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Irs 1040 Ez Form

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Irs 1040 Ez Form

Irs 1040 ez form 1. Irs 1040 ez form   Tax Withholding for 2014 Table of Contents Introduction Useful Items - You may want to see: Salaries and WagesDetermining Amount of Tax Withheld Using Form W-4 Completing Form W-4 and Worksheets Getting the Right Amount of Tax Withheld Rules Your Employer Must Follow Exemption From Withholding Supplemental Wages Penalties Tips Taxable Fringe BenefitsSpecial rule. Irs 1040 ez form Exceptions. Irs 1040 ez form Sick Pay Pensions and AnnuitiesPeriodic Payments Nonperiodic Payments Eligible Rollover Distributions Choosing Not To Have Income Tax Withheld Gambling WinningsException. Irs 1040 ez form Identical wagers. Irs 1040 ez form Unemployment Compensation Federal Payments Backup WithholdingTaxpayer identification number. Irs 1040 ez form Underreported interest or dividends. Irs 1040 ez form Introduction This chapter discusses income tax withholding on: Salaries and wages, Tips, Taxable fringe benefits, Sick pay, Pensions and annuities, Gambling winnings, Unemployment compensation, and Certain federal payments. Irs 1040 ez form This chapter explains in detail the rules for withholding tax from each of these types of income. Irs 1040 ez form The discussion of salaries and wages includes an explanation of how to complete Form W-4. Irs 1040 ez form This chapter also covers backup withholding on interest, dividends, and other payments. Irs 1040 ez form Useful Items - You may want to see: Form (and Instructions) W-4 Employee's Withholding Allowance Certificate W-4P Withholding Certificate for Pension or Annuity Payments W-4S Request for Federal Income Tax Withholding From Sick Pay W-4V Voluntary Withholding Request See chapter 5 of this publication for information about getting these publications and forms. Irs 1040 ez form Salaries and Wages Income tax is withheld from the pay of most employees. Irs 1040 ez form Your pay includes your regular pay, bonuses, commissions, and vacation allowances. Irs 1040 ez form It also includes reimbursements and other expense allowances paid under a nonaccountable plan. Irs 1040 ez form See Supplemental Wages , later, for definitions of accountable and nonaccountable plans. Irs 1040 ez form If your income is low enough that you will not have to pay income tax for the year, you may be exempt from withholding. Irs 1040 ez form This is explained under Exemption From Withholding , later. Irs 1040 ez form You can ask your employer to withhold income tax from noncash wages and other wages not subject to withholding. Irs 1040 ez form If your employer does not agree to withhold tax, or if not enough is withheld, you may have to pay estimated tax, as discussed in chapter 2. Irs 1040 ez form Military retirees. Irs 1040 ez form   Military retirement pay is treated in the same manner as regular pay for income tax withholding purposes, even though it is treated as a pension or annuity for other tax purposes. Irs 1040 ez form Household workers. Irs 1040 ez form   If you are a household worker, you can ask your employer to withhold income tax from your pay. Irs 1040 ez form A household worker is an employee who performs household work in a private home, local college club, or local fraternity or sorority chapter. Irs 1040 ez form   Tax is withheld only if you want it withheld and your employer agrees to withhold it. Irs 1040 ez form If you do not have enough income tax withheld, you may have to pay estimated tax, as discussed in chapter 2. Irs 1040 ez form Farmworkers. Irs 1040 ez form   Generally, income tax is withheld from your cash wages for work on a farm unless your employer both: Pays you cash wages of less than $150 during the year, and Has expenditures for agricultural labor totaling less than $2,500 during the year. Irs 1040 ez form Differential wage payments. Irs 1040 ez form   When employees are on leave from employment for military duty, some employers make up the difference between the military pay and civilian pay. Irs 1040 ez form Payments to an employee who is on active duty for a period of more than 30 days will be subject to income tax withholding, but not subject to social security or Medicare taxes. Irs 1040 ez form The wages and withholding will be reported on Form W-2, Wage and Tax Statement. Irs 1040 ez form Determining Amount of Tax Withheld Using Form W-4 The amount of income tax your employer withholds from your regular pay depends on two things. Irs 1040 ez form The amount you earn in each payroll period. Irs 1040 ez form The information you give your employer on Form W-4. Irs 1040 ez form Form W-4 includes four types of information that your employer will use to figure your withholding. Irs 1040 ez form Whether to withhold at the single rate or at the lower married rate. Irs 