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Hrblock taxes Publication 501 - Introductory Material Table of Contents What's New Reminders IntroductionOrdering forms and publications. Hrblock taxes Tax questions. Hrblock taxes Useful Items - You may want to see: What's New Who must file. Hrblock taxes   In some cases, the amount of income you can receive before you must file a tax return has increased. Hrblock taxes Table 1 shows the filing requirements for most taxpayers. Hrblock taxes Exemption amount. Hrblock taxes  The amount you can deduct for each exemption has increased. Hrblock taxes It was $3,800 for 2012. Hrblock taxes It is $3,900 for 2013. Hrblock taxes Exemption phaseout. Hrblock taxes  You lose at least part of the benefit of your exemptions if your adjusted gross income is above a certain amount. Hrblock taxes For 2013, the phaseout begins at $150,000 for married individuals filing separate returns; $250,000 for single individuals; $275,000 for heads of household; and $300,000 for married individuals filing joint returns or qualifying widow(er)s. Hrblock taxes See Phaseout of Exemptions , later. Hrblock taxes Standard deduction increased. Hrblock taxes   The standard deduction for some taxpayers who do not itemize their deductions on Schedule A of Form 1040 is higher for 2013 than it was for 2012. Hrblock taxes The amount depends on your filing status. Hrblock taxes You can use the 2013 Standard Deduction Tables near the end of this publication to figure your standard deduction. Hrblock taxes Same-sex marriages. Hrblock taxes . Hrblock taxes  If you have a same-sex spouse whom you legally married in a state (or foreign country) that recognizes same-sex marriage, you and your spouse generally must use the married filing jointly or married filing separately filing status on your 2013 return, even if you and your spouse now live in a state (or foreign country) that does not recognize same-sex marriage. Hrblock taxes See Same-sex marriage under Marital Status, later. Hrblock taxes If you meet certain requirements, you may be able to file amended returns to change your filing status for some earlier years. Hrblock taxes For details on filing amended returns, see Joint Return After Separate Returns . Hrblock taxes Reminders Future developments. Hrblock taxes  Information about any future developments affecting Publication 501 (such as legislation enacted after we release it) will be posted at www. Hrblock taxes irs. Hrblock taxes gov/pub501. Hrblock taxes Taxpayer identification number for aliens. Hrblock taxes   If you are a nonresident or resident alien and you do not have and are not eligible to get a social security number (SSN), you must apply for an individual taxpayer identification number (ITIN). Hrblock taxes Your spouse also may need an ITIN if he or she does not have and is not eligible to get an SSN. Hrblock taxes See Form W-7, Application for IRS Individual Taxpayer Identification Number. Hrblock taxes Also, see Social Security Numbers for Dependents , later. Hrblock taxes Photographs of missing children. Hrblock taxes   The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Hrblock taxes Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Hrblock taxes 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. Hrblock taxes Introduction This publication discusses some tax rules that affect every person who may have to file a federal income tax return. Hrblock taxes It answers some basic questions: who must file; who should file; what filing status to use; how many exemptions to claim; and the amount of the standard deduction. Hrblock taxes Who Must File explains who must file an income tax return. Hrblock taxes If you have little or no gross income, reading this section will help you decide if you have to file a return. Hrblock taxes Who Should File helps you decide if you should file a return, even if you are not required to do so. Hrblock taxes Filing Status helps you determine which filing status to use. Hrblock taxes Filing status is important in determining whether you must file a return and whether you may claim certain deductions and credits. Hrblock taxes It also helps determine your standard deduction and tax rate. Hrblock taxes Exemptions, which reduce your taxable income, are discussed in Exemptions . Hrblock taxes Exemptions for Dependents explains the difference between a qualifying child and a qualifying relative. Hrblock taxes Other topics include the social security number requirement for dependents, the rules for multiple support agreements, and the rules for divorced or separated parents. Hrblock taxes Phaseout of Exemptions explains how to determine whether you must reduce the dollar amount of exemptions you claim and, if so, the amount of the reduction. Hrblock taxes Standard Deduction gives the rules and dollar amounts for the standard deduction — a benefit for taxpayers who do not itemize their deductions. Hrblock taxes This section also discusses the standard deduction for taxpayers who are blind or age 65 or older, as well as special rules that limit the standard deduction available to dependents. Hrblock taxes In addition, this section helps you decide whether you would be better off taking the standard deduction or itemizing your deductions. Hrblock taxes How To Get Tax Help explains how to get tax help from the IRS. Hrblock taxes This publication is for U. Hrblock taxes S. Hrblock taxes citizens and resident aliens only. Hrblock taxes If you are a resident alien for the entire year, you must follow the same tax rules that apply to U. Hrblock taxes S. Hrblock taxes citizens. Hrblock taxes The rules to determine if you are a resident or nonresident alien are discussed in chapter 1 of Publication 519, U. Hrblock taxes S. Hrblock taxes Tax Guide for Aliens. Hrblock taxes Nonresident aliens. Hrblock taxes    If you were a nonresident alien at any time during the year, the rules and tax forms that apply to you may be different from those that apply to U. Hrblock taxes S. Hrblock taxes citizens. Hrblock taxes See Publication 519. Hrblock taxes Comments and suggestions. Hrblock taxes    We welcome your comments about this publication and your suggestions for future editions. Hrblock taxes   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Hrblock taxes NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Hrblock taxes Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Hrblock taxes   You can send your comments from www. Hrblock taxes irs. Hrblock taxes gov/formspubs. Hrblock taxes Click on “More Information” and then on “Comment on Tax Forms and Publications. Hrblock taxes ”   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. Hrblock taxes Ordering forms and publications. Hrblock taxes    Visit www. Hrblock taxes irs. Hrblock taxes 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. Hrblock taxes Internal Revenue Service 1201 N. Hrblock taxes Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Hrblock taxes    If you have a tax question, check the information available on IRS. Hrblock taxes gov or call 1-800-829-1040. Hrblock taxes We cannot answer tax questions sent to either of the above addresses. Hrblock taxes Useful Items - You may want to see: Publication 559 Survivors, Executors, and Administrators 929 Tax Rules for Children and Dependents Form (and Instructions) 1040X Amended U. Hrblock taxes S. Hrblock taxes Individual Income Tax Return 2848 Power of Attorney and Declaration of Representative 8332 Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent 8814 Parents' Election To Report Child's Interest and Dividends Prev  Up  Next   Home   More Online Publications
