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How To File Tax Amendment

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How To File Tax Amendment

How to file tax amendment 1. How to file tax amendment   Importance of Records Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Benefits of Recordkeeping Kinds of Records To Keep How Long To Keep Records Introduction A farmer, like other taxpayers, must keep records to prepare an accurate income tax return and determine the correct amount of tax. How to file tax amendment This chapter explains the benefits of keeping records, what kinds of records you must keep, and how long you must keep them for federal tax purposes. How to file tax amendment Tax records are not the only type of records you need to keep for your farming business. How to file tax amendment You should also keep records that measure your farm's financial performance. How to file tax amendment This publication only discusses tax records. How to file tax amendment The Farm Financial Standards Council has produced a publication that provides a detailed explanation of the recommendations of the Council for financial reporting and analysis. How to file tax amendment For information on recordkeeping, you can purchase and download Financial Guidelines for Agricultural Producers at www. How to file tax amendment ffsc. How to file tax amendment org. How to file tax amendment For more information, contact Countryside Marketing, Inc. How to file tax amendment in the following manner. How to file tax amendment Call 262-253-6902. How to file tax amendment Send a fax to 262-253-6903. How to file tax amendment Write to: Farm Financial Standards Council N78 W14573 Appleton Ave. How to file tax amendment , #287 Menomonee Falls, WI 53051. How to file tax amendment Topics - This chapter discusses: Benefits of recordkeeping Kinds of records to keep How long to keep records Useful Items - You may want to see: Publication 51 (Circular A), Agricultural Employer's Tax Guide 463 Travel, Entertainment, Gift, and Car Expenses See chapter 16 for information about getting publications. How to file tax amendment Benefits of Recordkeeping Everyone in business, including farmers, must keep appropriate records. How to file tax amendment Recordkeeping will help you do the following. How to file tax amendment Monitor the progress of your farming business. How to file tax amendment   You need records to monitor the progress of your farming business. How to file tax amendment Records can show whether your business is improving, which items are selling, or what changes you need to make. How to file tax amendment Records can help you make better decisions that may increase the likelihood of business success. How to file tax amendment Prepare your financial statements. How to file tax amendment   You need records to prepare accurate financial statements. How to file tax amendment These include income (profit and loss) statements and balance sheets. How to file tax amendment These statements can help you in dealing with your bank or creditors and help you to manage your farm business. How to file tax amendment Identify source of receipts. How to file tax amendment   You will receive money or property from many sources. How to file tax amendment Your records can identify the source of your receipts. How to file tax amendment You need this information to separate farm from nonfarm receipts and taxable from nontaxable income. How to file tax amendment Keep track of deductible expenses. How to file tax amendment   You may forget expenses when you prepare your tax return unless you record them when they occur. How to file tax amendment Prepare your tax returns. How to file tax amendment   You need records to prepare your tax return. How to file tax amendment For example, your records must support the income, expenses, and credits you report. How to file tax amendment Generally, these are the same records you use to monitor your farming business and prepare your financial statements. How to file tax amendment Support items reported on tax returns. How to file tax amendment   You must keep your business records available at all times for inspection by the IRS. How to file tax amendment If the IRS examines any of your tax returns, you may be asked to explain the items reported. How to file tax amendment A complete set of records will speed up the examination. How to file tax amendment Kinds of Records To Keep Except in a few cases, the law does not require any specific kind of records. How to file tax amendment You can choose any recordkeeping system suited to your farming business that clearly shows, for example, your income and expenses. How to file tax amendment You should set up your recordkeeping system using an accounting method that clearly shows your income for your tax year. How to file tax amendment See  chapter 2. How to file tax amendment If you are in more than one business, you should keep a complete and separate set of records for each business. How to file tax amendment A corporation should keep minutes of board of directors' meetings. How to file tax amendment Your recordkeeping system should include a summary of your business transactions. How to file tax amendment This summary is ordinarily