1040 ez form How many withholding allowances you claim (each allowance reduces the amount withheld). Irs 1040 ez form Whether you want an additional amount withheld. Irs 1040 ez form Whether you are claiming an exemption from withholding in 2014. Irs 1040 ez form See Exemption From Withholding , later. Irs 1040 ez form Note. Irs 1040 ez form You must specify a filing status and a number of withholding allowances on Form W-4. Irs 1040 ez form You cannot specify only a dollar amount of withholding. Irs 1040 ez form New Job When you start a new job, you must fill out a Form W-4 and give it to your employer. Irs 1040 ez form Your employer should have copies of the form. Irs 1040 ez form If you need to change the information later, you must fill out a new form. Irs 1040 ez form If you work only part of the year (for example, you start working after the beginning of the year), too much tax may be withheld. Irs 1040 ez form You may be able to avoid overwithholding if your employer agrees to use the part-year method. Irs 1040 ez form See Part-Year Method , later, for more information. Irs 1040 ez form Employee also receiving pension income. Irs 1040 ez form   If you receive pension or annuity income and begin a new job, you will need to file Form W-4 with your new employer. Irs 1040 ez form However, you can choose to split your withholding allowances between your pension and job in any manner. Irs 1040 ez form Changing Your Withholding During the year changes may occur to your marital status, exemptions, adjustments, deductions, or credits you expect to claim on your tax return. Irs 1040 ez form When this happens, you may need to give your employer a new Form W-4 to change your withholding status or number of allowances. Irs 1040 ez form If the changes reduce the number of allowances you are allowed to claim or changes your marital status from married to single, you must give your employer a new Form W-4 within 10 days. Irs 1040 ez form See Marital Status (Line 3 of Form W-4) and Withholding Allowances (Line 5 of Form W-4) , later. Irs 1040 ez form Generally, you can submit a new Form W-4 whenever you wish to change your withholding allowances for any other reason. Irs 1040 ez form See Table 1-1 for examples of personal and financial changes you should consider. Irs 1040 ez form Table 1-1. Irs 1040 ez form Personal and Financial Changes Factor Examples Lifestyle change Marriage Divorce Birth or adoption of child Loss of an exemption Purchase of a new home Retirement Filing chapter 11 bankruptcy Wage income You or your spouse start or stop working, or start or stop a second job Change in the amount of taxable income not subject to withholding Interest income Dividends Capital gains Self-employment income IRA (including certain Roth  IRA) distributions Change in the amount of adjustments to income IRA deduction Student loan interest deduction Alimony expense Change in the amount of itemized deductions or tax credits Medical expenses Taxes Interest expense Gifts to charity Job expenses Dependent care expenses Education credit Child tax credit Earned income credit If you change the number of your withholding allowances, you can request that your employer withhold using the Cumulative Wage Method , explained later. Irs 1040 ez form Checking Your Withholding After you have given your employer a Form W-4, you can check to see whether the amount of tax withheld from your pay is too much or too little. Irs 1040 ez form If too much or too little tax is being withheld, you should give your employer a new Form W-4 to change your withholding. Irs 1040 ez form You can get a blank Form W-4 from your employer or print the form from IRS. Irs 1040 ez form gov. Irs 1040 ez form You should try to have your withholding match your actual tax liability. Irs 1040 ez form If not enough tax is withheld, you will owe tax at the end of the year and may have to pay interest and a penalty. Irs 1040 ez form If too much tax is withheld, you will lose the use of that money until you get your refund. Irs 1040 ez form Always check your withholding if there are personal or financial changes in your life or changes in the law that might change your tax liability. Irs 1040 ez form See Table 1-1 for examples. Irs 1040 ez form Note. Irs 1040 ez form You cannot give your employer a payment to cover federal income tax withholding on salaries and wages for past pay periods or a payment for estimated tax. Irs 1040 ez form When Should You Check Your Withholding? The earlier in the year you check your withholding, the easier it is to get the right amount of tax withheld. Irs 1040 ez form You should check your withholding when any of the following situations occur. Irs 1040 ez form You receive a paycheck stub (statement) covering a full pay period in 2014, showing tax withheld based on 2014 tax rates. Irs 1040 ez form You prepare your 2013 