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Hrblock taxes 1. Hrblock taxes   Traditional IRAs Table of Contents What's New for 2013 What's New for 2014 Introduction Who Can Open a Traditional IRA?What Is Compensation? When Can a Traditional IRA Be Opened? How Can a Traditional IRA Be Opened?Individual Retirement Account Individual Retirement Annuity Individual Retirement Bonds Simplified Employee Pension (SEP) Employer and Employee Association Trust Accounts Required Disclosures How Much Can Be Contributed?Limit. Hrblock taxes When repayment contributions can be made. Hrblock taxes No deduction. Hrblock taxes Reserve component. Hrblock taxes Figuring your IRA deduction. Hrblock taxes Reporting the repayment. Hrblock taxes Example. Hrblock taxes General Limit Kay Bailey Hutchison Spousal IRA Limit Filing Status Less Than Maximum Contributions More Than Maximum Contributions When Can Contributions Be Made? How Much Can You Deduct?Kay Bailey Hutchison Spousal IRA. Hrblock taxes Are You Covered by an Employer Plan? Limit if Covered by Employer Plan Reporting Deductible Contributions Nondeductible Contributions Examples — Worksheet for Reduced IRA Deduction for 2013 What if You Inherit an IRA?Treating it as your own. Hrblock taxes Can You Move Retirement Plan Assets?Transfers to Roth IRAs from other retirement plans. Hrblock taxes Trustee-to-Trustee Transfer Rollovers Transfers Incident To Divorce Converting From Any Traditional IRA Into a Roth IRA Recharacterizations When Can You Withdraw or Use Assets?Contributions Returned Before Due Date of Return When Must You Withdraw Assets? (Required Minimum Distributions)IRA Owners IRA Beneficiaries Which Table Do You Use To Determine Your Required Minimum Distribution? What Age(s) Do You Use With the Table(s)? Miscellaneous Rules for Required Minimum Distributions Are Distributions Taxable?January 2013 QCDs treated as made in 2012. Hrblock taxes 2013 Reporting. Hrblock taxes Additional reporting requirements if you made the election to treat a January 2013 QCD as made in 2012. Hrblock taxes One-time transfer. Hrblock taxes Testing period rules apply. Hrblock taxes More information. Hrblock taxes Distributions Fully or Partly Taxable Figuring the Nontaxable and Taxable Amounts Recognizing Losses on Traditional IRA Investments Other Special IRA Distribution Situations Reporting and Withholding Requirements for Taxable Amounts What Acts Result in Penalties or Additional Taxes?Prohibited Transactions Investment in Collectibles Excess Contributions Early Distributions Excess Accumulations (Insufficient Distributions) Reporting Additional Taxes What's New for 2013 Traditional IRA contribution and deduction limit. Hrblock taxes  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. Hrblock taxes 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. Hrblock taxes For more information, see How Much Can Be Contributed? in this chapter. Hrblock taxes Modified AGI limit for traditional IRA contributions increased. Hrblock taxes  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. Hrblock taxes 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. Hrblock taxes If your modified AGI is $188,000 or more, you cannot take a deduction for contributions to a traditional IRA. Hrblock taxes See How Much Can You Deduct? in this chapter. Hrblock taxes Net Investment Income Tax. Hrblock taxes  For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan (for example, 401(a), 403(a), 403(b), 457(b) plans, and IRAs). Hrblock taxes However, these distributions are taken into account when determining the modified adjusted gross income threshold. Hrblock taxes Distributions from a nonqualified retirement plan are included in net investment income. Hrblock taxes See Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions for more information. Hrblock taxes What's New for 2014 Modified AGI limit for traditional IRA contributions increased. Hrblock taxes  For 2014, if you are 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 $96,000 but less than $116,000 for a married couple filing a joint return or a qualifying widow(er), More than $60,000 but less than $70,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. Hrblock taxes If you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work, but you are not, your deduction is phased out if your modified AGI is more than $181,000 but less than $191,000. Hrblock taxes If your modified AGI is $191,000 or more, you cannot take a deduction for contributions to a traditional IRA. Hrblock taxes Introduction This chapter discusses the original IRA. Hrblock taxes In this publication the original IRA (sometimes called an ordinary or regular IRA) is referred to as a “traditional IRA. Hrblock taxes ” A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA. Hrblock taxes The following are two advantages of a traditional IRA: You may be able to deduct some or all of your contributions to it, depending on your circumstances. Hrblock taxes Generally, amounts in your IRA, including earnings and gains, are not taxed until they are distributed. Hrblock taxes 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. Hrblock taxes You can have a traditional IRA whether or not you are covered by any other retirement plan. Hrblock taxes However, you may not be able to deduct all of your contributions if you or your spouse is covered by an employer retirement plan. Hrblock taxes See How Much Can You Deduct , later. Hrblock taxes Both spouses have compensation. Hrblock taxes   If both you and your spouse have compensation and are under age 70½, each of you can open an IRA. Hrblock taxes You cannot both participate in the same IRA. Hrblock taxes If you file a joint return, only one of you needs to have compensation. Hrblock taxes What Is Compensation? Generally, compensation is what you earn from working. Hrblock taxes For a summary of what compensation does and does not include, see Table 1-1. Hrblock taxes Compensation includes all of the items discussed next (even if you have more than one type). Hrblock taxes Wages, salaries, etc. Hrblock taxes   Wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services are compensation. Hrblock taxes 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). Hrblock taxes Scholarship and fellowship payments are compensation for IRA purposes only if shown in box 1 of Form W-2. Hrblock taxes Commissions. Hrblock taxes   An amount you receive that is a percentage of profits or sales price is compensation. Hrblock taxes Self-employment income. Hrblock taxes   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 deduction allowed for the deductible part of your self-employment taxes. Hrblock taxes   Compensation includes earnings from self-employment even if they are not subject to self-employment tax because of your religious beliefs. Hrblock taxes Self-employment loss. Hrblock taxes   If you have a net loss from self-employment, do not subtract the loss from your salaries or wages when figuring your total compensation. Hrblock taxes Alimony and separate maintenance. Hrblock taxes   For IRA purposes, compensation includes any taxable alimony and separate maintenance payments you receive under a decree of divorce or separate maintenance. Hrblock taxes Nontaxable combat pay. Hrblock taxes   If you were a member of the U. Hrblock taxes S. Hrblock taxes Armed Forces, compensation includes any nontaxable combat pay you received. Hrblock taxes This amount should be reported in box 12 of your 2013 Form W-2 with code Q. Hrblock taxes Table 1-1. Hrblock taxes Compensation for Purposes of an IRA Includes . Hrblock taxes . Hrblock taxes . Hrblock taxes Does not include . Hrblock taxes . Hrblock taxes . Hrblock taxes   earnings and profits from property. Hrblock taxes wages, salaries, etc. Hrblock taxes     interest and dividend income. Hrblock taxes commissions. Hrblock taxes     pension or annuity income. Hrblock taxes self-employment income. Hrblock taxes     deferred compensation. Hrblock taxes alimony and separate maintenance. Hrblock taxes     income from certain  partnerships. Hrblock taxes nontaxable combat pay. Hrblock taxes     any amounts you exclude from income. Hrblock taxes     What Is Not Compensation? Compensation does not include any of the following items. Hrblock taxes Earnings and profits from property, such as rental income, interest income, and dividend income. Hrblock taxes Pension or annuity income. Hrblock taxes Deferred compensation received (compensation payments postponed from a past year). Hrblock taxes Income from a partnership for which you do not provide services that are a material income-producing factor. Hrblock taxes Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b. Hrblock taxes Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs. Hrblock taxes When Can a Traditional IRA Be Opened? You can open a traditional IRA at any time. Hrblock taxes However, the time for making contributions for any year is limited. Hrblock taxes See When Can Contributions Be Made , later. Hrblock taxes How Can a Traditional IRA Be Opened? You can open different kinds of IRAs with a variety of organizations. Hrblock taxes You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. Hrblock taxes You can also open an IRA through your stockbroker. Hrblock taxes Any IRA must meet Internal Revenue Code requirements. Hrblock taxes The requirements for the various arrangements are discussed below. Hrblock taxes Kinds of traditional IRAs. Hrblock taxes   Your traditional IRA can be an individual retirement account or annuity. Hrblock taxes It can be part of either a simplified employee pension (SEP) or an employer or employee association trust account. Hrblock taxes Individual Retirement Account An individual retirement account is a trust or custodial account set up in the United States for the exclusive benefit of you or your beneficiaries. Hrblock taxes The account is created by a written document. Hrblock taxes The document must show that the account meets all of the following requirements. Hrblock taxes The trustee or custodian must be a bank, a federally insured credit union, a savings and loan association, or