made in accounting journals and ledgers. How to file tax amendment For example, they must show your gross income, as well as your deductions and credits. How to file tax amendment In addition, you must keep supporting documents. How to file tax amendment Purchases, sales, payroll, and other transactions you have in your business generate supporting documents such as invoices and receipts. How to file tax amendment These documents contain the information you need to record in your journals and ledgers. How to file tax amendment It is important to keep these documents because they support the entries in your journals and ledgers and on your tax return. How to file tax amendment Keep them in an orderly fashion and in a safe place. How to file tax amendment For instance, organize them by year and type of income or expense. How to file tax amendment Electronic records. How to file tax amendment   All requirements that apply to hard copy books and records also apply to electronic storage systems that maintain tax books and records. How to file tax amendment When you replace hard copy books and records, you must maintain the electronic storage systems for as long as they are material to the administration of tax law. How to file tax amendment An electronic storage system is any system for preparing or keeping your records either by electronic imaging or by transfer to an electronic storage media. How to file tax amendment The electronic storage system must index, store, preserve, retrieve and reproduce the electronically stored books and records in legible format. How to file tax amendment All electronic storage systems must provide a complete and accurate record of your data that is accessible to the IRS. How to file tax amendment Electronic storage systems are also subject to the same controls and retention guidelines as those imposed on your original hard copy books and records. How to file tax amendment The original hard copy books and records may be destroyed provided that the electronic storage system has been tested to establish that the hard copy books and records are being reproduced in compliance with IRS requirements for an electronic storage system and procedures are established to ensure continued compliance with all applicable rules and regulations. How to file tax amendment You still have the responsibility of retaining any other books and records that are required to be retained. How to file tax amendment The IRS may test your electronic storage system, including the equipment used, indexing methodology, software and retrieval capabilities. How to file tax amendment This test is not considered an examination and the results must be shared with you. How to file tax amendment If your electronic storage system meets the requirements mentioned earlier, you will be in compliance. How to file tax amendment If not, you may be subject to penalties for non-compliance, unless you continue to maintain your original hard copybooks and records in a manner that allows you and the IRS to determine your correct tax. How to file tax amendment For details on electronic storage system requirements, see Rev. How to file tax amendment Proc. How to file tax amendment 97-22. How to file tax amendment You can find Rev. How to file tax amendment Proc. How to file tax amendment 97-22 on page 9 of Internal Revenue Bulletin 1997-13 at  www. How to file tax amendment irs. How to file tax amendment gov/pub/irs-irbs/irb97-13. How to file tax amendment pdf. How to file tax amendment Travel, transportation, entertainment, and gift expenses. How to file tax amendment   Specific recordkeeping rules apply to these expenses. How to file tax amendment For more information, see Publication 463. How to file tax amendment Employment taxes. How to file tax amendment   There are specific employment tax records you must keep. How to file tax amendment For a list, see Publication 51 (Circular A). How to file tax amendment Excise taxes. How to file tax amendment   See How To Claim a Credit or Refund in chapter 14 for the specific records you must keep to verify your claim for credit or refund of excise taxes on certain fuels. How to file tax amendment Assets. How to file tax amendment   Assets are the property, such as machinery and equipment, you own and use in your business. How to file tax amendment You must keep records to verify certain information about your business assets. How to file tax amendment You need records to figure your annual depreciation deduction and the gain or (loss) when you sell the assets. How to file tax amendment Your records should show all the following. How to file tax amendment When and how you acquired the asset. How to file tax amendment Purchase price. How to file tax amendment Cost of any improvements. How to file tax amendment Section 179 deduction taken. How to file tax amendment Deductions taken for depreciation. How to file tax amendment Deductions taken for casualty losses, such as losses resulting from fires or storms. How to file tax amendment How you used the asset. How to file tax amendment When and how you disposed of the asset. How to file tax amendment Selling price. How to file tax amendment Expenses of sale. How to file tax amendment   The following are examples of