File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

Free State Return Turbotax

How Do I Amend My 2012 Tax Return OnlineIncome Tax Amendment FormFree Amended Tax Return OnlineTaxslayer 2012File Federal And State Tax For FreeHow To Amend Your Taxes2010 Irs Form 1040ezPrior Tax2011 Form 1040 EzHow To Fill Out Amended Tax FormMilitary Tax ServiceTurbotax Amended ReturnHr Block Free State FileFiling A 1040x2011 1040xTurbo Tax Filing1040nr Form 20122012 Tax ReturnFiling 1040nr1040ez Instructions 20141040ez Form Online2012 State TaxVita Income Tax Bakersfield CaFile 2006 Taxes OnlineIrsform1040xFile 2011 Taxes TurbotaxState Income Taxes More:label_state_20income_20taxes More:financialsoftState Income Tax ReturnCan I Still File Taxes For 2012How To Amend Tax Return1040x Site Irs Gov2014 1040ezAmended Tax Returns More:label_amended_20tax_20returns More:taxesIrs Form 1040 2012H&r Block Free State File CouponFree 2012 State Tax FilingHow Do I Complete A 1040x FormsHow Can I File My 2012 Taxes Online1040ez 2012 Fillable FormMilitary Tax Refund Calculator

Free State Return Turbotax

Free state return turbotax Publication 971 - Introductory Material Table of Contents What's New IntroductionOrdering forms and publications. Free state return turbotax Questions about innocent spouse relief. Free state return turbotax Useful Items - You may want to see: What's New Expanded filing deadline for equitable relief. Free state return turbotax  The period of time in which you may request equitable relief has been expanded. Free state return turbotax See How To Request Relief later. Free state return turbotax More information. Free state return turbotax   For more information about the latest developments on Publication 971, go to www. Free state return turbotax irs. Free state return turbotax gov/pub971. Free state return turbotax Introduction When you file a joint income tax return, the law makes both you and your spouse responsible for the entire tax liability. Free state return turbotax This is called joint and several liability. Free state return turbotax Joint and several liability applies not only to the tax liability you show on the return but also to any additional tax liability the IRS determines to be due, even if the additional tax is due to income, deductions, or credits of your spouse or former spouse. Free state return turbotax You remain jointly and severally liable for the taxes, and the IRS still can collect from you, even if you later divorce and the divorce decree states that your former spouse will be solely responsible for the tax. Free state return turbotax In some cases, a spouse (or former spouse) will be relieved of the tax, interest, and penalties on a joint tax return. Free state return turbotax Three types of relief are available to married persons who filed joint returns. Free state return turbotax Innocent spouse relief. Free state return turbotax Separation of liability relief. Free state return turbotax Equitable relief. Free state return turbotax Married persons who did not file joint returns, but who live in community property states, may also qualify for relief. Free state return turbotax See Community Property Laws , later. Free state return turbotax This publication explains these types of relief, who may qualify for them, and how to get them. Free state return turbotax You can also use the Innocent Spouse Tax Relief Eligibility Explorer at IRS. Free state return turbotax gov by entering “Innocent Spouse” in the search box. Free state return turbotax What this publication does not cover. Free state return turbotax   This publication does not discuss injured spouse relief. Free state return turbotax You are an injured spouse if your share of the overpayment shown on your joint return was, or is expected to be, applied (offset) against your spouse's legally enforceable past-due federal taxes, state income taxes, state unemployment compensation debts, child or spousal support payments, or a federal nontax debt, such as a student loan. Free state return turbotax If you are an injured spouse, you may be entitled to receive a refund of your share of the overpayment. Free state return turbotax For more information, see Form 8379, Injured Spouse Allocation. Free state return turbotax Comments and suggestions. Free state return turbotax   We welcome your comments about this publication and your suggestions for future editions. Free state return turbotax   You can write to us at the following address:  Internal Revenue Service Individual Forms and Publications Branch SE:W:CAR:MP:T:I 1111 Constitution Ave. Free state return turbotax NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Free state return turbotax Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Free state return turbotax   You can email us at taxforms@irs. Free state return turbotax gov. Free state return turbotax Please put “Publications Comment” on the subject line. Free state return turbotax You can also send us comments from www. Free state return turbotax irs. Free state return turbotax gov/formspubs/, select “Comment on Tax Forms and Publications” under “Information about. Free state return turbotax ”   Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax products. Free state return turbotax Ordering forms and publications. Free state return turbotax   Visit www. Free state return turbotax irs. Free state return turbotax gov/formspubs to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received. Free state return turbotax  Internal Revenue Service 1201 N. Free state return turbotax Mitsubishi Motorway Bloomington, IL 61705-6613 Questions about innocent spouse relief. Free state return turbotax The IRS can help you with your request for innocent spouse relief. Free state return turbotax If you are working with an IRS employee, you can ask that employee, or you can call 866-897-4270. Free state return turbotax Useful Items - You may want to see: Publications 504 Divorced or Separated Individuals 555 Community Property 556 Examination of Returns, Appeal Rights, and Claims for Refund 594 The IRS Collection Process Forms (and Instructions) 8857 Request for Innocent Spouse Relief Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

