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Free state tax preparation 2. Free state tax preparation   Roth IRAs Table of Contents What's New for 2013 What's New for 2014 Reminders Introduction What Is a Roth IRA? When Can a Roth IRA Be Opened? Can You Contribute to a Roth IRA?How Much Can Be Contributed? When Can You Make Contributions? What if You Contribute Too Much? Can You Move Amounts Into a Roth IRA?Conversions Rollover From Employer's Plan Into a Roth IRA Military Death Gratuities and Servicemembers' Group Life Insurance (SGLI) Payments Rollover From a Roth IRA Rollover of Exxon Valdez Settlement Income Rollover of Airline Payments Are Distributions Taxable?What Are Qualified Distributions? Additional Tax on Early Distributions Ordering Rules for Distributions How Do You Figure the Taxable Part? Must You Withdraw or Use Assets?Minimum distributions. Free state tax preparation Recognizing Losses on Investments Distributions After Owner's Death What's New for 2013 Roth IRA contribution limit. Free state tax preparation  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. Free state tax preparation 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. Free state tax preparation However, if your modified adjusted gross income (AGI) is above a certain amount, your contribution limit may be reduced. Free state tax preparation For more information, see How Much Can Be Contributed? under Can You Contribute to a Roth IRA? in this chapter. Free state tax preparation Modified AGI limit for Roth IRA contributions increased. Free state tax preparation  For 2013, your Roth IRA contribution limit is reduced (phased out) in the following situations. Free state tax preparation Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $178,000. Free state tax preparation You cannot make a Roth IRA contribution if your modified AGI is $188,000 or more. Free state tax preparation 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. Free state tax preparation You cannot make a Roth IRA contribution if your modified AGI is $127,000 or more. Free state tax preparation 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-. Free state tax preparation You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more. Free state tax preparation See Can You Contribute to a Roth IRA? in this chapter. Free state tax preparation Net Investment Income Tax. Free state tax preparation  For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan (for example, 401(a), 403(a), 403(b), 457(b) plans, and IRAs). Free state tax preparation However, these distributions are taken into account when determining the modified adjusted gross income threshold. Free state tax preparation Distributions from a nonqualified retirement plan are included in net investment income. Free state tax preparation See Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions for more information. Free state tax preparation What's New for 2014 Modified AGI limit for Roth IRA contributions increased. Free state tax preparation  For 2014, your Roth IRA contribution limit is reduced (phased out) in the following situations. Free state tax preparation Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $181,000. Free state tax preparation You cannot make a Roth IRA contribution if your modified AGI is $191,000 or more. Free state tax preparation Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2014 and your modified AGI is at least $114,000. Free state tax preparation You cannot make a Roth IRA contribution if your modified AGI is $129,000 or more. Free state tax preparation 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-. Free state tax preparation You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more. Free state tax preparation Reminders Deemed IRAs. Free state tax preparation  For plan years beginning after 2002, a qualified employer plan (retirement plan) can maintain a separate account or annuity under the plan (a deemed IRA) to receive voluntary employee contributions. Free state tax preparation If the separate account or annuity otherwise meets the requirements of an IRA, it will be subject only to IRA rules. Free state tax preparation An employee's account can be treated as a traditional IRA or a Roth IRA. Free state tax preparation For this purpose, a “qualified employer plan” includes: A qualified pension, profit-sharing, or stock bonus plan (section 401(a) plan), A qualified employee annuity plan (section 403(a) plan), A tax-sheltered annuity plan (section 403(b) plan), and A deferred compensation plan (section 457 plan) maintained by a state, a political subdivision of a state, or an agency or instrumentality of a state or political subdivision of a state. Free state tax preparation Designated Roth accounts. Free state tax preparation  Designated Roth accounts are separate accounts under 401(k), 403(b), or 457(b) plans that accept elective deferrals that are referred to as Roth contributions. Free state tax preparation These elective deferrals are included in your income, but qualified distributions from these accounts are not included in your income. Free state tax preparation Designated Roth accounts are not IRAs and should not be confused with Roth IRAs. Free state tax preparation Contributions, up to their respective limits, can be made to Roth IRAs and designated Roth accounts according to your eligibility to participate. Free state tax preparation A contribution to one does not impact your eligibility to contribute to the other. Free state tax preparation See Publication 575, for more information on designated Roth accounts. Free state tax preparation Introduction Regardless of your age, you may be able to establish and make nondeductible contributions to an individual retirement plan called a Roth IRA. Free state tax preparation Contributions not reported. Free state tax preparation   You do not report Roth IRA contributions on your return. Free state tax preparation What Is a Roth IRA? A Roth IRA is an individual retirement plan that, except as explained in this chapter, is subject to the rules that apply to a traditional IRA (defined next). Free state tax preparation It can be either an account or an annuity. Free state tax preparation Individual retirement accounts and annuities are described in chapter 1 under How Can a Traditional IRA Be Opened. Free state tax preparation To be a Roth IRA, the account or annuity must be designated as a Roth IRA when it is opened. Free state tax preparation A deemed IRA can be a Roth IRA, but neither a SEP IRA nor a SIMPLE IRA can be designated as a Roth IRA. Free state tax preparation Unlike a traditional IRA, you cannot deduct contributions to a Roth IRA. Free state tax preparation But, if you satisfy the requirements, qualified distributions (discussed later) are tax free. Free state tax preparation Contributions can be made to your Roth IRA after you reach age 70½ and you can leave amounts in your Roth IRA as long as you live. Free state tax preparation Traditional IRA. Free state tax preparation   A traditional IRA is any IRA that is not a Roth IRA or SIMPLE IRA. Free state tax preparation Traditional IRAs are discussed in chapter 1. Free state tax preparation When Can a Roth IRA Be Opened? You can open a Roth IRA at any time. Free state tax preparation However, the time for making contributions for any year is limited. Free state tax preparation See When Can You Make Contributions , later under Can You Contribute to a Roth IRA. Free state tax preparation Can You Contribute to a Roth IRA? Generally, you can contribute to a Roth IRA if you have taxable compensation (defined later) and your modified AGI (defined later) is less than: $188,000 for married filing jointly or qualifying widow(er), $127,000 for single, head of household, or married filing separately and you did not live with your spouse at any time during the year, and $10,000 for married filing separately and you lived with your spouse at any time during the year. Free state tax preparation You may be able to claim a credit for contributions to your Roth IRA. Free state tax preparation For more information, see chapter 4. Free state tax preparation Is there an age limit for contributions?   Contributions can be made to your Roth IRA regardless of your age. Free state tax preparation Can you contribute to a Roth IRA for your spouse?   You can contribute to a Roth IRA for your spouse provided the contributions satisfy the Kay Bailey Hutchison Spousal IRA limit discussed in chapter 1 under How Much Can Be Contributed, you file jointly, and your modified AGI is less than $188,000. Free state tax preparation Compensation. Free state tax preparation   Compensation includes wages, salaries, tips, professional fees, bonuses, and other amounts received for providing personal services. Free state tax preparation It also includes commissions, self-employment income, nontaxable combat pay, military differential pay, and taxable alimony and separate maintenance payments. Free state tax preparation For more information, see What Is Compensation? under Who Can Open a Traditional IRA? in chapter 1. Free state tax preparation Modified AGI. Free state tax preparation   Your modified AGI for Roth IRA purposes is your adjusted gross income (AGI) as shown on your return with some adjustments. Free state tax preparation Use Worksheet 2-1 , later, to determine your modified AGI. Free state tax preparation    Do not subtract conversion income when figuring your other AGI-based phaseouts and taxable income, such as your deduction for medical and dental expenses. Free state tax preparation Subtract them from AGI only for the purpose of figuring your modified AGI for Roth IRA purposes. Free state tax preparation How Much Can Be Contributed? The contribution limit for Roth IRAs generally depends on whether contributions are made only to Roth IRAs or to both traditional IRAs and Roth IRAs. Free state tax preparation Worksheet 2-1. Free state tax preparation Modified Adjusted Gross Income for Roth IRA Purposes Use this worksheet to figure your modified adjusted gross income for Roth IRA purposes. Free state tax preparation 1. Free state tax preparation Enter your adjusted gross income from Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37 1. Free state tax preparation   2. Free state tax preparation Enter any income resulting from the conversion of an IRA (other than a Roth IRA) to a Roth IRA (included on Form 1040, line 15b, Form 1040A, line 11b, or Form 1040NR, line 16b) and a rollover from a qualified retirement plan to a Roth IRA (included on Form 1040, line 16b, Form 1040A, line 12b, or Form 1040NR, line 17b) 2. Free state tax preparation   3. Free state tax preparation Subtract line 2 from line 1 3. Free state tax preparation   4. Free state tax preparation Enter any traditional IRA deduction from Form 1040, line 32; Form 1040A, line 17; or Form 1040NR, line 32 4. Free state tax preparation   5. Free state tax preparation Enter any student loan interest deduction from Form 1040, line 33; Form 1040A, line 18; or Form 1040NR, line 33 5. Free state tax preparation   6. Free state tax preparation Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 6. Free state tax preparation   7. Free state tax preparation Enter any domestic production activities deduction from Form 1040, line 35, or Form 1040NR, line 34 7. Free state tax preparation   8. Free state tax preparation Enter any foreign earned income exclusion and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 8. Free state tax preparation   9. Free state tax preparation Enter any foreign housing deduction from Form 2555, line 50 9. Free state tax preparation   10. Free state tax preparation Enter any excludable qualified savings bond interest from Form 8815, line 14 10. Free state tax preparation   11. Free state tax preparation Enter any excluded employer-provided adoption benefits from Form 8839, line 28 11. Free state tax preparation   12. Free state tax preparation Add the amounts on lines 3 through 11 12. Free state tax preparation   13. Free state tax preparation Enter: $188,000 if married filing jointly or qualifying widow(er), $10,000 if married filing separately and you lived with your spouse at any time during the year, or $127,000 for all others 13. Free state tax preparation   Is the amount on line 12 more than the amount on line 13? If yes, see the note below. Free state tax preparation  If no, the amount on line 12 is your modified adjusted gross income for Roth IRA purposes. Free state tax preparation       Note. Free state tax preparation If the amount on line 12 is more than the amount on line 13 and you have other income or loss items, such as social security income or passive activity losses, that are subject to AGI-based phaseouts, you can refigure your AGI solely for the purpose of figuring your modified AGI for Roth IRA purposes. Free state tax preparation (If you receive social security benefits, use Worksheet 1 in Appendix B to refigure your AGI. Free state tax preparation ) Then go to line 3 above in this Worksheet 2-1 to refigure your modified AGI. Free state tax preparation If you do not have other income or loss items subject to AGI-based phaseouts, your modified adjusted gross income for Roth IRA purposes is the amount on line 12 above. Free state tax preparation Roth IRAs only. Free state tax preparation   If contributions are made only to Roth IRAs, your contribution limit generally is the lesser of: $5,500 ($6,500 if you are age 50 or older), or Your taxable compensation. Free state tax preparation   However, if your modified AGI is above a certain amount, your contribution limit may be reduced, as explained later under Contribution limit reduced . Free state tax preparation Roth IRAs and traditional IRAs. Free state tax preparation   If contributions are made to both Roth IRAs and traditional IRAs established for your benefit, your contribution limit for Roth IRAs generally is the same as your limit would be if contributions were made only to Roth IRAs, but then reduced by all contributions for the year to all IRAs other than Roth IRAs. Free state tax preparation Employer contributions under a SEP or SIMPLE IRA plan