an entity approved by the IRS to act as trustee or custodian. Hrblock taxes The trustee or custodian generally cannot accept contributions of more than the deductible amount for the year. Hrblock taxes However, rollover contributions and employer contributions to a simplified employee pension (SEP) can be more than this amount. Hrblock taxes Contributions, except for rollover contributions, must be in cash. Hrblock taxes See Rollovers , later. Hrblock taxes You must have a nonforfeitable right to the amount at all times. Hrblock taxes Money in your account cannot be used to buy a life insurance policy. Hrblock taxes Assets in your account cannot be combined with other property, except in a common trust fund or common investment fund. Hrblock taxes You must start receiving distributions by April 1 of the year following the year in which you reach age 70½. Hrblock taxes See When Must You Withdraw Assets? (Required Minimum Distributions) , later. Hrblock taxes Individual Retirement Annuity You can open an individual retirement annuity by purchasing an annuity contract or an endowment contract from a life insurance company. Hrblock taxes An individual retirement annuity must be issued in your name as the owner, and either you or your beneficiaries who survive you are the only ones who can receive the benefits or payments. Hrblock taxes An individual retirement annuity must meet all the following requirements. Hrblock taxes Your entire interest in the contract must be nonforfeitable. Hrblock taxes The contract must provide that you cannot transfer any portion of it to any person other than the issuer. Hrblock taxes There must be flexible premiums so that if your compensation changes, your payment can also change. Hrblock taxes This provision applies to contracts issued after November 6, 1978. Hrblock taxes The contract must provide that contributions cannot be more than the deductible amount for an IRA for the year, and that you must use any refunded premiums to pay for future premiums or to buy more benefits before the end of the calendar year after the year in which you receive the refund. Hrblock taxes Distributions must begin by April 1 of the year following the year in which you reach age 70½. Hrblock taxes See When Must You Withdraw Assets? (Required Minimum Distributions) , later. Hrblock taxes Individual Retirement Bonds The sale of individual retirement bonds issued by the federal government was suspended after April 30, 1982. Hrblock taxes The bonds have the following features. Hrblock taxes They stop earning interest when you reach age 70½. Hrblock taxes If you die, interest will stop 5 years after your death, or on the date you would have reached age 70½, whichever is earlier. Hrblock taxes You cannot transfer the bonds. Hrblock taxes If you cash (redeem) the bonds before the year in which you reach age 59½, you may be subject to a 10% additional tax. Hrblock taxes See Age 59½ Rule under Early Distributions, later. Hrblock taxes You can roll over redemption proceeds into IRAs. Hrblock taxes Simplified Employee Pension (SEP) A simplified employee pension (SEP) is a written arrangement that allows your employer to make deductible contributions to a traditional IRA (a SEP IRA) set up for you to receive such contributions. Hrblock taxes Generally, distributions from SEP IRAs are subject to the withdrawal and tax rules that apply to traditional IRAs. Hrblock taxes See Publication 560 for more information about SEPs. Hrblock taxes Employer and Employee Association Trust Accounts Your employer or your labor union or other employee association can set up a trust to provide individual retirement accounts for employees or members. Hrblock taxes The requirements for individual retirement accounts apply to these traditional IRAs. Hrblock taxes Required Disclosures The trustee or issuer (sometimes called the sponsor) of your traditional IRA generally must give you a disclosure statement at least 7 days before you open your IRA. Hrblock taxes However, the sponsor does not have to give you the statement until the date you open (or purchase, if earlier) your IRA, provided you are given at least 7 days from that date to revoke the IRA. Hrblock taxes The disclosure statement must explain certain items in plain language. Hrblock taxes For example, the statement should explain when and how you can revoke the IRA, and include the name, address, and telephone number of the person to receive the notice of cancellation. Hrblock taxes This explanation must appear at the beginning of the disclosure statement. Hrblock taxes If you revoke your IRA within the revocation period, the sponsor must return to you the entire amount you paid. Hrblock taxes The sponsor must report on the appropriate IRS forms both your contribution to the IRA (unless it was made by a trustee-to-trustee transfer) and the amount returned to you. Hrblock taxes These requirements apply to all sponsors. Hrblock taxes How Much Can Be Contributed? There are limits and other rules that affect the amount that can be contributed to a traditional IRA. Hrblock taxes These limits and rules are explained below. Hrblock taxes Community property laws. Hrblock taxes   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. Hrblock taxes This is the rule even in states with community property laws. Hrblock taxes Brokers' commissions. Hrblock taxes   Brokers' commissions paid in connection with your traditional IRA are subject to the contribution limit. Hrblock taxes For information about whether you can deduct brokers' commissions, see Brokers' commissions , later, under How Much Can You Deduct. Hrblock taxes Trustees' fees. Hrblock taxes   Trustees' administrative fees are not subject to the contribution limit. Hrblock taxes For information about whether you can deduct trustees' fees, see Trustees' fees , later, under How Much Can You Deduct. Hrblock taxes Qualified reservist repayments. Hrblock taxes   If you 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 (defined later under Early Distributions) you received. Hrblock taxes 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. Hrblock taxes 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 a similar arrangement. Hrblock taxes Limit. Hrblock taxes   Your qualified reservist repayments cannot be more than your qualified reservist distributions, explained under Early Distributions , later. Hrblock taxes When repayment contributions can be made. Hrblock taxes   You cannot make these repayment contributions later than the date that is 2 years after your active duty period ends. Hrblock taxes No deduction. Hrblock taxes   You cannot deduct qualified reservist repayments. Hrblock taxes Reserve component. Hrblock taxes   The term “reserve component” means the: Army National Guard of the United States, Army Reserve, Naval Reserve, Marine Corps Reserve, Air National Guard of the United States, Air Force Reserve, Coast Guard Reserve, or Reserve Corps of the Public Health Service. Hrblock taxes Figuring your IRA deduction. Hrblock taxes   The repayment of qualified reservist distributions does not affect the amount you can deduct as an IRA contribution. Hrblock taxes Reporting the repayment. Hrblock taxes   If you repay a qualified reservist distribution, include the amount of the repayment with nondeductible contributions on line 1 of Form 8606. Hrblock taxes Example. Hrblock taxes   In 2013, your IRA contribution limit is $5,500. Hrblock taxes However, because of your filing status and AGI, the limit on the amount you can deduct is $3,500. Hrblock taxes You can make a nondeductible contribution of $2,000 ($5,500 - $3,500). Hrblock taxes In an earlier year you received a $3,000 qualified reservist distribution, which you would like to repay this year. Hrblock taxes   For 2013, you can contribute a total of $8,500 to your IRA. Hrblock taxes This is made up of the maximum deductible contribution of $3,500; a nondeductible contribution of $2,000; and a $3,000 qualified reservist repayment. Hrblock taxes You contribute the maximum allowable for the year. Hrblock taxes Since you are making a nondeductible contribution ($2,000) and a qualified reservist repayment ($3,000), you must file Form 8606 with your return and include $5,000 ($2,000 + $3,000) on line 1 of Form 8606. Hrblock taxes The qualified reservist repayment is not deductible. Hrblock taxes Contributions on your behalf to a traditional IRA reduce your limit for contributions to a Roth IRA. Hrblock taxes See chapter 2 for information about Roth IRAs. Hrblock taxes General Limit For 2013, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts: $5,500 ($6,500 if you are age 50 or older), or Your taxable compensation (defined earlier) for the year. Hrblock taxes Note. Hrblock taxes This limit is reduced by any contributions to a section 501(c)(18) plan (generally, a pension plan created before June 25, 1959, that is