IRS Charts a Path Forward with Immediate Actions

The IRS is outlining new actions and next steps to fix problems uncovered with the IRS’ review of tax-exempt applications and improve the wider processes and operations in place at the IRS. The report released by Principal Deputy Commissioner Danny Werfel reflects important findings, aggressive actions and the next steps to help the IRS make improvements. Other documents give specific highlights of those findings and actions.

The following table represents the current status of recommended actions from the Treasury Inspector General for Tax Administration's (TIGTA) report on IRS's tax-exempt area. The status of the recommended actions will be updated monthly. Use the link in the Status column to view the historical updates for each recommendation.

Recommended Actions Status


All recommendations are closed as of Jan. 31, 2014. In Recommendation 7, we continue to report on the number of original backlog cases monthly until those cases are closed. Most recent update: March 24, 2004.

No. Recommendation Lead ECD Status*
1 Ensure that the memorandum requiring the Director, Rulings and Agreements, to approve all original entries and changes to criteria included on the BOLO listing prior to implementation be formalized in the appropriate Internal Revenue Manual. Director, Exempt Organizations

06/28/2013
09/30/2013

 

Completed
2 Develop procedures to better document the reason(s) applications are chosen for review by the team of specialists (e.g., evidence of specific political campaign intervention in the application file or specific reasons the EO function may have for choosing to review the application further based on past experience). Director, Exempt Organizations 09/30/2013 Completed
3 Develop training or workshops to be held before each election cycle including, but not limited to, the proper ways to identify applications that require review of political campaign intervention activities. Director, Exempt Organizations 01/31/2014 Completed
4 Develop a process for the Determinations Unit to formally request assistance from the Technical Unit and the Guidance Unit. The process should include actions to initiate, track, and monitor requests for assistance to ensure that requests are responded to timely. Director, Exempt Organizations

06/28/2013
01/31/2014

 

Completed
5 Develop guidance for specialists on how to process requests for tax-exempt status involving potentially significant political campaign intervention. This guidance should also be posted to the Internet to provide transparency to organizations on the application process. Director, Exempt Organizations

06/27/2013
01/31/2014

 

Completed
6 Develop training or workshops to be held before each election cycle including, but not limited to: a) what constitutes political campaign intervention versus general advocacy (including case examples) and b) the ability to refer for follow-up those organizations that may conduct activities in a future year which may cause them to lose their tax-exempt status. Director, Exempt Organizations 01/31/2014 Completed
7 Provide oversight to ensure that potential political cases, some of which have been in process for three years, are approved or denied expeditiously. Director, Exempt Organizations 01/31/2014 Completed
8 Recommend to IRS Chief Counsel and the Department of the Treasury that guidance on how to measure the “primary activity” of I.R.C. § 501(c)(4) social welfare organizations be included for consideration in the Department of the Treasury Priority Guidance Plan. Commissioner, Tax Exempt and Government Entities 05/03/2013 Completed
9 The Director, EO, should develop training or workshops to be held before each election cycle including, but not limited to, how to word questions in additional information request letters and what additional information should be requested. Director, Exempt Organizations 01/31/2014 Completed