tax return and get a: Big refund, or Balance due that is: More than you can comfortably pay, or Subject to a penalty. Irs 1040 ez form There are changes in your life or financial situation that affect your tax liability. Irs 1040 ez form See Table 1-1. Irs 1040 ez form There are changes in the tax law that affect your tax liability. Irs 1040 ez form How Do You Check Your Withholding? You can use the worksheets and tables in this publication to see if you are having the right amount of tax withheld. Irs 1040 ez form You can also use the IRS Withholding calculator at www. Irs 1040 ez form irs. Irs 1040 ez form gov/individuals. Irs 1040 ez form If you use the worksheets and tables in this publication, follow these steps. Irs 1040 ez form Fill out Worksheet 1-5 to project your total federal income tax liability for 2014. Irs 1040 ez form Fill out Worksheet 1-7 to project your total federal withholding for 2014 and compare that with your projected tax liability from Worksheet 1-5. Irs 1040 ez form If you are not having enough tax withheld, line 6 of Worksheet 1-7 will show you how much more to have withheld each payday. Irs 1040 ez form For ways to increase the amount of tax withheld, see How Do You Increase Your Withholding? If line 5 of Worksheet 1-7 shows that you are having more tax withheld than necessary, see How Do You Decrease Your Withholding, for ways to decrease the amount of tax you have withheld each payday. Irs 1040 ez form How Do You Increase Your Withholding? There are two ways to increase your withholding. Irs 1040 ez form You can: Decrease the number of allowances you claim on Form W-4, or Enter an additional amount that you want withheld from each paycheck on Form W-4. Irs 1040 ez form Requesting an additional amount withheld. Irs 1040 ez form   You can request that an additional amount be withheld from each paycheck by following these steps. Irs 1040 ez form Complete Worksheets 1-5 and 1-7. Irs 1040 ez form Complete a new Form W-4 if the amount on Worksheet 1-7, line 5: Is more than you want to pay with your tax return or in estimated tax payments throughout the year, or Would cause you to pay a penalty when you file your tax return for 2014. Irs 1040 ez form Enter on your new Form W-4, the same number of withholding allowances your employer now uses for your withholding. Irs 1040 ez form This is the number of allowances you entered on the last Form W-4 you gave your employer. Irs 1040 ez form Enter on your new Form W-4, the amount from Worksheet 1-7, line 6. Irs 1040 ez form Give your newly completed Form W-4 to your employer. Irs 1040 ez form   If you have this additional amount withheld from your pay each payday, you should avoid owing a large amount at the end of the year. Irs 1040 ez form Example. Irs 1040 ez form Early in 2014, Steve Miller used Worksheets 1-5, 1-6, and 1-7 to project his 2014 tax liability ($4,316) and his withholding for the year ($3,516). Irs 1040 ez form Steve's tax will be underwithheld by $800 ($4,316 − $3,516). Irs 1040 ez form His choices are to pay this amount when he files his 2014 tax return, make estimated tax payments, or increase his withholding now. Irs 1040 ez form Steve gets a new Form W-4 from his employer, who tells him that there are 50 paydays remaining in 2014. Irs 1040 ez form Steve completes the new Form W-4 as before, entering the same number of withholding allowances as before, but, in addition, entering $16 ($800 ÷ 50) on the form as the additional amount to be withheld from his pay each payday. Irs 1040 ez form He gives the completed form to his employer. Irs 1040 ez form What if I have more than one job or my spouse also has a job?   You are more likely to need to increase your withholding if you have more than one job or if you are married filing jointly and your spouse also works. Irs 1040 ez form If this is the case, you can increase your withholding for one or more of the jobs. Irs 1040 ez form   You can apply the amount on Worksheet 1-7, line 5, to only one job or divide it between the jobs any way you wish. Irs 1040 ez form For each job, determine the extra amount that you want to apply to that job and divide that amount by the number of paydays remaining in 2014 for that job. Irs 1040 ez form This will give you the additional amount to enter on the Form W-4 you will file for that job. Irs 1040 ez form You need to give your employer a new Form W-4 for each job for which you are changing your withholding. Irs 1040 ez form Example. Irs 1040 ez form Meg Green works in a store and earns $46,000 a year. Irs 1040 ez form Her husband, John, works full-time in manufacturing and earns $68,000 a year. Irs 1040 ez form In 2014, they will also have $184 in taxable interest and $1,000 of other taxable income. Irs 1040 ez form They expect to file a joint income tax return. Irs 1040 ez form Meg and John complete Worksheets 1-5, 1-6, and 