do not affect this limit. Free state tax preparation   This means that your contribution limit is the lesser of: $5,500 ($6,500 if you are age 50 or older) minus all contributions (other than employer contributions under a SEP or SIMPLE IRA plan) for the year to all IRAs other than Roth IRAs, or Your taxable compensation minus all contributions (other than employer contributions under a SEP or SIMPLE IRA plan) for the year to all IRAs other than Roth IRAs. Free state tax preparation   However, if your modified AGI is above a certain amount, your contribution limit may be reduced, as explained below under Contribution limit reduced . Free state tax preparation   Simplified employee pensions (SEPs) are discussed in Publication 560. Free state tax preparation Savings incentive match plans for employees (SIMPLEs) are discussed in chapter 3. Free state tax preparation Repayment of reservist distributions. Free state tax preparation   You can repay qualified reservist distributions even if the repayments would cause your total contributions to the Roth IRA to be more than the general limit on contributions. Free state tax preparation However, the total repayments cannot be more than the amount of your distribution. Free state tax preparation Note. Free state tax preparation If you make repayments of qualified reservist distributions to a Roth IRA, increase your basis in the Roth IRA by the amount of the repayment. Free state tax preparation For more information, see Qualified reservist repayments under How Much Can Be Contributed? in chapter 1. Free state tax preparation Contribution limit reduced. Free state tax preparation   If your modified AGI is above a certain amount, your contribution limit is gradually reduced. Free state tax preparation Use Table 2-1, later, to determine if this reduction applies to you. Free state tax preparation Table 2-1. Free state tax preparation Effect of Modified AGI on Roth IRA Contribution This table shows whether your contribution to a Roth IRA is affected by the amount of your modified adjusted gross income (modified AGI). Free state tax preparation IF you have taxable compensation and your filing status is . Free state tax preparation . Free state tax preparation . Free state tax preparation AND your modified AGI is . Free state tax preparation . Free state tax preparation . Free state tax preparation THEN . Free state tax preparation . Free state tax preparation . Free state tax preparation married filing jointly or  qualifying widow(er) less than $178,000 you can contribute up to $5,500 ($6,500 if you are age 50 or older) as explained under How Much Can Be Contributed . Free state tax preparation at least $178,000 but less than $188,000 the amount you can contribute is reduced as explained under Contribution limit reduced . Free state tax preparation $188,000 or more you cannot contribute to a Roth IRA. Free state tax preparation married filing separately and you lived with your spouse at any time during the year zero (-0-) you can contribute up to $5,500 ($6,500 if you are age 50 or older) as explained under How Much Can Be Contributed . Free state tax preparation more than zero (-0-) but less than $10,000 the amount you can contribute is reduced as explained under Contribution limit reduced . Free state tax preparation $10,000 or more you cannot contribute to a Roth IRA. Free state tax preparation single, head of household,  or married filing separately and you did not live with your spouse at any time during the year less than $112,000 you can contribute up to $5,500 ($6,500 if you are age 50 or older) as explained under How Much Can Be Contributed . Free state tax preparation at least $112,000 but less than $127,000 the amount you can contribute is reduced as explained under Contribution limit reduced . Free state tax preparation $127,000 or more you cannot contribute to a Roth IRA. Free state tax preparation Figuring the reduction. Free state tax preparation   If the amount you can contribute must be reduced, use Worksheet 2-2, later, to figure your reduced contribution limit. Free state tax preparation Worksheet 2-2. Free state tax preparation Determining Your Reduced Roth IRA Contribution Limit Before using this worksheet, check Table 2-1, earlier, to determine whether or not your Roth IRA contribution limit is reduced. Free state tax preparation If it is, use this worksheet to determine how much it is reduced. Free state tax preparation 1. Free state tax preparation Enter your modified AGI for Roth IRA purposes (Worksheet 2-1, line 12) 1. Free state tax preparation   2. Free state tax preparation Enter: $178,000 if filing a joint return or qualifying widow(er), $-0- if married filing a separate return and you lived with your spouse at any time in 2013, or $112,000 for all others 2. Free state tax preparation   3. Free state tax preparation Subtract line 2 from line 1 3. Free state tax preparation   4. Free state tax preparation Enter: $10,000 if filing a joint return or qualifying widow(er) or married filing a separate return and you lived with your spouse at any time during the year, or $15,000 for all others 4. Free state tax preparation   5. Free state tax preparation Divide line 3 by line 4 and enter the result as a decimal (rounded to at least three places). Free state tax preparation If the result is 1. Free state tax preparation 000 or more, enter 1. Free state tax preparation 000 5. Free state tax preparation   6. Free state tax preparation Enter the lesser of: $5,500 ($6,500 if you are age 50 or older), or Your taxable compensation 6. Free state tax preparation   7. Free state tax preparation Multiply line 5 by line 6 7. Free state tax preparation   8. Free state tax preparation Subtract line 7 from line 6. Free state tax preparation Round the result up to the nearest $10. Free state tax preparation If the result is less than $200, enter $200 8. Free state tax preparation   9. Free state tax preparation Enter contributions for the year to other IRAs 9. Free state tax preparation   10. Free state tax preparation Subtract line 9 from line 6 10. Free state tax preparation   11. Free state tax preparation Enter the lesser of line 8 or line 10. Free state tax preparation This is your reduced Roth IRA contribution limit 11. Free state tax preparation      Round your reduced contribution limit up to the nearest $10. Free state tax preparation If your reduced contribution limit is more than $0, but less than $200, increase the limit to $200. Free state tax preparation Example. Free state tax preparation You are a 45-year-old, single individual with taxable compensation of $113,000. Free state tax preparation You want to make the maximum allowable contribution to your Roth IRA for 2013. Free state tax preparation Your modified AGI for 2013 is $113,000. Free state tax preparation You have not contributed to any traditional IRA, so the maximum contribution limit before the modified AGI reduction is $5,500. Free state tax preparation You figure your reduced Roth IRA contribution of $5,140 as shown on Worksheet 2-2. Free state tax preparation Example—Illustrated, later. Free state tax preparation   Worksheet 2-2. Free state tax preparation Example—Illustrated Before using this worksheet, check Table 2-1, earlier, to determine whether or not your Roth IRA contribution limit is reduced. Free state tax preparation If it is, use this worksheet to determine how much it is reduced. Free state tax preparation 1. Free state tax preparation Enter your modified AGI for Roth IRA purposes (Worksheet 2-1, line 12) 1. Free state tax preparation 113,000 2. Free state tax preparation Enter: $178,000 if filing a joint return or qualifying widow(er), $-0- if married filing a separate return and you lived with your spouse at any time in 2013, or $112,000 for all others 2. Free state tax preparation 112,000 3. Free state tax preparation Subtract line 2 from line 1 3. Free state tax preparation 1,000 4. Free state tax preparation Enter: $10,000 if filing a joint return or qualifying widow(er) or married filing a separate return and you lived with your spouse at any time during the year, or $15,000 for all others 4. Free state tax preparation 15,000 5. Free state tax preparation Divide line 3 by line 4 and enter the result as a decimal (rounded to at least three places). Free state tax preparation If the result is 1. Free state tax preparation 000 or more, enter 1. Free state tax preparation 000 5. Free state tax preparation . Free state tax preparation 067 6. Free state tax preparation Enter the lesser of: $5,500 ($6,500 if you are age 50 or older), or Your taxable compensation 6. Free state tax preparation 5,500 7. Free state tax preparation Multiply line 5 by line 6 7. Free state tax preparation 369 8. Free state tax preparation Subtract line 7 from line 6. Free state tax preparation Round the result up to the nearest $10. Free state tax preparation If the result is less than $200, enter $200 8. Free state tax preparation 5,140 9. Free state tax preparation Enter contributions for the year to other IRAs 9. Free state tax preparation 0 10. Free state tax preparation Subtract line 9 from line 6 10. Free state tax preparation 5,500 11. Free state tax preparation Enter the lesser of line 8 or line 10. Free state tax preparation This is your reduced Roth IRA contribution limit 11. Free state tax preparation 5,140 When Can You Make Contributions? You can make contributions to a Roth IRA for a year at any time during the year or by the due date of your return for that year (not including extensions). Free state tax preparation You can make contributions for 2013 by the due date (not including extensions) for filing your 2013 tax return. Free state tax preparation This means that most people can make contributions for 2013 by April 15, 2014. Free state tax preparation What if You Contribute Too Much? A 6% excise tax applies to any excess contribution to a Roth IRA. Free state tax preparation Excess contributions. Free state tax preparation   These are the contributions to your Roth IRAs for a year that equal the total of: Amounts contributed for the tax year to your Roth IRAs (other than amounts properly and timely rolled over from a Roth IRA or properly converted from a traditional IRA or rolled over from a qualified retirement plan, as described later) that are more than your contribution limit for the year (explained earlier under How Much Can Be Contributed? ), plus Any excess contributions for the preceding year, reduced by the total of: Any distributions out of your Roth IRAs for the year, plus Your contribution limit for the year minus your contributions to all your IRAs for the year. Free state tax preparation Withdrawal of excess contributions. Free state tax preparation   For purposes of determining excess contributions, any contribution that is withdrawn on or before the due date (including extensions) for filing your tax return for the year is treated as an amount not contributed. Free state tax preparation This treatment only applies if any earnings on the contributions are also withdrawn. Free state tax preparation The earnings are considered earned and received in the year the excess contribution was made. Free state tax preparation   If you timely filed your 2013 tax return without withdrawing a contribution that you made in 2013, you can still have the contribution returned to you within 6 months of the due date of your 2013 tax return, excluding extensions. Free state tax preparation If you do, file an amended return with “Filed pursuant to section 301. Free state tax preparation 9100-2” written at the top. Free state tax preparation Report any related earnings on the amended return and include an explanation of the withdrawal. Free state tax preparation Make any other necessary changes on the amended return. Free state tax preparation Applying excess contributions. Free state tax preparation    If contributions to your Roth IRA for a year were more than the limit, you can apply the excess contribution in one year to a later year if the contributions for that later year are less than the maximum allowed for that year. Free state tax preparation Can You Move Amounts Into a Roth IRA? You may be able to convert amounts from either a traditional, SEP, or SIMPLE IRA into a Roth IRA. Free state tax preparation You may be able to roll over amounts from a qualified retirement plan to a Roth IRA. Free state tax preparation You may be able to recharacterize contributions made to one IRA as having been made directly to a different IRA. Free state tax preparation You can roll amounts over from a designated Roth account or from one Roth IRA to another Roth IRA. Free state tax preparation Conversions You can convert a traditional IRA to a Roth IRA. Free state tax preparation The conversion is treated as a rollover, regardless of the conversion method used. Free state tax preparation Most of the rules for rollovers, described in chapter 1 under Rollover From One IRA Into Another , apply to these rollovers. Free state tax preparation However, the 1-year waiting period does not apply. Free state tax preparation Conversion methods. Free state tax preparation   You can convert amounts from a traditional IRA to a Roth IRA in any of the following three ways. Free state tax preparation Rollover. Free state tax preparation You can receive a distribution from a traditional IRA and roll it over (contribute it) to a Roth IRA within 60 days after the distribution. Free state tax preparation Trustee-to-trustee transfer. Free state tax preparation You can direct the trustee of the traditional IRA to transfer an amount from the traditional IRA to the trustee of the Roth IRA. Free state tax preparation Same trustee transfer. Free state tax preparation If the trustee of the traditional IRA also maintains the Roth IRA, you can direct the trustee to transfer an amount from the traditional IRA to the Roth IRA. Free state tax preparation Same trustee. Free state tax preparation   Conversions made with the same trustee can be made by redesignating the traditional IRA as a Roth IRA, rather than opening a new account or issuing a new contract. Free state tax preparation