* Green = On schedule; Yellow = Behind schedule; Red = Significant issues

 

Page Last Reviewed or Updated: 24-Mar-2014

The Free State Return Turbotax

Free state return turbotax 2. Free state return turbotax   Simplified Employee Pensions (SEPs) Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Setting Up a SEPWhen not to use Form 5305-SEP. Free state return turbotax How Much Can I Contribute?Contribution Limits Deducting ContributionsDeduction Limit for Contributions for Participants Deduction Limit for Self-Employed Individuals Carryover of Excess SEP Contributions When To Deduct Contributions Where To Deduct Contributions Salary Reduction Simplified Employee Pensions (SARSEPs)SARSEP ADP test. Free state return turbotax Deferral percentage. Free state return turbotax Employee compensation. Free state return turbotax Compensation of self-employed individuals. Free state return turbotax Choice not to treat deferrals as compensation. Free state return turbotax Limit on Elective Deferrals Tax Treatment of Deferrals Distributions (Withdrawals) Additional TaxesEffects on employee. Free state return turbotax Reporting and Disclosure Requirements Topics - This chapter discusses: Setting up a SEP How much can I contribute Deducting contributions Salary reduction simplified employee pensions (SARSEPs) Distributions (withdrawals) Additional taxes Reporting and disclosure requirements Useful Items - You may want to see: Publication 590 Individual Retirement Arrangements (IRAs) 3998 Choosing A Retirement Solution for Your Small Business 4285 SEP Checklist 4286 SARSEP Checklist 4333 SEP Retirement Plans for Small Businesses 4336 SARSEP for Small Businesses 4407 SARSEP—Key Issues and Assistance Forms (and Instructions) W-2 Wage and Tax Statement 1040 U. Free state return turbotax S. Free state return turbotax Individual Income Tax Return 5305-SEP Simplified Employee Pension—Individual Retirement Accounts Contribution Agreement 5305A-SEP Salary Reduction Simplified Employee Pension—Individual Retirement Accounts Contribution Agreement 8880 Credit for Qualified Retirement Savings Contributions 8881 Credit for Small Employer Pension Plan Startup Costs A SEP is a written plan that allows you to make contributions toward your own retirement and your employees' retirement without getting involved in a more complex qualified plan. Free state return turbotax Under a SEP, you make contributions to a traditional individual retirement arrangement (called a SEP-IRA) set up by or for each eligible employee. Free state return turbotax A SEP-IRA is owned and controlled by the employee, and you make contributions to the financial institution where the SEP-IRA is maintained. Free state return turbotax SEP-IRAs are set up for, at a minimum, each eligible employee (defined below). Free state return turbotax A SEP-IRA may have to be set up for a leased employee (defined in chapter 1), but does not need to be set up for excludable employees (defined later). Free state return turbotax Eligible employee. Free state return turbotax   An eligible employee is an individual who meets all the following requirements. Free state return turbotax Has reached age 21. Free state return turbotax Has worked for you in at least 3 of the last 5 years. Free state return turbotax Has received at least $550 in compensation from you in 2013. Free state return turbotax This amount remains the same in 2014. Free state return turbotax    You can use less restrictive participation requirements than those listed, but not more restrictive ones. Free state return turbotax Excludable employees. Free state return turbotax   The following employees can be excluded from coverage under a SEP. Free state return turbotax Employees covered by a union agreement and whose retirement benefits were bargained for in good faith by the employees' union and you. Free state return turbotax Nonresident alien employees who have received no U. Free state return turbotax S. Free state return turbotax source wages, salaries, or other personal services compensation from you. Free state return turbotax For more information about nonresident aliens, see Publication 519, U. Free state return turbotax S. Free state return turbotax Tax Guide for Aliens. Free state return turbotax Setting Up a SEP There are three basic steps in setting up a SEP. Free state return turbotax You must execute a formal written agreement to provide benefits to all eligible employees. Free state return turbotax You must give each eligible employee certain information about the SEP. Free state return turbotax A SEP-IRA must be set up by or for each eligible employee. Free state return turbotax Many financial institutions will help you set up a SEP. Free state return turbotax Formal written agreement. Free state return turbotax   You must execute a formal written agreement to provide benefits to all eligible employees under a SEP. Free state return turbotax You can satisfy the written agreement requirement by adopting an IRS model SEP using Form 5305-SEP. Free state return turbotax However, see When not to use Form 5305-SEP, below. Free state return