1-7. Irs 1040 ez form Line 5 of Worksheet 1-7 shows that they will owe an additional $4,459 after subtracting their withholding for the year. Irs 1040 ez form They can divide the $4,459 any way they want. Irs 1040 ez form They can enter an additional amount on either of their Forms W-4, or divide it between them. Irs 1040 ez form They decide to have the additional amount withheld from John's wages, so they enter $91 ($4,459 ÷ 49 remaining paydays) on his Form W-4. Irs 1040 ez form Both claim the same number of allowances as before. Irs 1040 ez form How Do You Decrease Your Withholding? If your completed Worksheets 1-5 and 1-7 show that you may have more tax withheld than your projected tax liability for 2014, you may be able to decrease your withholding. Irs 1040 ez form There are two ways to do this. Irs 1040 ez form You can: Decrease any additional amount you are having withheld, or Increase the number of allowances you claim on Form W-4. Irs 1040 ez form You can claim only the number of allowances to which you are entitled. Irs 1040 ez form To see if you can decrease your withholding by increasing your allowances, see the Form W-4 instructions and the rest of this publication. Irs 1040 ez form Increasing the number of allowances. Irs 1040 ez form   Figure and increase the number of withholding allowances you can claim as follows. Irs 1040 ez form On a new Form W-4, complete the Personal Allowances Worksheet. Irs 1040 ez form If you plan to itemize deductions, claim adjustments to income, or claim tax credits, complete a new Deductions and Adjustments Worksheet. Irs 1040 ez form If you plan to claim tax credits, see Converting Credits to Withholding Allowances, later. Irs 1040 ez form If you meet the criteria on line H of the Form W-4 Personal Allowances Worksheet, complete a new Two-Earners/Multiple Jobs Worksheet. Irs 1040 ez form If the number of allowances you can claim on Form W-4, is different from the number you already are claiming, give the newly completed Form W-4 to your employer. Irs 1040 ez form Converting Credits to Withholding Allowances Table 1-2 , later, shows many of the tax credits you may be able to use to decrease your withholding. Irs 1040 ez form The Form W-4 Personal Allowances Worksheet provides only rough adjustments for the child and dependent care credit and the child tax credit. Irs 1040 ez form Complete Worksheet 1-8 to figure these credits more accurately and also take other credits into account. Irs 1040 ez form Include the amount from line 12 of Worksheet 1-8 in the total on line 5 of the Deductions and Adjustments Worksheet. Irs 1040 ez form Then complete the Deductions and Adjustments Worksheet and the rest of Form W-4. Irs 1040 ez form If you take the child and dependent care credit into account on Worksheet 1-8, enter -0- on line F of the Personal Allowances Worksheet. Irs 1040 ez form If you take the child tax credit into account on Worksheet 1-8, enter -0- on line G of the Personal Allowances Worksheet. Irs 1040 ez form Example. Irs 1040 ez form Brett and Alyssa Davis are married and expect to file a joint return for 2014. Irs 1040 ez form Their expected taxable income from all sources is $68,000. Irs 1040 ez form They expect to have $15,900 of itemized deductions. Irs 1040 ez form Their projected tax credits include a child and dependent care credit of $960 and an adoption credit of $1,500. Irs 1040 ez form The Davis' complete Worksheet 1-8, as follows, to see whether they can convert their tax credits into additional withholding allowances. Irs 1040 ez form Line 1, expected child and dependent care credit—$960. Irs 1040 ez form Line 9, expected adoption credit—$1,500. Irs 1040 ez form Line 10, total estimated tax credits—$2,460. Irs 1040 ez form Line 11. Irs 1040 ez form Their combined total income from all sources, $68,000, falls between $42,001 and $98,000 on the table for married filing jointly or qualifying widow(er). Irs 1040 ez form The number to the right of this range is 6. Irs 1040 ez form 7. Irs 1040 ez form Line 12, multiply line 10 by line 11—$16,482. Irs 1040 ez form Then the Davis' complete the Form W-4 worksheets. Irs 1040 ez form Because they choose to account for their child and dependent care credit on the Deductions and Adjustments Worksheet, they enter -0- on line F of the Personal Allowances Worksheet and figure a new total for line H. Irs 1040 ez form They take the result on line 12 of Worksheet 1-8, add it to their other adjustments on line 5 of the Form W-4 Deductions and Adjustments Worksheet, and complete the Form W-4 worksheets. Irs 1040 ez form When Will Your New Form W-4 Go Into Effect? If the change is for the current year, your employer must put your new Form W-4 into effect no later than the start of the first payroll period ending on or after the 30th day after the day on which you give your employer your revised