funded entirely by employee contributions). Hrblock taxes 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. Hrblock taxes (See Nondeductible Contributions , later. Hrblock taxes ) Qualified reservist repayments do not affect this limit. Hrblock taxes Examples. Hrblock taxes George, who is 34 years old and single, earns $24,000 in 2013. Hrblock taxes His IRA contributions for 2013 are limited to $5,500. Hrblock taxes Danny, an unmarried college student working part time, earns $3,500 in 2013. Hrblock taxes His IRA contributions for 2013 are limited to $3,500, the amount of his compensation. Hrblock taxes More than one IRA. Hrblock taxes   If you have more than one IRA, the limit applies to the total contributions made on your behalf to all your traditional IRAs for the year. Hrblock taxes Annuity or endowment contracts. Hrblock taxes   If you invest in an annuity or endowment contract under an individual retirement annuity, no more than $5,500 ($6,500 if you are age 50 or older) can be contributed toward its cost for the tax year, including the cost of life insurance coverage. Hrblock taxes If more than this amount is contributed, the annuity or endowment contract is disqualified. Hrblock taxes Kay Bailey Hutchison Spousal IRA Limit 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 two amounts: $5,500 ($6,500 if you are age 50 or older), or The total compensation includible in the gross income of both you and your spouse for the year, reduced by the following two amounts. Hrblock taxes Your spouse's IRA contribution for the year to a traditional IRA. Hrblock taxes Any contributions for the year to a Roth IRA on behalf of your spouse. Hrblock taxes 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 age 50 or older or $13,000 if both of you are age 50 or older). Hrblock taxes Note. Hrblock taxes This traditional IRA limit is reduced by any contributions to a section 501(c)(18) plan (generally, a pension plan created before June 25, 1959, that is funded entirely by employee contributions). Hrblock taxes Example. Hrblock taxes Kristin, a full-time student with no taxable compensation, marries Carl during the year. Hrblock taxes Neither of them was age 50 by the end of 2013. Hrblock taxes For the year, Carl has taxable compensation of $30,000. Hrblock taxes He plans to contribute (and deduct) $5,500 to a traditional IRA. Hrblock taxes If he and Kristin file a joint return, each can contribute $5,500 to a traditional IRA. Hrblock taxes This is because Kristin, who has no compensation, can add Carl's compensation, reduced by the amount of his IRA contribution ($30,000 − $5,500 = $24,500), to her own compensation (-0-) to figure her maximum contribution to a traditional IRA. Hrblock taxes In her case, $5,500 is her contribution limit, because $5,500 is less than $24,500 (her compensation for purposes of figuring her contribution limit). Hrblock taxes Filing Status Generally, except as discussed earlier under Kay Bailey Hutchison Spousal IRA Limit , your filing status has no effect on the amount of allowable contributions to your traditional IRA. Hrblock taxes However, if during the year either you or your spouse was covered by a retirement plan at work, your deduction may be reduced or eliminated, depending on your filing status and income. Hrblock taxes See How Much Can You Deduct , later. Hrblock taxes Example. Hrblock taxes Tom and Darcy are married and both are 53. Hrblock taxes They both work and each has a traditional IRA. Hrblock taxes Tom earned $3,800 and Darcy earned $48,000 in 2013. Hrblock taxes Because of the Kay Bailey Hutchison Spousal IRA limit rule, even though Tom earned less than $6,500, they can contribute up to $6,500 to his IRA for 2013 if they file a joint return. Hrblock taxes They can contribute up to $6,500 to Darcy's IRA. Hrblock taxes If they file separate returns, the amount that can be contributed to Tom's IRA is limited by his earned income, $3,800. Hrblock taxes Less Than Maximum Contributions If contributions to your traditional IRA for a year were less than the limit, you cannot contribute more after the due date of your return for that year to make up the difference. Hrblock taxes Example. Hrblock taxes Rafael, who is 40, earns $30,000 in 2013. Hrblock taxes Although he can contribute up to $5,500 for 2013, he contributes only $3,000. Hrblock taxes After April 15, 2014, Rafael cannot make up the difference between his actual contributions for 2013 ($3,000) and his 2013 limit ($5,500). Hrblock taxes He cannot contribute $2,500 more than the limit for any later year. Hrblock taxes More Than Maximum Contributions If contributions to your IRA for a year were more than the limit, you can apply the excess contribution in one year to a later year if the contributions for that later year are less than the maximum allowed for that year. Hrblock taxes However, a penalty or additional tax may apply. Hrblock taxes See Excess Contributions , later, under What Acts Result in Penalties or Additional Taxes. Hrblock taxes 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). Hrblock taxes Contributions must be in the form of money (cash, check, or money order). Hrblock taxes Property cannot be contributed. Hrblock taxes Although property cannot be contributed, your IRA may invest in certain property. Hrblock taxes For example, your IRA may purchase shares of stock. Hrblock taxes For other restrictions on the use of funds in your IRA, see Prohibited Transactions , later in this chapter. Hrblock taxes You may be able to transfer or roll over certain property from one retirement plan to another. Hrblock taxes See the discussion of rollovers and other transfers later in this chapter under Can You Move Retirement Plan Assets . Hrblock taxes You can make a contribution to your IRA by having your income tax refund (or a portion of your refund), if any, paid directly to your traditional IRA, Roth IRA, or SEP IRA. Hrblock taxes For details, see the instructions for your income tax return or Form 8888, Allocation of Refund (Including Savings Bond Purchases). Hrblock taxes Contributions can be made to your traditional IRA for each year that you receive compensation and have not reached age 70½. Hrblock taxes For any year in which you do not work, contributions cannot be made to your IRA unless you receive alimony, nontaxable combat pay, military differential pay, or file a joint return with a spouse who has compensation. Hrblock taxes See Who Can Open a Traditional IRA , earlier. Hrblock taxes Even if contributions cannot be made for the current year, the amounts contributed for years in which you did qualify can remain in your IRA. Hrblock taxes Contributions can resume for any years that you qualify. Hrblock taxes Contributions must be made by due date. Hrblock taxes   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. Hrblock taxes For most people, this means that contributions for 2013 must be made by April 15, 2014, and contributions for 2014 must be made by April 15, 2015. Hrblock taxes Age 70½ rule. Hrblock taxes   Contributions cannot be made to your traditional IRA for the year in which you reach age 70½ or for any later year. Hrblock taxes   You attain age 70½ on the date that is 6 calendar months after the 70th anniversary of your birth. Hrblock taxes If you were born on or before June 30, 1943, you cannot contribute for 2013 or any later year. Hrblock taxes Designating year for which contribution is made. Hrblock taxes   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. Hrblock taxes 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). Hrblock taxes Filing before a contribution is made. Hrblock taxes    You can file your return claiming a traditional IRA contribution before the contribution is actually made. Hrblock taxes Generally, the contribution must be made by the due date of your return, not including extensions. Hrblock taxes Contributions not required. Hrblock taxes   You do not have to contribute to your traditional IRA for every tax year, even if you can. Hrblock taxes 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 applicable) explained earlier under How Much Can Be Contributed . Hrblock taxes However, if you or your spouse was covered by an employer retirement plan, you may not be able to deduct this amount. Hrblock taxes See Limit if Covered by Employer Plan , later. Hrblock taxes You may be able to claim a credit for contributions to your traditional IRA. Hrblock taxes For more information, see chapter 4. Hrblock taxes Trustees' fees. Hrblock taxes   Trustees' administrative fees that are billed separately and paid in connection with your traditional IRA are not deductible as IRA contributions. Hrblock taxes However, they may be deductible as a miscellaneous itemized deduction on Schedule A (Form 1040). Hrblock taxes For information about miscellaneous itemized deductions, see Publication 529, Miscellaneous