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Form 1040

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Form 1040

Form 1040 Publication 536 - Main Content Table of Contents NOL Steps How To Figure an NOLNonbusiness deductions (line 6). Form 1040 Nonbusiness income (line 7). Form 1040 Nonbusiness capital losses. Form 1040 Business capital losses. Form 1040 Illustrated Form 1045, Schedule A When To Use an NOLExceptions to 2-Year Carryback Rule Waiving the Carryback Period How To Carry an NOL Back or Forward How To Claim an NOL DeductionDeducting a Carryback Deducting a Carryforward Change in Marital Status Change in Filing Status Illustrated Form 1045 How To Figure an NOL CarryoverIllustrated Form 1045, Schedule B NOL Carryover From 2013 to 2014Worksheet Instructions How To Get Tax HelpLow Income Taxpayer Clinics NOL Steps Follow Steps 1 through 5 to figure and use your NOL. Form 1040 Step 1. Form 1040   Complete your tax return for the year. Form 1040 You may have an NOL if a negative figure appears on the line below: Individuals — Form 1040, line 41, or Form 1040NR, line 39. Form 1040 Estates and trusts — Form 1041, line 22. Form 1040   If the amount on that line is not negative, stop here — you do not have an NOL. Form 1040 Step 2. Form 1040   Determine whether you have an NOL and its amount. Form 1040 See How To Figure an NOL , later. Form 1040 If you do not have an NOL, stop here. Form 1040 Step 3. Form 1040   Decide whether to carry the NOL back to a past year or to waive the carryback period and instead carry the NOL forward to a future year. Form 1040 See When To Use an NOL , later. Form 1040 Step 4. Form 1040   Deduct the NOL in the carryback or carryforward year. Form 1040 See How To Claim an NOL Deduction , later. Form 1040 If your NOL deduction is equal to or less than your taxable income without the deduction, stop here — you have used up your NOL. Form 1040 Step 5. Form 1040   Determine the amount of your unused NOL. Form 1040 See How To Figure an NOL Carryover , later. Form 1040 Carry over the unused NOL to the next carryback or carryforward year and begin again at Step 4. Form 1040 Note. Form 1040   If your NOL deduction includes more than one NOL amount, apply Step 5 separately to each NOL amount, starting with the amount from the earliest year. Form 1040 How To Figure an NOL If your deductions for the year are more than your income for the year, you may have an NOL. Form 1040 There are rules that limit what you can deduct when figuring an NOL. Form 1040 In general, the following items are not allowed when figuring an NOL. Form 1040 Any deduction for personal exemptions. Form 1040 Capital losses in excess of capital gains. Form 1040 The section 1202 exclusion of the gain from the sale or exchange of qualified small business stock. Form 1040 Nonbusiness deductions in excess of nonbusiness income. Form 1040 The net operating loss deduction. Form 1040 The domestic production activities deduction. Form 1040 Form 1045, Schedule A. Form 1040   Use Form 1045, Schedule A, to figure an NOL. Form 1040 The following discussion explains Schedule A and includes an illustrated example. Form 1040   First, complete Form 1045, Schedule A, line 1, using amounts from your return. Form 1040 If line 1 is a negative amount, you may have an NOL. Form 1040   Next, complete the rest of Form 1045, Schedule A, to figure your NOL. Form 1040 Nonbusiness deductions (line 6). Form 1040   Enter on line 6 deductions that are not connected to your trade or business or your employment. Form 1040 Examples of deductions not related to your trade or business are: Alimony paid, Deductions for contributions to an IRA or a self-employed retirement plan, Health savings account deduction, Archer medical savings account deduction, Most itemized deductions (except for casualty and theft losses, state income tax on trade and business income, and any employee business expenses), and The standard deduction. Form 1040   Do not include on line 6 the deduction for personal exemptions for you, your spouse, or your dependents. Form 1040   Do not enter business deductions on line 6. Form 1040 These are deductions that are connected to your trade or business. Form 1040 They include the following. Form 1040 State income tax on income attributable to trade or business (including wages, salary, and unemployment compensation). Form 1040 Moving expenses. Form 1040 Educator expenses. Form 1040 The deduction for the deductible part of self-employed health insurance. Form 1040 Domestic production activities deduction. Form 1040 Rental losses. Form 1040 Loss on the sale or exchange of business real estate or depreciable property. Form 1040 Your share of a business loss from a partnership or an S corporation. Form 1040 Ordinary loss on the sale or exchange of stock in a small business corporation or a small business investment company. Form 1040 If you itemize your deductions, casualty and theft losses (even if they involve nonbusiness property) and employee business expenses (such as union dues, uniforms, tools, education expenses, and travel and transportation expenses). Form 1040 Loss on the sale of accounts receivable (if you use an accrual method of accounting). Form 1040 Interest and litigation expenses on state and federal income taxes related to your business. Form 1040 Unrecovered investment in a pension or annuity claimed on a decedent's final return. Form 1040 Payment by a federal employee to buy back sick leave used in an earlier year. Form 1040 Nonbusiness income (line 7). Form 1040   Enter on line 7 only income that is not related to your trade or business or your employment. Form 1040 For example, enter your annuity income, dividends, and interest on investments. Form 1040 Also, include your share of nonbusiness income from partnerships and S corporations. Form 1040   Do not include on line 7 the income you receive from your trade or business or your employment. Form 1040 This includes salaries and wages, self-employment income, unemployment compensation included in your gross income, and your share of business income from partnerships and S corporations. Form 1040 Also, do not include rental income or ordinary gain from the sale or other disposition of business real estate or depreciable business property. Form 1040 Adjustment for section 1202 exclusion (line 17). Form 1040   Enter on line 17 any gain you excluded under section 1202 on the sale or exchange of qualified small business stock. Form 1040 Adjustments for capital losses (lines 19–22). Form 1040   The amount deductible for capital losses is limited based on whether the losses are business capital losses or nonbusiness capital losses. Form 1040 Nonbusiness capital losses. Form 1040   You can deduct your nonbusiness capital losses (line 2) only up to the amount of your nonbusiness capital gains without regard to any section 1202 exclusion (line 3). Form 1040 If your nonbusiness capital losses are more than your nonbusiness capital gains without regard to any section 1202 exclusion, you cannot deduct the excess. Form 1040 Business capital losses. Form 1040   You can deduct your business capital losses (line 11) only up to the total of: Your nonbusiness capital gains that are more than the total of your nonbusiness capital losses and excess nonbusiness deductions (line 10), and Your total business capital gains without regard to any section 1202 exclusion (line 12). Form 1040 Domestic production activities deduction (line 23). Form 1040   You cannot take the domestic production activities deduction when figuring your NOL. Form 1040 Enter on line 23 any domestic production activities deduction claimed on your return. Form 1040 NOLs from other years (line 24). Form 1040   You cannot deduct any NOL carryovers or carrybacks from other years. Form 1040 Enter the total amount of your NOL deduction for losses from other years. Form 1040 Illustrated Form 1045, Schedule A The following example illustrates how to figure an NOL. Form 1040 It includes filled-in pages 1 and 2 of Form 1040 and Form 1045, Schedule A. Form 1040 Example. Form 1040 Glenn Johnson is in the retail record business. Form 1040 He is single and has the following income and deductions on his Form 1040 for 2013. Form 1040 See the illustrated Form 1040 , later. Form 1040 INCOME   Wages from part-time job $1,225 Interest on savings 425 Net long-term capital gain on sale of real estate used in business 2,000 Glenn's total income $3,650 DEDUCTIONS   Net loss from business (gross income of $67,000 minus expenses of $72,000) $5,000 Net short-term capital loss on sale of stock 1,000 Standard deduction 6,100 Personal exemption 3,900 Glenn's total deductions $16,000 Glenn's deductions exceed his income by $12,350 ($16,000 − $3,650). Form 1040 However, to figure whether he has an NOL, certain deductions are not allowed. Form 1040 He uses Form 1045, Schedule A, to figure his NOL. Form 1040 See the Illustrated Form 1045, Schedule A , later. Form 1040 The following items are not allowed on Form 1045, Schedule A. Form 1040 Nonbusiness net short-term capital loss $1,000 Nonbusiness deductions (standard deduction, $6,100) minus nonbusiness income (interest, $425) 5,675 Deduction for personal exemption 3,900 Total adjustments to net loss $10,575     Therefore, Glenn's NOL for 2013 is figured as follows: Glenn's total 2013 income $3,650 Less:     Glenn's original 2013 total deductions $16,000   Reduced by the disallowed items − 10,575 − 5,425 Glenn's NOL for 2013 $1,775 This image is too large to be displayed in the current screen. Form 1040 Please click the link to view the image. Form 1040 Form 1040, page 1 This image is too large to be displayed in the current screen. Form 1040 Please click the link to view the image. Form 1040 Form 1040, page 2 This image is too large to be displayed in the current screen. Form 1040 Please click the link to view the image. Form 1040 Form 1045, page 2 When To Use an NOL Generally, if you have an NOL for a tax year ending in 2013, you must carry back the entire amount of the NOL to the 2 tax years before the NOL year (the carryback period), and then carry forward any remaining NOL for up to 20 years after the NOL year (the carryforward period). Form 1040 You can, however, choose not to carry back an NOL and only carry it forward. Form 1040 See Waiving the Carryback Period , later. Form 1040 You cannot deduct any part of the NOL remaining after the 20-year carryforward period. Form 1040 NOL year. Form 1040   This is the year in which the NOL occurred. Form 1040 Exceptions to 2-Year Carryback Rule Eligible losses, farming losses, qualified disaster losses, and specified liability losses, all defined next, qualify for longer carryback periods. Form 1040 Eligible loss. Form 1040   The carryback period for eligible losses is 3 years. Form 1040 Only the eligible loss portion of the NOL can be carried back 3 years. Form 1040 An eligible loss is any part of an NOL that: Is from a casualty or theft, or Is attributable to a federally declared disaster for a qualified small business or certain qualified farming businesses. Form 1040 Qualified small business. Form 1040   A qualified small business is a sole proprietorship or a partnership that has average annual gross receipts (reduced by returns and allowances) of $5 million or less during the 3-year period ending with the tax year of the NOL. Form 1040 If the business did not exist for this entire 3-year period, use the period the business was in existence. Form 1040   An eligible loss does not include a farming loss or a qualified disaster loss. Form 1040 Farming loss. Form 1040   The carryback period for a farming loss is 5 years. Form 1040 Only the farming loss portion of the NOL can be carried back 5 years. Form 1040 A farming loss is the smaller of: The amount that would be the NOL for the tax year if only income and deductions attributable to farming businesses were taken into account, or The NOL for the tax year. Form 1040 Farming business. Form 1040   A farming business is a trade or business involving cultivation of land or the raising or harvesting of any agricultural or horticultural commodity. Form 1040 A farming business can include operating a nursery or sod farm or raising or harvesting most ornamental trees or trees bearing fruit, nuts, or other crops. Form 1040 The raising, shearing, feeding, caring for, training, and management of animals is also considered a farming business. Form 1040   A farming business does not include contract harvesting of an agricultural or horticultural commodity grown or raised by someone else. Form 1040 It also does not include a business in which you merely buy or sell plants or animals grown or raised entirely by someone else. Form 1040 Waiving the 5-year carryback. Form 1040   You can choose to figure the carryback period for a farming loss without regard to the special 5-year carryback rule. Form 1040 To make this choice for 2013, attach to your 2013 income tax return filed by the due date (including extensions) a statement that you are choosing to treat any 2013 farming losses without regard to the special 5-year carryback rule. Form 1040 If you filed your original return on time but did not file the statement with it, you can make this choice on an amended return filed within 6 months after the due date of the return (excluding extensions). Form 1040 Attach an election statement to your amended return, and write “Filed pursuant to section 301. Form 1040 9100-2” at the top of the statement. Form 1040 Once made, this choice is irrevocable. Form 1040 Qualified disaster loss. Form 1040   The carryback period for a qualified disaster loss is 5 years. Form 1040 Only the qualified disaster loss portion of the NOL can be carried back 5 years. Form 1040 A qualified disaster loss is the smaller of: The sum of: Any losses attributable to a federally declared disaster and occurring before January 1, 2010, in the disaster area, plus Any allowable qualified disaster expenses (even if you did not choose to treat those expenses as deductions in the current year), or The NOL for the tax year. Form 1040 Qualified disaster expenses. Form 1040   A qualified disaster expense is any capital expense paid or incurred in connection with a trade or business or with business-related property which is: For the abatement or control of hazardous substances that were released as a result of a federally declared disaster occurring before January 1, 2010, For the removal of debris from, or the demolition of structures on, real property which is business-related property damaged or destroyed as a result of a federally declared disaster occurring before January 1, 2010, or For the repair of business-related property damaged as a result of a federally declared disaster occurring before January 1, 2010. Form 1040 Business-related property is property held for use in a trade or business, property held for the production of income, or inventory property. Form 1040 Note. Form 1040 Section 198A allows taxpayers to treat certain capital expenses (qualified disaster expenses) as deductions in the year the expenses were paid or incurred. Form 1040 Excluded losses. Form 1040   A qualified disaster loss does not include any losses from property used in connection with any private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, or any store for which the principal business is the sale of alcoholic beverages for consumption off premises. Form 1040   A qualified disaster loss also does not include any losses from any gambling or animal racing property. Form 1040 Gambling or animal racing property is any equipment, furniture, software, or other property used directly in connection with gambling, the racing of animals, or the on-site viewing of such racing, and the portion of any real property (determined by square footage) that is dedicated to gambling, the racing of animals, or the on-site viewing of such racing, unless this portion is less than 100 square feet. Form 1040 Specified liability loss. Form 1040   The carryback period for a specified liability loss is 10 years. Form 1040 Only the specified liability loss portion of the NOL can be carried back 10 years. Form 1040 Generally, a specified liability loss is a loss arising from: Product liability and expenses incurred in the investigation or settlement of, or opposition to, product liability claims, or An act (or failure to act) that occurred at least 3 years before the beginning of the loss year and resulted in a liability under a federal or state law requiring: Reclamation of land, Dismantling of a drilling platform, Remediation of environmental contamination, or Payment under any workers compensation act. Form 1040   Any loss from a liability arising from (1) through (4) above can be taken into account as a specified liability loss only if you used an accrual method of accounting throughout the period in which the act (or failure