Form W-4. Irs 1040 ez form If the change is for next year, your new Form W-4 will not take effect until next year. Irs 1040 ez form Retirees Returning to the Workforce When you first began receiving your pension, you told the payer how much tax to withhold, if any, by completing Form W-4P, Withholding Certificate for Pension or Annuity Payments (or similar form). Irs 1040 ez form However, if your retirement pay is from the military or certain deferred compensation plans, you completed Form W-4 instead of Form W-4P. Irs 1040 ez form You completed either form based on your projected income at that time. Irs 1040 ez form Now that you are returning to the workforce, your new Form W-4 (given to your employer) and your Form W-4 or W-4P (on file with your pension plan) must work together to determine the correct amount of withholding for your new amount of income. Irs 1040 ez form The worksheets that come with Forms W-4 and W-4P are basically the same, so you can use either set of worksheets to figure out how many withholding allowances you are entitled to claim. Irs 1040 ez form Start off with the Personal Allowances Worksheet. Irs 1040 ez form Then, if you will be itemizing your deductions, claiming adjustments to income, or claiming tax credits when you file your tax return, complete the Deductions and Adjustments Worksheet. Irs 1040 ez form The third worksheet is the most important for this situation. Irs 1040 ez form Form W-4 calls it the Two-Earners/Multiple Jobs Worksheet, Form W-4P calls it the Multiple Pensions/More-Than-One-Income Worksheet—both are the same. Irs 1040 ez form If you have more than one source of income, in order to have enough withholding to cover the tax on your higher income, you may need to claim fewer withholding allowances or request your employer to withhold an additional amount from each paycheck. Irs 1040 ez form Once you have figured out how many allowances you are entitled to claim, look at the income from both your pension and your new job, and how often you receive payments. Irs 1040 ez form It is your decision how to divide up your withholding allowances between these sources of income. Irs 1040 ez form For example, you may want to “take home” most of your weekly paycheck to use as spending money and use your monthly pension to “pay the bills. Irs 1040 ez form ” In that case, change your Form W-4P to zero allowances and claim all that you are entitled to on your Form W-4. Irs 1040 ez form There are a couple of ways you can get a better idea of how much tax will be withheld when claiming a certain number of allowances. Irs 1040 ez form Use the withholding tables in Publication 15 (Circular E), Employer's Tax Guide. Irs 1040 ez form Contact your pension provider and your employer's payroll department. Irs 1040 ez form And remember, this is not a final decision. Irs 1040 ez form If you do not get the correct amount of withholding with the first Forms W-4 and W-4P you submit, you should refigure your allowances (or divide them differently) using the information and worksheets in this publication, or the resources mentioned above. Irs 1040 ez form You should go through this same process each time your life situation changes, whether it be for personal or financial reasons. Irs 1040 ez form You may need more tax withheld, or you may need less. Irs 1040 ez form Table 1-2. Irs 1040 ez form Tax Credits for 2014 For more information about the . Irs 1040 ez form . Irs 1040 ez form . Irs 1040 ez form See . Irs 1040 ez form . Irs 1040 ez form . Irs 1040 ez form Adoption credit Form 8839 instructions Child and dependent care expenses, credit for Publication 503, Child and Dependent Care Expenses Child tax credit (including the additional child tax credit) Instructions for Form 1040 or Form 1040A Earned income credit Publication 596, Earned Income Credit Education credits Publication 970, Tax Benefits for Education Elderly or the disabled, credit for the Publication 524, Credit for the Elderly or the Disabled Foreign tax credit (except any credit that applies to wages not subject to U. Irs 1040 ez form S. Irs 1040 ez form income tax withholding because they are subject to income tax withholding by a foreign country) Publication 514, Foreign Tax Credit for Individuals General business credit Form 3800, General Business Credit Mortgage interest credit Publication 530, Tax Information for First-Time Homeowners Qualified electric vehicle passive activity credit Form 8834 Prior year minimum tax, credit for (if you paid alternative minimum tax in an earlier year) Form 8801 instructions Retirement savings contributions credit (saver's credit) Publication 590, Individual Retirement Arrangements (IRAs) Tax credit bonds, credit to holders of Form 8912 instructions Completing Form W-4 and Worksheets When reading the following discussion, you may find it helpful to refer to Form W-4. Irs 