turbotax   If you adopt an IRS model SEP using Form 5305-SEP, no prior IRS approval or determination letter is required. Free state return turbotax Keep the original form. Free state return turbotax Do not file it with the IRS. Free state return turbotax Also, using Form 5305-SEP will usually relieve you from filing annual retirement plan information returns with the IRS and the Department of Labor. Free state return turbotax See the Form 5305-SEP instructions for details. Free state return turbotax If you choose not to use Form 5305-SEP, you should seek professional advice in adopting a SEP. Free state return turbotax When not to use Form 5305-SEP. Free state return turbotax   You cannot use Form 5305-SEP if any of the following apply. Free state return turbotax You currently maintain any other qualified retirement plan other than another SEP. Free state return turbotax You have any eligible employees for whom IRAs have not been set up. Free state return turbotax You use the services of leased employees, who are not your common-law employees (as described in chapter 1). Free state return turbotax You are a member of any of the following unless all eligible employees of all the members of these groups, trades, or businesses participate under the SEP. Free state return turbotax An affiliated service group described in section 414(m). Free state return turbotax A controlled group of corporations described in section 414(b). Free state return turbotax Trades or businesses under common control described in section 414(c). Free state return turbotax You do not pay the cost of the SEP contributions. Free state return turbotax Information you must give to employees. Free state return turbotax   You must give each eligible employee a copy of Form 5305-SEP, its instructions, and the other information listed in the Form 5305-SEP instructions. Free state return turbotax An IRS model SEP is not considered adopted until you give each employee this information. Free state return turbotax Setting up the employee's SEP-IRA. Free state return turbotax   A SEP-IRA must be set up by or for each eligible employee. Free state return turbotax SEP-IRAs can be set up with banks, insurance companies, or other qualified financial institutions. Free state return turbotax You send SEP contributions to the financial institution where the SEP-IRA is maintained. Free state return turbotax Deadline for setting up a SEP. Free state return turbotax   You can set up a SEP for any year as late as the due date (including extensions) of your income tax return for that year. Free state return turbotax Credit for startup costs. Free state return turbotax   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SEP that first became effective in 2013. Free state return turbotax For more information, see Credit for startup costs under Reminders, earlier. Free state return turbotax How Much Can I Contribute? The SEP rules permit you to contribute a limited amount of money each year to each employee's SEP-IRA. Free state return turbotax If you are self-employed, you can contribute to your own SEP-IRA. Free state return turbotax Contributions must be in the form of money (cash, check, or money order). Free state return turbotax You cannot contribute property. Free state return turbotax However, participants may be able to transfer or roll over certain property from one retirement plan to another. Free state return turbotax See Publication 590 for more information about rollovers. Free state return turbotax You do not have to make contributions every year. Free state return turbotax But if you make contributions, they must be based on a written allocation formula and must not discriminate in favor of highly compensated employees (defined in chapter 1). Free state return turbotax When you contribute, you must contribute to the SEP-IRAs of all participants who actually performed personal services during the year for which the contributions are made, including employees who die or terminate employment before the contributions are made. Free state return turbotax Contributions are deductible within limits, as discussed later, and generally are not taxable to the plan participants. Free state return turbotax A SEP-IRA cannot be a Roth IRA. Free state return turbotax Employer contributions to a SEP-IRA will not affect the amount an individual can contribute to a Roth or traditional IRA. Free state return turbotax Unlike regular contributions to a traditional IRA, contributions under a SEP can be made to participants over age 70½. Free state return turbotax If you are self-employed, you can also make contributions under the SEP for yourself even if you are over 70½. Free state return turbotax Participants age 70½ or over must take required minimum distributions. Free state return turbotax Time limit for making contributions. Free state return turbotax   To deduct contributions for a year, you must make the contributions by the due date (including extensions) of your tax return for the year. Free state return turbotax Contribution Limits Contributions you make for 2013 to a common-law