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H&r Block Tax Software

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H&r Block Tax Software

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

H&r block tax software Publication 547 - Introductory Material Table of Contents What's New Reminders IntroductionOrdering forms and publications. H&r block tax software Tax questions. H&r block tax software Useful Items - You may want to see: What's New Section C of Form 4684 for Ponzi-type investment schemes. H&r block tax software  Section C of Form 4684 is new for 2013. H&r block tax software You must complete Section C if you are claiming a theft loss deduction due to a Ponzi-type investment scheme and are using Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58. H&r block tax software Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. H&r block tax software You do not need to complete Appendix A. H&r block tax software For details, see Losses from Ponzi-type investment schemes , later. H&r block tax software Reminders Future developments. H&r block tax software   For the latest information about developments related to Publication 547, such as legislation enacted after it was published, go to www. H&r block tax software irs. H&r block tax software gov/pub547. H&r block tax software Photographs of missing children. H&r block tax software  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. H&r block tax software Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. H&r block tax software You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. H&r block tax software Introduction This publication explains the tax treatment of casualties, thefts, and losses on deposits. H&r block tax software A casualty occurs when your property is damaged as a result of a disaster such as a storm, fire, car accident, or similar event. H&r block tax software A theft occurs when someone steals your property. H&r block tax software A loss on deposits occurs when your financial institution becomes insolvent or bankrupt. H&r block tax software This publication discusses the following topics. H&r block tax software Definitions of a casualty, theft, and loss on deposits. H&r block tax software How to figure the amount of your gain or loss. H&r block tax software How to treat insurance and other reimbursements you receive. H&r block tax software The deduction limits. H&r block tax software When and how to report a casualty or theft. H&r block tax software The special rules for disaster area losses. H&r block tax software Forms to file. H&r block tax software   Generally, when you have a casualty or theft, you have to file Form 4684. H&r block tax software You may also have to file one or more of the following forms. H&r block tax software Schedule A (Form 1040). H&r block tax software Form 1040NR, Schedule A (for nonresident aliens). H&r block tax software Schedule D. H&r block tax software Form 4797. H&r block tax software For details on which form to use, see How To Report Gains and Losses , later. H&r block tax software Condemnations. H&r block tax software   For information on condemnations of property, see Involuntary Conversions in chapter 1 of Publication 544, Sales and Other Dispositions of Assets. H&r block tax software Workbooks for casualties and thefts. H&r block tax software   Publication 584, Casualty, Disaster, and Theft Loss Workbook (Personal-Use Property), is available to help you make a list of your stolen or damaged personal-use property and figure your loss. H&r block tax software It includes schedules to help you figure the loss on your home and its contents, and your motor vehicles. H&r block tax software   Publication 584-B, Business Casualty, Disaster, and Theft Loss Workbook, is available to help you make a list of your stolen or damaged business or income-producing property and figure your loss. H&r block tax software Comments and suggestions. H&r block tax software   We welcome your comments about this publication and your suggestions for future editions. H&r block tax software   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. H&r block tax software NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. H&r block tax software Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. H&r block tax software   You can send your comments from www. H&r block tax software irs. H&r block tax software gov/formspubs/. H&r block tax software Click on “More Information” and then on “Comment on Tax Forms and Publications”. H&r block tax software   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. H&r block tax software Ordering forms and publications. H&r block tax software   Visit www. H&r block tax software irs. H&r block tax software gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. H&r block tax software Internal Revenue Service 1201 N. H&r block tax software Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. H&r block tax software   If you have a tax question, check the information available on IRS. H&r block tax software gov or call 1-800-829-1040. H&r block tax software We cannot answer tax questions sent to either of the above addresses. H&r block tax software Useful Items - You may want to see: Publication 523 Selling Your Home 525 Taxable and Nontaxable Income 550 Investment Income and Expenses 551 Basis of Assets 584 Casualty, Disaster, and Theft Loss Workbook (Personal-Use Property) 584-B Business Casualty, Disaster, and   Theft Loss Workbook Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Form 1040NR, Schedule A Itemized Deductions (for nonresident aliens) Schedule D (Form 1040) Capital Gains and Losses 4684 Casualties and Thefts 4797 Sales of Business Property See How To Get Tax Help near the end of this publication for information about getting publications and forms. H&r block tax software Prev  Up  Next   Home   More Online Publications