records that may show this information. How to file tax amendment Purchase and sales invoices. How to file tax amendment Real estate closing statements. How to file tax amendment Canceled checks. How to file tax amendment Bank statements. How to file tax amendment Financial account statements as proof of payment. How to file tax amendment   If you do not have a canceled check, you may be able to prove payment with certain financial account statements prepared by financial institutions. How to file tax amendment These include account statements prepared for the financial institution by a third party. How to file tax amendment These account statements must be legible. How to file tax amendment The following table lists acceptable account statements. How to file tax amendment IF payment is by. How to file tax amendment . How to file tax amendment . How to file tax amendment THEN the statement must show the. How to file tax amendment . How to file tax amendment . How to file tax amendment Check Check number. How to file tax amendment Amount. How to file tax amendment Payee's name. How to file tax amendment Date the check amount was posted to the account by the financial institution. How to file tax amendment Electronic funds  transfer Amount transferred. How to file tax amendment Payee's name. How to file tax amendment Date the transfer was posted to the account by the financial institution. How to file tax amendment Credit card Amount charged. How to file tax amendment Payee's name. How to file tax amendment Transaction date. How to file tax amendment    Proof of payment of an amount, by itself, does not establish you are entitled to a tax deduction. How to file tax amendment You should also keep other documents, such as credit card sales slips and invoices, to show that you also incurred the cost. How to file tax amendment Tax returns. How to file tax amendment   Keep copies of your filed tax returns. How to file tax amendment They help in preparing future tax returns and making computations if you file an amended return. How to file tax amendment Keep copies of your information returns such as Form 1099, Schedule K-1, and Form W-2. How to file tax amendment How Long To Keep Records You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. How to file tax amendment Keep records that support an item of income or a deduction appearing on a return until the period of limitations for the return runs out. How to file tax amendment A period of limitations is the period of time after which no legal action can be brought. How to file tax amendment Generally, that means you must keep your records for at least 3 years from when your tax return was due or filed or within 2 years of the date the tax was paid, whichever is later. How to file tax amendment However, certain records must be kept for a longer period of time, as discussed below. How to file tax amendment Employment taxes. How to file tax amendment   If you have employees, you must keep all employment tax records for at least 4 years after the date the tax becomes due or is paid, whichever is later. How to file tax amendment Assets. How to file tax amendment   Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition. How to file tax amendment You must keep these records to figure any depreciation, amortization, or depletion deduction and to figure your basis for computing gain or (loss) when you sell or otherwise dispose of the property. How to file tax amendment   You may need to keep records relating to the basis of property longer than the period of limitation. How to file tax amendment Keep those records as long as they are important in figuring the basis of the original or replacement property. How to file tax amendment Generally, this means as long as you own the property and, after you dispose of it, for the period of limitations that applies to you. How to file tax amendment For example, if you received property in a nontaxable exchange, you must keep the records for the old property, as well as for the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition. How to file tax amendment For more information on basis, see chapter 6. How to file tax amendment Records for nontax purposes. How to file tax amendment   When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes. How to file tax amendment For example, your insurance company or creditors may require you to keep them longer than the IRS does. How to file tax amendment Prev  Up  Next   Home   More Online Publications
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The How To File Tax Amendment