to act) occurred. Form 1040 For details, see section 172(f). Form 1040 Waiving the 10-year carryback. Form 1040   You can choose to figure the carryback period for a specified liability loss without regard to the special 10-year carryback rule. Form 1040 To make this choice for 2013 attach to your 2013 income tax return filed by the due date (including extensions) a statement that you are choosing to treat any 2013 specified liability losses without regard to the special 10-year carryback rule. Form 1040 If you filed your original return on time but did not file the statement with it, you can make this choice on an amended return filed within 6 months after the due date of the return (excluding extensions). Form 1040 Attach a statement to your amended return and write “Filed pursuant to section 301. Form 1040 9100-2” at the top of the statement. Form 1040 Once made, this choice is irrevocable. Form 1040 Waiving the Carryback Period You can choose not to carry back your NOL. Form 1040 If you make this choice, then you can use your NOL only in the 20-year carryforward period. Form 1040 (This choice means you also choose not to carry back any alternative tax NOL. Form 1040 ) To make this choice, attach a statement to your original return filed by the due date (including extensions) for the NOL year. Form 1040 This statement must show that you are choosing to waive the carryback period under section 172(b)(3). Form 1040 If you filed your original return on time but did not file the statement with it, you can make this choice on an amended return filed within 6 months of the due date of the return (excluding extensions). Form 1040 Attach a statement to your amended return, and write “Filed pursuant to section 301. Form 1040 9100-2” at the top of the statement. Form 1040 Once you choose to waive the carryback period, it generally is irrevocable. Form 1040 If you choose to waive the carryback period for more than one NOL, you must make a separate choice and attach a separate statement for each NOL year. Form 1040 If you do not file this statement on time, you cannot waive the carryback period. Form 1040 How To Carry an NOL Back or Forward If you choose to carry back the NOL, you must first carry the entire NOL to the earliest carryback year. Form 1040 If your NOL is not used up, you can carry the rest to the next earliest carryback year, and so on. Form 1040 If you waive the carryback period or do not use up the NOL in the carryback period, carry forward what remains of the NOL to the 20 tax years following the NOL year. Form 1040 Start by carrying it to the first tax year after the NOL year. Form 1040 If you do not use it up, carry the unused part to the next year. Form 1040 Continue to carry any unused part of the NOL forward until the NOL is used up or you complete the 20-year carryforward period. Form 1040 Example 1. Form 1040 You started your business as a sole proprietor in 2013 and had a $42,000 NOL for the year. Form 1040 No part of the NOL qualifies for the 3-year, 5-year, or 10-year carryback. Form 1040 You begin using your NOL in 2011, the second year before the NOL year, as shown in the following chart. Form 1040 Year   Carryback/  Carryover Unused  Loss 2011 $42,000 $40,000 2012 40,000 37,000 2013 (NOL year)     2014 37,000 31,500 2015 31,500 22,500 2016 22,500 12,700 2017 12,700 4,000 2018 4,000 -0- If your loss were larger, you could carry it forward until the year 2033. Form 1040 If you still had an unused 2013 carryforward after the year 2033, you would not be allowed to deduct it. Form 1040 Example 2. Form 1040 Assume the same facts as in Example 1 , except that $4,000 of the NOL is attributable to a casualty loss and this loss qualifies for a 3-year carryback period. Form 1040 You begin using the $4,000 in 2010. Form 1040 As shown in the following chart, $3,000 of this NOL is used in 2010. Form 1040 The remaining $1,000 is carried to 2011 with the $38,000 NOL that you must begin using in 2011. Form 1040 Year   Carryback/  Carryover Unused  Loss 2010 $4,000 $1,000 2011 39,000 37,000 2012 37,000 34,000 2013 (NOL year)     2014 34,000 28,500 2015 28,500 19,500 2016 19,500 9,700 2017 9,700 1,000 2018 1,000 -0- How To Claim an NOL Deduction If you have not already carried the NOL to an earlier year, your NOL deduction is the total NOL. Form 1040 If you carried the NOL to an earlier year, your NOL deduction is the carried over NOL minus the NOL amount you used in the earlier year or years. Form 1040 If you carry more than one NOL to the same year, your NOL deduction is the total of these carrybacks and carryovers. Form 1040 NOL resulting in no taxable income. Form 1040   If your NOL is more than the taxable income of the year you carry it to (figured before deducting the NOL), you generally will have an NOL carryover to the next year. Form 1040 See How To Figure an NOL Carryover , later, to determine how much NOL you have used and how much you carry to the next year. Form 1040 Deducting a Carryback If you carry back your NOL, you can use either Form 1045 or Form 1040X. Form 1040 You can get your refund faster by using Form 1045, but you have a shorter time to file it. Form 1040 You can use Form 1045 to apply an NOL to all carryback years. Form 1040 If you use Form 1040X, you must use a separate Form 1040X for each carryback year to which you apply the NOL. Form 1040 Estates and trusts that do not file Form 1045 must file an amended Form 1041 (instead of Form 1040X) for each carryback year to which NOLs are applied. Form 1040 Use a copy of the appropriate year's Form 1041, check the “Amended return” box, and follow the Form 1041 instructions for amended returns. Form 1040 Include the NOL deduction with other deductions not subject to the 2% limit (line 15a). Form 1040 Also, see the special procedures for filing an amended return due to an NOL carryback, explained under Form 1040X , later. Form 1040 Form 1045. Form 1040   You can apply for a quick refund by filing Form 1045. Form 1040 This form results in a tentative adjustment of tax in the carryback year. Form 1040 See the Illustrated Form 1045 . Form 1040 at the end of this discussion. Form 1040   If the IRS refunds or credits an amount to you from Form 1045 and later determines that the refund or credit is too much, the IRS may assess and collect the excess immediately. Form 1040   Generally, you must file Form 1045 on or after the date you file your tax return for the NOL year, but not later than one year after the end of the NOL year. Form 1040 If the last day of the NOL year falls on a Saturday, Sunday, or holiday, the form will be considered timely if postmarked on the next business day. Form 1040 For example, if you are a calendar year taxpayer with a carryback from 2013 to 2011, you must file Form 1045 on or after the date you file your tax return for 2013, but no later than December 31, 2014. Form 1040 Form 1040X. Form 1040   If you do not file Form 1045, you can file Form 1040X to get a refund of tax because of an NOL carryback. Form 1040 File Form 1040X within 3 years after the due date, including extensions, for filing the return for the NOL year. Form 1040 For example, if you are a calendar year taxpayer and filed your 2011 return by the April 15, 2012, due date, you must file a claim for refund of 2008 tax because of an NOL carryback from 2011 by April 15, 2015. Form 1040   Attach a computation of your NOL using Form 1045, Schedule A, and, if it applies, your NOL carryover using Form 1045, Schedule B, discussed later . Form 1040 Refiguring your tax. Form 1040   To refigure your total tax liability for a carryback year, first refigure your adjusted gross income for that year. Form 1040 (On Form 1045, use lines 10 and 11 and the “After carryback” column for the applicable carryback year. Form 1040 ) Use your adjusted gross income after applying the NOL deduction to refigure income or deduction items that are based on, or limited to, a percentage of your adjusted gross income. Form 1040 Refigure the following items. Form 1040 The special allowance for passive activity losses from rental real estate activities. Form 1040 Taxable social security and tier 1 railroad retirement benefits. Form 1040 IRA deductions. Form 1040 Excludable savings bond interest. Form 1040 Excludable employer-provided adoption benefits. Form 1040 The student loan interest deduction. Form 1040 The tuition and fees deduction. Form 1040   If more than one of these items apply, refigure them in the order listed above, using your adjusted gross income after applying the NOL deduction and any previous item. Form 1040 (Enter your NOL deduction on Form 1045, line 10. Form 1040 On line 11, using the “After carryback” column, enter your adjusted gross income refigured after applying the NOL deduction and after refiguring any above items. Form 1040 )   Next, refigure your taxable income. Form 1040 (On Form 1045, use lines 12 through 15 and the “After carryback” column. Form 1040 ) Use your refigured adjusted gross income (Form 1045, line 11, using the “After carryback” column) to refigure certain deductions and other items that are based on or limited to a percentage of your adjusted gross income. Form 1040 Refigure the following items. Form 1040 The itemized deduction for medical expenses. Form 1040 The itemized deduction for qualified mortgage insurance premiums. Form 1040 The itemized deduction for casualty losses. Form 1040 Miscellaneous itemized deductions subject to the 2% limit. Form 1040 The overall limit on itemized deductions (do not apply to carryback years beginning after December 31, 2009). Form 1040 The phaseout of the deduction for exemptions (do not apply to carryback years beginning after December 31, 2009). Form 1040 Qualified motor vehicle tax (do not apply to carryback years beginning after December 31, 2009). Form 1040    Do not refigure the itemized deduction for charitable contributions. Form 1040   Finally, use your refigured taxable income (Form 1045, line 15, using the “After carryback” column) to refigure your total tax liability. Form 1040 Refigure your income tax, your alternative minimum tax, and any credits that are based on or limited by your adjusted gross income (AGI), modified adjusted gross income (MAGI), or tax liability. Form 1040 (On Form 1045, use lines 16 through 25, and the “After carryback” column. Form 1040 ) The earned income credit, for example, may be affected by changes to adjusted gross income or the amount of tax (or both) and, therefore, must be recomputed. Form 1040 If you become eligible for a credit because of the carryback, complete the form for that specific credit (such as the EIC Worksheet) for that year. Form 1040   While it is necessary to refigure your income tax, alternative minimum tax, and credits, do not refigure your self-employment tax. Form 1040 Deducting a Carryforward If you carry forward your NOL to a tax year after the NOL year, list your NOL deduction as a negative figure on the “Other income” line of Form 1040 or Form 1040NR (line 21 for 2013). Form 1040 Estates and trusts include an NOL deduction on Form 1041 with other deductions not subject to the 2% limit (line 15a for 2013). Form 1040 You must attach a statement that shows all the important facts about the NOL. Form 1040 Your statement should include a computation showing how you figured the NOL deduction. Form 1040 If you deduct more than one NOL in the same year, your statement must cover each of them. Form 1040 Change in Marital Status If you and your spouse were not married to each other in all years involved in figuring NOL carrybacks and carryovers, only the spouse who had the loss can take the NOL deduction. Form 1040 If you file a joint return, the NOL deduction is limited to the income of that spouse. Form 1040 For example, if your marital status changes because of death or divorce, and in a later year you have an NOL, you can carry back that loss only to the part of the income reported on the joint return (filed with your former spouse) that was related to your taxable income. Form 1040 After you deduct the NOL in the carryback year, the joint rates apply to the resulting taxable income. Form 1040 Refund limit. Form 1040   If you are not married in the NOL year (or are married to a different spouse), and in the carryback year you were married and filed a joint return, your refund for the overpaid joint tax may be limited. Form 1040 You can claim a refund for the difference between your share of the refigured tax and your contribution toward the tax paid on the joint return. Form 1040 The refund cannot be more than the joint overpayment. Form 1040 Attach a statement showing how you figured your refund. Form 1040 Figuring your share of a joint tax liability. Form 1040   There are five steps for figuring your share of the refigured joint tax liability. Form 1040 Figure your total tax as though you had filed as married filing separately. Form 1040 Figure your spouse's total tax as though your spouse had also filed as married filing separately. Form 1040 Add the amounts in (1) and (2). Form 1040 Divide the amount in (1) by the amount in (3). Form 1040 Multiply the refigured tax on your joint return by the amount figured in (4). Form 1040 This is your share of the joint tax liability. Form 1040 Figuring your contribution toward tax paid. Form 1040   Unless you have an agreement or clear evidence of each spouse's contributions toward the payment of the joint tax liability, figure your contribution by adding the tax withheld on your wages and your share of joint estimated tax payments or tax paid with the return. Form 1040 If the original return for the carryback year resulted in an overpayment, reduce your contribution by your share of the tax refund. Form 1040 Figure your share of a joint payment or refund by the same method used in figuring your share of the joint tax liability. Form 1040 Use your taxable income as originally reported on the joint return in steps (1) and (2) above, and substitute the joint payment or refund for the refigured joint tax in step (5). Form 1040 Change in Filing Status If you and your spouse were married and filed a joint return for each year involved in figuring NOL carrybacks and carryovers, figure the NOL deduction on a joint return as you would for an individual. Form 1040 However, treat the NOL deduction as a joint NOL. Form 1040 If you and your spouse were married and filed separate returns for each year involved in figuring NOL carrybacks and carryovers, the spouse who sustained the loss may take the NOL deduction on a separate return. Form 1040 Special rules apply for figuring the NOL carrybacks and carryovers of married people whose filing status changes for any tax year involved in figuring an NOL carryback or carryover. Form 1040 Separate to joint return. Form 1040   If you and your spouse file a joint return for a carryback or carryforward year, and were married but filed separate returns for any of the tax years involved in figuring the NOL carryback or carryover, treat the separate carryback or carryover as a joint carryback or carryover. Form 1040 Joint to separate returns. Form 1040   If you and your spouse file separate returns for a carryback or carryforward year, but filed a joint return for any or all of the tax years involved in figuring the NOL carryover, figure each of your carryovers separately. Form 1040 Joint return in NOL year. Form 1040   Figure each spouse's share of the joint NOL through the following steps. Form 1040 Figure each spouse's NOL as if he or she filed a separate return. Form 1040 See How To Figure an NOL , earlier. Form 1040 If only one spouse has an NOL, stop here. Form 1040 All of the joint NOL is that spouse's NOL. Form 1040 If both spouses have an NOL, multiply the joint NOL by a fraction, the numerator of which is spouse A's NOL figured in (1) and the denominator of which is the total of the spouses' NOLs figured in (1). Form 1040 The result is spouse A's share of the joint NOL. Form 1040 The rest of the joint NOL is spouse B's share. Form 1040 Example 1. Form 1040 Mark and Nancy are married and file a joint return for 2013. Form 1040 They have an NOL of $5,000. Form 1040 They carry the NOL back to 2011, a year in which Mark and Nancy filed separate returns. Form 1040 Figured separately, Nancy's 2013 deductions were more than her income, and Mark's income was more than his deductions. Form 1040 Mark does not have any NOL to carry back. Form 1040 Nancy can carry back the entire $5,000 NOL to her 2011 separate return. Form 1040 Example 2. Form 1040 Assume the same facts as in Example 1 , except that both Mark and Nancy had deductions in 2013 that were more than their income. Form 1040 Figured separately, his NOL is $1,800 and her NOL is $3,000. Form 1040 The sum of their separate NOLs ($4,800) is less than their $5,000 joint NOL because his deductions included a $200 net capital loss that is not allowed in figuring his