employee's SEP-IRA cannot exceed the lesser of 25% of the employee's compensation or $51,000. Free state return turbotax Compensation generally does not include your contributions to the SEP. Free state return turbotax The SEP plan document will specify how the employer contribution is determined and how it will be allocated to participants. Free state return turbotax Example. Free state return turbotax Your employee, Mary Plant, earned $21,000 for 2013. Free state return turbotax The maximum contribution you can make to her SEP-IRA is $5,250 (25% x $21,000). Free state return turbotax Contributions for yourself. Free state return turbotax   The annual limits on your contributions to a common-law employee's SEP-IRA also apply to contributions you make to your own SEP-IRA. Free state return turbotax However, special rules apply when figuring your maximum deductible contribution. Free state return turbotax See Deduction Limit for Self-Employed Individuals , later. Free state return turbotax Annual compensation limit. Free state return turbotax   You cannot consider the part of an employee's compensation over $255,000 when figuring your contribution limit for that employee. Free state return turbotax However, $51,000 is the maximum contribution for an eligible employee. Free state return turbotax These limits are $260,000 and $52,000, respectively, in 2014. Free state return turbotax Example. Free state return turbotax Your employee, Susan Green, earned $210,000 for 2013. Free state return turbotax Because of the maximum contribution limit for 2013, you can only contribute $51,000 to her SEP-IRA. Free state return turbotax More than one plan. Free state return turbotax   If you contribute to a defined contribution plan (defined in chapter 4), annual additions to an account are limited to the lesser of $51,000 or 100% of the participant's compensation. Free state return turbotax When you figure this limit, you must add your contributions to all defined contribution plans maintained by you. Free state return turbotax Because a SEP is considered a defined contribution plan for this limit, your contributions to a SEP must be added to your contributions to other defined contribution plans you maintain. Free state return turbotax Tax treatment of excess contributions. Free state return turbotax   Excess contributions are your contributions to an employee's SEP-IRA (or to your own SEP-IRA) for 2013 that exceed the lesser of the following amounts. Free state return turbotax 25% of the employee's compensation (or, for you, 20% of your net earnings from self-employment). Free state return turbotax $51,000. Free state return turbotax Excess contributions are included in the employee's income for the year and are treated as contributions by the employee to his or her SEP-IRA. Free state return turbotax For more information on employee tax treatment of excess contributions, see chapter 1 in Publication 590. Free state return turbotax Reporting on Form W-2. Free state return turbotax   Do not include SEP contributions on your employee's Form W-2 unless contributions were made under a salary reduction arrangement (discussed later). Free state return turbotax Deducting Contributions Generally, you can deduct the contributions you make each year to each employee's SEP-IRA. Free state return turbotax If you are self-employed, you can deduct the contributions you make each year to your own SEP-IRA. Free state return turbotax Deduction Limit for Contributions for Participants The most you can deduct for your contributions to you or your employee's SEP-IRA is the lesser of the following amounts. Free state return turbotax Your contributions (including any excess contributions carryover). Free state return turbotax 25% of the compensation (limited to $255,000 per participant) paid to the participants during 2013 from the business that has the plan, not to exceed $51,000 per participant. Free state return turbotax In 2014, the amounts in (2) above are $260,000 and $52,000, respectively. Free state return turbotax Deduction Limit for Self-Employed Individuals If you contribute to your own SEP-IRA, you must make a special computation to figure your maximum deduction for these contributions. Free state return turbotax When figuring the deduction for contributions made to your own SEP-IRA, compensation is your net earnings from self-employment (defined in chapter 1), which takes into account both the following deductions. Free state return turbotax The deduction for the deductible part of your self-employment tax. Free state return turbotax The deduction for contributions to your own SEP-IRA. Free state return turbotax The deduction for contributions to your own SEP-IRA and your net earnings depend on each other. Free state return turbotax For this reason, you determine the deduction for contributions to your own SEP-IRA indirectly by reducing the contribution rate called for in your plan. Free state return turbotax To do this, use the Rate Table for Self-Employed or the Rate Worksheet for Self-Employed, whichever is appropriate for your plan's contribution rate, in chapter 