How to file tax amendment 3. How to file tax amendment   SIMPLE Plans Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: SIMPLE IRA PlanWho Can Set Up a SIMPLE IRA Plan? Who Can Participate in a SIMPLE IRA Plan? How To Set Up a SIMPLE IRA Plan Notification Requirement Contribution Limits When To Deduct Contributions Where To Deduct Contributions Tax Treatment of Contributions Distributions (Withdrawals) More Information on SIMPLE IRA Plans SIMPLE 401(k) Plan Topics - This chapter discusses: SIMPLE IRA plan SIMPLE 401(k) plan Useful Items - You may want to see: Publications 590 Individual Retirement Arrangements (IRAs) 3998 Choosing A Retirement Solution for Your Small Business 4284 SIMPLE IRA Plan Checklist 4334 SIMPLE IRA Plans for Small Businesses Forms (and Instructions) W-2 Wage and Tax Statement 5304-SIMPLE Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)–Not for Use With a Designated Financial Institution 5305-SIMPLE Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)–for Use With a Designated Financial Institution 8880 Credit for Qualified Retirement Savings Contributions 8881 Credit for Small Employer Pension Plan Startup Costs A savings incentive match plan for employees (SIMPLE plan) is a written arrangement that provides you and your employees with a simplified way to make contributions to provide retirement income. How to file tax amendment Under a SIMPLE plan, employees can choose to make salary reduction contributions to the plan rather than receiving these amounts as part of their regular pay. How to file tax amendment In addition, you will contribute matching or nonelective contributions. How to file tax amendment SIMPLE plans can only be maintained on a calendar-year basis. How to file tax amendment A SIMPLE plan can be set up in either of the following ways. How to file tax amendment Using SIMPLE IRAs (SIMPLE IRA plan). How to file tax amendment As part of a 401(k) plan (SIMPLE 401(k) plan). How to file tax amendment Many financial institutions will help you set up a SIMPLE plan. How to file tax amendment SIMPLE IRA Plan A SIMPLE IRA plan is a retirement plan that uses SIMPLE IRAs for each eligible employee. How to file tax amendment Under a SIMPLE IRA plan, a SIMPLE IRA must be set up for each eligible employee. How to file tax amendment For the definition of an eligible employee, see Who Can Participate in a SIMPLE IRA Plan , later. How to file tax amendment Who Can Set Up a SIMPLE IRA Plan? You can set up a SIMPLE IRA plan if you meet both the following requirements. How to file tax amendment You meet the employee limit. How to file tax amendment You do not maintain another qualified plan unless the other plan is for collective bargaining employees. How to file tax amendment Employee limit. How to file tax amendment   You can set up a SIMPLE IRA plan only if you had 100 or fewer employees who received $5,000 or more in compensation from you for the preceding year. How to file tax amendment Under this rule, you must take into account all employees employed at any time during the calendar year regardless of whether they are eligible to participate. How to file tax amendment Employees include self-employed individuals who received earned income and leased employees (defined in chapter 1). How to file tax amendment   Once you set up a SIMPLE IRA plan, you must continue to meet the 100-employee limit each year you maintain the plan. How to file tax amendment Grace period for employers who cease to meet the 100-employee limit. How to file tax amendment   If you maintain the SIMPLE IRA plan for at least 1 year and you cease to meet the 100-employee limit in a later year, you will be treated as meeting it for the 2 calendar years immediately following the calendar year for which you last met it. How to file tax amendment   A different rule applies if you do not meet the 100-employee limit because of an acquisition, disposition, or similar transaction. How to file tax amendment Under this rule, the SIMPLE IRA plan will be treated as meeting the 100-employee limit for the year of the transaction and the 2 following years if both the following conditions are satisfied. How to file tax amendment Coverage under the plan has not significantly changed during the grace period. How to file tax amendment The SIMPLE IRA plan would have continued to qualify after the transaction if you had remained a separate employer. How to file tax amendment    The grace period for acquisitions, dispositions, and similar transactions also applies if, because of these types of transactions, you do not meet the rules explained under Other qualified plan or Who Can Participate in a SIMPLE IRA Plan, below. How to file tax amendment Other qualified plan. How to file tax amendment   The SIMPLE IRA plan generally must be the only retirement plan to which you make contributions, or to which benefits accrue, for service in any year beginning with the year the SIMPLE IRA plan becomes effective. How to file tax amendment Exception. How to file tax amendment   If you maintain a qualified plan for collective bargaining employees, you are permitted to maintain a SIMPLE IRA plan for other employees. How to file tax amendment Who Can Participate in a SIMPLE IRA Plan? Eligible employee. How to file tax amendment   Any employee who received at least $5,000 in compensation during any 2 years preceding the current calendar year and is reasonably expected to receive at least $5,000 during the current calendar year is eligible to participate. How to file tax amendment The term “employee” includes a self-employed individual who received earned income. How to file tax amendment   You can use less restrictive eligibility requirements (but not more restrictive ones) by eliminating or reducing the prior year compensation requirements, the current year compensation requirements, or both. How to file tax amendment For example, you can allow participation for employees who received at