Income. Free state tax preparation   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. Free state tax preparation 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. Free state tax preparation If you must include any amount in your gross income, you may have to increase your withholding or make estimated tax payments. Free state tax preparation See Publication 505, Tax Withholding and Estimated Tax. Free state tax preparation More information. Free state tax preparation   For more information on conversions, see Converting From Any Traditional IRA Into a Roth IRA in chapter 1. Free state tax preparation Rollover From Employer's Plan Into a Roth IRA You can roll over into a Roth 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 (including a 401(k) plan); Annuity plan; Tax-sheltered annuity plan (section 403(b) plan); or Governmental deferred compensation plan (section 457 plan). Free state tax preparation Any amount rolled over is subject to the same rules for converting a traditional IRA into a Roth IRA. Free state tax preparation See Converting From Any Traditional IRA Into a Roth IRA in chapter 1. Free state tax preparation Also, the rollover contribution must meet the rollover requirements that apply to the specific type of retirement plan. Free state tax preparation Rollover methods. Free state tax preparation   You can roll over amounts from a qualified retirement plan to a Roth IRA in one of the following ways. Free state tax preparation Rollover. Free state tax preparation You can receive a distribution from a qualified retirement plan and roll it over (contribute) to a Roth IRA within 60 days after the distribution. Free state tax preparation Since the distribution is paid directly to you, the payer generally must withhold 20% of it. Free state tax preparation Direct rollover option. Free state tax preparation Your employer's qualified plan must give you the option to have any part of an eligible rollover distribution paid directly to a Roth IRA. Free state tax preparation Generally, no tax is withheld from any part of the designated distribution that is directly paid to the trustee of the Roth IRA. Free state tax preparation Rollover by nonspouse beneficiary. Free state tax preparation   If you are a designated beneficiary (other than a surviving spouse) of a deceased employee, you can roll over all or part of an eligible rollover distribution from one of the types of plans listed above into a Roth IRA. Free state tax preparation You must make the rollover by a direct trustee-to-trustee transfer into an inherited Roth IRA. Free state tax preparation   You will determine your required minimum distributions in years after you make the rollover based on whether the employee died before his or her required beginning date for taking distributions from the plan. Free state tax preparation For more information, see Distributions after the employee’s death under Tax on Excess Accumulation in Publication 575. Free state tax preparation Income. Free state tax preparation   You must include in your gross income distributions from a qualified retirement plan that you would have had to include in income if you had not rolled them over into a Roth IRA. Free state tax preparation You do not include in gross income any part of a distribution from a qualified retirement plan that is a return of contributions (after-tax contributions) to the plan that were taxable to you when paid. Free state tax preparation These amounts are normally included in income on your return for the year of the rollover from the qualified employer plan to a Roth IRA. Free state tax preparation If you must include any amount in your gross income, you may have to increase your withholding or make estimated tax payments. Free state tax preparation See Publication 505, Tax Withholding and Estimated Tax. Free state tax preparation For more information on eligible rollover distributions from qualified retirement plans and withholding, see Rollover From Employer's Plan Into an IRA in chapter 1. Free state tax preparation Military Death Gratuities and Servicemembers' Group Life Insurance (SGLI) Payments If you received a military death gratuity or SGLI payment with respect to a death from injury that occurred after October 6, 2001, you can contribute (roll over) all or part of the amount received to your Roth IRA. Free state tax preparation The contribution is treated as a qualified rollover contribution. Free state tax preparation The amount you can roll over to your Roth IRA cannot exceed the total amount that you received reduced by any part of that amount that was contributed to a Coverdell ESA or another Roth IRA. Free state tax preparation Any military death gratuity or SGLI payment contributed to a Roth IRA is disregarded for purposes of the 1-year waiting period between rollovers. Free state tax preparation The rollover must be completed before the end of the 1-year period beginning on the date you received the payment. Free state tax preparation The amount contributed to your Roth IRA is treated as part of your cost basis (investment in the contract) in the Roth IRA that is not taxable when distributed. Free state tax preparation Rollover From a Roth IRA You can withdraw, tax free, all or part of the assets from one Roth IRA if you contribute them within 60 days to another Roth IRA. Free state tax preparation Most of the rules for rollovers, described in chapter 1 under Rollover From One IRA Into Another , apply to these rollovers. Free state tax preparation However, rollovers from retirement plans other than Roth IRAs are disregarded for purposes of the 1-year waiting period between rollovers. Free state tax preparation A rollover from a Roth IRA to an employer retirement plan is not allowed. Free state tax preparation A rollover from a designated Roth account can only be made to another designated Roth account or to a Roth IRA. Free state tax preparation If you roll over an amount from one Roth IRA to another Roth IRA, the 5-year period used to determine qualified distributions does not change. Free state tax preparation The 5-year period begins with the first taxable year for which the contribution was made to the initial Roth IRA. Free state tax preparation See What are Qualified Distributions , later. Free state tax preparation Rollover of Exxon Valdez Settlement Income If you are a qualified taxpayer (defined in chapter 1, earlier) and you received qualified settlement income (defined in chapter 1, earlier), you can contribute all or part of the amount received to an eligible retirement plan which includes a Roth IRA. Free state tax preparation The rules for contributing qualified settlement income to a Roth IRA are the same as the rules for contributing qualified settlement income to a traditional IRA with the following exception. Free state tax preparation Qualified settlement income that is contributed to a Roth IRA, or to a designated Roth account, will be: Included in your taxable income for the year the qualified settlement income was received, and Treated as part of your cost basis (investment in the contract) in the Roth IRA that is not taxable when distributed. Free state tax preparation For more information, see Rollover of Exxon Valdez Settlement Income in chapter 1. Free state tax preparation Rollover of Airline Payments If you are a qualified airline employee (defined next), you may contribute any portion of an airline payment (defined below) you receive to a Roth IRA. Free state tax preparation The contribution must be made within 180 days from the date you received the payment. Free state tax preparation The contribution will be treated as a qualified rollover contribution. Free state tax preparation The rollover contribution is included in income to the extent it would be included in income if it were not part of the rollover contribution. Free state tax preparation Also, any reduction in the airline payment amount on account of employment taxes shall be disregarded when figuring the amount you can contribute to your Roth IRA. Free state tax preparation Qualified airline employee. Free state tax preparation    A current or former employee of a commercial airline carrier who was a participant in a qualified defined benefit plan maintained by the carrier which was terminated or became subject to restrictions under Section 402(b) of the Pension Protection Act of 2006. Free state tax preparation These provisions also apply to surviving spouses of qualified airline employees. Free state tax preparation Airline payment. Free state tax preparation    An airline payment is any payment of money or other property that is paid to a qualified airline employee from a commercial airline carrier. Free state tax preparation The payment also must be made both: Under the approval of an order of federal bankruptcy court in a case filed after September 11, 2001, and before January 1, 2007, and In respect of the qualified airline employee’s interest in a bankruptcy claim against the airline carrier, any note of the carrier (or amount paid in lieu of a note being issued), or any other fixed obligation of the carrier to pay a lump sum amount. Free state tax preparation Any reduction in the airline payment amount on account of employment taxes shall be disregarded when figuring the amount you can roll over to your traditional IRA. Free state tax preparation Also, an airline payment shall not include any amount payable on the basis of the airline carrier’s future earnings or profits. Free state tax preparation Are Distributions Taxable? You do not include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s). Free state tax preparation You also do not include distributions from your Roth IRA that you roll over tax free into another Roth IRA. Free state tax preparation You may have to include part of other distributions in your income. Free state tax preparation See Ordering Rules for Distributions , later. Free state tax preparation Basis of distributed property. Free state tax preparation   The basis of property distributed from a Roth IRA is its fair market value (FMV) on the date of distribution, whether or not the distribution is a qualified distribution. Free state tax preparation Withdrawals of contributions by due date. Free state tax preparation   If you withdraw contributions (including any net earnings on the contributions) by the due date of your return for the year in which you made the contribution, the contributions are treated as if you never made them. Free state tax preparation If you have an extension of time to file your return, you can withdraw the contributions and earnings by the extended due date. Free state tax preparation The withdrawal of contributions is tax free, but you must include the earnings on the contributions in income for the year in which you made the contributions. Free state tax preparation What Are Qualified Distributions? A qualified distribution is any payment or distribution from your Roth IRA that meets the following requirements. Free state tax preparation It is made after the 5-year period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for your benefit, and The payment or distribution is: Made on or after the date you reach age 59½, Made because you are disabled (defined earlier), Made to a beneficiary or to your estate after your death, or One that meets the requirements listed under First home under Exceptions in chapter 1 (up to a $10,000 lifetime limit). Free state tax preparation Additional Tax on Early Distributions If you receive a distribution that is not a qualified distribution, you may have to pay the 10% additional tax on early distributions as explained in the following paragraphs. Free state tax preparation Distributions of conversion and certain rollover contributions within 5-year period. Free state tax preparation   If, within the 5-year period starting with the first day of your tax year in which you convert an amount from a traditional IRA or rollover an amount from a qualified retirement plan to a Roth IRA, you take a distribution from a Roth IRA, you may have to pay the 10% additional tax on early distributions. Free state tax preparation You generally must pay the 10% additional tax on any amount attributable to the part of the amount converted or rolled over (the conversion or rollover contribution) that you had to include in income (recapture amount). Free state tax preparation A separate 5-year period applies to each conversion and rollover. Free state tax preparation See Ordering Rules for Distributions , later, to determine the recapture amount, if any. Free state tax preparation   The 5-year period used for determining whether the 10% early distribution tax applies to a distribution from a conversion or rollover contribution is separately determined for each conversion and rollover, and is not necessarily the same as the 5-year period used for determining whether a distribution is a qualified distribution. Free state tax preparation See What Are Qualified Distributions , earlier. Free state tax preparation   For example, if a calendar-year taxpayer makes a conversion contribution on February 25, 2013, and makes a regular contribution for 2012 on the same date, the 5-year period for the conversion begins January 1, 2013, while the 5-year period for the regular contribution begins on January 1, 2012. Free state tax preparation   Unless one of the exceptions listed later applies, you must pay the additional tax on the portion of the distribution attributable to the part of the conversion or rollover contribution that you had to include in income because of the conversion or rollover. Free state tax preparation   You must pay the 10% additional tax in the year of the distribution, even if you had included the conversion or rollover contribution in an earlier year. Free state tax preparation You also must pay the additional tax on any portion of the distribution attributable to earnings on contributions. Free state tax preparation Other early distributions. Free state tax preparation   Unless one of the exceptions listed below applies, you must pay the 10% additional tax on the taxable part of any distributions