5. Free state return turbotax Then figure your maximum deduction by using the Deduction Worksheet for Self-Employed in chapter 5. Free state return turbotax Carryover of Excess SEP Contributions If you made SEP contributions that are more than the deduction limit (nondeductible contributions), you can carry over and deduct the difference in later years. Free state return turbotax However, the carryover, when combined with the contribution for the later year, is subject to the deduction limit for that year. Free state return turbotax If you also contributed to a defined benefit plan or defined contribution plan, see Carryover of Excess Contributions under Employer Deduction in chapter 4 for the carryover limit. Free state return turbotax Excise tax. Free state return turbotax   If you made nondeductible (excess) contributions to a SEP, you may be subject to a 10% excise tax. Free state return turbotax For information about the excise tax, see Excise Tax for Nondeductible (Excess) Contributions under Employer Deduction in chapter 4. Free state return turbotax When To Deduct Contributions When you can deduct contributions made for a year depends on the tax year on which the SEP is maintained. Free state return turbotax If the SEP is maintained on a calendar year basis, you deduct the yearly contributions on your tax return for the year within which the calendar year ends. Free state return turbotax If you file your tax return and maintain the SEP using a fiscal year or short tax year, you deduct contributions made for a year on your tax return for that year. Free state return turbotax Example. Free state return turbotax You are a fiscal year taxpayer whose tax year ends June 30. Free state return turbotax You maintain a SEP on a calendar year basis. Free state return turbotax You deduct SEP contributions made for calendar year 2013 on your tax return for your tax year ending June 30, 2014. Free state return turbotax Where To Deduct Contributions Deduct the contributions you make for your common-law employees on your tax return. Free state return turbotax For example, sole proprietors deduct them on Schedule C (Form 1040) or Schedule F (Form 1040), Profit or Loss From Farming; partnerships deduct them on Form 1065, U. Free state return turbotax S. Free state return turbotax Return of Partnership Income; and corporations deduct them on Form 1120, U. Free state return turbotax S. Free state return turbotax Corporation Income Tax Return, or Form 1120S, U. Free state return turbotax S. Free state return turbotax Income Tax Return for an S Corporation. Free state return turbotax Sole proprietors and partners deduct contributions for themselves on line 28 of Form 1040. Free state return turbotax (If you are a partner, contributions for yourself are shown on the Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Free state return turbotax , you receive from the partnership. Free state return turbotax ) Remember that sole proprietors and partners can't deduct as a business expense contributions made to a SEP for themselves, only those made for their common-law employees. Free state return turbotax Salary Reduction Simplified Employee Pensions (SARSEPs) A SARSEP is a SEP set up before 1997 that includes a salary reduction arrangement. Free state return turbotax (See the Caution, next. Free state return turbotax ) Under a SARSEP, your employees can choose to have you contribute part of their pay to their SEP-IRAs rather than receive it in cash. Free state return turbotax This contribution is called an “elective deferral” because employees choose (elect) to set aside the money, and they defer the tax on the money until it is distributed to them. Free state return turbotax You are not allowed to set up a SARSEP after 1996. Free state return turbotax However, participants (including employees hired after 1996) in a SARSEP set up before 1997 can continue to have you contribute part of their pay to the plan. Free state return turbotax If you are interested in setting up a retirement plan that includes a salary reduction arrangement, see chapter 3. Free state return turbotax Who can have a SARSEP?   A SARSEP set up before 1997 is available to you and your eligible employees only if all the following requirements are met. Free state return turbotax At least 50% of your employees eligible to participate choose to make elective deferrals. Free state return turbotax You have 25 or fewer employees who were eligible to participate in the SEP at any time during the preceding year. Free state return turbotax The elective deferrals of your highly compensated employees meet the SARSEP ADP test. Free state return turbotax SARSEP ADP test. Free state return turbotax   Under the SARSEP ADP test, the amount deferred each year by each eligible highly compensated employee as a percentage of pay (the deferral percentage) cannot be more than 125% of the average deferral percentage (ADP) of all non-highly compensated employees eligible to participate. Free state return turbotax A highly compensated employee is defined in chapter 1. Free state return turbotax Deferral