least $3,000 in compensation during any preceding calendar year. How to file tax amendment However, you cannot impose any other conditions for participating in a SIMPLE IRA plan. How to file tax amendment Excludable employees. How to file tax amendment   The following employees do not need to be covered under a SIMPLE IRA plan. How to file tax amendment Employees who are covered by a union agreement and whose retirement benefits were bargained for in good faith by the employees' union and you. How to file tax amendment Nonresident alien employees who have received no U. How to file tax amendment S. How to file tax amendment source wages, salaries, or other personal services compensation from you. How to file tax amendment Compensation. How to file tax amendment   Compensation for employees is the total wages, tips, and other compensation from the employer subject to federal income tax withholding and the amounts paid for domestic service in a private home, local college club, or local chapter of a college fraternity or sorority. How to file tax amendment Compensation also includes the employee's salary reduction contributions made under this plan and, if applicable, elective deferrals under a section 401(k) plan, a SARSEP, or a section 403(b) annuity contract and compensation deferred under a section 457 plan required to be reported by the employer on Form W-2. How to file tax amendment If you are self-employed, compensation is your net earnings from self-employment (line 4 of Short Schedule SE or line 6 of Long Schedule SE (Form 1040)) before subtracting any contributions made to the SIMPLE IRA plan for yourself. How to file tax amendment How To Set Up a SIMPLE IRA Plan You can use Form 5304-SIMPLE or Form 5305-SIMPLE to set up a SIMPLE IRA plan. How to file tax amendment Each form is a model savings incentive match plan for employees (SIMPLE) plan document. How to file tax amendment Which form you use depends on whether you select a financial institution or your employees select the institution that will receive the contributions. How to file tax amendment Use Form 5304-SIMPLE if you allow each plan participant to select the financial institution for receiving his or her SIMPLE IRA plan contributions. How to file tax amendment Use Form 5305-SIMPLE if you require that all contributions under the SIMPLE IRA plan be deposited initially at a designated financial institution. How to file tax amendment The SIMPLE IRA plan is adopted when you have completed all appropriate boxes and blanks on the form and you (and the designated financial institution, if any) have signed it. How to file tax amendment Keep the original form. How to file tax amendment Do not file it with the IRS. How to file tax amendment Other uses of the forms. How to file tax amendment   If you set up a SIMPLE IRA plan using Form 5304-SIMPLE or Form 5305-SIMPLE, you can use the form to satisfy other requirements, including the following. How to file tax amendment Meeting employer notification requirements for the SIMPLE IRA plan. How to file tax amendment Form 5304-SIMPLE and Form 5305-SIMPLE contain a Model Notification to Eligible Employees that provides the necessary information to the employee. How to file tax amendment Maintaining the SIMPLE IRA plan records and proving you set up a SIMPLE IRA plan for employees. How to file tax amendment Deadline for setting up a SIMPLE IRA plan. How to file tax amendment   You can set up a SIMPLE IRA plan effective on any date from January 1 through October 1 of a year, provided you did not previously maintain a SIMPLE IRA plan. How to file tax amendment This requirement does not apply if you are a new employer that comes into existence after October 1 of the year the SIMPLE IRA plan is set up and you set up a SIMPLE IRA plan as soon as administratively feasible after your business comes into existence. How to file tax amendment If you previously maintained a SIMPLE IRA plan, you can set up a SIMPLE IRA plan effective only on January 1 of a year. How to file tax amendment A SIMPLE IRA plan cannot have an effective date that is before the date you actually adopt the plan. How to file tax amendment Setting up a SIMPLE IRA. How to file tax amendment   SIMPLE IRAs are the individual retirement accounts or annuities into which the contributions are deposited. How to file tax amendment A SIMPLE IRA must be set up for each eligible employee. How to file tax amendment Forms 5305-S, SIMPLE Individual Retirement Trust Account, and 5305-SA, SIMPLE Individual Retirement Custodial Account, are model trust and custodial account documents the participant and the trustee (or custodian) can use for this purpose. How to file tax amendment   A SIMPLE IRA cannot be a Roth IRA. How to file tax amendment Contributions to a SIMPLE IRA will not affect the amount an individual can contribute to a Roth or traditional IRA. How to file tax amendment Deadline for setting up a SIMPLE IRA. How to file tax amendment   A SIMPLE IRA must be set up for an employee before the first date by which a contribution is required to be deposited into the employee's IRA. How to file tax amendment See Time limits for contributing funds , later, under Contribution Limits. How to file tax amendment Credit for startup costs. How