that are not qualified distributions. Free state tax preparation Exceptions. Free state tax preparation   You may not have to pay the 10% additional tax in the following situations. Free state tax preparation You have reached age 59½. Free state tax preparation You are totally and permanently disabled. Free state tax preparation You are the beneficiary of a deceased IRA owner. Free state tax preparation You use the distribution to buy, build, or rebuild a first home. Free state tax preparation The distributions are part of a series of substantially equal payments. Free state tax preparation You have unreimbursed medical expenses that are more than 10% (or 7. Free state tax preparation 5% if you or your spouse was born before January 2, 1949) of your adjusted gross income (defined earlier) for the year. Free state tax preparation You are paying medical insurance premiums during a period of unemployment. Free state tax preparation The distributions are not more than your qualified higher education expenses. Free state tax preparation The distribution is due to an IRS levy of the qualified plan. Free state tax preparation The distribution is a qualified reservist distribution. Free state tax preparation Most of these exceptions are discussed earlier in chapter 1 under Early Distributions . Free state tax preparation Please click here for the text description of the image. Free state tax preparation Is Roth Distributions a Qualified Distribution? Ordering Rules for Distributions If you receive a distribution from your Roth IRA that is not a qualified distribution, part of it may be taxable. Free state tax preparation There is a set order in which contributions (including conversion contributions and rollover contributions from qualified retirement plans) and earnings are considered to be distributed from your Roth IRA. Free state tax preparation For these purposes, disregard the withdrawal of excess contributions and the earnings on them (discussed earlier under What if You Contribute Too Much ). Free state tax preparation Order the distributions as follows. Free state tax preparation Regular contributions. Free state tax preparation Conversion and rollover contributions, on a first-in, first-out basis (generally, total conversions and rollovers from the earliest year first). Free state tax preparation See Aggregation (grouping and adding) rules, later. Free state tax preparation Take these conversion and rollover contributions into account as follows: Taxable portion (the amount required to be included in gross income because of the conversion or rollover) first, and then the Nontaxable portion. Free state tax preparation Earnings on contributions. Free state tax preparation Disregard rollover contributions from other Roth IRAs for this purpose. Free state tax preparation Aggregation (grouping and adding) rules. Free state tax preparation   Determine the taxable amounts distributed (withdrawn), distributions, and contributions by grouping and adding them together as follows. Free state tax preparation Add all distributions from all your Roth IRAs during the year together. Free state tax preparation Add all regular contributions made for the year (including contributions made after the close of the year, but before the due date of your return) together. Free state tax preparation Add this total to the total undistributed regular contributions made in prior years. Free state tax preparation Add all conversion and rollover contributions made during the year together. Free state tax preparation For purposes of the ordering rules, in the case of any conversion or rollover in which the conversion or rollover distribution is made in 2013 and the conversion or rollover contribution is made in 2014, treat the conversion or rollover contribution as contributed before any other conversion or rollover contributions made in 2014. Free state tax preparation Add any recharacterized contributions that end up in a Roth IRA to the appropriate contribution group for the year that the original contribution would have been taken into account if it had been made directly to the Roth IRA. Free state tax preparation   Disregard any recharacterized contribution that ends up in an IRA other than a Roth IRA for the purpose of grouping (aggregating) both contributions and distributions. Free state tax preparation Also disregard any amount withdrawn to correct an excess contribution (including the earnings withdrawn) for this purpose. Free state tax preparation Example. Free state tax preparation On October 15, 2009, Justin converted all $80,000 in his traditional IRA to his Roth IRA. Free state tax preparation His Forms 8606 from prior years show that $20,000 of the amount converted is his basis. Free state tax preparation Justin included $60,000 ($80,000 − $20,000) in his gross income. Free state tax preparation On February 23, 2013, Justin made a regular contribution of $5,000 to a Roth IRA. Free state tax preparation On November 8, 2013, at age 60, Justin took a $7,000 distribution from his Roth IRA. Free state tax preparation The first $5,000 of the distribution is a return of Justin's regular contribution and is not includible in his income. Free state tax preparation The next $2,000 of the distribution is not includible in income because it was included previously. Free state tax preparation Figuring your recapture amount. Free state tax preparation   If you had an early distribution from your Roth IRAs in 2013, you must allocate the early distribution by using the Recapture Amount—Allocation Chart, later. Free state tax preparation Recapture Amount—Allocation Chart Enter the amount from your 2013 Form 8606, line 19   Before you begin: You will need your prior year Form(s) 8606 and income tax return(s) if you entered an amount on any line(s) as indicated below. Free state tax preparation   You will now allocate the amount you entered above (2013 Form 8606, line 19) in the order shown, to the amounts on the lines listed below (to the extent a prior year distribution was not allocable to the amount). Free state tax preparation The maximum amount you can enter on each line below is the amount entered on the referenced lines of the form for that year. Free state tax preparation Note. Free state tax preparation Once you have allocated the full amount from your 2013 Form 8606, line 19, STOP. Free state tax preparation See the Example , earlier. Free state tax preparation Tax Year Your Form 2013 Form 8606, line 20   Form 8606, line 22   1998 Form 8606, line 16   Form 8606, line 15   1999 Form 8606, line 16   Form 8606, line 15   2000 Form 8606, line 16   Form 8606, line 15   2001 Form 8606, line 18   Form 8606, line 17   2002 Form 8606, line 18   Form 8606, line 17   2003 Form 8606, line 18   Form 8606, line 17   2004 Form 8606, line 18   Form 8606, line 17   2005 Form 8606, line 18   Form 8606, line 17   2006 Form 8606, line 18   Form 8606, line 17   2007 Form 8606, line 18   Form 8606, line 17   2008 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2009 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2010 Form 8606, lines 18 and 23   Form 8606, lines 17 and 22   2011 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2012 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2013 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2013 Form 8606, line 25       *Only include those amounts rolled over to a Roth IRA. Free state tax preparation  **Only include any contributions (usually Form 1099-R, box 5) that were taxable to you when made and rolled over to a Roth IRA. Free state tax preparation Amount to include on Form 5329, line 1. Free state tax preparation   Include on line 1 of your 2013 Form 5329 the following four amounts from the Recapture Amount—Allocation Chart that you filled out. Free state tax preparation The amount you allocated to line 20 of your 2013 Form 8606. Free state tax preparation The amount(s) allocated to your 2009 through 2013 Forms 8606, line 18, and your 2010 Form 8606, line 23. Free state tax preparation The amount(s) allocated to your 2009, 2011, 2012, and 2013 Forms 1040, line 16b; Forms 1040A, line 12b; and Forms 1040NR, line 17b. Free state tax preparation The amount from your 2013 Form 8606, line 25. Free state tax preparation   Also, include any amount you allocated to line 20 of your 2013 Form 8606 on your 2013 Form 5329, line 2, and enter exception number 09. Free state tax preparation Example. Free state tax preparation Ishmael, age 32, opened a Roth IRA in 2000. Free state tax preparation He made the maximum contributions to it every year. Free state tax preparation In addition, he made the following transactions into his Roth IRA. Free state tax preparation In 2005, he converted $10,000 from his traditional IRA into his Roth IRA. Free state tax preparation He filled out a 2005 Form 8606 and attached it with his 2005 Form 1040. Free state tax preparation He entered $0 on line 17 of Form 8606 because he took a deduction for all the contributions to the traditional IRA, therefore he has no basis. Free state tax preparation He entered $10,000 on line 18 of Form 8606. Free state tax preparation In 2011, he rolled over the entire balance of his qualified retirement plan, $20,000, into a Roth IRA when he changed jobs. Free state tax preparation He used a 2011 Form 1040 to file his taxes. Free state tax preparation He entered $20,000 on line 16a of Form 1040 because that was the amount reported in box 1 of his 2011 Form 1099-R. Free state tax preparation Box 5 of his 2011 Form 1099-R reported $0 since he did not make any after-tax contributions to the qualified retirement plan. Free state tax preparation He entered $20,000 on line 16b of Form 1040 since that is the taxable amount that was rolled over in 2011. Free state tax preparation The total balance in his Roth IRA as of January 1, 2013 was $105,000 ($50,000 in contributions from 2000 through 2012 + $10,000 from the 2005 conversion + $20,000 from the 2011 rollover + $25,000 from earnings). Free state tax preparation He has not taken any early distribution from his Roth IRA before 2013. Free state tax preparation In 2013, he made the maximum contribution of $5,500 to his Roth IRA. Free state tax preparation In August of 2013, he took a $85,500 early distribution from his Roth IRA to use as a down payment on the purchase of his first home. Free state tax preparation See his filled out Illustrated Recapture Amount—Allocation Chart, later, to see how he allocated the amounts from the above transactions. Free state tax preparation Based on his allocation, he would enter $20,000 on his 2013 Form 5329, line 1 (see Amount to include on Form 5329, line 1 , above). Free state tax preparation He should also report $10,000 on his 2013 Form 5329, line 2, and enter exception 09 since that amount is not subject to the 10% additional tax on early distributions. Free state tax preparation Illustrated Recapture Amount—Allocation Chart Enter the amount from your 2013 Form 8606, line 19 $85,500 Before you begin: You will need your prior year Form(s) 8606 and income tax return(s) if you entered an amount on any line(s) as indicated below. Free state tax preparation   You will now allocate the amount you entered above (2013 Form 8606, line 19) in the order shown, to the amounts on the lines listed below (to the extent a prior year distribution was not allocable to the amount). Free state tax preparation The maximum amount you can enter on each line below is the amount entered on the referenced lines of the form for that year. Free state tax preparation Note. Free state tax preparation Once you have allocated the full amount from your 2013 Form 8606, line 19, STOP. Free state tax preparation See the Example , earlier. Free state tax preparation Tax Year Your Form 2013 Form 8606, line 20 $10,000 Form 8606, line 22 $55,500 1998 Form 8606, line 16   Form 8606, line 15   1999 Form 8606, line 16   Form 8606, line 15   2000 Form 8606, line 16   Form 8606, line 15   2001 Form 8606, line 18   Form 8606, line 17   2002 Form 8606, line 18   Form 8606, line 17   2003 Form 8606, line 18   Form 8606, line 17   2004 Form 8606, line 18   Form 8606, line 17   2005 Form 8606, line 18 $10,000 Form 8606, line 17 $-0- 2006 Form 8606, line 18   Form 8606, line 17   2007 Form 8606, line 18   Form 8606, line 17   2008 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2009 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2010 Form 8606, lines 18 and 23   Form 8606, lines 17 and 22   2011 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b* $10,000 Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2012 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2013 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2013 Form 8606, line 25       *Only include those amounts rolled over to a Roth IRA. Free state tax preparation  **Only include any contributions (usually Form 1099-R, box 5) that were taxable to you when made and rolled over to a Roth IRA. Free state tax preparation How Do You Figure the Taxable Part? To figure the taxable part of a distribution that is not a qualified distribution, complete Form 8606, Part III. Free state tax preparation Must You Withdraw or Use Assets? You are not required to take distributions from your Roth IRA at any age. Free state tax preparation The minimum distribution rules that apply to traditional IRAs do not apply to Roth IRAs while the owner is alive. Free state tax preparation However, after the death of a Roth IRA owner, certain of the minimum distribution rules that apply to traditional IRAs also apply to Roth IRAs as explained later under Distributions After Owner's Death . Free state tax preparation Minimum distributions. Free state tax preparation   You cannot use your Roth IRA to satisfy minimum distribution requirements for your traditional IRA. Free state tax preparation Nor can you use distributions from traditional IRAs for required distributions from Roth IRAs. Free state tax preparation See Distributions to beneficiaries , later. Free state tax preparation Recognizing Losses on Investments If you have a loss on your Roth IRA investment, you can recognize the loss on your income