Deductions. Hrblock taxes Brokers' commissions. Hrblock taxes   These commissions are part of your IRA contribution and, as such, are deductible subject to the limits. Hrblock taxes Full deduction. Hrblock taxes   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 of your traditional IRAs of up to the lesser of: $5,500 ($6,500 if you are age 50 or older), or 100% of your compensation. Hrblock taxes   This limit is reduced by any contributions made to a 501(c)(18) plan on your behalf. Hrblock taxes Kay Bailey Hutchison Spousal IRA. Hrblock taxes   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: $5,500 ($6,500 if the spouse with the lower compensation is age 50 or older), or The total compensation includible in the gross income of both spouses for the year reduced by the following three amounts. Hrblock taxes The IRA deduction for the year of the spouse with the greater compensation. Hrblock taxes Any designated nondeductible contribution for the year made on behalf of the spouse with the greater compensation. Hrblock taxes Any contributions for the year to a Roth IRA on behalf of the spouse with the greater compensation. Hrblock taxes   This limit is reduced by any contributions to a section 501(c)(18) plan on behalf of the spouse with the lesser compensation. Hrblock taxes Note. Hrblock taxes 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. Hrblock taxes After a divorce or legal separation, you can deduct only the contributions to your own IRA. Hrblock taxes Your deductions are subject to the rules for single individuals. Hrblock taxes Covered by an employer retirement plan. Hrblock taxes   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. Hrblock taxes This is discussed later under Limit if Covered by Employer Plan . Hrblock taxes Limits on the amount you can deduct do not affect the amount that can be contributed. Hrblock taxes 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. Hrblock taxes The “Retirement Plan” box should be checked if you were covered. Hrblock taxes Reservists and volunteer firefighters should also see Situations in Which You Are Not Covered , later. Hrblock taxes If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer. Hrblock taxes Federal judges. Hrblock taxes   For purposes of the IRA deduction, federal judges are covered by an employer plan. Hrblock taxes For Which Year(s) Are You Covered? Special rules apply to determine the tax years for which you are covered by an employer plan. Hrblock taxes These rules differ depending on whether the plan is a defined contribution plan or a defined benefit plan. Hrblock taxes Tax year. Hrblock taxes   Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. Hrblock taxes For almost all people, the tax year is the calendar year. Hrblock taxes Defined contribution plan. Hrblock taxes   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. Hrblock taxes However, also see Situations in Which You Are Not Covered , later. Hrblock taxes   A defined contribution plan is a plan that provides for a separate account for each person covered by the plan. Hrblock taxes In a defined contribution plan, the amount to be contributed to each participant's account is spelled out in the plan. Hrblock taxes The level of benefits actually provided to a participant depends on the total amount contributed to that participant's account and any earnings and losses on those contributions. Hrblock taxes Types of defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans. Hrblock taxes Example. Hrblock taxes Company A has a money purchase pension plan. Hrblock taxes Its plan year is from July 1 to June 30. Hrblock taxes The plan provides that contributions must be allocated as of June 30. Hrblock taxes Bob, an employee, leaves Company A on December 31, 2012. Hrblock taxes The contribution for the plan year ending on June 30, 2013, is made February 15, 2014. Hrblock taxes Because an amount is contributed to Bob's account for the plan year, Bob is covered by the plan for his 2013 tax year. Hrblock taxes   A special rule applies to certain plans in which it is not possible to determine if an amount will be contributed to your account for a given plan year. Hrblock taxes If, for a plan year, no amounts have been allocated to your account that are attributable to employer contributions, employee contributions, or forfeitures, by the last day of the plan year, and contributions are discretionary for the plan year, you are not covered for the tax year in which the plan year ends. Hrblock taxes If, after the plan year ends, the employer makes a contribution for that plan year, you are covered for the tax year in which the contribution is made. Hrblock taxes Example. Hrblock taxes Mickey was covered by a profit-sharing plan and left the company on December 31, 2012. Hrblock taxes The plan year runs from July 1 to June 30. Hrblock taxes Under the terms of the plan, employer contributions do not have to be made, but if they are made, they are contributed to the plan before the due date for filing the company's tax return. Hrblock taxes Such contributions are allocated as of the last day of the plan year, and allocations are made to the accounts of individuals who have any service during the plan year. Hrblock taxes As of June 30, 2013, no contributions were made that were allocated to the June 30, 2013, plan year, and no forfeitures had been allocated within the plan year. Hrblock taxes In addition, as of that date, the company was not obligated to make a contribution for such plan year and it was impossible to determine whether or not a contribution would be made for the plan year. Hrblock taxes On December 31, 2013, the company decided to contribute to the plan for the plan year ending June 30, 2013. Hrblock taxes That contribution was made on February 15, 2014. Hrblock taxes Mickey is an active participant in the plan for his 2014 tax year but not for his 2013 tax year. Hrblock taxes No vested interest. Hrblock taxes   If an amount is allocated to your account for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the account. Hrblock taxes Defined benefit plan. Hrblock taxes   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. Hrblock taxes 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. Hrblock taxes   A defined benefit plan is any plan that is not a defined contribution plan. Hrblock taxes In a defined benefit plan, the level of benefits to be provided to each participant is spelled out in the plan. Hrblock taxes The plan administrator figures the amount needed to provide those benefits and those amounts are contributed to the plan. Hrblock taxes Defined benefit plans include pension plans and annuity plans. Hrblock taxes Example. Hrblock taxes Nick, an employee of Company B, is eligible to participate in Company B's defined benefit plan, which has a July 1 to June 30 plan year. Hrblock taxes Nick leaves Company B on December 31, 2012. Hrblock taxes Because Nick is eligible to participate in the plan for its year ending June 30, 2013, he is covered by the plan for his 2013 tax year. Hrblock taxes No vested interest. Hrblock taxes   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. Hrblock taxes Situations in Which You Are Not Covered Unless you are covered by another employer plan, you are not covered by an employer plan if you are in one of the situations described below. Hrblock taxes Social security or railroad retirement. Hrblock taxes   Coverage under social security or railroad retirement is not coverage under an employer retirement plan. Hrblock taxes Benefits from previous employer's plan. Hrblock taxes   If you receive retirement benefits from a previous employer's plan, you are not covered by that plan. Hrblock taxes Reservists. Hrblock taxes   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. Hrblock taxes You are not covered by the plan if both of the following conditions are met. Hrblock taxes 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. Hrblock taxes You did not serve more than 90 days on active duty during the year (not counting duty for training). Hrblock taxes Volunteer firefighters. Hrblock taxes   If the only reason you participate in a plan is because you are a volunteer firefighter, you may not be covered by the plan. Hrblock taxes You are not covered by the plan if both of the following conditions are met. Hrblock taxes 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. Hrblock taxes Your accrued retirement benefits at the beginning of the year will not provide more than $1,800 per year at retirement. Hrblock taxes Limit if Covered by Employer Plan As discussed earlier, the deduction you can take for contributions made to your traditional IRA depends on whether you or your spouse was covered for any part of the year by an employer retirement plan. Hrblock taxes Your deduction is also affected by how much income you had and by your filing status. Hrblock