separate NOL. Form 1040 The loss is allowed in figuring their joint NOL because it was offset by Nancy's capital gains. Form 1040 Mark's share of their $5,000 joint NOL is $1,875 ($5,000 × $1,800/$4,800) and Nancy's is $3,125 ($5,000 − $1,875). Form 1040 Joint return in previous carryback or carryforward year. Form 1040   If only one spouse had an NOL deduction on the previous year's joint return, all of the joint carryover is that spouse's carryover. Form 1040 If both spouses had an NOL deduction (including separate carryovers of a joint NOL, figured as explained in the previous discussion ), figure each spouse's share of the joint carryover through the following steps. Form 1040 Figure each spouse's modified taxable income as if he or she filed a separate return. Form 1040 See Modified taxable income under How To Figure an NOL Carryover , later. Form 1040 Multiply the joint modified taxable income you used to figure the joint carryover by a fraction, the numerator of which is spouse A's modified taxable income figured in (1) and the denominator of which is the total of the spouses' modified taxable incomes figured in (1). Form 1040 This is spouse A's share of the joint modified taxable income. Form 1040 Subtract the amount figured in (2) from the joint modified taxable income. Form 1040 This is spouse B's share of the joint modified taxable income. Form 1040 Reduce the amount figured in (3), but not below zero, by spouse B's NOL deduction. Form 1040 Add the amounts figured in (2) and (4). Form 1040 Subtract the amount figured in (5) from spouse A's NOL deduction. Form 1040 This is spouse A's share of the joint carryover. Form 1040 The rest of the joint carryover is spouse B's share. Form 1040 Example. Form 1040 Sam and Wanda filed a joint return for 2011 and separate returns for 2012 and 2013. Form 1040 In 2013, Sam had an NOL of $18,000 and Wanda had an NOL of $2,000. Form 1040 They choose to carry back both NOLs 2 years to their 2011 joint return and claim a $20,000 NOL deduction. Form 1040 Their joint modified taxable income (MTI) for 2011 is $15,000, and their joint NOL carryover to 2012 is $5,000 ($20,000 – $15,000). Form 1040 Sam and Wanda each figure their separate MTI for 2011 as if they had filed separate returns. Form 1040 Then they figure their shares of the $5,000 carryover as follows. Form 1040 Step 1. Form 1040   Sam's separate MTI $9,000 Wanda's separate MTI + 3,000 Total MTI $12,000 Step 2. Form 1040   Joint MTI $15,000 Sam's MTI ÷ total MTI ($9,000 ÷ $12,000) × . Form 1040 75 Sam's share of joint MTI $11,250 Step 3. Form 1040   Joint MTI $15,000 Sam's share of joint MTI − 11,250 Wanda's share of joint MTI $3,750 Step 4. Form 1040   Wanda's share of joint MTI $3,750 Wanda's NOL deduction − 2,000 Wanda's remaining share $1,750 Step 5. Form 1040   Sam's share of joint MTI $11,250 Wanda's remaining share + 1,750 Joint MTI to be offset $13,000 Step 6. Form 1040   Sam's NOL deduction $18,000 Joint MTI to be offset − 13,000 Sam's carryover to 2012 $5,000 Joint carryover to 2012 $5,000 Sam's carryover − 5,000 Wanda's carryover to 2012 $-0- Wanda's $2,000 NOL deduction offsets $2,000 of her $3,750 share of the joint modified taxable income and is completely used up. Form 1040 She has no carryover to 2012. Form 1040 Sam's $18,000 NOL deduction offsets all of his $11,250 share of joint modified taxable income and the remaining $1,750 of Wanda's share. Form 1040 His carryover to 2012 is $5,000. Form 1040 Illustrated Form 1045 The following example illustrates how to use Form 1045 to claim an NOL deduction in a carryback year. Form 1040 It includes a filled-in page 1 of Form 1045. Form 1040 Example. Form 1040 Martha Sanders is a self-employed contractor. Form 1040 Martha's 2013 deductions are more than her 2013 income because of a business loss. Form 1040 She uses Form 1045 to carry back her NOL 2 years and claim an NOL deduction in 2011. Form 1040 Her filing status in both years was single. Form 1040 See the filled-in Form 1045 later. Form 1040 Martha figures her 2013 NOL on Form 1045, Schedule A (not shown). Form 1040 (For an example using Form 1045, Schedule A, see Illustrated Form 1045, Schedule A under How To Figure an NOL , earlier. Form 1040 ) She enters the $10,000 NOL from Form 1045, Schedule A, line 25, on Form 1045, line 1a. Form 1040 Martha completes lines 10 through 25, using the “Before carryback” column under the column for the second preceding tax year ended 12/31/11 on page 1 of Form 1045 using the following amounts from her 2011 return. Form 1040 2011 Adjusted gross income $50,000 Itemized deductions:     Medical expenses [$6,000 − ($50,000 × 7. Form 1040 5%)] $2,250   State income tax + 2,000   Real estate tax + 4,000   Home mortgage interest + 5,000   Total itemized deductions $13,250 Exemption $3,700 Income tax $4,550 Self-employment tax $6,120   Martha refigures her taxable income for 2011 after carrying back her 2013 NOL as follows: 2011 Adjusted gross income $50,000 Less:     NOL from 2013 −10,000 2011 Adjusted gross income after carryback $40,000 Less:     Itemized deductions:     Medical expenses [$6,000 − ($40,000 × 7. Form 1040 5%)] $3,000   State income tax + 2,000   Real estate tax + 4,000   Home mortgage interest + 5,000   Total itemized deductions −14,000 Less:     Exemption − 3,700 2011 Taxable income after carryback $22,300 Martha then completes lines 10 through 25, using the “After carryback” column under the column for the second preceding tax year ended 12/31/11. Form 1040 On line 10, Martha enters her $10,000 NOL deduction. Form 1040 Her new adjusted gross income on line 11 is $40,000 ($50,000 − $10,000). Form 1040 To complete line 12, she must refigure her medical expense deduction using her new adjusted gross income. Form 1040 Her refigured medical expense deduction is $3,000 [$6,000 − ($40,000 × 7. Form 1040 5%)]. Form 1040 This increases her total itemized deductions to $14,000 [$13,250 + ($3,000 − $2,250)]. Form 1040 Martha uses her refigured taxable income ($22,300) from line 15, and the tax tables in her 2011 Form 1040 instructions to find her income tax. Form 1040 She enters the new amount, $2,924, on line 16, and her new total tax liability, $9,044, on line 25. Form 1040 Martha used up her $10,000 NOL in 2011 so she does not complete a column for the first preceding tax year ended 12/31/2012. Form 1040 The decrease in tax because of her NOL deduction (line 27) is $1,612. Form 1040 Martha files Form 1045 after filing her 2013 return, but no later than December 31, 2014. Form 1040 She mails it to the Internal Revenue Service Center for the place where she lives as shown in the 2013 instructions for Form 1040 and attaches a copy of her 2013 return (including the applicable forms and schedules). Form 1040 This image is too large to be displayed in the current screen. Form 1040 Please click the link to view the image. Form 1040 Form 1045, page 1 How To Figure an NOL Carryover If your NOL is more than your taxable income for the year to which you carry it (figured before deducting the NOL), you may have an NOL carryover. Form 1040 You must make certain modifications to your taxable income to determine how much NOL you will use up in that year and how much you can carry over to the next tax year. Form 1040 Your carryover is the excess of your NOL deduction over your modified taxable income for the carryback or carryforward year. Form 1040 If your NOL deduction includes more than one NOL, apply the NOLs against your modified taxable income in the same order in which you incurred them, starting with the earliest. Form 1040 Modified taxable income. Form 1040   Your modified taxable income is your taxable income figured with the following changes. Form 1040 You cannot claim an NOL deduction for the NOL carryover you are figuring or for any later NOL. Form 1040 You cannot claim a deduction for capital losses in excess of your capital gains. Form 1040 Also, you must increase your taxable income by the amount of any section 1202 exclusion. Form 1040 You cannot claim the domestic production activities deduction. Form 1040 You cannot claim a deduction for your exemptions for yourself, your spouse, or dependents. Form 1040 You must figure any item affected by the amount of your adjusted gross income after making the changes in (1), (2), and (3), above, and certain other changes to your adjusted gross income that result from (1), (2), and (3). Form 1040 This includes income and deduction items used to figure adjusted gross income (for example, IRA deductions), as well as certain itemized deductions. Form 1040 To figure a charitable contribution deduction, do not include deductions for NOL carrybacks in the change in (1) but do include deductions for NOL carryforwards from tax years before the NOL year. Form 1040   Your taxable income as modified cannot be less than zero. Form 1040 Form 1045, Schedule B. Form 1040   You can use Form 1045, Schedule B, to figure your modified taxable income for carryback years and your carryover from each of those years. Form 1040 Do not use Form 1045, Schedule B, for a carryforward year. Form 1040 If your 2013 return includes an NOL deduction from an NOL year before 2013 that reduced your taxable income to zero (to less than zero, if an estate or trust), see NOL Carryover From 2013 to 2014 , later. Form 1040 Illustrated Form 1045, Schedule B The following example illustrates how to figure an NOL carryover from a carryback year. Form 1040 It includes a filled-in Form 1045, Schedule B. Form 1040 Example. Form 1040 Ida Brown runs a small clothing shop. Form 1040 In 2013, she has an NOL of $36,000 that she carries back to 2011. Form 1040 She has no other carrybacks or carryforwards to 2011. Form 1040 Ida's adjusted gross income in 2011 was $35,000, consisting of her salary of $36,000 minus a $1,000 capital loss deduction. Form 1040 She is single and claimed only one personal exemption of $3,700. Form 1040 During that year, she gave $1,450 in charitable contributions. Form 1040 Her medical expenses were $3,000. Form 1040 She also deducted $1,650 in taxes and $3,125 in home mortgage interest. Form 1040 Her deduction for charitable contributions was not limited because her contributions, $1,450, were less than 50% of her adjusted gross income. Form 1040 The deduction for medical expenses was limited to expenses over 7. Form 1040 5% of adjusted gross income (. Form 1040 075 × $35,000 = $2,625; $3,000 − $2,625 = $375). Form 1040 The deductions for taxes and home mortgage interest were not subject to any limits. Form 1040 She was able to claim $6,600 ($1,450 + $375 + $1,650 + $3,125) in itemized deductions and a personal exemption deduction of $3,700 for 2011. Form 1040 She had no other deductions in 2011 (except the NOL deduction). Form 1040 Her taxable income (figured without the NOL deduction) for the year was $24,700. Form 1040 Ida's adjusted gross income in 2012 was $9,325, consisting of net business income from the clothing shop of $12,325 and a net capital loss of $3,000. Form 1040 She did not itemize her deductions in 2012. Form 1040 She deducted the standard deduction of $5,950 and the personal exemption deduction of $3,800. Form 1040 She had no other deductions in 2012 (other than the NOL deduction). Form 1040 Her taxable income, therefore, was ($425). Form 1040 Ida's $36,000 carryback will result in her having 2011 taxable income of zero. Form 1040 She then completes the column for the second preceding tax year ended 12/31/11 on Form 1045, Schedule B, to figure how much of her NOL she uses up in 2011 and how much she can carry over to 2012. Form 1040 She completes the column for the first preceding tax year ended 12/31/12. Form 1040 See the illustrated Form 1045, Schedule B , shown later. Form 1040 Column 1, line 1. Form 1040 Ida enters $36,000, her 2013 net operating loss, on line 1. Form 1040 Column 1, line 2. Form 1040 She enters $24,700, her 2011 taxable income (figured without the NOL deduction), on line 2. Form 1040 Column 1, line 3. Form 1040 Ida enters her net capital loss deduction of $1,000 on line 3. Form 1040 Column 1, lines 4 and 5. Form 1040 Ida had no section 1202 exclusion or domestic production activities deduction in 2011. Form 1040 She enters zero on lines 4 and 5. Form 1040 Column 1, line 6. Form 1040 Although Ida's entry on line 3 modifies her adjusted gross income, that does not affect any other items included in her adjusted gross income. Form 1040 Ida enters zero on line 6. Form 1040 Column 1, line 7. Form 1040 Ida had itemized deductions and entered $1,000 on line 3, so she completes lines 11 through 38 to figure her adjustment to itemized deductions. Form 1040 On line 7, she enters the total adjustment from line 38. Form 1040 Column 1, line 8. Form 1040 Ida enters the deduction for her personal exemption of $3,700 for 2011. Form 1040 Column 1, line 9. Form 1040 After combining lines 2 through 8, Ida's modified taxable income is $29,475. Form 1040 Column 1, line 10. Form 1040 Ida figures her carryover to 2012 by subtracting her modified taxable income (line 9) from her NOL deduction (line 1). Form 1040 She enters the $6,525 carryover on line 10. Form 1040 She also enters the $6,525 as her NOL deduction for 2012 on Form 1045, page 1, line 10, in the “After carryback” column under the column for the first preceding tax year ended 12/31/12. Form 1040 (For an illustrated example of page 1 of Form 1045, see Illustrated Form 1045 under How To Claim an NOL Deduction , earlier. Form 1040 ) Next, Ida completes column 2 for the first preceding tax year ended 12/31/12. Form 1040 Column 1, line 11. Form 1040 Ida's adjusted gross income for 2011 was $35,000. Form 1040 Column 1, line 12. Form 1040 She adds lines 3 through 6 and enters $1,000 on line 12. Form 1040 (This is her net capital loss deduction added back, which modifies her adjusted gross income. Form 1040 ) Column 1, line 13. Form 1040 Her modified adjusted gross income for 2011 is now $36,000. Form 1040 Column 1, line 14. Form 1040 On her 2011 tax return, she deducted $375 as medical expenses. Form 1040 Column 1, line 15. Form 1040 Her actual medical expenses were $3,000. Form 1040 Column 1, line 16. Form 1040 She multiplies her modified adjusted gross income, $36,000, by . Form 1040 075. Form 1040 She enters $2,700 on line 16. Form 1040 Column 1, line 17. Form 1040 She substracts $2,700 from her actual medical expenses, $3,000. Form 1040 She enters $300 on line 17. Form 1040 This is her modified medical deduction. Form 1040 Column 1, line 18. Form 1040 The difference between her medical deduction and her modified medical deduction is $75. Form 1040 She enters this on line 18. Form 1040 Column 1, lines 19 through 21. Form 1040 Ida had no deduction for qualified mortgage insurance premiums in 2011. Form 1040 She skips lines 19 and 20 and enters zero on line 21. Form 1040 Column 1, line 22. Form 1040 She enters her modified adjusted gross income of $36,000 on line 22. Form 1040 Column 1, line 23. Form 1040 She had no other carrybacks to 2011 and enters zero on line 23. Form 1040 Column 1, line 24. Form 1040 Her modified adjusted gross income remains $36,000. Form 1040 Column 1, line 25. Form 1040 Her actual contributions for 2011 were $1,450, which she enters on line 25. Form 1040 Column 1, line 26. Form 1040 She now refigures her charitable contributions based on her modified adjusted gross income. Form 1040 Her contributions are well below the 50% limit, so she enters $1,450 on line 26. Form 1040 Column 1, line 27. Form 1040 The difference is zero. Form 1040 Column 1, lines 28 through 37. Form 1040 Ida had no casualty losses or deductions for miscellaneous items in 2011. Form 1040 She skips lines 28 through 31 and lines 33 through 36. Form 1040 Ida enters zero on lines 32 and 37. Form 1040 Column 1, line 38. Form 1040 She combines lines 18, 21, 27, 32, and 37 and enters $75 on line 38. Form 1040 She carries this figure to line 7. Form 1040 Column 2, line 1. Form 1040 Ida enters $6,525, the carryback of her 2013 NOL to 2012, from column 1, line 10, on line 1. Form 1040 Column 2, line 2. Form 1040 She enters ($425), her 2012 taxable income, on line 2. Form 1040 Column 2, line 3. Form 1040 Ida enters her net capital loss deduction of $3,000 on line 3. Form 1040 Column 2, lines 4 and 5. Form 1040 Ida had no section 1202 exclusion or domestic production activities deduction in 2012. Form 1040 She enters zero on lines 4 and 5. Form 1040 Column 2, line 6. Form 1040 Although Ida's entry on line 3 modifies her adjusted gross income, that does not affect any other items included in her adjusted gross income. Form 1040 Ida enters zero on line 6. Form 1040 Column 2, line 7. Form 1040 Because Ida did not itemize deductions on her 2012 tax return, she enters zero on line 7. Form 1040 Column 2, line 8. Form 1040 Ida enters the deduction for her personal exemption of $3,800 for 2012. Form 1040 Column 2, line 9. Form 1040 After