and the $3,200 QTP distributions ($4,000 total). Filing a tax amendment online   $3,000 QHEE × $800 ESA distribution  $4,000 total distribution = $600 QHEE (ESA)     $3,000 QHEE × $3,200 QTP distribution  $4,000 total distribution = $2,400 QHEE (QTP)   Beatrice then figures the taxable part of her: Coverdell ESA distribution based on qualified education expenses of $1,600 ($1,000 QESEE + $600 QHEE). Filing a tax amendment online See Figuring the Taxable Portion of a Distribution , earlier, in this chapter. Filing a tax amendment online   QTP distribution based on her $2,400 of QHEE (see Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program). Filing a tax amendment online The above examples show two types of allocation between distributions from a Coverdell ESA and a QTP. Filing a tax amendment online However, you do not have to allocate your expenses in the same way. Filing a tax amendment online You can use any reasonable method. Filing a tax amendment online Losses on Coverdell ESA Investments If you have a loss on your investment in a Coverdell ESA, you may be able to deduct the loss on your income tax return. Filing a tax amendment online You can deduct the loss only when all amounts from that account have been distributed and the total distributions are less than your unrecovered basis. Filing a tax amendment online Your basis is the total amount of contributions to that Coverdell ESA. Filing a tax amendment online You claim the loss as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23 (Schedule A (Form 1040NR), line 9), subject to the 2%-of-adjusted-gross-income limit. Filing a tax amendment online If you have distributions from more than one Coverdell ESA account during a year, you must combine the information (amount of distribution, basis, etc. Filing a tax amendment online ) from all such accounts in order to determine your taxable earnings for the year. Filing a tax amendment online By doing this, the loss from one ESA account reduces the distributed earnings (if any) from any other ESA account. Filing a tax amendment online For examples of the calculation, see Losses on QTP Investments in chapter 8, Qualified Tuition Program. Filing a tax amendment online Additional Tax on Taxable Distributions Generally, if you receive a taxable distribution, you also must pay a 10% additional tax on the amount included in income. Filing a tax amendment online Exceptions. Filing a tax amendment online   The 10% additional tax does not apply to distributions: Paid to a beneficiary (or to the estate of the designated beneficiary) on or after the death of the designated beneficiary. Filing a tax amendment online Made because the designated beneficiary is disabled. Filing a tax amendment online A person is considered to be disabled if he or she shows proof that he or she cannot do any substantial gainful activity because of his or her physical or mental condition. Filing a tax amendment online A physician must determine that his or her condition can be expected to result in death or to be of long-continued and indefinite duration. Filing a tax amendment online Included in income because the designated beneficiary received: A tax-free scholarship or fellowship (see Tax-Free Scholarships and Fellowships 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 ), or Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Filing a tax amendment online Made on account of the attendance of the designated beneficiary at a U. Filing a tax amendment online S. Filing a tax amendment online military academy (such as the USMA at West Point). Filing a tax amendment online This exception applies only to the extent that the amount of the distribution does not exceed the costs of advanced education (as defined in section 2005(d)(3) of title 10 of the U. Filing a tax amendment online S. Filing a tax amendment online Code) attributable to such attendance. Filing a tax amendment online Included in income only because the qualified education expenses were taken into account in determining the American opportunity or lifetime learning credit (see Coordination With American Opportunity and Lifetime Learning Credits , earlier). Filing a tax amendment online Made before June 1, 2014, of an excess 2013 contribution (and any earnings on it). Filing a tax amendment online The distributed earnings must be included in gross income for the year in which the excess contribution was made. Filing a tax amendment online Exception (3) applies only to the extent the distribution is not more than the scholarship, allowance, or payment. Filing a tax amendment online Figuring the additional tax. Filing a tax amendment online    Use Part II of Form 5329, to figure any additional tax. Filing a tax amendment online Report the amount on Form 1040, line 58, or Form 1040NR, line 56. Filing a tax amendment online When Assets Must Be Distributed Any assets remaining in a Coverdell ESA must be distributed when either one of the following two events occurs. Filing a tax amendment online The designated beneficiary reaches age 30. Filing a tax amendment online In this case, the remaining assets must be distributed within 30 days after the beneficiary reaches age 30. Filing a tax amendment online However, this rule does not apply if the beneficiary is a special needs beneficiary. Filing a tax amendment online The designated beneficiary dies before reaching age 30. Filing a tax amendment online In this case, the remaining assets must generally be distributed within 30 days after the date of death. Filing a tax amendment online Exception for Transfer to Surviving Spouse or Family