taxes Your deduction may also be affected by social security benefits you received. Hrblock taxes Reduced or no deduction. Hrblock taxes   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. Hrblock taxes   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. Hrblock taxes These amounts vary depending on your filing status. Hrblock taxes   To determine if your deduction is subject to the phaseout, you must determine your modified adjusted gross income (AGI) and your filing status, as explained later under Deduction Phaseout . Hrblock taxes Once you have determined your modified AGI and your filing status, you can use Table 1-2 or Table 1-3 to determine if the phaseout applies. Hrblock taxes Social Security Recipients Instead of using Table 1-2 or Table 1-3 and Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, later, complete the worksheets in Appendix B of this publication if, for the year, all of the following apply. Hrblock taxes You received social security benefits. Hrblock taxes You received taxable compensation. Hrblock taxes Contributions were made to your traditional IRA. Hrblock taxes You or your spouse was covered by an employer retirement plan. Hrblock taxes Use the worksheets in Appendix B to figure your IRA deduction, your nondeductible contribution, and the taxable portion, if any, of your social security benefits. Hrblock taxes Appendix B includes an example with filled-in worksheets to assist you. Hrblock taxes Table 1-2. Hrblock taxes Effect of Modified AGI1 on Deduction if You Are Covered by a 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. Hrblock taxes IF your filing status is . Hrblock taxes . Hrblock taxes . Hrblock taxes AND your modified adjusted gross income (modified AGI) is . Hrblock taxes . Hrblock taxes . Hrblock taxes THEN you can take . Hrblock taxes . Hrblock taxes . Hrblock taxes single or head of household $59,000 or less a full deduction. Hrblock taxes more than $59,000 but less than $69,000 a partial deduction. Hrblock taxes $69,000 or more no deduction. Hrblock taxes married filing jointly or  qualifying widow(er) $95,000 or less a full deduction. Hrblock taxes more than $95,000 but less than $115,000 a partial deduction. Hrblock taxes $115,000 or more no deduction. Hrblock taxes married filing separately2 less than $10,000 a partial deduction. Hrblock taxes $10,000 or more no deduction. Hrblock taxes 1 Modified AGI (adjusted gross income). Hrblock taxes See Modified adjusted gross income (AGI) , later. Hrblock taxes  2 If 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” filing status). Hrblock taxes Table 1-3. Hrblock taxes Effect of Modified AGI1 on Deduction if You Are NOT Covered by a 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. Hrblock taxes IF your filing status is . Hrblock taxes . Hrblock taxes . Hrblock taxes AND your modified adjusted gross income (modified AGI) is . Hrblock taxes . Hrblock taxes . Hrblock taxes THEN you can take . Hrblock taxes . Hrblock taxes . Hrblock taxes single, head of household, or qualifying widow(er) any amount a full deduction. Hrblock taxes married filing jointly or separately with a spouse who is not covered by a plan at work any amount a full deduction. Hrblock taxes married filing jointly with a spouse who is covered by a plan at work $178,000 or less a full deduction. Hrblock taxes more than $178,000 but less than $188,000 a partial deduction. Hrblock taxes $188,000 or more no deduction. Hrblock taxes married filing separately with a spouse who is covered by a plan at work2 less than $10,000 a partial deduction. Hrblock taxes $10,000 or more no deduction. Hrblock taxes 1 Modified AGI (adjusted gross income). Hrblock taxes See Modified adjusted gross income (AGI) , later. Hrblock taxes  2 You are entitled to the full deduction if you did not live with your spouse at any time during the year. Hrblock taxes For 2014, if you are not covered by a retirement plan at work and you are married filing jointly with a spouse who is covered by a plan at work, your deduction is phased out if your modified AGI is more than $181,000 but less than $191,000. Hrblock taxes If your AGI is $191,000 or more, you cannot take a deduction for a contribution to a traditional IRA. Hrblock taxes Deduction Phaseout The amount of any reduction in the limit on your IRA deduction (phaseout) depends on whether you or your spouse was covered by an employer retirement plan. Hrblock taxes Covered by a retirement plan. Hrblock taxes   If you are 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 1-2. Hrblock taxes For 2014, if you are covered by a retirement plan at work, your IRA deduction will not be reduced (phased out) unless your modified AGI is: More than $60,000 but less than $70,000 for a single individual (or head of household), More than $96,000 but less than $116,000 for a married couple filing a joint return (or a qualifying widow(er)), or Less than $10,000 for a married individual filing a separate return. Hrblock taxes If your spouse is covered. Hrblock taxes   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 1-3. Hrblock taxes Filing status. Hrblock taxes   Your filing status depends primarily on your marital status. Hrblock taxes 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. Hrblock taxes If you need more information on filing status, see Publication 501, Exemptions, Standard Deduction, and Filing Information. Hrblock taxes Lived apart from spouse. Hrblock taxes   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. Hrblock taxes Modified adjusted gross income (AGI). Hrblock taxes   You can use Worksheet 1-1 to figure your modified AGI. Hrblock taxes If you made contributions to your IRA for 2013 and received a distribution from your IRA in 2013, see Both contributions for 2013 and distributions in 2013 , later. Hrblock taxes    Do not assume that your modified AGI is the same as your compensation. Hrblock taxes Your modified AGI may include income in addition to your compensation (discussed earlier) such as interest, dividends, and income from IRA distributions. Hrblock taxes Form 1040. Hrblock taxes   If you file Form 1040, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. Hrblock taxes IRA deduction. Hrblock taxes Student loan interest deduction. Hrblock taxes Tuition and fees deduction. Hrblock taxes Domestic production activities deduction. Hrblock taxes Foreign earned income exclusion. Hrblock taxes Foreign housing exclusion or deduction. Hrblock taxes Exclusion of qualified savings bond interest shown on Form 8815. Hrblock taxes Exclusion of employer-provided adoption benefits shown on Form 8839. Hrblock taxes This is your modified AGI. Hrblock taxes Form 1040A. Hrblock taxes   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. Hrblock taxes IRA deduction. Hrblock taxes Student loan interest deduction. Hrblock taxes Tuition and fees deduction. Hrblock taxes Exclusion of qualified savings bond interest shown on Form 8815. Hrblock taxes This is your modified AGI. Hrblock taxes Form 1040NR. Hrblock taxes   If you file Form 1040NR, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. Hrblock taxes IRA deduction. Hrblock taxes Student loan interest deduction. Hrblock taxes Domestic production activities deduction. Hrblock taxes Exclusion of qualified savings bond interest shown on Form 8815. Hrblock taxes Exclusion of employer-provided adoption benefits shown on Form 8839. Hrblock taxes This is your modified AGI. Hrblock taxes Income from IRA distributions. Hrblock taxes   If you received distributions in 2013 from one or more traditional IRAs and your traditional IRAs include only deductible contributions, the distributions are fully taxable and are included in your modified AGI. Hrblock taxes Both contributions for 2013 and distributions in 2013. Hrblock taxes   If all three of the following apply, any IRA distributions you received in 2013 may be partly tax free and partly taxable. Hrblock taxes You received distributions in 2013 from one or more traditional IRAs, You made contributions to a traditional IRA for 2013, and Some of those contributions may be nondeductible contributions. Hrblock taxes (See Nondeductible Contributions and Worksheet 1-2, later. Hrblock taxes ) If this is your situation, you must figure the taxable part of the traditional IRA distribution before you can figure your modified AGI. Hrblock taxes To do this, you can use Worksheet 1-5, later. Hrblock taxes   If at least one of the above does not apply, figure your modified AGI using Worksheet 1-1, later. Hrblock taxes How To Figure Your Reduced IRA Deduction If you or your spouse is covered by an employer retirement plan and you did not receive any social security benefits, you can figure your reduced IRA deduction by using Worksheet 1-2. Hrblock taxes Figuring Your Reduced IRA Deduction for 2013. Hrblock taxes The Instructions for Form 1040, Form 1040A, and Form 