combining lines 2 through 8, Ida's modified taxable income is $6,375. Form 1040 Column 2, line 10. Form 1040 Ida figures her carryforward to 2014 by subtracting her modified taxable income (line 9) from her NOL deduction (line 1). Form 1040 She enters the $150 carryover on line 10. Form 1040 This image is too large to be displayed in the current screen. Form 1040 Please click the link to view the image. Form 1040 Form 1045, page 3 This image is too large to be displayed in the current screen. Form 1040 Please click the link to view the image. Form 1040 Form 1045, page 4 NOL Carryover From 2013 to 2014 If you had an NOL deduction carried forward from a year prior to 2013 that resulted in your having taxable income on your 2013 return of zero (of less than zero, if an estate or trust), complete Table 1 , Worksheet for NOL Carryover From 2013 to 2014, on the following pages. Form 1040 It will help you figure your NOL to carry to 2014. Form 1040 Keep the worksheet for your records. Form 1040 Worksheet Instructions At the top of the worksheet, enter the NOL year for which you are figuring the carryover. Form 1040 More than one NOL. Form 1040   If your 2013 NOL deduction includes amounts for more than one loss year, complete this worksheet only for one loss year. Form 1040 To determine which year, start with your earliest NOL and subtract each NOL separately from your taxable income figured without the NOL deduction. Form 1040 Complete this worksheet for the earliest NOL that results in your having taxable income below zero. Form 1040 Your NOL carryover to 2014 is the total of the amount on line 10 of the worksheet and all later NOL amounts. Form 1040 Example. Form 1040 Your taxable income for 2013 is $5,000 without your $9,000 NOL deduction. Form 1040 Your NOL deduction includes a $2,000 carryover from 2011 and a $7,000 carryover from 2012. Form 1040 Subtract your 2011 NOL of $2,000 from $5,000. Form 1040 This gives you taxable income of $3,000. Form 1040 Your 2011 NOL is now completely used up. Form 1040 Subtract your $7,000 2012 NOL from $3,000. Form 1040 This gives you taxable income of ($4,000). Form 1040 You now complete the worksheet for your 2012 NOL. Form 1040 Your NOL carryover to 2014 is the unused part of your 2012 NOL from line 10 of the worksheet. Form 1040 Line 2. Form 1040   Treat your NOL deduction for the NOL year entered at the top of the worksheet and later years as a positive amount. Form 1040 Add it to your negative taxable income (figured without the NOL deduction). Form 1040 Enter the result on line 2. Form 1040 Line 6. Form 1040   You must refigure the following income and deductions based on adjusted gross income. Form 1040 The special allowance for passive activity losses from rental real estate activities. Form 1040 Taxable social security and tier 1 railroad retirement benefits. Form 1040 IRA deductions. Form 1040 Excludable savings bond interest. Form 1040 Excludable employer-provided adoption benefits. Form 1040 The student loan interest deduction. Form 1040 The tuition and fees deduction. Form 1040   If none of these items apply to you, enter zero on line 6. Form 1040 Otherwise, increase your adjusted gross income by the total of lines 3 through 5 and your NOL deduction for the NOL year entered at the top of the worksheet and later years. Form 1040 Using this increased adjusted gross income, refigure the items that apply, in the order listed above. Form 1040 Your adjustment for each item is the difference between the refigured amount and the amount included on your return. Form 1040 Combine the adjustments for previous items with your adjusted gross income before refiguring the next item. Form 1040 Keep a record of your computations. Form 1040   Enter your total adjustments for the above items on line 6. Form 1040 Line 7. Form 1040   Enter zero if you claimed the standard deduction or the amounts on lines 3 through 5 are zero. Form 1040 Otherwise, use lines 11 through 33 of the worksheet to figure the amount to enter on this line. Form 1040 Complete only those sections that apply to you. Form 1040 Estates and trusts. Form 1040   Enter zero on line 7 if you did not claim any miscellaneous deductions on Form 1041, line 15c, or a casualty or theft loss. Form 1040 Otherwise, refigure these deductions by substituting modified adjusted gross income (see below ) for adjusted gross income. Form 1040 Subtract the recomputed deductions from those claimed on the return. Form 1040 Enter the result on line 7. Form 1040 Modified adjusted gross income. Form 1040   To refigure miscellaneous itemized deductions of an estate or trust (Form 1041, line 15c), modified adjusted gross income is the total of the following amounts. Form 1040 The adjusted gross income on the return. Form 1040 The amounts from lines 3 through 5 of the worksheet. Form 1040 The exemption amount from Form 1041, line 20. Form 1040 The NOL deduction for the NOL year entered at the top of the worksheet and for later years. Form 1040   To refigure the casualty and theft loss deduction of an estate or trust, modified adjusted gross income is the total of the following amounts. Form 1040 The adjusted gross income amount you used to figure the deduction claimed on the return. Form 1040 The amounts from lines 3 through 5 of the worksheet. Form 1040 The NOL deduction for the NOL year entered at the top of the worksheet and for later years. Form 1040 Line 11. Form 1040   Treat your NOL deduction for the NOL year entered at the top of the worksheet and for later years as a positive amount. Form 1040 Add it to your adjusted gross income. Form 1040 Enter the result on line 11. Form 1040 Line 20. Form 1040   Is your modified adjusted gross income from line 13 of this worksheet more than $100,000 ($50,000 if married filing separately)?   □ Yes. Form 1040 Your deduction is limited. Form 1040 Refigure your deduction using the Mortgage Insurance Premiums Deduction Worksheet in the 2013 Instructions for Form 1045. Form 1040 On line 2 of the Mortgage Insurance Premiums Deduction Worksheet, enter the amount from line 13 of this worksheet. Form 1040   □ No. Form 1040 Your deduction is not limited. Form 1040 Enter the amount from line 19 on line 20 and enter -0- on line 21. Form 1040 Line 23. Form 1040   If you had a contributions carryover from 2012 to 2013 and your NOL deduction includes an amount from an NOL year before 2012, you may have to reduce your contributions carryover. Form 1040 Reduce the contributions carryover by the amount of any adjustment you made to your 2012 charitable contributions deduction when figuring your NOL carryover to 2013. Form 1040 Use the reduced contributions carryover to figure the amount to enter on line 23. Form 1040 Please click here for the text description of the image. Form 1040 Worksheet for NOL Carryover Worksheet for NOL Carryover (Continued) How To Get Tax Help Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. Form 1040 Free help with your tax return. Form 1040   You can get free help preparing your return nationwide from IRS-certified volunteers. Form 1040 The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. Form 1040 The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Form 1040 Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Form 1040 In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. Form 1040 To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. Form 1040 gov, download the IRS2Go app, or call 1-800-906-9887. Form 1040   As part of the TCE program, AARP offers the Tax-Aide counseling program. Form 1040 To find the nearest AARP Tax-Aide site, visit AARP's website at www. Form 1040 aarp. Form 1040 org/money/taxaide or call 1-888-227-7669. Form 1040 For more information on these programs, go to IRS. Form 1040 gov and enter “VITA” in the search box. Form 1040 Internet. Form 1040    IRS. Form 1040 gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. Form 1040 Download the free IRS2Go app from the iTunes app store or from Google Play. Form 1040 Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. Form 1040 Check the status of your 2013 refund with the Where's My Refund? application on IRS. Form 1040 gov or download the IRS2Go app and select the Refund Status option. Form 1040 The IRS issues more than 9 out of 10 refunds in less than 21 days. Form 1040 Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. Form 1040 You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. Form 1040 The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Form 1040 Use the Interactive Tax Assistant (ITA) to research your tax questions. Form 1040 No need to wait on the phone or stand in line. Form 1040 The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. Form 1040 When you reach the response screen, you can print the entire interview and the final response for your records. Form 1040 New subject areas are added on a regular basis. Form 1040  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. Form 1040 gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. Form 1040 You can use the IRS Tax Map to search publications and instructions by topic or keyword. Form 1040 The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. Form 1040 When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. Form 1040 Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. Form 1040 You can also ask the IRS to mail a return or an account transcript to you. Form 1040 Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. Form 1040 gov or by calling 1-800-908-9946. Form 1040 Tax return and tax account transcripts are generally available for the current year and the past three years. Form 1040 Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. Form 1040 Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. Form 1040 If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. Form 1040 Check the status of your amended return using Where's My Amended Return? Go to IRS. Form 1040 gov and enter Where's My Amended Return? in the search box. Form 1040 You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. Form 1040 It can take up to 3 weeks from the date you mailed it to show up in our system. Form 1040 Make a payment using one of several safe and convenient electronic payment options available on IRS. Form 1040 gov. Form 1040 Select the Payment tab on the front page of IRS. Form 1040 gov for more information. Form 1040 Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. Form 1040 Figure your income tax withholding with the IRS Withholding Calculator on IRS. Form 1040 gov. Form 1040 Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. Form 1040 Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. Form 1040 gov. Form 1040 Request an Electronic Filing PIN by going to IRS. Form 1040 gov and entering Electronic Filing PIN in the search box. Form 1040 Download forms, instructions and publications, including accessible versions for people with disabilities. Form 1040 Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. Form 1040 gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. Form 1040 An employee can answer questions about your tax account or help you set up a payment plan. Form 1040 Before you visit, check the Office Locator on IRS. Form 1040 gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. Form 1040 If you have a special need, such as a disability, you can request an appointment. Form 1040 Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. Form 1040 Apply for an Employer Identification Number (EIN). Form 1040 Go to IRS. Form 1040 gov and enter Apply for an EIN in the search box. Form 1040 Read the Internal Revenue Code, regulations, or other official guidance. Form 1040 Read Internal Revenue Bulletins. Form 1040 Sign up to receive local and national tax news and more by email. Form 1040 Just click on “subscriptions” above the search box on IRS. Form 1040 gov and choose from a variety of options. Form 1040 Phone. Form 1040    You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. Form 1040 Download the free IRS2Go app from the iTunes app store or from Google Play. Form 1040 Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. Form 1040 gov, or download the IRS2Go app. Form 1040 Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Form 1040 The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Form 1040 Most VITA and TCE sites offer free electronic filing. Form 1040 Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. Form 1040 Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. Form 1040 Call the automated Where's My Refund? information hotline to check the status of your 2013 refund 24 hours a day, 7 days a week at 1-800-829-1954. Form 1040 If you e-file, you can start checking on the status of your return within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. Form 1040 The IRS issues more than 9 out of 10 refunds in less than 21 days. Form 1040 Where's My Refund? will give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. Form 1040 Before you call this automated hotline, have your 2013 tax return handy so you can enter your social security number, your filing status, and the exact whole dollar amount of your refund. Form 1040 The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Form 1040 Note, the above information is for our automated hotline. Form 1040 Our live phone and walk-in assistors can research the status of your refund only if it's been 21 days or more since you filed electronically or more than 6 weeks since you mailed your paper return. Form 1040 Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. Form 1040 You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. Form 1040 It can take up to 3 weeks from the date you mailed it to show up in our system. Form 1040 Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, publications, and prior-year forms and instructions (limited to 5 years). Form 1040 You should receive your order within 10 business days. Form 1040 Call TeleTax, 1-800-829-4477, to listen to pre-recorded messages covering general and business tax information. Form 1040 If, between January and April 15, you still have questions about the Form 1040, 1040A, or 1040EZ (like filing requirements, dependents, credits, Schedule D, pensions and IRAs or self-employment taxes), call 1-800-829-1040. Form 1040 Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. Form 1040 The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. Form 1040 These individuals can also contact the IRS through relay services such as the Federal Relay Service. Form 1040 Walk-in. Form 1040   You can find a selection of forms, publications and services — in person. Form 1040 Products. Form 1040 You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Form 1040 Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. Form 1040 Services. Form 1040 You can walk in to your local TAC for face-to-face tax help. Form 1040 An employee can answer questions about your tax account or help you set up a payment plan. Form 1040 Before visiting, use the Office Locator tool on IRS. Form 1040 gov, or choose the Contact Us option on the IRS2Go app and search Local Offices for days and hours of operation, and services provided. Form 1040 Mail. Form 1040   You can send your order for forms, instructions, and publications to the address below. Form 1040 You should receive a response within 10 business days after your request is received. Form 1040 Internal Revenue Service 1201 N. Form 1040 Mitsubishi Motorway Bloomington, IL 61705-6613    The Taxpayer Advocate Service Is Here to Help You. Form 1040 The Taxpayer Advocate Service (TAS) is your voice at the IRS. Form 1040 Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. Form 1040   What can TAS do for you? We can offer you free help with IRS problems that you can't resolve on your own. Form 1040 We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. Form 1040 You face (or your business is facing) an immediate threat of adverse action. Form 1040 You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. Form 1040   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. Form 1040 Here's why we can help: TAS is an independent organization within the IRS. Form 1040 Our advocates know how to work with the IRS. Form 1040 Our services are free and tailored to meet your needs. Form 1040 We have offices in every state, the District of Columbia, and Puerto Rico. Form 1040   How can you reach us? If you think TAS can help you, call your local advocate, whose number is in your local directory and at Taxpayer Advocate, or call us toll-free at 1-877-777-4778. Form 1040   How else does TAS help taxpayers?  TAS also works to resolve large-scale, systemic problems that affect many taxpayers. Form 1040 If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System. Form 1040 Low Income Taxpayer Clinics Low Income
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SOI Tax Stats - Tax Stats at a Glance