tax return, but only when all the amounts in all of your Roth IRA accounts have been distributed to you and the total distributions are less than your unrecovered basis. Free state tax preparation Your basis is the total amount of contributions in your Roth IRAs. Free state tax preparation You claim the loss as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit that applies to certain miscellaneous itemized deductions on Schedule A (Form 1040). Free state tax preparation Any such losses are added back to taxable income for purposes of calculating the alternative minimum tax. Free state tax preparation Distributions After Owner's Death If a Roth IRA owner dies, the minimum distribution rules that apply to traditional IRAs apply to Roth IRAs as though the Roth IRA owner died before his or her required beginning date. Free state tax preparation See When Can You Withdraw or Use Assets? in chapter 1. Free state tax preparation Distributions to beneficiaries. Free state tax preparation   Generally, the entire interest in the Roth IRA must be distributed by the end of the fifth calendar year after the year of the owner's death unless the interest is payable to a designated beneficiary over the life or life expectancy of the designated beneficiary. Free state tax preparation (See When Must You Withdraw Assets? (Required Minimum Distributions) in chapter 1. Free state tax preparation )   If paid as an annuity, the entire interest must be payable over a period not greater than the designated beneficiary's life expectancy and distributions must begin before the end of the calendar year following the year of death. Free state tax preparation Distributions from another Roth IRA cannot be substituted for these distributions unless the other Roth IRA was inherited from the same decedent. Free state tax preparation   If the sole beneficiary is the spouse, he or she can either delay distributions until the decedent would have reached age 70½ or treat the Roth IRA as his or her own. Free state tax preparation Combining with other Roth IRAs. Free state tax preparation   A beneficiary can combine an inherited Roth IRA with another Roth IRA maintained by the beneficiary only if the beneficiary either: Inherited the other Roth IRA from the same decedent, or Was the spouse of the decedent and the sole beneficiary of the Roth IRA and elects to treat it as his or her own IRA. Free state tax preparation Distributions that are not qualified distributions. Free state tax preparation   If a distribution to a beneficiary is not a qualified distribution, it is generally includible in the beneficiary's gross income in the same manner as it would have been included in the owner's income had it been distributed to the IRA owner when he or she was alive. Free state tax preparation   If the owner of a Roth IRA dies before the end of: The 5-year period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for the owner's benefit, or The 5-year period starting with the year of a conversion contribution from a traditional IRA or a rollover from a qualified retirement plan to a Roth IRA, each type of contribution is divided among multiple beneficiaries according to the pro-rata share of each. Free state tax preparation See Ordering Rules for Distributions , earlier in this chapter under Are Distributions Taxable. Free state tax preparation Example. Free state tax preparation When Ms. Free state tax preparation Hibbard died in 2013, her Roth IRA contained regular contributions of $4,000, a conversion contribution of $10,000 that was made in 2009, and earnings of $2,000. Free state tax preparation No distributions had been made from her IRA. Free state tax preparation She had no basis in the conversion contribution in 2009. Free state tax preparation When she established this Roth IRA (her first) in 2009, she named each of her four children as equal beneficiaries. Free state tax preparation Each child will receive one-fourth of each type of contribution and one-fourth of the earnings. Free state tax preparation An immediate distribution of $4,000 to each child will be treated as $1,000 from regular contributions, $2,500 from conversion contributions, and $500 from earnings. Free state tax preparation In this case, because the distributions are made before the end of the applicable 5-year period for a qualified distribution, each beneficiary includes $500 in income for 2013. Free state tax preparation The 10% additional tax on early distributions does not apply because the distribution was made to the beneficiaries as a result of the death of the IRA owner. Free state tax preparation If distributions from an inherited Roth IRA are less than the required minimum distribution for the year, discussed in chapter 1 under When Must You Withdraw Assets? (Required Minimum Distributions), you may have to pay a 50% excise tax for that year on the amount not distributed as required. Free state tax preparation For the tax on excess accumulations (insufficient distributions), see Excess Accumulations (Insufficient Distributions) under What Acts Result in Penalties or Additional Taxes? in chapter 1. Free state tax preparation If this applies to you, substitute “Roth IRA” for “traditional IRA” in that discussion. Free state tax preparation Prev  Up  Next   Home   More Online Publications
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Security Forms

IRS Contractor Investigation Risk Assessment Checklist (RAC)

IRS contractors who require a background investigation prior to starting work on an IRS contract must complete the RAC xls spreadsheet. The spreadsheet is completed by the vendor and individual contractor, and should be forwarded to both the COTR of record and the Contractor Security Lifecycle Program (CSLP) office.

All fields on Tab 1 of the RAC must be completed. Tab 2 contains instructions for each field. The spreadsheet contains a variety of information required for entry into various IRS systems to initiate and/or update the contractor investigation. These systems include but are not limited to:

• PBIP (PIV Background Investigation Process) – the contractor lifecycle tracking system, which tracks personal, investigation, training, badge, and separation information.
• USAccess – government-wide system used to submit fingerprints to OPM for a criminal check.
• ABIS (Automated Background Investigation System) – the system used to initiate the actual IRS investigation.
• e-QIP – the OPM  system used to complete the SF85 or SF85P (Questionnaire for Public Trust Positions)

Other forms that may be required prior to the investigation initiation may include the Fair Credit Reporting Act (Form 13440), Tax Check Notice (Form 1379), and the Declaration for Federal Employment (OF 0306).  You will be notified regarding which forms are required when you are contacted about initiating investigations for a specific contract with the IRS.  

If you have questions or concerns please contact Contractor Security Lifecycle Program office.  Be sure to include the Contracting Officer’s Technical Representative (COTR) on any questions or communications with CSLP.

Risk Assessment Spreadsheet
13340 - Fair Credit Reporting Act
1379 - Tax Record Check Notice
OF-306 - Declaration for Federal Employment
Page Last Reviewed or Updated: 03-Feb-2014

The Free State Tax Preparation

Free state tax preparation 1. Free state tax preparation   Filing Information Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Filing RequirementsWhen To File and Pay Foreign Currency Does My Return Have To Be On Paper? Where To File Nonresident Alien Spouse Treated as a ResidentSocial Security Number (SSN) How To Make the Choice Suspending the Choice Ending the Choice Estimated Tax Other Forms You May Have To File Topics - This chapter discusses: Whether you have to file a return, When to file your return and pay any tax due, How to treat foreign currency, How to file electronically, Where to file your return, When you can treat your nonresident alien spouse as a resident, and When you may have to make estimated tax payments. Free state tax preparation Useful Items - You may want to see: Publication 3 Armed Forces' Tax Guide 501 Exemptions, Standard Deduction, and Filing Information 505 Tax Withholding and Estimated Tax 519 U. Free state tax preparation S. Free state tax preparation Tax Guide for Aliens 970 Tax Benefits for Education Form (and Instructions) 1040-ES Estimated Tax for Individuals 1040X Amended U. Free state tax preparation S. Free state tax preparation Individual Income Tax Return 2350 Application for Extension of Time To File U. Free state tax preparation S. Free state tax preparation Income Tax Return 2555 Foreign Earned Income 2555-EZ Foreign Earned Income Exclusion 4868 Application for Automatic Extension of Time To File U. Free state tax preparation S. Free state tax preparation Individual Income Tax Return 8822 Change of Address See chapter 7 for information about getting these publications and forms. Free state tax preparation Filing Requirements If you are a U. Free state tax preparation S. Free state tax preparation citizen or resident alien, the rules for filing income, estate, and gift tax returns and for paying estimated tax are generally the same whether you are in the United States or abroad. Free state tax preparation Your income, filing status, and age generally determine whether you must file an income tax return. Free state tax preparation Generally, you must file a return for 2013 if your gross income from worldwide sources is at least the amount shown for your filing status in the following table. Free state tax preparation Filing Status*   Amount Single $10,000 65 or older $11,500 Head of household $12,850 65 or older $14,350 Qualifying widow(er) $16,100 65 or older $17,300 Married filing jointly $20,000 Not living with spouse at end of year $3,900 One spouse 65 or older $21,200 Both spouses 65 or older $22,400 Married filing separately $3,900 *If you are the dependent of another taxpayer, see the instructions for Form 1040 for more information on whether you must file a return. Free state tax preparation Gross income. Free state tax preparation   This includes all income you receive in the form of money, goods, property, and services that is not exempt from tax. Free state tax preparation   For purposes of determining whether you must file a return, gross income includes any income that you can exclude as foreign earned income or as a foreign housing amount. Free state tax preparation If you are self-employed, your gross income includes the amount on Part I, line 7 of Schedule C (Form 1040), Profit or Loss From Business, or line 1 of Schedule C-EZ (Form 1040), Net Profit From Business. Free state tax preparation Self-employed individuals. Free state tax preparation   If your net earnings from self-employment are $400 or more, you must file a return even if your gross income is below the amount listed for your filing status in the table shown earlier. Free state tax preparation Net earnings from self-employment are defined in Publication 334, Tax Guide for Small Business. Free state tax preparation 65 or older. Free state tax preparation   You are considered to be age 65 on the day before your 65th birthday. Free state tax preparation For example, if your 65th birthday is on January 1, 2014, you are considered 65 for 2013. Free state tax preparation Residents of U. Free state tax preparation S. Free state tax preparation possessions. Free state tax preparation   If you are (or were) a bona fide resident of a U. Free state tax preparation S. Free state tax preparation possession, you may be required to file Form 8898, Statement for Individuals Who Begin or End Bona Fide Residence in a U. Free state tax preparation S. Free state tax preparation Possession. Free state tax preparation See the instructions for the form for more information. Free state tax preparation When To File and Pay If you file on a calendar year basis, the due date for filing your return is April 15 of the following year. Free state tax preparation If you file on a fiscal year basis (a year ending on the last day of any month except December), the due date is 3 months and 15 days after the close of your fiscal year. Free state tax preparation In general, the tax shown on your return should be paid by the due date of the return, without regard to any extension of time for filing the return. Free state tax preparation When the due date for doing any act for tax purposes—filing a return, paying taxes, etc. Free state tax preparation — falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day. Free state tax preparation A tax return delivered by the U. Free state tax preparation S. Free state tax preparation mail or a designated delivery service that is postmarked or dated by the delivery service on or before the due date is considered to have been filed on or before that date. Free state tax preparation See your Form 1040 or Form 1040A instructions for a list of designated delivery services. Free state tax preparation Foreign wire transfers. Free state tax preparation   If you have a U. Free state tax preparation S. Free state tax preparation bank account, you can use: EFTPS (Electronic Federal Tax Payment System), or Federal Tax Application (same-day wire transfer). Free state tax preparation If you do not have a U. Free state tax preparation S. Free state tax preparation bank account, ask if your financial institution has a U. Free state tax preparation S. Free state tax preparation affiliate that can help you make same-day wire transfers. Free state tax preparation   For more information, visit www. Free state tax preparation eftps. Free state tax preparation gov. Free state tax preparation Extensions You can get an extension of time to file your return. Free state tax preparation In some circumstances, you also can get an extension of time to file and pay any tax due. Free state tax preparation However, if you pay the tax due after the regular due date, interest will be charged from the regular due date until the date the tax is paid. Free state tax preparation This publication discusses four extensions: an automatic 2-month extension, an automatic 