1040NR include similar worksheets that you can use instead of the worksheet in this publication. Hrblock taxes If you or your spouse is covered by an employer retirement plan, and you received any social security benefits, see Social Security Recipients , earlier. Hrblock taxes Note. Hrblock taxes If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Hrblock taxes Worksheet 1-1. Hrblock taxes Figuring Your Modified AGI Use this worksheet to figure your modified AGI for traditional IRA purposes. Hrblock taxes 1. Hrblock taxes Enter your adjusted gross income (AGI) from Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37, figured without taking into account the amount from Form 1040, line 32; Form 1040A, line 17; or Form 1040NR, line 32 1. Hrblock taxes   2. Hrblock taxes Enter any student loan interest deduction from Form 1040, line 33; Form 1040A, line 18; or Form 1040NR, line 33 2. Hrblock taxes   3. Hrblock taxes Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 3. Hrblock taxes   4. Hrblock taxes Enter any domestic production activities deduction from Form 1040, line 35, or Form 1040NR, line 34 4. Hrblock taxes   5. Hrblock taxes Enter any foreign earned income exclusion and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 5. Hrblock taxes   6. Hrblock taxes Enter any foreign housing deduction from Form 2555, line 50 6. Hrblock taxes   7. Hrblock taxes Enter any excludable savings bond interest from Form 8815, line 14 7. Hrblock taxes   8. Hrblock taxes Enter any excluded employer-provided adoption benefits from Form 8839, line 28 8. Hrblock taxes   9. Hrblock taxes Add lines 1 through 8. Hrblock taxes This is your Modified AGI for traditional IRA purposes 9. Hrblock taxes   Reporting Deductible Contributions If you file Form 1040, enter your IRA deduction on line 32 of that form. Hrblock taxes If you file Form 1040A, enter your IRA deduction on line 17 of that form. Hrblock taxes If you file Form 1040NR, enter your IRA deduction on line 32 of that form. Hrblock taxes You cannot deduct IRA contributions on Form 1040EZ or Form 1040NR-EZ. Hrblock taxes Self-employed. Hrblock taxes   If you are self-employed (a sole proprietor or partner) and have a SIMPLE IRA, enter your deduction for allowable plan contributions on Form 1040, line 28. Hrblock taxes If you file Form 1040NR, enter your deduction on line 28 of that form. Hrblock taxes Nondeductible Contributions Although your deduction for IRA contributions may be reduced or eliminated, contributions can be made to your IRA of up to the general limit or, if it applies, the Kay Bailey Hutchison Spousal IRA limit. Hrblock taxes The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. Hrblock taxes Example. Hrblock taxes Tony is 29 years old and single. Hrblock taxes In 2013, he was covered by a retirement plan at work. Hrblock taxes His salary is $62,000. Hrblock taxes His modified AGI is $70,000. Hrblock taxes Tony makes a $5,500 IRA contribution for 2013. Hrblock taxes Because he was covered by a retirement plan and his modified AGI is above $69,000, he cannot deduct his $5,500 IRA contribution. Hrblock taxes He must designate this contribution as a nondeductible contribution by reporting it on Form 8606. Hrblock taxes Repayment of reservist distributions. Hrblock taxes   Nondeductible contributions may include repayments of qualified reservist distributions. Hrblock taxes For more information, see Qualified reservist repayments under How Much Can Be Contributed, earlier. Hrblock taxes Form 8606. Hrblock taxes   To designate contributions as nondeductible, you must file Form 8606. Hrblock taxes (See the filled-in Forms 8606 in this chapter. Hrblock taxes )   You do not have to designate a contribution as nondeductible until you file your tax return. Hrblock taxes When you file, you can even designate otherwise deductible contributions as nondeductible contributions. Hrblock taxes   You must file Form 8606 to report nondeductible contributions even if you do not have to file a tax return for the year. Hrblock taxes    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. Hrblock taxes In those situations, a Form 8606 is completed for the year you take a distribution from that IRA. Hrblock taxes See Form 8606 under Distributions Fully or Partly Taxable, later. Hrblock taxes Failure to report nondeductible contributions. Hrblock taxes   If you do not report nondeductible contributions, all of the contributions to your traditional IRA will be treated like deductible contributions when withdrawn. Hrblock taxes All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. Hrblock taxes Penalty for overstatement. Hrblock taxes   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. Hrblock taxes Penalty for failure to file Form 8606. Hrblock taxes   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. Hrblock taxes Tax on earnings on nondeductible contributions. Hrblock taxes   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. Hrblock taxes Cost basis. Hrblock taxes   You will have a cost basis in your traditional IRA if you made any nondeductible contributions. Hrblock taxes Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions. Hrblock taxes    Commonly, distributions from your traditional IRAs will include both taxable and nontaxable (cost basis) amounts. Hrblock taxes See Are Distributions Taxable, later, for more information. Hrblock taxes Recordkeeping. Hrblock taxes There is a recordkeeping worksheet, Appendix A. Hrblock taxes Summary Record of Traditional IRA(s) for 2013 , that you can use to keep a record of deductible and nondeductible IRA contributions. Hrblock taxes Examples — Worksheet for Reduced IRA Deduction for 2013 The following examples illustrate the use of Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013. Hrblock taxes Example 1. Hrblock taxes For 2013, Tom and Betty file a joint return on Form 1040. Hrblock taxes They are both 39 years old. Hrblock taxes They are both employed and Tom is covered by his employer's retirement plan. Hrblock taxes Tom's salary is $59,000 and Betty's is $32,555. Hrblock taxes They each have a traditional IRA and their combined modified AGI, which includes $5,000 interest and dividend income, is $96,555. Hrblock taxes Because their modified AGI is between $95,000 and $115,000 and Tom is covered by an employer plan, Tom is subject to the deduction phaseout discussed earlier under Limit if Covered by Employer Plan . Hrblock taxes For 2013, Tom contributed $5,500 to his IRA and Betty contributed $5,500 to hers. Hrblock taxes Even though they file a joint return, they must use separate worksheets to figure the IRA deduction for each of them. Hrblock taxes Tom can take a deduction of only $5,080. Hrblock taxes He can choose to treat the $5,080 as either deductible or nondeductible contributions. Hrblock taxes He can either leave the $420 ($5,500 − $5,080) of nondeductible contributions in his IRA or withdraw them by April 15, 2014. Hrblock taxes He decides to treat the $5,080 as deductible contributions and leave the $420 of nondeductible contributions in his IRA. Hrblock taxes Using Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, Tom figures his deductible and nondeductible amounts as shown on Worksheet 1-2. Hrblock taxes Figuring Your Reduced IRA Deduction for 2013—Example 1 Illustrated. Hrblock taxes Betty figures her IRA deduction as follows. Hrblock taxes Betty can treat all or part of her contributions as either deductible or nondeductible. Hrblock taxes This is because her $5,500 contribution for 2013 is not subject to the deduction phaseout discussed earlier under Limit if Covered by Employer Plan . Hrblock taxes She does not need to use Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, because their modified AGI is not within the phaseout range that applies. Hrblock taxes Betty decides to treat her $5,500 IRA contributions as deductible. Hrblock taxes The IRA deductions of $5,080 and $5,500 on the joint return for Tom and Betty total $10,580. Hrblock taxes Example 2. Hrblock taxes For 2013, Ed and Sue file a joint return on Form 1040. Hrblock taxes They are both 39 years old. Hrblock taxes Ed is covered by his employer's retirement plan. Hrblock taxes Ed's salary is $45,000. Hrblock taxes Sue had no compensation for the year and did not contribute to an IRA. Hrblock taxes Sue is not covered by an employer plan. Hrblock taxes Ed contributed $5,500 to his traditional IRA and $5,500 to a traditional IRA for Sue (a Kay Bailey Hutchison Spousal IRA). Hrblock taxes Their combined modified AGI, which includes $2,000 interest and dividend income and a large capital gain from the sale of stock, is $180,555. Hrblock taxes Because the combined modified AGI is $115,000 or more, Ed cannot deduct any of the contribution to his traditional IRA. Hrblock taxes He can either leave the $5,500 of nondeductible contributions in his IRA or withdraw them