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2013 Tax Stats Card


Summary of Collections Before Refunds by Type of Return, FY 2012 [1]

 


Type of Return


Number of Returns


Gross Collections
(Millions of $)

Individual income tax

146,243,886

1,371,402

Corporation income tax

2,262,961 [2]

280,965

Employment taxes

29,589,891

784,397

Excise taxes

1,196,789

56,175

Gift tax

249,451

2,110

Estate tax

26,859

12,341


Selected Information from Returns Filed


Corporate Returns (TY 2010) [3]
 

 Number filing with assets $250M or more

 14,584

 Percent of total corporate net income for firms with assets $250M or more

73.2%

 


S Corporation Returns (TY 2010) [3]
 

 Number of returns

 4,127,554

 


Partnership Returns  (TY 2011) [3]
 

 Number of returns

3,285,177

 


Individual Returns

Top 1-percent Adjusted Gross Income (AGI) break (TY 2011) [3]

 $388,799

Top 10-percent AGI break (TY 2011) [3]

  $120,077

Median AGI (TY 2011) [3] 

$34,794

 

Percent that claim standard deductions (TY 2011) [3]

  66.5%

Percent that claim itemized deductions (TY 2011) [3]

  31.8%

Percent e-filed (TY 2012) thru 4/25/2013 [4]  

90.1%

Percent using paid preparers (TY 2011) [3]

  56.0%

 

Number of returns with AGI $1M or more (TY 2011) [4] 

304,118

State with the highest number-California (TY 2011)

45,109

State with the least number- Vermont (TY 2011)  

340

 

Number of individual refunds (TY 2011) (millions) [3] 

  113.5

Individual refund amount (TY 2011) (billions of $) [3]

  $325.8

Average individual refund amount (TY 2011)

  $2,872

 

Earned Income Tax Credit (TY 2011) [3]:

Number of returns with credit (millions)  

27.9

Amount claimed (billions of $)

  $62.9

 

Nonprofit Organizations  (TY 2009) [3,5]

Number of returns (Forms 990 & 990-PF filers)  

413,415

Assets controlled by nonprofits (billions of $)  

$3.2

 

Taxpayer Assistance  (FY 2012) [1]

Number assisted by writing, calling, or by walk-in

96,867,755

 

 



Sources and footnotes:

[FY] Fiscal Year 
[TY] Tax Year
[1] Source: IRS Data Book, publication 55B
[2] Excludes S Corporations.
[3] Source—SOI data.
[4] Source— IRS Masterfile System
[5] Organizations tax-exempt under Section 501(c)(3)
 

Revised: August 2013


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Page Last Reviewed or Updated: 24-Jan-2014