6-month extension, an additional extension for taxpayers out of the country, and an extension of time to meet tests. Free state tax preparation If you served in a combat zone or qualified hazardous duty area, see Publication 3 for a discussion of extensions of deadlines. Free state tax preparation Automatic 2-month extension. Free state tax preparation   You are allowed an automatic 2-month extension to file your return and pay federal income tax if you are a U. Free state tax preparation S. Free state tax preparation citizen or resident alien, and on the regular due date of your return: You are living outside the United States and Puerto Rico and your main place of business or post of duty is outside the United States and Puerto Rico, or You are in military or naval service on duty outside the United States and Puerto Rico. Free state tax preparation   If you use a calendar year, the regular due date of your return is April 15. Free state tax preparation Even if you are allowed an extension, you will have to pay interest on any tax not paid by the regular due date of your return. Free state tax preparation Married taxpayers. Free state tax preparation   If you file a joint return, either you or your spouse can qualify for the automatic extension. Free state tax preparation If you and your spouse file separate returns, this automatic extension applies only to the spouse who qualifies for it. Free state tax preparation How to get the extension. Free state tax preparation   To use this automatic 2-month extension, you must attach a statement to your return explaining which of the two situations listed earlier qualified you for the extension. Free state tax preparation Automatic 6-month extension. Free state tax preparation   If you are not able to file your return by the due date, you generally can get an automatic 6-month extension of time to file (but not of time to pay). Free state tax preparation To get this automatic extension, you must file a paper Form 4868 or use IRS e-file (electronic filing). Free state tax preparation For more information about filing electronically, see E-file options , later. Free state tax preparation   The form must show your properly estimated tax liability based on the information available to you. Free state tax preparation    You may not be eligible. Free state tax preparation You cannot use the automatic 6-month extension of time to file if: You want the IRS to figure your tax, or You are under a court order to file by the regular due date. Free state tax preparation E-file options. Free state tax preparation    You can use e-file to get an extension of time to file. Free state tax preparation You can either file Form 4868 electronically or you can pay part or all of your estimate of tax due using a credit or debit card. Free state tax preparation   First, complete Form 4868 to use as a worksheet. Free state tax preparation If you think you may owe tax when you file your return, use Part II of the form to estimate your balance due. Free state tax preparation    Then, do one of the following. Free state tax preparation E-file Form 4868. Free state tax preparation You can use a tax software package with your personal computer or a tax professional to file Form 4868 electronically. Free state tax preparation You will need to provide certain information from your tax return for 2012. Free state tax preparation If you wish to make a payment by electronic funds withdrawal, see the instructions for Form 4868. Free state tax preparation If you e-file Form 4868, do not also send a paper Form 4868. Free state tax preparation E-file and pay by credit or debit card. Free state tax preparation You can get an extension by paying part or all of your estimate of tax due by using a credit or debit card. Free state tax preparation You can do this by phone or over the Internet. Free state tax preparation If you do this, you do not file Form 4868. Free state tax preparation For more information, see the instructions for your tax return. Free state tax preparation When to file. Free state tax preparation   Generally, you must request the 6-month extension by the regular due date of your return. Free state tax preparation Previous 2-month extension. Free state tax preparation   If you cannot file your return within the automatic 2-month extension period, you generally can get an additional 4 months to file your return, for a total of 6 months. Free state tax preparation The 2-month period and the 6-month period start at the same time. Free state tax preparation You have to request the additional 4 months by the new due date allowed by the 2-month extension. Free state tax preparation   The additional 4 months of time to file (unlike the original 2-month extension) is not an extension of time to pay. Free state tax preparation You must make an accurate estimate of your tax based on the information available to you. Free state tax preparation If you find you cannot pay the full amount due with Form 4868, you can still get the extension. Free state tax preparation You will owe interest on the unpaid amount from the original due date of the return. Free state tax preparation   You also may be charged a penalty for paying the tax late unless you have reasonable cause for not paying your tax when due. Free state tax preparation Penalties for paying the tax late are assessed from the original due date of your return, unless you qualify for the automatic 2-month extension. Free state tax preparation In that situation, penalties for paying late are assessed from the extended due date of the payment (June 15 for calendar year taxpayers). Free state tax preparation Additional extension of time for taxpayers out of the country. Free state tax preparation   In addition to the 6-month extension, taxpayers who are out of the country can request a discretionary 2-month additional extension of time to file their returns (to December 15 for calendar year taxpayers). Free state tax preparation   To request this extension, you must send the Internal Revenue Service a letter explaining the reasons why you need the additional 2 months. Free state tax preparation Send the letter by the extended due date (October 15 for calendar year taxpayers) to the following address: Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0045   You will not receive any notification from the Internal Revenue Service unless your request is denied. Free state tax preparation   The discretionary 2-month additional extension is not available to taxpayers who have an approved extension of time to file on Form 2350, discussed next. Free state tax preparation Extension of time to meet tests. Free state tax preparation   You generally cannot get an extension of more than 6 months. Free state tax preparation However, if you are outside the United States and meet certain requirements, you may be able to get a longer extension. Free state tax preparation   You can get an extension of more than 6 months to file your tax return if you need the time to meet either the bona fide residence test or the physical presence test to qualify for either the foreign earned income exclusion or the foreign housing exclusion or deduction. Free state tax preparation The tests, the exclusions, and the deduction are explained in chapter 4. Free state tax preparation   You should request an extension if all three of the following apply. Free state tax preparation You are a U. Free state tax preparation S. Free state tax preparation citizen or resident alien. Free state tax preparation You expect to meet either the bona fide residence test or the physical presence test, but not until after your tax return is due. Free state tax preparation Your tax home is in a foreign country (or countries) throughout your period of bona fide residence or physical presence, whichever applies. Free state tax preparation   If you are granted an extension, it generally will be to 30 days beyond the date on which you can reasonably expect to qualify for an exclusion or deduction under either the bona fide residence test or the physical presence test. Free state tax preparation However, if you have moving expenses that are for services performed in 2 years, you may be granted an extension until after the end of the second year. Free state tax preparation How to get an extension. Free state tax preparation   To obtain an extension, file Form 2350 either by giving it to a local IRS representative or other IRS employee or by mailing it to the: Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0045   You must file Form 2350 by the due date for filing your return. Free state tax preparation Generally, if both your tax home and your abode are outside the United States and Puerto Rico on the regular due date of your return and you file on a calendar year basis, the due date for filing your return is June 15. Free state tax preparation What if tests are not met. Free state tax preparation   If you obtain an extension and unforeseen events make it impossible for you to meet either the bona fide residence test or the physical presence test, you should file your income tax return as soon as possible because you must pay interest on any tax due after the regular due date of the return (even though an extension was granted). Free state tax preparation    You should make any request for an extension early, so that if it is denied you still can file your return on time. Free state tax preparation Otherwise, if you file late and additional tax is due, you may be subject to a penalty. Free state tax preparation Return filed before test is met. Free state tax preparation   If you file a return before you meet the bona fide residence test or the physical presence test, you must include all income from both U. Free state tax preparation S. Free state tax preparation and foreign sources and pay the tax on that income. Free state tax preparation If you later meet either of the tests, you can claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction on Form 1040X. Free state tax preparation Foreign Currency You must express the amounts you report on your U. Free state tax preparation S. Free state tax preparation tax return in U. Free state tax preparation S. Free state tax preparation dollars. Free state tax preparation If you receive all or part of your income or pay some or all of your expenses in foreign currency, you must translate the foreign currency into U. Free state tax preparation S. Free state tax preparation dollars. Free state tax preparation How you do this depends on your functional currency. Free state tax preparation Your functional currency generally is the U. Free state tax preparation S. Free state tax preparation dollar unless you are required to use the currency of a foreign country. Free state tax preparation You must make all federal income tax determinations in your functional currency. Free state tax preparation The U. Free state tax preparation S. Free state tax preparation dollar is the functional currency for all taxpayers except some qualified business units (QBUs). Free state tax preparation A QBU is a separate and clearly identified unit of a trade or business that maintains separate books and records. Free state tax preparation Even if you have a QBU, your functional currency is the dollar if any of the following apply. Free state tax preparation You conduct the business in U. Free state tax preparation S. Free state tax preparation dollars. Free state tax preparation The principal place of business is located in the United States. Free state tax preparation You choose to or are required to use the U. Free state tax preparation S. Free state tax preparation dollar as your functional currency. Free state tax preparation The business books and records are not kept in the currency of the economic environment in which a significant part of the business activities is conducted. Free state tax preparation Make all income tax determinations in your functional currency. Free state tax preparation If your functional currency is the U. Free state tax preparation S. Free state tax preparation dollar, you must immediately translate into U. Free state tax preparation S. Free state tax preparation dollars all items of income, expense, etc. Free state tax preparation (including taxes), that you receive, pay, or accrue in a foreign currency and that will affect computation of your income tax. Free state tax preparation Use the exchange rate prevailing when you receive, pay, or accrue the item. Free state tax preparation If there is more than one exchange rate, use the one that most properly reflects your income. Free state tax preparation You can generally get exchange rates from banks and U. Free state tax preparation S. Free state tax preparation Embassies. Free state tax preparation If your functional currency is not the U. Free state tax preparation S. Free state tax preparation dollar, make all income tax determinations in your functional currency. Free state tax preparation At the end of the year, translate the results, such as income or loss, into U. Free state tax preparation S. Free state tax preparation dollars to report on your income tax return. Free state tax preparation Blocked Income You generally must report your foreign income in terms of U. Free state tax preparation S. Free state tax preparation dollars and, with one exception (see Fulbright Grant, later), you must pay taxes due on it in U. Free state tax preparation S. Free state tax preparation dollars. Free state tax preparation If, because of restrictions in a foreign country, your income is not readily convertible into U. Free state tax preparation S. Free state tax preparation dollars or into other money or property that is readily convertible into U. Free state tax preparation S. Free state tax preparation dollars, your income is “blocked” or “deferrable” income. Free state tax preparation You can report this income in one of two ways: Report the income and pay your federal income tax with U. Free state tax preparation S. Free state tax preparation dollars that you have in the United States or in some other country, or Postpone the reporting of the income until it