by April 15, 2014. Hrblock taxes Sue figures her IRA deduction as shown on Worksheet 1-2. Hrblock taxes Figuring Your Reduced IRA Deduction for 2013—Example 2 Illustrated. Hrblock taxes Worksheet 1-2. Hrblock taxes Figuring Your Reduced IRA Deduction for 2013 (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. Hrblock taxes ) Note. Hrblock taxes If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Hrblock taxes IF you . Hrblock taxes . Hrblock taxes . Hrblock taxes AND your  filing status is . Hrblock taxes . Hrblock taxes . Hrblock taxes AND your modified AGI is over . Hrblock taxes . Hrblock taxes . Hrblock taxes THEN enter on  line 1 below . Hrblock taxes . Hrblock taxes . Hrblock taxes       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. Hrblock taxes Enter applicable amount from table above 1. Hrblock taxes   2. Hrblock taxes Enter your modified AGI (that of both spouses, if married filing jointly) 2. Hrblock taxes     Note. Hrblock taxes If line 2 is equal to or more than the amount on line 1, stop here. Hrblock taxes  Your IRA contributions are not deductible. Hrblock taxes See Nondeductible Contributions , earlier. Hrblock taxes     3. Hrblock taxes Subtract line 2 from line 1. Hrblock taxes If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. Hrblock taxes You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. Hrblock taxes   4. Hrblock taxes Multiply line 3 by the percentage below that applies to you. Hrblock taxes If the result is not a multiple of $10, round it to the next highest multiple of $10. Hrblock taxes (For example, $611. Hrblock taxes 40 is rounded to $620. Hrblock taxes ) However, if the result is less than $200, enter $200. Hrblock taxes         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Hrblock taxes 5% (. Hrblock taxes 275) (by 32. Hrblock taxes 5% (. Hrblock taxes 325) if you are age 50 or older). Hrblock taxes All others, multiply line 3 by 55% (. Hrblock taxes 55) (by 65% (. Hrblock taxes 65) if you are age 50 or older). Hrblock taxes 4. Hrblock taxes   5. Hrblock taxes Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). Hrblock taxes If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. Hrblock taxes If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Hrblock taxes   6. Hrblock taxes Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). Hrblock taxes If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Hrblock taxes 6. Hrblock taxes   7. Hrblock taxes IRA deduction. Hrblock taxes Compare lines 4, 5, and 6. Hrblock taxes Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. Hrblock taxes If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Hrblock taxes   8. Hrblock taxes Nondeductible contribution. Hrblock taxes Subtract line 7 from line 5 or 6, whichever is smaller. Hrblock taxes  Enter the result here and on line 1 of your Form 8606 8. Hrblock taxes   Worksheet 1-2. Hrblock taxes Figuring Your Reduced IRA Deduction for 2013—Example 1 Illustrated (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. Hrblock taxes ) Note. Hrblock taxes If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Hrblock taxes IF you . Hrblock taxes . Hrblock taxes . Hrblock taxes AND your  filing status is . Hrblock taxes . Hrblock taxes . Hrblock taxes AND your modified AGI is over . Hrblock taxes . Hrblock taxes . Hrblock taxes THEN enter on  line 1 below . Hrblock taxes . Hrblock taxes . Hrblock taxes       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. Hrblock taxes Enter applicable amount from table above 1. Hrblock taxes 115,000 2. Hrblock taxes Enter your modified AGI (that of both spouses, if married filing jointly) 2. Hrblock taxes 96,555   Note. Hrblock taxes If line 2 is equal to or more than the amount on line 1, stop here. Hrblock taxes  Your IRA contributions are not deductible. Hrblock taxes See Nondeductible Contributions , earlier. Hrblock taxes     3. Hrblock taxes Subtract line 2 from line 1. Hrblock taxes If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. Hrblock taxes You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. Hrblock taxes 18,445 4. Hrblock taxes Multiply line 3 by the percentage below that applies to you. Hrblock taxes If the result is not a multiple of $10, round it to the next highest multiple of $10. Hrblock taxes (For example, $611. Hrblock taxes 40 is rounded to $620. Hrblock taxes ) However, if the result is less than $200, enter $200. Hrblock taxes         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Hrblock taxes 5% (. Hrblock taxes 275) (by 32. Hrblock taxes 5% (. Hrblock taxes 325) if you are age 50 or older). Hrblock taxes All others, multiply line 3 by 55% (. Hrblock taxes 55) (by 65% (. Hrblock taxes 65) if you are age 50 or older). Hrblock taxes 4. Hrblock taxes 5,080 5. Hrblock taxes Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). Hrblock taxes If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. Hrblock taxes If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Hrblock taxes 59,000 6. Hrblock taxes Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). Hrblock taxes If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Hrblock taxes 6. Hrblock taxes 5,500 7. Hrblock taxes IRA deduction. Hrblock taxes Compare lines 4, 5, and 6. Hrblock taxes Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. Hrblock taxes If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Hrblock taxes 5,080 8. Hrblock taxes Nondeductible contribution. Hrblock taxes Subtract line 7 from line 5 or 6, whichever is smaller. Hrblock taxes  Enter the result here and on line 1 of your Form 8606 8. Hrblock taxes 420 Worksheet 1-2. Hrblock taxes Figuring Your Reduced IRA Deduction for 2013—Example 2 Illustrated (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. Hrblock taxes ) Note. Hrblock taxes If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Hrblock taxes IF you . Hrblock taxes . Hrblock taxes . Hrblock taxes AND your  filing status is . Hrblock taxes . Hrblock taxes . Hrblock taxes AND your modified AGI is over . Hrblock taxes . Hrblock taxes . Hrblock taxes THEN enter on  line 1 below . Hrblock taxes . Hrblock taxes . Hrblock taxes       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. Hrblock taxes Enter applicable amount from table above 1. Hrblock taxes 188,000 2. Hrblock taxes Enter your modified AGI (that of both spouses, if married filing jointly) 2. Hrblock taxes 180,555   Note. Hrblock taxes If line 2 is equal to or more than the amount on line 1, stop here. Hrblock taxes  Your IRA contributions are not deductible. Hrblock taxes See Nondeductible Contributions , earlier. Hrblock taxes     3. Hrblock taxes Subtract line 2 from line 1. Hrblock taxes If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. Hrblock taxes You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. Hrblock taxes 7,445 4. Hrblock taxes Multiply line 3 by the percentage below that applies to you. Hrblock taxes If the result is not a multiple of $10, round it to the next highest multiple of $10. Hrblock taxes (For example, $611. Hrblock taxes 40 is rounded to $620. Hrblock taxes ) However, if the result is less than $200, enter $200. Hrblock taxes         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Hrblock taxes 5% (. Hrblock taxes 275) (by 32. Hrblock taxes 5% (. Hrblock taxes 325) if you are age 50 or older). Hrblock taxes All others, multiply line 3 by 55% (. Hrblock taxes 55) (by 65% (. Hrblock taxes 65) if you are age 50 or older). Hrblock taxes 4. Hrblock taxes 4,100 5. Hrblock taxes Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). Hrblock taxes If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. Hrblock taxes If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Hrblock taxes 39,500 6. Hrblock taxes Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). Hrblock taxes If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Hrblock taxes 6. Hrblock taxes 5,500 7. Hrblock taxes IRA deduction. Hrblock taxes Compare lines 4, 5, and 6. Hrblock taxes Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. Hrblock taxes If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Hrblock taxes 4,100 8. Hrblock taxes Nondeductible contribution. Hrblock taxes Subtract line 7 from line 5 or 6, whichever is smaller. Hrblock taxes  Enter the result here and on line 1 of your Form 8606 8. Hrblock taxes 1,400 What if You Inherit an IRA? If you inherit a traditional IRA, you are called a beneficiary. Hrblock taxes A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. Hrblock taxes Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive. Hrblock taxes Inherited from spouse. Hrblock taxes   If you inherit a traditional IRA from your spouse, you generally have the following three choices. Hrblock taxes You can: Treat it as your own IRA by designating yourself as the account owner. Hrblock taxes 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 (s