Member If a Coverdell ESA is transferred to a surviving spouse or other family member as the result of the death of the designated beneficiary, the Coverdell ESA retains its status. Filing a tax amendment online (“Family member” was defined earlier under Rollovers . Filing a tax amendment online ) This means the spouse or other family member can treat the Coverdell ESA as his or her own and does not need to withdraw the assets until he or she reaches age 30. Filing a tax amendment online This age limitation does not apply if the new beneficiary is a special needs beneficiary. Filing a tax amendment online There are no tax consequences as a result of the transfer. Filing a tax amendment online How To Figure the Taxable Earnings When a total distribution is made because the designated beneficiary either reached age 30 or died, the earnings that accumulated tax free in the account must be included in taxable income. Filing a tax amendment online You determine these earnings as shown in the following two steps. Filing a tax amendment online Multiply the amount distributed by a fraction. Filing a tax amendment online The numerator is the basis (contributions not previously distributed) at the end of 2012 plus total contributions for 2013 and the denominator is the balance in the account at the end of 2013 plus the amount distributed during 2013. Filing a tax amendment online Subtract the amount figured in (1) from the total amount distributed during 2013. Filing a tax amendment online The result is the amount of earnings included in the distribution. Filing a tax amendment online For an example, see steps (1) and (2) of the Example under Figuring the Taxable Portion of a Distribution, earlier. Filing a tax amendment online The beneficiary or other person receiving the distribution must report this amount on Form 1040, line 21, or Form 1040NR, line 21, listing the type and amount of income on the dotted line. Filing a tax amendment online Worksheet 7-3 Instructions. Filing a tax amendment online Coverdell ESA—Taxable Distributions and Basis Line G. Filing a tax amendment online Enter the total distributions received from all Coverdell ESAs during 2013. Filing a tax amendment online Do not include amounts rolled over to another ESA within 60 days (only one rollover is allowed during any 12-month period). Filing a tax amendment online Also, do not include excess contributions that were distributed with the related earnings (or less any loss) before the first day of the sixth month of the tax year following the year for which the contributions were made. Filing a tax amendment online Line 2. Filing a tax amendment online Your basis (amount already taxed) in this Coverdell ESA as of December 31, 2012, is the total of:   •All contributions to this Coverdell ESA before 2013 •Minus the tax-free portion of any distributions from this Coverdell ESA before 2013. Filing a tax amendment online   If your last distribution from this Coverdell ESA was before 2013, you must start with the basis in your account as of the end of the last year in which you took a distribution. Filing a tax amendment online For years before 2002, you can find that amount on the last line of the worksheet in the Instructions for Form 8606, Nondeductible IRAs, that you completed for that year. Filing a tax amendment online For years after 2001, you can find that amount by using the ending basis from the worksheet in Publication 970 for that year. Filing a tax amendment online You can determine your basis in this Coverdell ESA as of December 31, 2012, by adding to the basis as of the end of that year any contributions made to that account after the year of the distribution and before 2013. Filing a tax amendment online Line 4. Filing a tax amendment online Enter the total distributions received from this Coverdell ESA in 2013. Filing a tax amendment online Do not include amounts rolled over to another Coverdell ESA within 60 days (only one rollover is allowed during any 12-month period). Filing a tax amendment online   Also, do not include excess contributions that were distributed with the related earnings (or less any loss) before the first day of the sixth month of the tax year following the year of the contributions. Filing a tax amendment online Line 7. Filing a tax amendment online Enter the total value of this Coverdell ESA as of December 31, 2013, plus any outstanding rollovers contributed to the account after 2012, but before the end of the 60-day rollover period. Filing a tax amendment online A statement should be sent to you by January 31, 2014, for this Coverdell ESA showing the value on December 31, 2013. Filing a tax amendment online   A rollover is a tax-free withdrawal from one Coverdell ESA that is contributed to another Coverdell ESA. Filing a tax amendment online An outstanding rollover is any amount withdrawn within 60 days before the end of 2013 (November 2 through December 31) that was rolled over after December 31, 2013, but within the 60-day rollover period. Filing a tax amendment online Worksheet 7-3. Filing a tax amendment online Coverdell ESA—Taxable Distributions and Basis How to complete this worksheet. Filing a tax amendment online • • • Complete Part I, lines A through H, on only one worksheet. Filing a tax amendment online  Complete a separate Part II, lines 1 through 15, for each of your Coverdell ESAs. Filing a tax amendment online  Complete Part III, the Summary (line 16), on only one worksheet. Filing a tax amendment online Part I. Filing a tax amendment online Qualified Education Expenses (Complete for total expenses)       A. Filing a