to file tax amendment   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SIMPLE IRA plan that first became effective in 2013. How to file tax amendment For more information, see Credit for startup costs under Reminders, earlier. How to file tax amendment Notification Requirement If you adopt a SIMPLE IRA plan, you must notify each employee of the following information before the beginning of the election period. How to file tax amendment The employee's opportunity to make or change a salary reduction choice under a SIMPLE IRA plan. How to file tax amendment Your decision to make either matching contributions or nonelective contributions (discussed later). How to file tax amendment A summary description provided by the financial institution. How to file tax amendment Written notice that his or her balance can be transferred without cost or penalty if they use a designated financial institution. How to file tax amendment Election period. How to file tax amendment   The election period is generally the 60-day period immediately preceding January 1 of a calendar year (November 2 to December 31 of the preceding calendar year). How to file tax amendment However, the dates of this period are modified if you set up a SIMPLE IRA plan in mid-year (for example, on July 1) or if the 60-day period falls before the first day an employee becomes eligible to participate in the SIMPLE IRA plan. How to file tax amendment   A SIMPLE IRA plan can provide longer periods for permitting employees to enter into salary reduction agreements or to modify prior agreements. How to file tax amendment For example, a SIMPLE IRA plan can provide a 90-day election period instead of the 60-day period. How to file tax amendment Similarly, in addition to the 60-day period, a SIMPLE IRA plan can provide quarterly election periods during the 30 days before each calendar quarter, other than the first quarter of each year. How to file tax amendment Contribution Limits Contributions are made up of salary reduction contributions and employer contributions. How to file tax amendment You, as the employer, must make either matching contributions or nonelective contributions, defined later. How to file tax amendment No other contributions can be made to the SIMPLE IRA plan. How to file tax amendment These contributions, which you can deduct, must be made timely. How to file tax amendment See Time limits for contributing funds , later. How to file tax amendment Salary reduction contributions. How to file tax amendment   The amount the employee chooses to have you contribute to a SIMPLE IRA on his or her behalf cannot be more than $12,000 for 2013 and 2014. How to file tax amendment These contributions must be expressed as a percentage of the employee's compensation unless you permit the employee to express them as a specific dollar amount. How to file tax amendment You cannot place restrictions on the contribution amount (such as limiting the contribution percentage), except to comply with the $12,000 limit. How to file tax amendment   If you or an employee participates in any other qualified plan during the year and you or your employee have salary reduction contributions (elective deferrals) under those plans, the salary reduction contributions under a SIMPLE IRA plan also count toward the overall annual limit ($17,500 for 2013 and 2014) on exclusion of salary reduction contributions and other elective deferrals. How to file tax amendment Catch-up contributions. How to file tax amendment   A SIMPLE IRA plan can permit participants who are age 50 or over at the end of the calendar year to also make catch-up contributions. How to file tax amendment The catch-up contribution limit for 2013 and 2014 for SIMPLE IRA plans is $2,500. How to file tax amendment Salary reduction contributions are not treated as catch-up contributions for 2013 or 2014 until they exceed $12,000. How to file tax amendment However, the catch-up contribution a participant can make for a year cannot exceed the lesser of the following amounts. How to file tax amendment The catch-up contribution limit. How to file tax amendment The excess of the participant's compensation over the salary reduction contributions that are not catch-up contributions. How to file tax amendment Employer matching contributions. How to file tax amendment   You are generally required to match each employee's salary reduction contributions on a dollar-for-dollar basis up to 3% of the employee's compensation. How to file tax amendment This requirement does not apply if you make nonelective contributions as discussed later. How to file tax amendment Example. How to file tax amendment In 2013, your employee, John Rose, earned $25,000 and chose to defer 5% of his salary. How to file tax amendment Your net earnings from self-employment are $40,000, and you choose to contribute 10% of your earnings to your SIMPLE IRA. How to file tax amendment You make 3% matching contributions. How to file tax amendment The total contribution you make for John is $2,000, figured as follows. How to file tax amendment Salary reduction contributions ($25,000 × . How to file tax amendment 05) $1,250 Employer matching contribution ($25,000 × . How to file tax amendment 03) 750 Total contributions $2,000     