percentage. Free state return turbotax   The deferral percentage for an employee for a year is figured as follows. Free state return turbotax   The elective employer contributions (excluding certain catch-up contributions)  paid to the SEP for the employee for the year     The employee's compensation (limited to $255,000 in 2013)   The instructions for Form 5305A-SEP have a worksheet you can use to determine whether the elective deferrals of your highly compensated employees meet the SARSEP ADP test. Free state return turbotax Employee compensation. Free state return turbotax   For figuring the deferral percentage, compensation is generally the amount you pay to the employee for the year. Free state return turbotax Compensation includes the elective deferral and other amounts deferred in certain employee benefit plans. Free state return turbotax See Compensation in chapter 1. Free state return turbotax Elective deferrals under the SARSEP are included in figuring your employees' deferral percentage even though they are not included in the income of your employees for income tax purposes. Free state return turbotax Compensation of self-employed individuals. Free state return turbotax   If you are self-employed, compensation is your net earnings from self-employment as defined in chapter 1. Free state return turbotax   Compensation does not include tax-free items (or deductions related to them) other than foreign earned income and housing cost amounts. Free state return turbotax Choice not to treat deferrals as compensation. Free state return turbotax   You can choose not to treat elective deferrals (and other amounts deferred in certain employee benefit plans) for a year as compensation under your SARSEP. Free state return turbotax Limit on Elective Deferrals The most a participant can choose to defer for calendar year 2013 is the lesser of the following amounts. Free state return turbotax 25% of the participant's compensation (limited to $255,000 of the participant's compensation). Free state return turbotax $17,500. Free state return turbotax The $17,500 limit applies to the total elective deferrals the employee makes for the year to a SEP and any of the following. Free state return turbotax Cash or deferred arrangement (section 401(k) plan). Free state return turbotax Salary reduction arrangement under a tax-sheltered annuity plan (section 403(b) plan). Free state return turbotax SIMPLE IRA plan. Free state return turbotax In 2014, the $255,000 limit increases to $260,000 and the $17,500 limit remains at $17,500. Free state return turbotax Catch-up contributions. Free state return turbotax   A SARSEP can permit participants who are age 50 or over at the end of the calendar year to also make catch-up contributions. Free state return turbotax The catch-up contribution limit for 2013 is $5,500 and remains at $5,500 for 2014. Free state return turbotax Elective deferrals are not treated as catch-up contributions for 2013 until they exceed the elective deferral limit (the lesser of 25% of compensation or $17,500), the SARSEP ADP test limit discussed earlier, or the plan limit (if any). Free state return turbotax However, the catch-up contribution a participant can make for a year cannot exceed the lesser of the following amounts. Free state return turbotax The catch-up contribution limit. Free state return turbotax The excess of the participant's compensation over the elective deferrals that are not catch-up contributions. Free state return turbotax   Catch-up contributions are not subject to the elective deferral limit (the lesser of 25% of compensation or $17,500 in 2013 and in 2014). Free state return turbotax Overall limit on SEP contributions. Free state return turbotax   If you also make nonelective contributions to a SEP-IRA, the total of the nonelective and elective contributions to that SEP-IRA cannot exceed the lesser of 25% of the employee's compensation or $51,000 for 2013 ($52,000 for 2014). Free state return turbotax The same rule applies to contributions you make to your own SEP-IRA. Free state return turbotax See Contribution Limits , earlier. Free state return turbotax Figuring the elective deferral. Free state return turbotax   For figuring the 25% limit on elective deferrals, compensation does not include SEP contributions, including elective deferrals or other amounts deferred in certain employee benefit plans. Free state return turbotax Tax Treatment of Deferrals Elective deferrals that are not more than the limits discussed earlier under Limit on Elective Deferrals are excluded from your employees' wages subject to federal income tax in the year of deferral. Free state return turbotax However, these deferrals are included in wages for social security, Medicare, and federal unemployment (FUTA) tax. Free state return turbotax Excess deferrals. Free state return turbotax   For 2013, excess deferrals are the elective deferrals for the year that are more than the $17,500 limit discussed earlier. Free state return turbotax For a participant who is eligible to make catch-up contributions, excess deferrals are the elective deferrals