tax amendment online Enter your total qualified education expenses for 2013   A. Filing a tax amendment online   B. Filing a tax amendment online Enter those qualified education expenses paid for with tax-free educational assistance (for example, tax-free scholarships, veterans' educational benefits, Pell grants, employer-provided educational assistance)   B. Filing a tax amendment online         C. Filing a tax amendment online Enter those qualified higher education expenses deducted on Schedule C or C-EZ (Form 1040). Filing a tax amendment online Schedule F (Form 1040), or as a miscellaneous itemized deduction on Schedule A (Form 1040 or 1040NR)   C. Filing a tax amendment online         D. Filing a tax amendment online Enter those qualified higher education expenses on which  an American opportunity or lifetime learning credit was based   D. Filing a tax amendment online         E. Filing a tax amendment online Add lines B, C, and D   D. Filing a tax amendment online   F. Filing a tax amendment online Subtract line E from line A. Filing a tax amendment online This is your adjusted qualified education expense for 2013   E. Filing a tax amendment online   G. Filing a tax amendment online Enter your total distributions from all Coverdell ESAs during 2013. Filing a tax amendment online Do not include rollovers  or the return of excess contributions (see instructions)   F. Filing a tax amendment online   H. Filing a tax amendment online Divide line F by line G. Filing a tax amendment online Enter the result as a decimal (rounded to at least 3 places). Filing a tax amendment online If the  result is 1. Filing a tax amendment online 000 or more, enter 1. Filing a tax amendment online 000   G. Filing a tax amendment online . Filing a tax amendment online Part II. Filing a tax amendment online Taxable Distributions and Basis (Complete separately for each account) 1. Filing a tax amendment online Enter the amount contributed to this Coverdell ESA for 2013, including contributions made for 2013 from January 1, 2014, through April 15, 2014. Filing a tax amendment online Do not include rollovers or the return of excess contributions   1. Filing a tax amendment online   2. Filing a tax amendment online Enter your basis in this Coverdell ESA as of December 31, 2012 (see instructions)   2. Filing a tax amendment online   3. Filing a tax amendment online Add lines 1 and 2   3. Filing a tax amendment online   4. Filing a tax amendment online Enter the total distributions from this Coverdell ESA during 2013. Filing a tax amendment online Do not include rollovers  or the return of excess contributions (see instructions)   4. Filing a tax amendment online   5. Filing a tax amendment online Multiply line 4 by line H. Filing a tax amendment online This is the amount of adjusted qualified  education expense attributable to this Coverdell ESA   5. Filing a tax amendment online         6. Filing a tax amendment online Subtract line 5 from line 4   6. Filing a tax amendment online         7. Filing a tax amendment online Enter the total value of this Coverdell ESA as of December 31, 2013,  plus any outstanding rollovers (see instructions)   7. Filing a tax amendment online         8. Filing a tax amendment online Add lines 4 and 7   8. Filing a tax amendment online         9. Filing a tax amendment online Divide line 3 by line 8. Filing a tax amendment online Enter the result as a decimal (rounded to  at least 3 places). Filing a tax amendment online If the result is 1. Filing a tax amendment online 000 or more, enter 1. Filing a tax amendment online 000   9. Filing a tax amendment online . Filing a tax amendment online       10. Filing a tax amendment online Multiply line 4 by line 9. Filing a tax amendment online This is the amount of basis allocated to your  distributions, and is tax free   10. Filing a tax amendment online     Note. Filing a tax amendment online If line 6 is zero, skip lines 11 through 13, enter -0- on line 14, and go to line 15. Filing a tax amendment online       11. Filing a tax amendment online Subtract line 10 from line 4   11. Filing a tax amendment online   12. Filing a tax amendment online Divide line 5 by line 4. Filing a tax amendment online Enter the result as a decimal (rounded to  at least 3 places). Filing a tax amendment online If the result is 1. Filing a tax amendment online 000 or more, enter 1. Filing a tax amendment online 000   12. Filing a tax amendment online . Filing a tax amendment online       13. Filing a tax amendment online Multiply line 11 by line 12. Filing a tax amendment online This is the amount of qualified education  expenses allocated to your distributions, and is tax free   13. Filing a tax amendment online   14. Filing a tax amendment online Subtract line 13 from line 11. Filing a tax amendment online This is the portion of the distributions from this  Coverdell ESA in 2013 that you must include in income   14. Filing a tax amendment online   15. Filing a tax amendment online Subtract line 10 from line 3. Filing a tax amendment online This is your basis in this Coverdell ESA as of December 31, 2013   15. Filing a tax amendment online   Part III. Filing a tax amendment online Summary (Complete only once)       16. Filing a tax amendment online Taxable amount. Filing a tax amendment online Add together all amounts on line 14 for all your Coverdell ESAs. Filing a tax amendment online Enter here  and include on Form 1040, line 21, or Form 1040NR, line 21, listing the type and amount of income on the dotted line   16. Filing a tax amendment online   Prev  Up  Next   Home   More Online Publications