The Form 1040

Form 1040 17. Form 1040   Individual Retirement Arrangements (IRAs) Table of Contents What's New Reminders Introduction Useful Items - You may want to see: Traditional IRAsWho Can Open a Traditional IRA? When and How Can a Traditional IRA Be Opened? How Much Can Be Contributed? When Can Contributions Be Made? How Much Can You Deduct? Nondeductible Contributions Inherited IRAs Can You Move Retirement Plan Assets? When Can You Withdraw or Use IRA Assets? When Must You Withdraw IRA Assets? (Required Minimum Distributions) Are Distributions Taxable? What Acts Result in Penalties or Additional Taxes? Roth IRAsWhat Is a Roth IRA? When Can a Roth IRA Be Opened? Can You Contribute to a Roth IRA? Can You Move Amounts Into a Roth IRA? Are Distributions Taxable? What's New Traditional IRA contribution and deduction limit. Form 1040  The contribution limit to your traditional IRA for 2013 will be increased to the smaller of the following amounts: $5,500, or Your taxable compensation for the year. Form 1040 If you were age 50 or older before 2014, the most that can be contributed to your traditional IRA for 2013 will be the smaller of the following amounts: $6,500, or Your taxable compensation for the year. Form 1040 For more information, see How Much Can Be Contributed? later. Form 1040 Roth IRA contribution limit. Form 1040  If contributions on your behalf are made only to Roth IRAs, your contribution limit for 2013 will generally be the lesser of: $5,500, or Your taxable compensation for the year. Form 1040 If you were age 50 or older before 2014 and contributions on your behalf were made only to Roth IRAs, your contribution limit for 2013 will generally be the lesser of: $6,500, or Your taxable compensation for the year. Form 1040 However, if your modified adjusted gross income (AGI) is above a certain amount, your contribution limit may be reduced. Form 1040 For more information, see How Much Can Be Contributed? under Can You Contribute to a Roth IRA? later. Form 1040 Modified AGI limit for traditional IRA contributions increased. Form 1040  For 2013, if you were covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is: More than $95,000 but less than $115,000 for a married couple filing a joint return or a qualifying widow(er), More than $59,000 but less than $69,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. Form 1040 If you either lived with your spouse or file a joint return, and your spouse was covered by a retirement plan at work, but you were not, your deduction is phased out if your modified AGI is more than $178,000 but less than $188,000. Form 1040 If your modified AGI is $188,000 or more, you cannot take a deduction for contributions to a traditional IRA. Form 1040 See How Much Can You Deduct , later. Form 1040 Modified AGI limit for Roth IRA contributions increased. Form 1040  For 2013, your Roth IRA contribution limit is reduced (phased out) in the following situations. Form 1040 Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $178,000. Form 1040 You cannot make a Roth IRA contribution if your modified AGI is $188,000 or more. Form 1040 Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2013 and your modified AGI is at least $112,000. Form 1040 You cannot make a Roth IRA contribution if your modified AGI is $127,000 or more. Form 1040 Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. Form 1040 You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more. Form 1040 See Can You Contribute to a Roth IRA , later. Form 1040 Net Investment Income Tax. Form 1040   For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan including IRAs (for example; 401(a), 403(a), 403(b), 408, 408A, or 457(b) plans). Form 1040 However, these distributions are taken into account when determining the modified adjusted gross income threshold. Form 1040 Distributions from a nonqualified retirement plan are included in net investment income. Form 1040 See Form 8960, Net Investment Income Tax - Individuals, Estates, and Trusts, and its instructions for more information. Form 1040 Name change. Form 1040  All spousal IRAs have been renamed Kay Bailey Hutchison Spousal IRAs. Form 1040 There are no changes to the rules regarding these IRAs. Form 1040 See Kay Bailey Hutchison Spousal IRA Limit , later, for more information. Form 1040 Reminders 2014 limits. Form 1040   You can find information about the 2014 contribution and AGI limits in Publication 590. Form 1040 Contributions to both traditional and Roth IRAs. Form 1040   For information on your combined contribution limit if you contribute to both traditional and Roth IRAs, see Roth IRAs and traditional IRAs under How Much Can Be Contributed? in Roth IRAs, later. Form 1040 Statement of required minimum distribution. Form 1040  If a minimum distribution from your IRA is required, the trustee, custodian, or issuer that held the IRA at the end of the preceding year must either report the amount of the required minimum distribution to you, or offer to calculate it for you. Form 1040 The report or offer must include the date by which the amount must be distributed. Form 1040 The report is due January 31 of the year in which the minimum distribution is required. Form 1040 It can be provided with the year-end fair market value statement that you normally get each year. Form 1040 No report is required for IRAs of owners who have died. Form 1040 IRA interest. Form 1040  Although interest earned from your IRA is generally not taxed in the year earned, it is not tax-exempt interest. Form 1040 Tax on your traditional IRA is generally deferred until you take a distribution. Form 1040 Do not report this interest on your tax return as tax-exempt interest. Form 1040 Form 8606. Form 1040   To designate contributions as nondeductible, you must file Form 8606, Nondeductible IRAs. Form 1040 The term “50 or older” is used several times in this chapter. Form 1040 It refers to an IRA owner who is age 50 or older by the end of the tax year. Form 1040 Introduction An individual retirement arrangement (IRA) is a personal savings plan that gives you tax advantages for setting aside money for your retirement. Form 1040 This chapter discusses the following topics. Form 1040 The rules for a traditional IRA (any IRA that is not a Roth or SIMPLE IRA). Form 1040 The Roth IRA, which features nondeductible contributions and tax-free distributions. Form 1040 Simplified Employee Pensions (SEPs) and Savings Incentive Match Plans for Employees (SIMPLEs) are not discussed in this chapter. Form 1040 For more information on these plans and employees' SEP IRAs and SIMPLE IRAs that are part of these plans, see Publications 560 and 590. Form 1040 For information about contributions, deductions, withdrawals, transfers, rollovers, and other transactions, see Publication 590. Form 1040 Useful Items - You may want to see: Publication 560 Retirement Plans for Small Business 590 Individual Retirement Arrangements (IRAs) Form (and Instructions) 5329 Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts 8606 Nondeductible IRAs Traditional IRAs In this chapter, the original IRA (sometimes called an ordinary or regular IRA) is referred to as a “traditional IRA. Form 1040 ” A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA. Form 1040 Two advantages of a traditional IRA are: You may be able to deduct some or all of your contributions to it, depending on your circumstances, and Generally, amounts in your IRA, including earnings and gains, are not taxed until they are distributed. Form 1040 Who Can Open a Traditional IRA? You can open and make contributions to a traditional IRA if: You (or, if you file a joint return, your spouse) received taxable compensation during the year, and You were not age 70½ by the end of the year. Form 1040 What is compensation?   Generally, compensation is what you earn from working. Form 1040 Compensation includes wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services. Form 1040 The IRS treats as compensation any amount properly shown in box 1 (Wages, tips, other compensation) of Form W-2, Wage and Tax Statement, provided that amount is reduced by any amount properly shown in box 11 (Nonqualified plans). Form 1040   Scholarship and fellowship payments are compensation for this purpose only if shown in box 1 of Form W-2. Form 1040   Compensation also includes commissions and taxable alimony and separate maintenance payments. Form 1040 Self-employment income. Form 1040   If you are self-employed (a sole proprietor or a partner), compensation is the net earnings from your trade or business (provided your personal services are a material income-producing factor) reduced by the total of: The deduction for contributions made on your behalf to retirement plans, and The deductible part of your self-employment tax. Form 1040   Compensation includes earnings from self-employment even if they are not subject to self-employment tax because of your religious beliefs. Form 1040 Nontaxable combat pay. Form 1040   For IRA purposes, if you were a member of the U. Form 1040 S. Form 1040 Armed Forces, your compensation includes any nontaxable combat pay you receive. Form 1040 What is not compensation?   Compensation does not include any of the following items. Form 1040 Earnings and profits from property, such as rental income, interest income, and dividend income. Form 1040 Pension or annuity income. Form 1040 Deferred compensation received (compensation payments postponed from a past year). Form 1040 Income from a partnership for which you do not provide services that are a material income-producing factor. Form 1040 Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b. Form 1040 Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs. Form 1040 When and How Can a Traditional IRA Be Opened? You can open a traditional IRA at any time. Form 1040 However, the time for making contributions for any year is limited. Form 1040 See When Can Contributions Be Made , later. Form 1040 You can open different kinds of IRAs with a variety of organizations. Form 1040 You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. Form 1040 You can also open an IRA through your stockbroker. Form 1040 Any IRA must meet Internal Revenue Code requirements. Form 1040 Kinds of traditional IRAs. Form 1040   Your traditional IRA can be an individual retirement account or annuity. Form 1040 It can be part of either a simplified employee pension (SEP) or an employer or employee association trust account. Form 1040 How Much Can Be Contributed? There are limits and other rules that affect the amount that can be contributed to a traditional IRA. Form 1040 These limits and other rules are explained below. Form 1040 Community property laws. Form 1040   Except as discussed later under Kay Bailey Hutchison Spousal IRA limit , each spouse figures his or her limit separately, using his or her own compensation. Form 1040 This is the rule even in states with community property laws. Form 1040 Brokers' commissions. Form 1040   Brokers' commissions paid in connection with your traditional IRA are subject to the contribution limit. Form 1040 Trustees' fees. Form 1040   Trustees' administrative fees are not subject to the contribution limit. Form 1040 Qualified reservist repayments. Form 1040   If you are (or were) a member of a reserve component and you were ordered or called to active duty after September 11, 2001, you may be able to contribute (repay) to an IRA amounts equal to any qualified reservist distributions you received. Form 1040 You can make these repayment contributions even if they would cause your total contributions to the IRA to be more than the general limit on contributions. Form 1040 To be eligible to make these repayment contributions, you must have received a qualified reservist distribution from an IRA or from a section 401(k) or 403(b) plan or similar arrangement. Form 1040   For more information, see Qualified reservist repayments under How Much Can Be Contributed? in chapter 1 of Publication 590. Form 1040 Contributions on your behalf to a traditional IRA reduce your limit for contributions to a Roth IRA. Form 1040 (See Roth IRAs, later. Form 1040 ) General limit. Form 1040   For 2013, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts. Form 1040 $5,500 ($6,500 if you are 50 or older). Form 1040 Your taxable compensation (defined earlier) for the year. Form 1040 This is the most that can be contributed regardless of whether the contributions are to one or more traditional IRAs or whether all or part of the contributions are nondeductible. Form 1040 (See Nondeductible Contributions , later. Form 1040 ) Qualified reservist repayments do not affect this limit. Form 1040 Example 1. Form 1040 Betty, who is 34 years old and single, earned $24,000 in 2013. Form 1040 Her IRA contributions for 2013 are limited to $5,500. Form 1040 Example 2. Form 1040 John, an unmarried college student working part time, earned $3,500 in 2013. Form 1040 His IRA contributions for 2013 are limited to $3,500, the amount of his compensation. Form 1040 Kay Bailey Hutchison Spousal IRA limit. Form 1040   For 2013, if you file a joint return and your taxable compensation is less than that of your spouse, the most that can be contributed for the year to your IRA is the smaller of the following amounts. Form 1040 $5,500 ($6,500 if you are 50 or older). Form 1040 The total compensation includible in the gross income of both you and your spouse for the year, reduced by the following two amounts. Form 1040 Your spouse's IRA contribution for the year to a traditional IRA. Form 1040 Any contribution for the year to a Roth IRA on behalf of your spouse. Form 1040 This means that the total combined contributions that can be made for the year to your IRA and your spouse's IRA can be as much as $11,000 ($12,000 if only one of you is 50 or older, or $13,000 if both of you are 50 or older). Form 1040 When Can Contributions Be Made? As soon as you open your traditional IRA, contributions can be made to it through your chosen sponsor (trustee or other administrator). Form 1040 Contributions must be in the form of money (cash, check, or money order). Form 1040 Property cannot be contributed. Form 1040 Contributions must be made by due date. Form 1040   Contributions can be made to your traditional IRA for a year at any time during the year or by the due date for filing your return for that year, not including extensions. Form 1040 Age 70½ rule. Form 1040   Contributions cannot be made to your traditional IRA for the year in which you reach age 70½ or for any later year. Form 1040   You attain age 70½ on the date that is 6 calendar months after the 70th anniversary of your birth. Form 1040 If you were born on or before June 30, 1943, you cannot contribute for 2013 or any later year. Form 1040 Designating year for which contribution is made. Form 1040   If an amount is contributed to your traditional IRA between January 1 and April 15, you should tell the sponsor which year (the current year or the previous year) the contribution is for. Form 1040 If you do not tell the sponsor which year it is for, the sponsor can assume, and report to the IRS, that the contribution is for the current year (the year the sponsor received it). Form 1040 Filing before a contribution is made. Form 1040   You can file your return claiming a traditional IRA contribution before the contribution is actually made. Form 1040 Generally, the contribution must be made by the due date of your return, not including extensions. Form 1040 Contributions not required. Form 1040   You do not have to contribute to your traditional IRA for every tax year, even if you can. Form 1040 How Much Can You Deduct? Generally, you can deduct the lesser of: The contributions to your traditional IRA for the year, or The general limit (or the Kay Bailey Hutchison Spousal IRA limit, if it applies). Form 1040 However, if you or your spouse was covered by an employer retirement plan, you may not be able to deduct this amount. Form 1040 See Limit If Covered by Employer Plan , later. Form 1040 You may be able to claim a credit for contributions to your traditional IRA. Form 1040 For more information, see chapter 37. Form 1040 Trustees' fees. Form 1040   Trustees' administrative fees that are billed separately and paid in connection with your traditional IRA are not deductible as IRA contributions. Form 1040 However, they may be deductible as a miscellaneous itemized deduction on Schedule A (Form 1040). Form 1040 See chapter 28. Form 1040 Brokers' commissions. Form 1040   Brokers' commissions are part of your IRA contribution and, as such, are deductible subject to the limits. Form 1040 Full deduction. Form 1040   If neither you nor your spouse was covered for any part of the year by an employer retirement plan, you can take a deduction for total contributions to one or more traditional IRAs of up to the lesser of: $5,500 ($6,500 if you are age 50 or older in 2013). Form 1040 100% of your compensation. Form 1040 This limit is reduced by any contributions made to a 501(c)(18) plan on your behalf. Form 1040 Kay Bailey Hutchison Spousal IRA. Form 1040   In the case of a married couple with unequal compensation who file a joint return, the deduction for contributions to the traditional IRA of the spouse with less compensation is limited to the lesser of the following amounts. Form 1040 $5,500 ($6,500 if the spouse with the lower compensation is age 50 or older in 2013). Form 1040 The total compensation includible in the gross income of both spouses for the year reduced by the following three amounts. Form 1040 The IRA deduction for the year of the spouse with the greater compensation. Form 1040 Any designated nondeductible contribution for the year made on behalf of the spouse with the greater compensation. Form 1040 Any contributions for the year to a Roth IRA on behalf of the spouse with the greater compensation. Form 1040 This limit is reduced by any contributions to a 501(c)(18) plan on behalf of the spouse with the lesser compensation. Form 1040 Note. Form 1040 If you were divorced or legally separated (and did not remarry) before the end of the year, you cannot deduct any contributions to your spouse's IRA. Form 1040 After a divorce or legal separation, you can deduct only contributions to your own IRA. Form 1040 Your deductions are subject to the rules for single individuals. Form 1040 Covered by an employer retirement plan. Form 1040   If you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, your deduction may be further limited. Form 1040 This is discussed later under Limit If Covered by Employer Plan . Form 1040 Limits on the amount you can deduct do not affect the amount that can be contributed. Form 1040 See Nondeductible Contributions , later. Form 1040 Are You Covered by an Employer Plan? The Form W-2 you receive from your employer has a box used to indicate whether you were covered for the year. Form 1040 The “Retirement plan” box should be checked if you were covered. Form 1040 Reservists and volunteer firefighters should also see Situations in Which You Are Not Covered by an Employer Plan , later. Form 1040 If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer. Form 1040 Federal judges. Form 1040   For purposes of the IRA deduction, federal judges are covered by an employer retirement plan. Form 1040 For Which Year(s) Are You Covered by an Employer Plan? Special rules apply to determine the tax years for which you are covered by an employer plan. Form 1040 These rules differ depending on whether the plan is a defined contribution plan or a defined benefit plan. Form 1040 Tax year. Form 1040   Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. Form 1040 For almost all people, the tax year is the calendar year. Form 1040 Defined contribution plan. Form 1040   Generally, you are covered by a defined contribution plan for a tax year if amounts are contributed or allocated to your account for the plan year that ends with or within that tax year. Form 1040   A defined contribution plan is a plan that provides for a separate account for each person covered by the plan. Form 1040 Types of defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans. Form 1040 Defined benefit plan. Form 1040   If you are eligible to participate in your employer's defined benefit plan for the plan year that ends within your tax year, you are covered by the plan. Form 1040 This rule applies even if you: Declined to participate in the plan, Did not make a required contribution, or Did not perform the minimum service required to accrue a benefit for the year. Form 1040   A defined benefit plan is any plan that is not a defined contribution plan. Form 1040 Defined benefit plans include pension plans and annuity plans. Form 1040 No vested interest. Form 1040   If you accrue a benefit for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the accrual. Form 1040 Situations in Which You Are Not Covered by an Employer Plan Unless you are covered under another employer plan, you are not covered by an employer plan if you are in one of the situations described below. Form 1040 Social security or railroad retirement. Form 1040   Coverage under social security or railroad retirement is not coverage under an employer retirement plan. Form 1040 Benefits from a previous employer's plan. Form 1040   If you receive retirement benefits from a previous employer's plan, you are not covered by that plan. Form 1040 Reservists. Form 1040   If the only reason you participate in a plan is because you are a member of a reserve unit of the armed forces, you may not be covered by the plan. Form 1040 You are not covered by the plan if both of the following conditions are met. Form 1040 The plan you participate in is established for its employees by: The United States, A state or political subdivision of a state, or An instrumentality of either (a) or (b) above. Form 1040 You did not serve more than 90 days on active duty during the year (not counting duty for training). Form 1040 Volunteer firefighters. Form 1040   If the only reason you participate in a plan is because you are a volunteer firefighter, you may not be covered by the plan. Form 1040 You are not covered by the plan if both of the following conditions are met. Form 1040 The plan you participate in is established for its employees by: The United States, A state or political subdivision of a state, or An instrumentality of either (a) or (b) above. Form 1040 Your accrued retirement benefits at the beginning of the year will not provide more than $1,800 per year at retirement. Form 1040 Limit If Covered by Employer Plan If either you or your spouse was covered by an employer retirement plan, you may be entitled to only a partial (reduced) deduction or no deduction at all, depending on your income and your filing status. Form 1040 Your deduction begins to decrease (phase out) when your income rises above a certain amount and is eliminated altogether when it reaches a higher amount. Form 1040 