The total contribution you make for yourself is $5,200, figured as follows. How to file tax amendment Salary reduction contributions ($40,000 × . How to file tax amendment 10) $4,000 Employer matching contribution ($40,000 × . How to file tax amendment 03) 1,200 Total contributions $5,200 Lower percentage. How to file tax amendment   If you choose a matching contribution less than 3%, the percentage must be at least 1%. How to file tax amendment You must notify the employees of the lower match within a reasonable period of time before the 60-day election period (discussed earlier) for the calendar year. How to file tax amendment You cannot choose a percentage less than 3% for more than 2 years during the 5-year period that ends with (and includes) the year for which the choice is effective. How to file tax amendment Nonelective contributions. How to file tax amendment   Instead of matching contributions, you can choose to make nonelective contributions of 2% of compensation on behalf of each eligible employee who has at least $5,000 (or some lower amount you select) of compensation from you for the year. How to file tax amendment If you make this choice, you must make nonelective contributions whether or not the employee chooses to make salary reduction contributions. How to file tax amendment Only $255,000 of the employee's compensation can be taken into account to figure the contribution limit in 2013 ($260,000 in 2014). How to file tax amendment   If you choose this 2% contribution formula, you must notify the employees within a reasonable period of time before the 60-day election period (discussed earlier) for the calendar year. How to file tax amendment Example 1. How to file tax amendment In 2013, your employee, Jane Wood, earned $36,000 and chose to have you contribute 10% of her salary. How to file tax amendment Your net earnings from self-employment are $50,000, and you choose to contribute 10% of your earnings to your SIMPLE IRA. How to file tax amendment You make a 2% nonelective contribution. How to file tax amendment Both of you are under age 50. How to file tax amendment The total contribution you make for Jane is $4,320, figured as follows. How to file tax amendment Salary reduction contributions ($36,000 × . How to file tax amendment 10) $3,600 2% nonelective contributions ($36,000 × . How to file tax amendment 02) 720 Total contributions $4,320     The total contribution you make for yourself is $6,000, figured as follows. How to file tax amendment Salary reduction contributions ($50,000 × . How to file tax amendment 10) $5,000 2% nonelective contributions ($50,000 × . How to file tax amendment 02) 1,000 Total contributions $6,000 Example 2. How to file tax amendment Using the same facts as in Example 1, above, the maximum contribution you make for Jane or for yourself if you each earned $75,000 is $13,500, figured as follows. How to file tax amendment Salary reduction contributions (maximum amount allowed) $12,000 2% nonelective contributions ($75,000 × . How to file tax amendment 02) 1,500 Total contributions $13,500 Time limits for contributing funds. How to file tax amendment   You must make the salary reduction contributions to the SIMPLE IRA within 30 days after the end of the month in which the amounts would otherwise have been payable to the employee in cash. How to file tax amendment You must make matching contributions or nonelective contributions by the due date (including extensions) for filing your federal income tax return for the year. How to file tax amendment Certain plans subject to Department of Labor rules may have an earlier due date for salary reduction contributions. How to file tax amendment When To Deduct Contributions You can deduct SIMPLE IRA contributions in the tax year within which the calendar year for which contributions were made ends. How to file tax amendment You can deduct contributions for a particular tax year if they are made for that tax year and are made by the due date (including extensions) of your federal income tax return for that year. How to file tax amendment Example 1. How to file tax amendment Your tax year is the fiscal year ending June 30. How to file tax amendment Contributions under a SIMPLE IRA plan for the calendar year 2013 (including contributions made in 2013 before July 1, 2013) are deductible in the tax year ending June 30, 2014. How to file tax amendment Example 2. How to file tax amendment You are a sole proprietor whose tax year is the calendar year. How to file tax amendment Contributions under a SIMPLE IRA plan for the calendar year 2013 (including contributions made in 2014 by April 15, 2014) are deductible in the 2013 tax year. How to file tax amendment Where To Deduct Contributions Deduct the contributions you make for your common-law employees on your tax return. How to file tax amendment For example, sole proprietors deduct them on Schedule C (Form 1040) or Schedule F (Form 1040); partnerships deduct them on Form 1065; and corporations deduct them on Form 1120 or Form 1120S. How to file tax amendment Sole proprietors and partners deduct contributions for themselves on line 28 of Form 1040. How to file tax amendment (If you are a partner, contributions for yourself are shown on the Schedule K-1 (Form 1065) you receive from the partnership. How to file tax amendment ) Tax Treatment of Contributions You can deduct your contributions and your employees can exclude these contributions from their gross income. How to file tax amendment SIMPLE IRA plan contributions are not subject to federal income tax withholding. How to file tax amendment However, salary reduction contributions are subject to social security, Medicare, and federal unemployment (FUTA) taxes. How to file tax amendment Matching and nonelective contributions are not subject to these taxes. How to file tax amendment Reporting on Form W-2. How to file tax amendment   Do not include SIMPLE IRA plan contributions in the “Wages, tips, other compensation” box of Form W-2. How to file tax amendment You must, however, include them in the “Social security wages” and “Medicare wages and tips” boxes. How to file tax amendment You must also include them in box 12. How to file tax amendment Mark the “Retirement plan” checkbox in box 13. How to file tax amendment For more information, see the Form W-2 instructions. How to file tax amendment Distributions (Withdrawals) Distributions from a SIMPLE IRA are subject to IRA rules and generally are includible in income for the year received. How to file tax amendment Tax-free rollovers can be made from one SIMPLE IRA into another SIMPLE IRA. How to file tax amendment However, a rollover from a SIMPLE IRA to a non-SIMPLE IRA can be made tax free only after a 2-year participation in the SIMPLE IRA plan. How to file tax amendment Generally, you or your employee must begin to receive distributions from a SIMPLE IRA by April 1 of the first year after the calendar year in which you or your employee reaches age 70½. How to file tax amendment Early withdrawals generally are subject to a 10% additional tax. How to file tax amendment However, the additional tax is increased to 25% if funds are withdrawn within 2 years of beginning participation. How to file tax amendment More information. How to file tax amendment   See Publication 590 for information about IRA rules, including those on the tax treatment of distributions, rollovers, required distributions, and income tax withholding. How to file tax amendment More Information on SIMPLE IRA Plans If you need help to set up or maintain a SIMPLE IRA plan, go to the IRS website and search SIMPLE IRA Plan. How to file tax amendment SIMPLE 401(k) Plan You can adopt a SIMPLE plan as part of a 401(k) plan if you meet the 100-employee limit as discussed earlier under SIMPLE IRA Plan. How to file tax amendment A SIMPLE 401(k) plan is a qualified retirement plan and generally must satisfy the rules discussed under Qualification Rules in chapter 4, including the required distribution rules. How to file tax amendment However, a SIMPLE 401(k) plan is not subject to the nondiscrimination and top-heavy rules discussed in chapter 4 if the plan meets the conditions listed below. How to file tax amendment Under the plan, an employee can choose to have you make salary reduction contributions for the year to a trust in an amount expressed as a percentage of the employee's compensation, but not more than $12,000 for 2013 and 2014. How to file tax amendment If permitted under the plan, an employee who is age 50 or over can also make a catch-up contribution of up to $2,500 for 2013 and 2014. How to file tax amendment See Catch-up contributions , earlier under Contribution Limits. How to file tax amendment You must make either: Matching contributions up to 3% of compensation for the year, or Nonelective contributions of 2% of compensation on behalf of each eligible employee who has at least $5,000 of compensation from you for the year. How to file tax amendment No other contributions can be made to the trust. How to file tax amendment No contributions are made, and no benefits accrue, for services during the year under any other qualified retirement plan sponsored by you on behalf of any employee eligible to participate in the SIMPLE 401(k) plan. How to file tax amendment The employee's rights to any contributions are nonforfeitable. How to file tax amendment No more than $255,000 of the employee's compensation can be taken into account in figuring matching contributions and nonelective contributions in 2013 ($260,000 in 2014). How to file tax amendment Compensation is defined earlier in this chapter. How to file tax amendment Employee notification. How to file tax amendment   The notification requirement that applies to SIMPLE IRA plans also applies to SIMPLE 401(k) plans. How to file tax amendment See Notification Requirement in this chapter. How to file tax amendment Credit for startup costs. How to file tax amendment   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SIMPLE 401(k) plan that first became effective in 2013. How to file tax amendment For more information, see Credit for startup costs under Reminders, earlier. How to file tax amendment Note on Forms. How to file tax amendment   Please note that Forms 5304-SIMPLE and 5305-SIMPLE can not be used to establish a SIMPLE 401(k) plan. How to file tax amendment To set up a SIMPLE 401(k) plan, see Adopting a Written Plan in chapter 4. How to file tax amendment Prev  Up  Next   Home   More Online Publications