becomes unblocked. Free state tax preparation If you choose to postpone the reporting of the income, you must file an information return with your tax return. Free state tax preparation For this information return, you should use another Form 1040 labeled “Report of Deferrable Foreign Income, pursuant to Rev. Free state tax preparation Rul. Free state tax preparation 74-351. Free state tax preparation ” You must declare on the information return that you will include the deferrable income in your taxable income for the year that it becomes unblocked. Free state tax preparation You also must state that you waive any right to claim that the deferrable income was includible in your income for any earlier year. Free state tax preparation You must report your income on your information return using the foreign currency in which you received that income. Free state tax preparation If you have blocked income from more than one foreign country, include a separate information return for each country. Free state tax preparation Income becomes unblocked and reportable for tax purposes when it becomes convertible, or when it is converted, into U. Free state tax preparation S. Free state tax preparation dollars or into other money or property that is convertible into U. Free state tax preparation S. Free state tax preparation currency. Free state tax preparation Also, if you use blocked income for your personal expenses or dispose of it by gift, bequest, or devise, you must treat it as unblocked and reportable. Free state tax preparation If you have received blocked income on which you have not paid tax, you should check to see whether that income is still blocked. Free state tax preparation If it is not, you should take immediate steps to pay tax on it, file a declaration or amended declaration of estimated tax, and include the income on your tax return for the year in which the income became unblocked. Free state tax preparation If you choose to postpone reporting blocked income and in a later tax year you wish to begin including it in gross income although it is still blocked, you must obtain the permission of the IRS to do so. Free state tax preparation To apply for permission, file Form 3115, Application for Change in Accounting Method. Free state tax preparation You also must request permission from the IRS on Form 3115 if you have not chosen to defer the reporting of blocked income in the past, but now wish to begin reporting blocked income under the deferred method. Free state tax preparation See the instructions for Form 3115 for information on changing your accounting method. Free state tax preparation Fulbright Grant All income must be reported in U. Free state tax preparation S. Free state tax preparation dollars. Free state tax preparation In most cases, the tax also must be paid in U. Free state tax preparation S. Free state tax preparation dollars. Free state tax preparation If, however, at least 70% of your Fulbright grant has been paid in nonconvertible foreign currency (blocked income), you can use the currency of the host country to pay the part of the U. Free state tax preparation S. Free state tax preparation tax that is based on the blocked income. Free state tax preparation Paying U. Free state tax preparation S. Free state tax preparation tax in foreign currency. Free state tax preparation   To qualify for this method of payment, you must prepare a statement that shows the following information. Free state tax preparation You were a Fulbright grantee and were paid in nonconvertible foreign currency. Free state tax preparation The total grant you received during the year and the amount you received in nonconvertible foreign currency. Free state tax preparation At least 70% of the grant was paid in nonconvertible foreign currency. Free state tax preparation The statement must be certified by the U. Free state tax preparation S. Free state tax preparation educational foundation or commission paying the grant or other person having control of grant payments to you. Free state tax preparation   You should prepare at least two copies of this statement. Free state tax preparation Attach one copy to your Form 1040 and keep the other copy for identification purposes when you make a tax deposit of nonconvertible foreign currency. Free state tax preparation Figuring actual tax. Free state tax preparation   When you prepare your income tax return, you may owe tax or the entire liability may have been satisfied with your estimated tax payments. Free state tax preparation If you owe tax, figure the part due to (and payable in) the nonconvertible foreign currency by using the following formula. Free state tax preparation   Adjusted gross income that is blocked income × Total U. Free state tax preparation S. Free state tax preparation tax = Tax on blocked income     Total adjusted  gross income     You must attach all of the following to the return. Free state tax preparation A copy of the certified statement discussed earlier. Free state tax preparation A detailed statement showing the allocation of tax attributable to amounts received in foreign currency and the rates of exchange used in determining your tax liability in U. Free state tax preparation S. Free state tax preparation dollars. Free state tax preparation The original deposit receipt for any balance of tax due that you paid in nonconvertible foreign currency. Free state tax preparation Figuring estimated tax on nonconvertible foreign currency. Free state tax preparation   If you are liable for estimated tax (discussed later), figure the amount you can pay to the IRS in nonconvertible foreign currency using the following formula. Free state tax preparation   Adjusted gross income that is blocked income × Total estimated U. Free state tax preparation S. Free state tax preparation tax = Estimated tax on blocked income     Total adjusted  gross income     If you must pay your host country income tax on your grant, subtract any estimated foreign tax credit that applies to your grant from the estimated tax on the blocked income. Free state tax preparation Deposit of foreign currency with disbursing officer. Free state tax preparation   Once you have determined the amount of the actual tax or estimated tax that you can pay in nonconvertible foreign currency, deposit that amount with the disbursing officer of the Department of State in the foreign country in which the foundation or commission paying the grant is located. Free state tax preparation Estimated tax installments. Free state tax preparation   You can either deposit the full estimated tax amount before the first installment due date or make four equal payments before the installment due dates. Free state tax preparation See Estimated Tax , later. Free state tax preparation Deposit receipt. Free state tax preparation   Upon accepting the foreign currency, the disbursing officer will give you a receipt in duplicate. Free state tax preparation The original of this receipt (showing the amount of foreign currency deposited and its equivalent in U. Free state tax preparation S. Free state tax preparation dollars) should be attached to your Form 1040 or payment voucher from Form 1040-ES. Free state tax preparation Keep the copy for your records. Free state tax preparation Does My Return Have To Be On Paper? IRS e-file (electronic filing) is the fastest, easiest, and most convenient way to file your income tax return electronically. Free state tax preparation IRS e-file offers accurate, safe, and fast alternatives to filing on paper. Free state tax preparation IRS computers quickly and automatically check for errors or other missing information. Free state tax preparation Even returns with a foreign address can be e-filed! How to e-file. Free state tax preparation   There are three ways you can e-file. Free state tax preparation Use your personal computer. Free state tax preparation Use a volunteer. Free state tax preparation Many programs offering free tax help can e-file your return. Free state tax preparation Use a tax professional. Free state tax preparation Most tax professionals can e-file your return. Free state tax preparation These methods are explained in detail in the instructions for your tax return. Free state tax preparation Where To File If any of the following situations apply to you, do not file your return with the service center listed for your home state. Free state tax preparation You claim the foreign earned income exclusion. Free state tax preparation You claim the foreign housing exclusion or deduction. Free state tax preparation You live in a foreign country. Free state tax preparation Instead, use one of the following special addresses. Free state tax preparation If you are not enclosing a check or money order, file your return with the: Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0215 USA If you are enclosing a check or money order, file your return with: Internal Revenue Service Center P. Free state tax preparation O. Free state tax preparation Box 1303 Charlotte, NC 28201-1303 USA If you do not know where your legal residence is and you do not have a principal place of business in the United States, you can file with the appropriate address listed above. Free state tax preparation However, you should not file with the addresses listed above if you are a bona fide resident of the U. Free state tax preparation S. Free state tax preparation Virgin Islands, Guam, or the Commonwealth of the Northern Mariana Islands during your entire tax year. Free state tax preparation Resident of U. Free state tax preparation S. Free state tax preparation Virgin Islands (USVI). Free state tax preparation   If you are a bona fide resident of the USVI during your entire tax year, you generally are not required to file a U. Free state tax preparation S. Free state tax preparation return. Free state tax preparation However, you must file a return with the USVI. Free state tax preparation    Send your return to the:     Virgin Islands Bureau of Internal Revenue 6115 Estate Smith Bay Suite 225 St. Free state tax preparation Thomas, Virgin Islands 00802 Non-USVI resident with USVI income. Free state tax preparation   If you are a U. Free state tax preparation S. Free state tax preparation citizen or resident alien and you have income from sources in the USVI or income effectively connected with the conduct of a trade or business in the USVI, and you are not a bona fide resident of the USVI during your entire tax year, you must file identical tax returns with the United States and the USVI. Free state tax preparation File the original return with the United States and file a signed copy of the U. Free state tax preparation S. Free state tax preparation return (including all attachments, forms, and schedules) with the Virgin Islands Bureau of Internal Revenue. Free state tax preparation   You must complete Form 8689, Allocation of Individual Income Tax to the U. Free state tax preparation S. Free state tax preparation Virgin Islands, and attach a copy to both your U. Free state tax preparation S. Free state tax preparation return and your USVI return. Free state tax preparation You should file your U. Free state tax preparation S. Free state tax preparation return with the address listed under Where To File. Free state tax preparation   See Publication 570, Tax Guide for Individuals With Income From U. Free state tax preparation S. Free state tax preparation Possessions, for information about filing Virgin Islands returns. Free state tax preparation Resident of Guam. Free state tax preparation   If you are a bona fide resident of Guam during your entire tax year, you should file a return with Guam. Free state tax preparation    Send your return to the:     Department of Revenue and Taxation Government of Guam P. Free state tax preparation O. Free state tax preparation Box 23607 GMF, GU 96921   However, if you have income from sources within Guam and you are a U. Free state tax preparation S. Free state tax preparation citizen or resident alien, but not a bona fide resident of Guam during the entire tax year, you should file a return with the United States. Free state tax preparation Send your return to the address listed under Where To File. Free state tax preparation   See Publication 570 for information about filing Guam returns. Free state tax preparation Resident of the Commonwealth of the Northern Mariana Islands. Free state tax preparation   If you are a bona fide resident of the Commonwealth of the Northern Mariana Islands (CNMI) during your entire tax year, you should file a return with the Northern Mariana Islands. Free state tax preparation    Send your return to the:      Division of Revenue and Taxation Commonwealth of the Northern Mariana Islands P. Free state tax preparation O. Free state tax preparation Box 5234, CHRB Saipan, MP 96950   However, if you have income from sources within the CNMI and you are a U. Free state tax preparation S. Free state tax preparation citizen or resident alien, but not a bona fide resident of the CNMI during the entire tax year, you should file a return with the United States. Free state tax preparation Send your return to the address listed under Where To File. Free state tax preparation   See Publication 570 for information about filing Northern Mariana Islands returns. Free state tax preparation Nonresident Alien Spouse Treated as a Resident If, at the end of your tax year, you are married and one spouse is a U. Free state tax preparation S. Free state tax preparation citizen or a resident alien and the other is a nonresident alien, you can choose to treat the nonresident as a U. Free state tax preparation S. Free state tax preparation resident. Free state tax preparation This includes situations in which one of you is a nonresident alien at the beginning of the tax year and a resident alien at the end of the year and the other is a nonresident alien at the end of the year. Free state tax preparation If you make this choice, the following two rules apply. Free state tax preparation You and your spouse are treated, for income tax purposes, as residents for all tax years that the choice is in effect. Free