These amounts vary depending on your filing status. Form 1040 To determine if your deduction is subject to phaseout, you must determine your modified adjusted gross income (AGI) and your filing status. Form 1040 See Filing status and Modified adjusted gross income (AGI) , later. Form 1040 Then use Table 17-1 or 17-2 to determine if the phaseout applies. Form 1040 Social security recipients. Form 1040   Instead of using Table 17-1 or Table 17-2, use the worksheets in Appendix B of Publication 590 if, for the year, all of the following apply. Form 1040 You received social security benefits. Form 1040 You received taxable compensation. Form 1040 Contributions were made to your traditional IRA. Form 1040 You or your spouse was covered by an employer retirement plan. Form 1040 Use those worksheets to figure your IRA deduction, your nondeductible contribution, and the taxable portion, if any, of your social security benefits. Form 1040 Deduction phaseout. Form 1040   If you were covered by an employer retirement plan and you did not receive any social security retirement benefits, your IRA deduction may be reduced or eliminated depending on your filing status and modified AGI as shown in Table 17-1. Form 1040 Table 17-1. Form 1040 Effect of Modified AGI1 on Deduction if You Are Covered by Retirement Plan at Work If you are covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. Form 1040 IF your filing status is. Form 1040 . Form 1040 . Form 1040   AND your modified AGI is. Form 1040 . Form 1040 . Form 1040   THEN you can take. Form 1040 . Form 1040 . Form 1040 single   or  head of household   $59,000 or less   a full deduction. Form 1040   more than $59,000 but less than $69,000   a partial deduction. Form 1040   $69,000 or more   no deduction. Form 1040 married filing jointly   or  qualifying widow(er)   $95,000 or less   a full deduction. Form 1040   more than $95,000 but less than $115,000   a partial deduction. Form 1040   $115,000 or more   no deduction. Form 1040 married filing separately2   less than $10,000   a partial deduction. Form 1040   $10,000 or more   no deduction. Form 1040 1Modified AGI (adjusted gross income). Form 1040 See Modified adjusted gross income (AGI) . Form 1040 2If you did not live with your spouse at any time during the year, your filing status is considered Single for this purpose (therefore, your IRA deduction is determined under the “Single” column). Form 1040 If your spouse is covered. Form 1040   If you are not covered by an employer retirement plan, but your spouse is, and you did not receive any social security benefits, your IRA deduction may be reduced or eliminated entirely depending on your filing status and modified AGI as shown in Table 17-2. Form 1040 Filing status. Form 1040   Your filing status depends primarily on your marital status. Form 1040 For this purpose, you need to know if your filing status is single or head of household, married filing jointly or qualifying widow(er), or married filing separately. Form 1040 If you need more information on filing status, see chapter 2. Form 1040 Lived apart from spouse. Form 1040   If you did not live with your spouse at any time during the year and you file a separate return, your filing status, for this purpose, is single. Form 1040 Table 17-2. Form 1040 Effect of Modified AGI1 on Deduction if You Are NOT Covered by Retirement Plan at Work If you are not covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. Form 1040 IF your filing status is. Form 1040 . Form 1040 . Form 1040   AND your modified AGI is. Form 1040 . Form 1040 . Form 1040   THEN you can take. Form 1040 . Form 1040 . Form 1040 single, head of household, or qualifying widow(er)   any amount   a full deduction. Form 1040 married filing jointly or separately with a spouse who is not covered by a plan at work   any amount   a full deduction. Form 1040 married filing jointly with a spouse who is covered by a plan at work   $178,000 or less   a full deduction. Form 1040   more than $178,000 but less than $188,000   a partial deduction. Form 1040   $188,000 or more   no deduction. Form 1040 married filing separately with a spouse who is covered by a plan at work2   less than $10,000   a partial deduction. Form 1040   $10,000 or more   no deduction. Form 1040 1Modified AGI (adjusted gross income). Form 1040 See Modified adjusted gross income (AGI) . Form 1040 2You are entitled to the full deduction if you did not live with your spouse at any time during the year. Form 1040 Modified adjusted gross income (AGI). Form 1040   How you figure your modified AGI depends on whether you are filing Form 1040 or Form 1040A. Form 1040 If you made contributions to your IRA for 2013 and received a distribution from your IRA in 2013, see Publication 590. Form 1040 You may be able to use Worksheet 17-1 to figure your modified AGI. Form 1040    Do not assume that your modified AGI is the same as your compensation. Form 1040 Your modified AGI may include income in addition to your compensation (discussed earlier), such as interest, dividends, and income from IRA distributions. Form 1040 Form 1040. Form 1040   If you file Form 1040, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following eight amounts. Form 1040 IRA deduction. Form 1040 Student loan interest deduction. Form 1040 Tuition and fees deduction. Form 1040 Domestic production activities deduction. Form 1040 Foreign earned income exclusion. Form 1040 Foreign housing exclusion or deduction. Form 1040 Exclusion of qualified savings bond interest shown on Form 8815, Exclusion of Interest From Series EE and I U. Form 1040 S. Form 1040 Savings Bonds Issued After 1989. Form 1040 Exclusion of employer-provided adoption benefits shown on Form 8839, Qualified Adoption Expenses. Form 1040 This is your modified AGI. Form 1040 Form 1040A. Form 1040   If you file Form 1040A, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. Form 1040 IRA deduction. Form 1040 Student loan interest deduction. Form 1040 Tuition and fees deduction. Form 1040 Exclusion of qualified savings bond interest shown on Form 8815. Form 1040 This is your modified AGI. Form 1040 Both contributions for 2013 and distributions in 2013. Form 1040   If all three of the following apply, any IRA distributions you received in 2013 may be partly tax free and partly taxable. Form 1040 You received distributions in 2013 from one or more traditional IRAs. Form 1040 You made contributions to a traditional IRA for 2013. Form 1040 Some of those contributions may be nondeductible contributions. Form 1040 If this is your situation, you must figure the taxable part of the traditional IRA distribution before you can figure your modified AGI. Form 1040 To do this, you can use Worksheet 1-5, Figuring the Taxable Part of Your IRA Distribution, in Publication 590. Form 1040   If at least one of the above does not apply, figure your modified AGI using Worksheet 17-1, later. Form 1040    How to figure your reduced IRA deduction. Form 1040   You can figure your reduced IRA deduction for either Form 1040 or Form 1040A by using the worksheets in chapter 1 of Publication 590. Form 1040 Also, the instructions for Form 1040 and Form 1040A include similar worksheets that you may be able to use instead. Form 1040 Worksheet 17-1. Form 1040 Figuring Your Modified AGI Use this worksheet to figure your modified adjusted gross income for traditional IRA purposes. Form 1040 1. Form 1040 Enter your adjusted gross income (AGI) from Form 1040, line 38, or Form 1040A, line 22, figured without taking into account the amount from Form 1040, line 32, or Form 1040A, line 17 1. Form 1040   2. Form 1040 Enter any student loan interest deduction from Form 1040, line 33, or Form 1040A, line 18 2. Form 1040   3. Form 1040 Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 3. Form 1040   4. Form 1040 Enter any domestic production activities deduction from Form 1040, line 35 4. Form 1040   5. Form 1040 Enter any foreign earned income and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 5. Form 1040   6. Form 1040 Enter any foreign housing deduction from Form 2555, line 50 6. Form 1040   7. Form 1040 Enter any excludable savings bond interest from Form 8815, line 14 7. Form 1040   8. Form 1040 Enter any excluded employer-provided adoption benefits from Form 8839, line 28 8. Form 1040   9. Form 1040 Add lines 1 through 8. Form 1040 This is your Modified AGI for traditional IRA purposes 9. Form 1040   Reporting Deductible Contributions If you file Form 1040, enter your IRA deduction on line 32 of that form. Form 1040 If you file Form 1040A, enter your IRA deduction on line 17. Form 1040 You cannot deduct IRA contributions on Form 1040EZ. Form 1040 Nondeductible Contributions Although your deduction for IRA contributions may be reduced or eliminated, contributions can be made to your IRA up to the general limit or, if it applies, the Kay Bailey Hutchison Spousal IRA limit. Form 1040 The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. Form 1040 Example. Form 1040 Mike is 28 years old and single. Form 1040 In 2013, he was covered by a retirement plan at work. Form 1040 His salary was $57,312. Form 1040 His modified AGI was $70,000. Form 1040 Mike made a $5,500 IRA contribution for 2013. Form 1040 Because he was covered by a retirement plan and his modified AGI was over $69,000, he cannot deduct his $5,500 IRA contribution. Form 1040 He must designate this contribution as a nondeductible contribution by reporting it on Form 8606, as explained next. Form 1040 Form 8606. Form 1040   To designate contributions as nondeductible, you must file Form 8606. Form 1040   You do not have to designate a contribution as nondeductible until you file your tax return. Form 1040 When you file, you can even designate otherwise deductible contributions as nondeductible. Form 1040   You must file Form 8606 to report nondeductible contributions even if you do not have to file a tax return for the year. Form 1040 A Form 8606 is not used for the year that you make a rollover from a qualified retirement plan to a traditional IRA and the rollover includes nontaxable amounts. Form 1040 In those situations, a Form 8606 is completed for the year you take a distribution from that IRA. Form 1040 See Form 8606 under Distributions Fully or Partly Taxable, later. Form 1040 Failure to report nondeductible contributions. Form 1040   If you do not report nondeductible contributions, all of the contributions to your traditional IRA will be treated as deductible contributions when withdrawn. Form 1040 All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. Form 1040 Penalty for overstatement. Form 1040   If you overstate the amount of nondeductible contributions on your Form 8606 for any tax year, you must pay a penalty of $100 for each overstatement, unless it was due to reasonable cause. Form 1040 Penalty for failure to file Form 8606. Form 1040   You will have to pay a $50 penalty if you do not file a required Form 8606, unless you can prove that the failure was due to reasonable cause. Form 1040    Tax on earnings on nondeductible contributions. Form 1040   As long as contributions are within the contribution limits, none of the earnings or gains on contributions (deductible or nondeductible) will be taxed until they are distributed. Form 1040 See When Can You Withdraw or Use IRA Assets , later. Form 1040 Cost basis. Form 1040   You will have a cost basis in your traditional IRA if you made any nondeductible contributions. Form 1040 Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions. Form 1040 Inherited IRAs If you inherit a traditional IRA, you are called a beneficiary. Form 1040 A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. Form 1040 Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive. Form 1040 Inherited from spouse. Form 1040   If you inherit a traditional IRA from your spouse, you generally have the following three choices. Form 1040 You can: Treat it as your own IRA by designating yourself as the account owner. Form 1040 Treat it as your own by rolling it over into your IRA, or to the extent it is taxable, into a: Qualified employer plan, Qualified employee annuity plan (section 403(a) plan), Tax-sheltered annuity plan (section 403(b) plan), or Deferred compensation plan of a state or local government (section 457 plan). Form 1040 Treat yourself as the beneficiary rather than treating the IRA as your own. Form 1040 Treating it as your own. Form 1040   You will be considered to have chosen to treat the IRA as your own if: Contributions (including rollover contributions) are made to the inherited IRA, or You do not take the required minimum distribution for a year as a beneficiary of the IRA. Form 1040 You will only be considered to have chosen to treat the IRA as your own if: You are the sole beneficiary of the IRA, and You have an unlimited right to withdraw amounts from it. Form 1040   However, if you receive a distribution from your deceased spouse's IRA, you can roll that distribution over into your own IRA within the 60-day time limit, as long as the distribution is not a required distribution, even if you are not the sole beneficiary of your deceased spouse's IRA. Form 1040 Inherited from someone other than spouse. Form 1040   If you inherit a traditional IRA from anyone other than your deceased spouse, you cannot treat the inherited IRA as your own. Form 1040 This means that you cannot make any contributions to the IRA. Form 1040 It also means you cannot roll over any amounts into or out of the inherited IRA. Form 1040 However, you can make a trustee-to-trustee transfer as long as the IRA into which amounts are being moved is set up and maintained in the name of the deceased IRA owner for the benefit of you as beneficiary. Form 1040 For more information, see the discussion of inherited IRAs under Rollover From One IRA Into Another, later. Form 1040 Can You Move Retirement Plan Assets? You can transfer, tax free, assets (money or property) from other retirement plans (including traditional IRAs) to a traditional IRA. Form 1040 You can make the following kinds of transfers. Form 1040 Transfers from one trustee to another. Form 1040 Rollovers. Form 1040 Transfers incident to a divorce. Form 1040 Transfers to Roth IRAs. Form 1040   Under certain conditions, you can move assets from a traditional IRA or from a designated Roth account to a Roth IRA. Form 1040 You can also move assets from a qualified retirement plan to a Roth IRA. Form 1040 See Can You Move Amounts Into a Roth IRA? under Roth IRAs, later. Form 1040 Trustee-to-Trustee Transfer A transfer of funds in your traditional IRA from one trustee directly to another, either at your request or at the trustee's request, is not a rollover. Form 1040 Because there is no distribution to you, the transfer is tax free. Form 1040 Because it is not a rollover, it is not affected by the 1-year waiting period required between rollovers, discussed later under Rollover From One IRA Into Another . Form 1040 For information about direct transfers to IRAs from retirement plans other than IRAs, see Can You Move Retirement Plan Assets? in chapter 1 and Can You Move Amounts Into a Roth IRA? in chapter 2 of Publication 590. Form 1040 Rollovers Generally, a rollover is a tax-free distribution to you of cash or other assets from one retirement plan that you contribute (roll over) to another retirement plan. Form 1040 The contribution to the second retirement plan is called a “rollover contribution. Form 1040 ” Note. Form 1040 An amount rolled over tax free from one retirement plan to another is generally includible in income when it is distributed from the second plan. Form 1040 Kinds of rollovers to a traditional IRA. Form 1040   You can roll over amounts from the following plans into a traditional IRA: A traditional IRA, An employer's qualified retirement plan for its employees, A deferred compensation plan of a state or local government (section 457 plan), or A tax-sheltered annuity plan (section 403(b) plan). Form 1040 Treatment of rollovers. Form 1040   You cannot deduct a rollover contribution, but you must report the rollover distribution on your tax return as discussed later under Reporting rollovers from IRAs and under Reporting rollovers from employer plans . Form 1040 Kinds of rollovers from a traditional IRA. Form 1040   You may be able to roll over, tax free, a distribution from your traditional IRA into a qualified plan. Form 1040 These plans include the federal Thrift Savings Fund (for federal employees), deferred compensation plans of state or local governments (section 457 plans), and tax-sheltered annuity plans (section 403(b) plans). Form 1040 The part of the distribution that you can roll over is the part that would otherwise be taxable (includible in your income). Form 1040 Qualified plans may, but are not required to, accept such rollovers. Form 1040 Time limit for making a rollover contribution. Form 1040   You generally must make the rollover contribution by the 60th day after the day you receive the distribution from your traditional IRA or your employer's plan. Form 1040 The IRS may waive the 60-day requirement where the failure to do so would be against equity or good conscience, such as in the event of a casualty, disaster, or other event beyond your reasonable control. Form 1040 For more information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Form 1040 Extension of rollover period. Form 1040   If an amount distributed to you from a traditional IRA or a qualified employer retirement plan is a frozen deposit at any time during the 60-day period allowed for a rollover, special rules extend the rollover period. Form 1040 For more information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Form 1040 More information. Form 1040   For more information on rollovers, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Form 1040 Rollover From One IRA Into Another You can withdraw, tax free, all or part of the assets from one traditional IRA if you reinvest them within 60 days in the same or another traditional IRA. Form 1040 Because this is a rollover, you cannot deduct the amount that you reinvest in an IRA. Form 1040 Waiting period between rollovers. Form 1040   Generally, if you make a tax-free rollover of any part of a distribution from a traditional IRA, you cannot, within a 1-year period, make a tax-free rollover of any later distribution from that same IRA. Form 1040 You also cannot make a tax-free rollover of any amount distributed, within the same 1-year period, from the IRA into which you made the tax-free rollover. Form 1040   The 1-year period begins on the date you receive the IRA distribution, not on the date you roll it over into an IRA. Form 1040 Example. Form 1040 You have two traditional IRAs, IRA-1 and IRA-2. Form 1040 You make a tax-free rollover of a distribution from IRA-1 into a new traditional IRA (IRA-3). Form 1040 You cannot, within 1 year of the distribution from IRA-1, make a tax-free rollover of any distribution from either IRA-1 or IRA-3 into another traditional IRA. Form 1040 However, the rollover from IRA-1 into IRA-3 does not prevent you from making a tax-free rollover from IRA-2 into any other traditional IRA. Form 1040 This is because you have not, within the last year, rolled over, tax free, any distribution from IRA-2 or made a tax-free rollover into IRA-2. Form 1040 Exception. Form 1040   For an exception for distributions from failed financial institutions, see Rollover From One IRA Into Another under Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Form 1040 Partial rollovers. Form 1040   If you withdraw assets from a traditional IRA, you can roll over part of the withdrawal tax free and keep the rest of it. Form 1040 The amount you keep will generally be taxable (except for the part that is a return of nondeductible contributions). Form 1040 The amount you keep may be subject to the 10% additional tax on early distributions, discussed later under What Acts Result in Penalties or Additional Taxes? . Form 1040 Required distributions. Form 1040   Amounts that must be distributed during a particular year under the required distribution rules (discussed later) are not eligible for rollover treatment. Form 1040 Inherited IRAs. Form 1040   If you inherit a traditional IRA from your spouse, you generally can roll it over, or you can choose to make the inherited IRA your own. Form 1040 See Treating it as your own , earlier. Form 1040 Not inherited from spouse. Form 1040   If you inherit a traditional IRA from someone other than your spouse, you cannot roll it over or allow it to receive a rollover contribution. Form 1040 You must withdraw the IRA assets within a certain period. Form 1040 For more information, see When Must You Withdraw Assets? in chapter 1 of Publication 590. Form 1040 Reporting rollovers from IRAs. Form 1040   Report any rollover from one traditional IRA to the same or another traditional IRA on lines 15a and 15b, Form 1040, or lines 11a and 11b, Form 1040A, as follows. Form 1040   Enter the total amount of the distribution on Form 1040, line 15a, or Form 1040A, line 11a. Form 1040 If the total amount on Form 1040, line 15a, or Form 1040A, line 11a, was rolled over, enter zero on Form 1040, line 15b, or Form 1040A, line 11b. Form 1040 If the total distribution was not rolled over, enter the taxable portion of the part that was not rolled over on Form 1040, line 15b, or Form 1040A, line 11b. Form 1040 Put “Rollover” next to Form 1040, line 15b, or Form 1040A, line 11b. Form 1040 See your tax return instructions. Form 1040   If you rolled over the distribution into a qualified plan (other than an IRA) or you make the rollover in 2014, attach a statement explaining what you did. Form 1040 Rollover From Employer's Plan Into an IRA You can roll over into a traditional IRA all or part of an eligible rollover distribution you receive from your (or your deceased spouse's): Employer's qualified pension, profit-sharing, or stock bonus plan; Annuity plan; Tax-sheltered annuity plan (section 403(b) plan); or Governmental deferred compensation plan (section 457 plan). Form 1040 A qualified plan is one that meets the requirements of the Internal Revenue Code. Form 1040 Eligible rollover distribution. Form 1040   Generally, an eligible rollover distribution is any distribution of all or part of the balance to your credit in a qualified retirement plan except the following. Form 1040 A required minimum distribution (explained later under When Must You Withdraw IRA Assets? (Required Minimum Distributions) ). Form 1040 A hardship distribution. Form 1040 Any of a series of substantially equal periodic distributions paid at least once a year over: Your lifetime or life expectancy, The lifetimes or life expectancies of you and your beneficiary, or A period of 10 years or more. Form 1040 Corrective distributions of excess contributions or excess deferrals, and any income allocable to the excess, or of excess annual additions and any