that are more than $23,000. Free state return turbotax The treatment of excess deferrals made under a SARSEP is similar to the treatment of excess deferrals made under a qualified plan. Free state return turbotax See Treatment of Excess Deferrals under Elective Deferrals (401(k) Plans) in chapter 4. Free state return turbotax Excess SEP contributions. Free state return turbotax   Excess SEP contributions are elective deferrals of highly compensated employees that are more than the amount permitted under the SARSEP ADP test. Free state return turbotax You must notify your highly compensated employees within 2½ months after the end of the plan year of their excess SEP contributions. Free state return turbotax If you do not notify them within this time period, you must pay a 10% tax on the excess. Free state return turbotax For an explanation of the notification requirements, see Rev. Free state return turbotax Proc. Free state return turbotax 91-44, 1991-2 C. Free state return turbotax B. Free state return turbotax 733. Free state return turbotax If you adopted a SARSEP using Form 5305A-SEP, the notification requirements are explained in the instructions for that form. Free state return turbotax Reporting on Form W-2. Free state return turbotax   Do not include elective deferrals in the “Wages, tips, other compensation” box of Form W-2. Free state return turbotax You must, however, include them in the “Social security wages” and “Medicare wages and tips” boxes. Free state return turbotax You must also include them in box 12. Free state return turbotax Mark the “Retirement plan” checkbox in box 13. Free state return turbotax For more information, see the Form W-2 instructions. Free state return turbotax Distributions (Withdrawals) As an employer, you cannot prohibit distributions from a SEP-IRA. Free state return turbotax Also, you cannot make your contributions on the condition that any part of them must be kept in the account after you have made your contributions to the employee's accounts. Free state return turbotax Distributions are subject to IRA rules. Free state return turbotax Generally, you or your employee must begin to receive distributions from a SEP-IRA by April 1 of the first year after the calendar year in which you or your employee reaches age 70½. Free state return turbotax For more information about IRA rules, including the tax treatment of distributions, rollovers, required distributions, and income tax withholding, see Publication 590. Free state return turbotax Additional Taxes The tax advantages of using SEP-IRAs for retirement savings can be offset by additional taxes that may be imposed for all the following actions. Free state return turbotax Making excess contributions. Free state return turbotax Making early withdrawals. Free state return turbotax Not making required withdrawals. Free state return turbotax For information about these taxes, see chapter 1 in Publication 590. Free state return turbotax Also, a SEP-IRA may be disqualified, or an excise tax may apply, if the account is involved in a prohibited transaction, discussed next. Free state return turbotax Prohibited transaction. Free state return turbotax   If an employee improperly uses his or her SEP-IRA, such as by borrowing money from it, the employee has engaged in a prohibited transaction. Free state return turbotax In that case, the SEP-IRA will no longer qualify as an IRA. Free state return turbotax For a list of prohibited transactions, see Prohibited Transactions in chapter 4. Free state return turbotax Effects on employee. Free state return turbotax   If a SEP-IRA is disqualified because of a prohibited transaction, the assets in the account will be treated as having been distributed to the employee on the first day of the year in which the transaction occurred. Free state return turbotax The employee must include in income the fair market value of the assets (on the first day of the year) that is more than any cost basis in the account. Free state return turbotax Also, the employee may have to pay the additional tax for making early withdrawals. Free state return turbotax Reporting and Disclosure Requirements If you set up a SEP using Form 5305-SEP, you must give your eligible employees certain information about the SEP when you set it up. Free state return turbotax See Setting Up a SEP , earlier. Free state return turbotax Also, you must give your eligible employees a statement each year showing any contributions to their SEP-IRAs. Free state return turbotax You must also give them notice of any excess contributions. Free state return turbotax For details about other information you must give them, see the instructions for Form 5305-SEP or Form 5305A-SEP (for a salary reduction SEP). Free state return turbotax Even if you did not use Form 5305-SEP or Form 5305A-SEP to set up your SEP, you must give your employees information similar to that described above. Free state return turbotax For more information, see the instructions for either Form 5305-SEP or Form 5305A-SEP. Free state return turbotax Prev  Up  Next   Home   More Online Publications