state tax preparation You must file a joint income tax return for the year you make the choice. Free state tax preparation This means that neither of you can claim under any tax treaty not to be a U. Free state tax preparation S. Free state tax preparation resident for a tax year for which the choice is in effect. Free state tax preparation You can file joint or separate returns in years after the year in which you make the choice. Free state tax preparation Example 1. Free state tax preparation Pat Smith, a U. Free state tax preparation S. Free state tax preparation citizen, is married to Norman, a nonresident alien. Free state tax preparation Pat and Norman make the choice to treat Norman as a resident alien by attaching a statement to their joint return. Free state tax preparation Pat and Norman must report their worldwide income for the year they make the choice and for all later years unless the choice is ended or suspended. Free state tax preparation Although Pat and Norman must file a joint return for the year they make the choice, they can file either joint or separate returns for later years. Free state tax preparation Example 2. Free state tax preparation When Bob and Sharon Williams got married, both were nonresident aliens. Free state tax preparation In June of last year, Bob became a resident alien and remained a resident for the rest of the year. Free state tax preparation Bob and Sharon both choose to be treated as resident aliens by attaching a statement to their joint return for last year. Free state tax preparation Bob and Sharon must report their worldwide income for last year and all later years unless the choice is ended or suspended. Free state tax preparation Bob and Sharon must file a joint return for last year, but they can file either joint or separate returns for later years. Free state tax preparation If you do not choose to treat your nonresident alien spouse as a U. Free state tax preparation S. Free state tax preparation resident, you may be able to use head of household filing status. Free state tax preparation To use this status, you must pay more than half the cost of maintaining a household for certain dependents or relatives other than your nonresident alien spouse. Free state tax preparation For more information, see Publication 501. Free state tax preparation Social Security Number (SSN) If you choose to treat your nonresident alien spouse as a U. Free state tax preparation S. Free state tax preparation resident, your spouse must have either an SSN or an individual taxpayer identification number (ITIN). Free state tax preparation To get an SSN for a nonresident alien spouse, apply at an office of the U. Free state tax preparation S. Free state tax preparation Social Security Administration (SSA) or U. Free state tax preparation S. Free state tax preparation consulate. Free state tax preparation You must complete Form SS-5, Application for a Social Security Card, available at www. Free state tax preparation socialsecurity. Free state tax preparation gov or by calling 1-800-772-1213. Free state tax preparation You must also provide original or certified copies of documents to verify that spouse's age, identity, and citizenship. Free state tax preparation If the nonresident alien spouse is not eligible to get an SSN, he or she can file Form W-7, Application for IRS Individual Taxpayer Identification Number, with the IRS to apply for an ITIN. Free state tax preparation How To Make the Choice Attach a statement, signed by both spouses, to your joint return for the first tax year for which the choice applies. Free state tax preparation It should contain the following: A declaration that one spouse was a nonresident alien and the other spouse a U. Free state tax preparation S. Free state tax preparation citizen or resident alien on the last day of your tax year and that you choose to be treated as U. Free state tax preparation S. Free state tax preparation residents for the entire tax year, and The name, address, and social security number (or individual taxpayer identification number) of each spouse. Free state tax preparation (If one spouse died, include the name and address of the person making the choice for the deceased spouse. Free state tax preparation ) You generally make this choice when you file your joint return. Free state tax preparation However, you also can make the choice by filing a joint amended return on Form 1040X. Free state tax preparation Attach Form 1040, 1040A, or 1040EZ and print “Amended” across the top of the amended return. Free state tax preparation If you make the choice with an amended return, you and your spouse also must amend any returns that you may have filed after the year for which you made the choice. Free state tax preparation You generally must file the amended joint return within 3 years from the date you filed your original U. Free state tax preparation S. Free state tax preparation income tax return or 2 years from the date you paid your income tax for that year, whichever is later. Free state tax preparation Table 1–1. Free state tax preparation Ending the Choice To Treat Nonresident Alien Spouse as a Resident Revocation   Either spouse can revoke the choice for any tax year. Free state tax preparation   • The revocation must be made by the due date for filing the tax return for that tax year. Free state tax preparation   • The spouse who revokes the choice must attach a signed statement declaring that the choice is being revoked. Free state tax preparation The statement revoking the choice must include the following:     • The name, address, and social security number (or taxpayer identification number) of each spouse. Free state tax preparation     • The name and address of any person who is revoking the choice for a deceased spouse. Free state tax preparation     • A list of any states, foreign countries, and possessions that have community property laws in which either spouse is domiciled or where real property is located from which either spouse receives income. Free state tax preparation   • If the spouse revoking the choice does not have to file a return and does not file a claim for refund, send the statement to the Internal Revenue Service Center where the last joint return was filed. Free state tax preparation Death   The death of either spouse ends the choice, beginning with the first tax year following the year in which the spouse died. Free state tax preparation   • If the surviving spouse is a U. Free state tax preparation S. Free state tax preparation citizen or resident alien and is entitled to the joint tax rates as a surviving spouse, the choice will not end until the close of the last year for which these joint rates may be used. Free state tax preparation   • If both spouses die in the same tax year, the choice ends on the first day after the close of the tax year in which the spouses died. Free state tax preparation Divorce or  Legal separation   A divorce or legal separation ends the choice as of the beginning of the tax year in which the legal separation occurs. Free state tax preparation Inadequate records   The Internal Revenue Service can end the choice for any tax year that either spouse has failed to keep adequate books, records, and other information necessary to determine the correct income tax liability, or to provide adequate access to those records. Free state tax preparation Suspending the Choice The choice to be treated as a resident alien does not apply to any later tax year if neither of you is a U. Free state tax preparation S. Free state tax preparation citizen or resident alien at any time during the later tax year. Free state tax preparation Example. Free state tax preparation Dick Brown was a resident alien on December 31, 2010, and married to Judy, a nonresident alien. Free state tax preparation They chose to treat Judy as a resident alien and filed a joint 2010 income tax return. Free state tax preparation On January 10, 2012, Dick became a nonresident alien. Free state tax preparation Judy had remained a nonresident alien. Free state tax preparation Because Dick was a resident alien during part of 2012, Dick and Judy can file joint or separate returns for that year. Free state tax preparation Neither Dick nor Judy was a resident alien at any time during 2013 and their choice is suspended for that year. Free state tax preparation For 2013, both are treated as nonresident aliens. Free state tax preparation If Dick becomes a resident alien again in 2014, their choice is no longer suspended and both are treated as resident aliens. Free state tax preparation Ending the Choice Once made, the choice to be treated as a resident applies to all later years unless suspended (as explained earlier) or ended in one of the ways shown in Table 1-1. Free state tax preparation If the choice is ended for any of the reasons listed in Table 1-1, neither spouse can make a choice in any later tax year. Free state tax preparation Estimated Tax The requirements for determining who must pay estimated tax are the same for a U. Free state tax preparation S. Free state tax preparation citizen or resident abroad as for a taxpayer in the United States. Free state tax preparation For current instructions on making estimated tax payments, see Form 1040-ES. Free state tax preparation If you had a tax liability for 2013, you may have to pay estimated tax for 2014. Free state tax preparation Generally, you must make estimated tax payments for 2014 if you expect to owe at least $1,000 in tax for 2014 after subtracting your withholding and credits and you expect your withholding and credits to be less than the smaller of: 90% of the tax to be shown on your 2014 tax return, or 100% of the tax shown on your 2013 tax return. Free state tax preparation (The return must cover all 12 months. Free state tax preparation ) If less than two-thirds of your gross income for 2013 and 2014 is from farming or fishing and your adjusted gross income for 2013 is more than $150,000 ($75,000 if you are married and file separately), substitute 110% for 100% in (2). Free state tax preparation See Publication 505 for more information. Free state tax preparation The first installment of estimated tax is due on April 15, 2014. Free state tax preparation Foreign earned income exclusion. Free state tax preparation   When figuring your estimated gross income, subtract amounts you expect to exclude under the foreign earned income exclusion and the foreign housing exclusion. Free state tax preparation In addition, you can reduce your income by your estimated foreign housing deduction. Free state tax preparation However, you must estimate tax on your nonexcluded income using the tax rates that will apply had you not excluded the income. Free state tax preparation If the actual amount of the exclusion or deduction is less than you estimate, you may have to pay a penalty for underpayment of estimated tax. Free state tax preparation   For more information about figuring your estimated tax, see Publication 505. Free state tax preparation Other Forms You May Have To File FinCEN Form 114 (replaces Form TD F 90-22. Free state tax preparation 1). Free state tax preparation   Beginning October 1, 2013, Form 114, Report of Foreign Bank and Financial Accounts (FBAR), must be filed instead of Form TD F 90-22. Free state tax preparation 1. Free state tax preparation Form 114 is filed electronically with the Financial Crimes Enforcement Network (FinCEN). Free state tax preparation See the filing instructions at www. Free state tax preparation bsaefiling. Free state tax preparation fincen. Free state tax preparation treas. Free state tax preparation gov/main. Free state tax preparation html. Free state tax preparation   You must file Form 114 if you had any financial interest in, or signature or other authority over a bank, securities, or other financial account in a foreign country. Free state tax preparation You do not need to file the report if the assets are with a U. Free state tax preparation S. Free state tax preparation military banking facility operated by a financial institution or if the combined assets in the account(s) are $10,000 or less during the entire year. Free state tax preparation   More information about the filing of Form 114 can be found in the instructions for the form. Free state tax preparation FinCEN Form 105. Free state tax preparation   You must file Form 105, Report of International Transportation of Currency or Monetary Instruments, if you physically transport, mail, ship, or cause to be physically transported, mailed, or shipped into or out of the United States, currency or other monetary instruments totaling more than $10,000 at one time. Free state tax preparation Certain recipients of currency or monetary instruments also must file Form 105. Free state tax preparation   More information about the filing of Form 105 can be found in the instructions on the back of the form. Free state tax preparation Form 8938. Free state tax preparation   You must file Form 8938 to report the ownership of specified foreign financial assets if the total value of those assets exceeds an applicable threshold amount (the “reporting threshold ”). Free state tax preparation The reporting threshold varies depending on whether you live in the United States, are married, or file a joint income tax return with your spouse. Free state tax preparation Specified foreign financial assets include any financial account maintained by a foreign financial institution and, to the extent held for investment, any stock, securities, or any other interest in a foreign entity and any financial instrument or contract with an issuer or counterparty that is not a U. Free state tax preparation S. Free state tax preparation person. Free state tax preparation   You may have to pay penalties if you are required to file Form 8938 and fail to do so, or if you have an understatement of tax due to any transaction involving an undisclosed foreign financial asset. Free state tax preparation   More information about the filing of Form 8938 can be found in the separate instructions for Form 8938. 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