allocable gains. Form 1040 A loan treated as a distribution because it does not satisfy certain requirements either when made or later (such as upon default), unless the participant's accrued benefits are reduced (offset) to repay the loan. Form 1040 Dividends on employer securities. Form 1040 The cost of life insurance coverage. Form 1040 Any nontaxable amounts that you roll over into your traditional IRA become part of your basis (cost) in your IRAs. Form 1040 To recover your basis when you take distributions from your IRA, you must complete Form 8606 for the year of the distribution. Form 1040 See Form 8606 under Distributions Fully or Partly Taxable, later. Form 1040 Rollover by nonspouse beneficiary. Form 1040   A direct transfer from a deceased employee's qualified pension, profit-sharing, or stock bonus plan; annuity plan; tax-sheltered annuity (section 403(b)) plan; or governmental deferred compensation (section 457) plan to an IRA set up to receive the distribution on your behalf can be treated as an eligible rollover distribution if you are the designated beneficiary of the plan and not the employee's spouse. Form 1040 The IRA is treated as an inherited IRA. Form 1040 For more information about inherited IRAs, see Inherited IRAs , earlier. Form 1040 Reporting rollovers from employer plans. Form 1040    Enter the total distribution (before income tax or other deductions were withheld) on Form 1040, line 16a, or Form 1040A, line 12a. Form 1040 This amount should be shown in box 1 of Form 1099-R. Form 1040 From this amount, subtract any contributions (usually shown in box 5 of Form 1099-R) that were taxable to you when made. Form 1040 From that result, subtract the amount that was rolled over either directly or within 60 days of receiving the distribution. Form 1040 Enter the remaining amount, even if zero, on Form 1040, line 16b, or Form 1040A, line 12b. Form 1040 Also, enter "Rollover" next to Form 1040, line 16b, or Form 1040A, line 12b. Form 1040 Transfers Incident to Divorce If an interest in a traditional IRA is transferred from your spouse or former spouse to you by a divorce or separate maintenance decree or a written document related to such a decree, the interest in the IRA, starting from the date of the transfer, is treated as your IRA. Form 1040 The transfer is tax free. Form 1040 For detailed information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Form 1040 Converting From Any Traditional IRA to a Roth IRA Allowable conversions. Form 1040   You can withdraw all or part of the assets from a traditional IRA and reinvest them (within 60 days) in a Roth IRA. Form 1040 The amount that you withdraw and timely contribute (convert) to the Roth IRA is called a conversion contribution. Form 1040 If properly (and timely) rolled over, the 10% additional tax on early distributions will not apply. Form 1040 However, a part or all of the conversion contribution from your traditional IRA is included in your gross income. Form 1040 Required distributions. Form 1040   You cannot convert amounts that must be distributed from your traditional IRA for a particular year (including the calendar year in which you reach age 70½) under the required distribution rules (discussed later). Form 1040 Income. Form 1040   You must include in your gross income distributions from a traditional IRA that you would have had to include in income if you had not converted them into a Roth IRA. Form 1040 These amounts are normally included in income on your return for the year that you converted them from a traditional IRA to a Roth IRA. Form 1040   You do not include in gross income any part of a distribution from a traditional IRA that is a return of your basis, as discussed later. Form 1040   You must file Form 8606 to report 2013 conversions from traditional, SEP, or SIMPLE IRAs to a Roth IRA in 2013 (unless you recharacterized the entire amount) and to figure the amount to include in income. Form 1040   If you must include any amount in your gross income, you may have to increase your withholding or make estimated tax payments. Form 1040 See chapter 4. Form 1040 Recharacterizations You may be able to treat a contribution made to one type of IRA as having been made to a different type of IRA. Form 1040 This is called recharacterizing the contribution. Form 1040 See Can You Move Retirement Plan Assets? in chapter 1 of Publication 590 for more detailed information. Form 1040 How to recharacterize a contribution. Form 1040   To recharacterize a contribution, you generally must have the contribution transferred from the first IRA (the one to which it was made) to the second IRA in a trustee-to-trustee transfer. Form 1040 If the transfer is made by the due date (including extensions) for your tax return for the year during which the contribution was made, you can elect to treat the contribution as having been originally made to the second IRA instead of to the first IRA. Form 1040 If you recharacterize your contribution, you must do all three of the following. Form 1040 Include in the transfer any net income allocable to the contribution. Form 1040 If there was a loss, the net income you must transfer may be a negative amount. Form 1040 Report the recharacterization on your tax return for the year during which the contribution was made. Form 1040 Treat the contribution as having been made to the second IRA on the date that it was actually made to the first IRA. Form 1040 No deduction allowed. Form 1040   You cannot deduct the contribution to the first IRA. Form 1040 Any net income you transfer with the recharacterized contribution is treated as earned in the second IRA. Form 1040 Required notifications. Form 1040   To recharacterize a contribution, you must notify both the trustee of the first IRA (the one to which the contribution was actually made) and the trustee of the second IRA (the one to which the contribution is being moved) that you have elected to treat the contribution as having been made to the second IRA rather than the first. Form 1040 You must make the notifications by the date of the transfer. Form 1040 Only one notification is required if both IRAs are maintained by the same trustee. Form 1040 The notification(s) must include all of the following information. Form 1040 The type and amount of the contribution to the first IRA that is to be recharacterized. Form 1040 The date on which the contribution was made to the first IRA and the year for which it was made. Form 1040 A direction to the trustee of the first IRA to transfer in a trustee-to-trustee transfer the amount of the contribution and any net income (or loss) allocable to the contribution to the trustee of the second IRA. Form 1040 The name of the trustee of the first IRA and the name of the trustee of the second IRA. Form 1040 Any additional information needed to make the transfer. Form 1040 Reporting a recharacterization. Form 1040   If you elect to recharacterize a contribution to one IRA as a contribution to another IRA, you must report the recharacterization on your tax return as directed by Form 8606 and its instructions. Form 1040 You must treat the contribution as having been made to the second IRA. Form 1040 When Can You Withdraw or Use IRA Assets? There are rules limiting use of your IRA assets and distributions from it. Form 1040 Violation of the rules generally results in additional taxes in the year of violation. Form 1040 See What Acts Result in Penalties or Additional Taxes , later. Form 1040 Contributions returned before the due date of return. Form 1040   If you made IRA contributions in 2013, you can withdraw them tax free by the due date of your return. Form 1040 If you have an extension of time to file your return, you can withdraw them tax free by the extended due date. Form 1040 You can do this if, for each contribution you withdraw, both of the following conditions apply. Form 1040 You did not take a deduction for the contribution. Form 1040 You withdraw any interest or other income earned on the contribution. Form 1040 You can take into account any loss on the contribution while it was in the IRA when calculating the amount that must be withdrawn. Form 1040 If there was a loss, the net income earned on the contribution may be a negative amount. Form 1040 Note. Form 1040 To calculate the amount you must withdraw, see Worksheet 1-4 under When Can You Withdraw or Use Assets? in chapter 1 of Publication 590. Form 1040 Earnings includible in income. Form 1040   You must include in income any earnings on the contributions you withdraw. Form 1040 Include the earnings in income for the year in which you made the contributions, not in the year in which you withdraw them. Form 1040 Generally, except for any part of a withdrawal that is a return of nondeductible contributions (basis), any withdrawal of your contributions after the due date (or extended due date) of your return will be treated as a taxable distribution. Form 1040 Excess contributions can also be recovered tax free as discussed under What Acts Result in Penalties or Additional Taxes?, later. Form 1040    Early distributions tax. Form 1040   The 10% additional tax on distributions made before you reach age 59½ does not apply to these tax-free withdrawals of your contributions. Form 1040 However, the distribution of interest or other income must be reported on Form 5329 and, unless the distribution qualifies as an exception to the age 59½ rule, it will be subject to this tax. Form 1040 When Must You Withdraw IRA Assets? (Required Minimum Distributions) You cannot keep funds in a traditional IRA indefinitely. Form 1040 Eventually they must be distributed. Form 1040 If there are no distributions, or if the distributions are not large enough, you may have to pay a 50% excise tax on the amount not distributed as required. Form 1040 See Excess Accumulations (Insufficient Distributions) , later. Form 1040 The requirements for distributing IRA funds differ depending on whether you are the IRA owner or the beneficiary of a decedent's IRA. Form 1040 Required minimum distribution. Form 1040   The amount that must be distributed each year is referred to as the required minimum distribution. Form 1040 Required distributions not eligible for rollover. Form 1040   Amounts that must be distributed (required minimum distributions) during a particular year are not eligible for rollover treatment. Form 1040 IRA owners. Form 1040   If you are the owner of a traditional IRA, you must generally start receiving distributions from your IRA by April 1 of the year following the year in which you reach age 70½. Form 1040 April 1 of the year following the year in which you reach age 70½ is referred to as the required beginning date. Form 1040 Distributions by the required beginning date. Form 1040   You must receive at least a minimum amount for each year starting with the year you reach age 70½ (your 70½ year). Form 1040 If you do not (or did not) receive that minimum amount in your 70½ year, then you must receive distributions for your 70½ year by April 1 of the next year. Form 1040   If an IRA owner dies after reaching age 70½, but before April 1 of the next year, no minimum distribution is required because death occurred before the required beginning date. Form 1040 Even if you begin receiving distributions before you attain age 70½, you must begin calculating and receiving required minimum distributions by your required beginning date. Form 1040 Distributions after the required beginning date. Form 1040   The required minimum distribution for any year after the year you turn 70½ must be made by December 31 of that later year. Form 1040    Beneficiaries. Form 1040   If you are the beneficiary of a decedent's traditional IRA, the requirements for distributions from that IRA generally depend on whether the IRA owner died before or after the required beginning date for distributions. Form 1040 More information. Form 1040   For more information, including how to figure your minimum required distribution each year and how to figure your required distribution if you are a beneficiary of a decedent's IRA, see When Must You Withdraw Assets? in chapter 1 of Publication 590. Form 1040 Are Distributions Taxable? In general, distributions from a traditional IRA are taxable in the year you receive them. Form 1040 Exceptions. Form 1040   Exceptions to distributions from traditional IRAs being taxable in the year you receive them are: Rollovers, Qualified charitable distributions (QCD), discussed later, Tax-free withdrawals of contributions, discussed earlier, and The return of nondeductible contributions, discussed later under Distributions Fully or Partly Taxable . Form 1040    Although a conversion of a traditional IRA is considered a rollover for Roth IRA purposes, it is not an exception to the rule that distributions from a traditional IRA are taxable in the year you receive them. Form 1040 Conversion distributions are includible in your gross income subject to this rule and the special rules for conversions explained in Converting From Any Traditional IRA Into a Roth IRA under Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Form 1040 Qualified charitable distributions (QCD). Form 1040   A QCD is generally a nontaxable distribution made directly by the trustee of your IRA to an organization eligible to receive tax-deductible contributions. Form 1040 Special rules apply if you made a qualified charitable distribution in January 2013 that you elected to treat as made in 2012. Form 1040 See Qualified Charitable Distributions in Publication 590 for more information. Form 1040 Ordinary income. Form 1040   Distributions from traditional IRAs that you include in income are taxed as ordinary income. Form 1040 No special treatment. Form 1040   In figuring your tax, you cannot use the 10-year tax option or capital gain treatment that applies to lump-sum distributions from qualified retirement plans. Form 1040 Distributions Fully or Partly Taxable Distributions from your traditional IRA may be fully or partly taxable, depending on whether your IRA includes any nondeductible contributions. Form 1040 Fully taxable. Form 1040   If only deductible contributions were made to your traditional IRA (or IRAs, if you have more than one), you have no basis in your IRA. Form 1040 Because you have no basis in your IRA, any distributions are fully taxable when received. Form 1040 See Reporting taxable distributions on your return , later. Form 1040 Partly taxable. Form 1040    If you made nondeductible contributions or rolled over any after-tax amounts to any of your traditional IRAs, you have a cost basis (investment in the contract) equal to the amount of those contributions. Form 1040 These nondeductible contributions are not taxed when they are distributed to you. Form 1040 They are a return of your investment in your IRA. Form 1040   Only the part of the distribution that represents nondeductible contributions and rolled over after-tax amounts (your cost basis) is tax free. Form 1040 If nondeductible contributions have been made or after-tax amounts have been rolled over to your IRA, distributions consist partly of nondeductible contributions (basis) and partly of deductible contributions, earnings, and gains (if there are any). Form 1040 Until all of your basis has been distributed, each distribution is partly nontaxable and partly taxable. Form 1040 Form 8606. Form 1040   You must complete Form 8606 and attach it to your return if you receive a distribution from a traditional IRA and have ever made nondeductible contributions or rolled over after-tax amounts to any of your traditional IRAs. Form 1040 Using the form, you will figure the nontaxable distributions for 2013 and your total IRA basis for 2013 and earlier years. Form 1040 Note. Form 1040 If you are required to file Form 8606, but you are not required to file an income tax return, you still must file Form 8606. Form 1040 Send it to the IRS at the time and place you would otherwise file an income tax return. Form 1040 Distributions reported on Form 1099-R. Form 1040   If you receive a distribution from your traditional IRA, you will receive Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Form 1040 , or a similar statement. Form 1040 IRA distributions are shown in boxes 1 and 2a of Form 1099-R. Form 1040 A number or letter code in box 7 tells you what type of distribution you received from your IRA. Form 1040 Withholding. Form 1040   Federal income tax is withheld from distributions from traditional IRAs unless you choose not to have tax withheld. Form 1040 See chapter 4. Form 1040 IRA distributions delivered outside the United States. Form 1040   In general, if you are a U. Form 1040 S. Form 1040 citizen or resident alien and your home address is outside the United States or its possessions, you cannot choose exemption from withholding on distributions from your traditional IRA. Form 1040 Reporting taxable distributions on your return. Form 1040    Report fully taxable distributions, including early distributions on Form 1040, line 15b, or Form 1040A, line 11b (no entry is required on Form 1040, line 15a, or Form 1040A, line 11a). Form 1040 If only part of the distribution is taxable, enter the total amount on Form 1040, line 15a, or Form 1040A, line 11a, and the taxable part on Form 1040, line 15b, or Form 1040A, line 11b. Form 1040 You cannot report distributions on Form 1040EZ. Form 1040 What Acts Result in Penalties or Additional Taxes? The tax advantages of using traditional IRAs for retirement savings can be offset by additional taxes and penalties if you do not follow the rules. Form 1040 There are additions to the regular tax for using your IRA funds in prohibited transactions. Form 1040 There are also additional taxes for the following activities. Form 1040 Investing in collectibles. Form 1040 Making excess contributions. Form 1040 Taking early distributions. Form 1040 Allowing excess amounts to accumulate (failing to take required distributions). Form 1040 There are penalties for overstating the amount of nondeductible contributions and for failure to file a Form 8606, if required. Form 1040 Prohibited Transactions Generally, a prohibited transaction is any improper use of your traditional IRA by you, your beneficiary, or any disqualified person. Form 1040 Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendent, and any spouse of a lineal descendent). Form 1040 The following are examples of prohibited transactions with a traditional IRA. Form 1040 Borrowing money from it. Form 1040 Selling property to it. Form 1040 Receiving unreasonable compensation for managing it. Form 1040 Using it as security for a loan. Form 1040 Buying property for personal use (present or future) with IRA funds. Form 1040 Effect on an IRA account. Form 1040   Generally, if you or your beneficiary engages in a prohibited transaction in connection with your traditional IRA account at any time during the year, the account stops being an IRA as of the first day of that year. Form 1040 Effect on you or your beneficiary. Form 1040   If your account stops being an IRA because you or your beneficiary engaged in a prohibited transaction, the account is treated as distributing all its assets to you at their fair market values on the first day of the year. Form 1040 If the total of those values is more than your basis in the IRA, you will have a taxable gain that is includible in your income. Form 1040 For information on figuring your gain and reporting it in income, see Are Distributions Taxable , earlier. Form 1040 The distribution may be subject to additional taxes or penalties. Form 1040 Taxes on prohibited transactions. Form 1040   If someone other than the owner or beneficiary of a traditional IRA engages in a prohibited transaction, that person may be liable for certain taxes. Form 1040 In general, there is a 15% tax on the amount of the prohibited transaction and a 100% additional tax if the transaction is not corrected. Form 1040 More information. Form 1040   For more information on prohibited transactions, see What Acts Result in Penalties or Additional Taxes? in chapter 1 of Publication 590. Form 1040 Investment in Collectibles If your traditional IRA invests in collectibles, the amount invested is considered distributed to you in the year invested. Form 1040 You may have to pay the 10% additional tax on early distributions, discussed later. Form 1040 Collectibles. Form 1040   These include: Artworks, Rugs, Antiques, Metals, Gems, Stamps, Coins, Alcoholic beverages, and Certain other tangible personal property. Form 1040 Exception. Form 1040    Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U. Form 1040 S. Form 1040 gold coins, or one-ounce silver coins minted by the Treasury Department. Form 1040 It can also invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion. Form 1040 Excess Contributions Generally, an excess contribution is the amount contributed to your traditional IRA(s) for the year that is more than the smaller of: The maximum deductible amount for the year. Form 1040 For 2013, this is $5,500 ($6,500 if you are 50 or older), or Your taxable compensation for the year. Form 1040 Tax on excess contributions. Form 1040   In general, if the excess contributions for a year are not withdrawn by the date your return for the year is due (including extensions), you are subject to a 6% tax. Form 1040 You must pay the 6% tax each year on excess amounts that remain in your traditional IRA at the end of your tax year. Form 1040 The tax cannot be more than 6% of the combined value of all your IRAs as of the end of your tax year. Form 1040 Excess contributions withdrawn by due date of return. Form 1040   You will not have to pay the 6% tax if you withdraw an excess contribution made during a tax year and you also withdraw interest or other income earned on the excess contribution. Form 1040 You must complete your withdrawal by the date your tax return for that year is due, including extensions. Form 1040 How to treat withdrawn contributions. Form 1040   Do not include in your gross income an excess contribution that you withdraw from your traditional IRA before your tax return is due if both the following conditions are met. Form 1040 No deduction was allowed for the excess contribution. Form 1040 You withdraw the interest or other income earned on the excess contribution. Form 1040 You can take into account any loss on the contribution while it was in the IRA when calculating the amount that must be withdrawn. Form 1040 If there was a loss, the net income you must withdraw may be a negative amount. Form 1040 How to treat withdrawn interest or other income. Form 1040   You must include in your gross income the interest or other income that was earned on the excess contribution. Form 1040 Report it on your return for the year in which the excess contribution was made. Form 1040 Your withdrawal of interest or other income may be subject to an additional 10% tax on early distributions, discus