1040 ez form Marital Status There is a lower withholding rate for people who qualify to check the “Married” box on line 3 of Form W-4. Irs 1040 ez form Everyone else must have tax withheld at the higher single rate. Irs 1040 ez form Single. Irs 1040 ez form   You must check the “Single” box if any of the following applies. Irs 1040 ez form You are single. Irs 1040 ez form If you are divorced, or separated from your spouse under a court decree of separate maintenance, you are considered single. Irs 1040 ez form You are married, but neither you nor your spouse is a citizen or resident of the United States. Irs 1040 ez form You are married, either you or your spouse is a nonresident alien, and you have not chosen to have that person treated as a resident alien for tax purposes. Irs 1040 ez form For more information, see Nonresident Spouse Treated as a Resident in chapter 1 of Publication 519. Irs 1040 ez form Married. Irs 1040 ez form   You qualify to check the “Married” box if any of the following applies. Irs 1040 ez form You are married and neither you nor your spouse is a nonresident alien. Irs 1040 ez form You are considered married for the whole year even if your spouse died during the year. Irs 1040 ez form You are married and either you or your spouse is a nonresident alien who has chosen to be treated as a resident alien for tax purposes. Irs 1040 ez form For more information, see Nonresident Spouse Treated as a Resident in chapter 1 of Publication 519. Irs 1040 ez form You expect to be able to file your return as a qualifying widow or widower. Irs 1040 ez form You usually can use this filing status if your spouse died within the previous 2 years and you provide more than half the cost of keeping up a home for the entire year that was the main home for you and your child whom you can claim as a dependent. Irs 1040 ez form However, you must file a new Form W-4 showing your filing status as single by December 1 of the last year you are eligible to file as a qualifying widow or widower. Irs 1040 ez form For more information on this filing status, see Qualifying Widow(er) With Dependent Child under Filing Status in Publication 501, Exemptions, Standard Deduction, and Filing Information. Irs 1040 ez form Married, but withhold at higher single rate. Irs 1040 ez form   Some married people find that they do not have enough tax withheld at the married rate. Irs 1040 ez form This can happen, for example, when both spouses work. Irs 1040 ez form To avoid this, you can check the “Married, but withhold at higher Single rate” box (even if you qualify for the married rate). Irs 1040 ez form Also, you may find that more tax is withheld if you fill out the Two-Earners/Multiple Jobs Worksheet, explained later. Irs 1040 ez form Withholding Allowances The more allowances you claim on Form W-4, the less income tax your employer will withhold. Irs 1040 ez form You will have the most tax withheld if you claim “0” allowances. Irs 1040 ez form The number of allowances you can claim depends on the following factors. Irs 1040 ez form How many exemptions you can take on your tax return. Irs 1040 ez form Whether you have income from more than one job. Irs 1040 ez form What deductions, adjustments to income, and credits you expect to have for the year. Irs 1040 ez form Whether you will file as head of household. Irs 1040 ez form If you are married (filing jointly), it also depends on whether your spouse also works and claims any allowances on his or her own Form W-4. Irs 1040 ez form Or, if married filing separately, whether or not your spouse also works. Irs 1040 ez form Form W-4 worksheets. Irs 1040 ez form    Form W-4 has worksheets to help you figure how many withholding allowances you can claim. Irs 1040 ez form The worksheets are for your own records. Irs 1040 ez form Do not give them to your employer. Irs 1040 ez form   Complete only one set of Form W-4 worksheets, no matter how many jobs you have. Irs 1040 ez form If you are married and will file a joint return, complete only one set of worksheets for you and your spouse, even if you both earn wages and each must give Form W-4 to your employers. Irs 1040 ez form Complete separate sets of worksheets only if you and your spouse will file separate returns. Irs 1040 ez form   If you are not exempt from withholding (see Exemption From Withholding , later), complete the Personal Allowances Worksheet on page 1 of the form. Irs 1040 ez form Also, use the worksheets on page 2 of the form to adjust the number of your withholding allowances for itemized deductions and adjustments to income, and for two-earner or multiple-job situations. Irs 1040 ez form If you want to adjust the number of your withholding allowances for certain tax credits, use the Deductions and Adjustments Worksheet on page 2 of Form W-4, even if you do not have any deductions or adjustments. Irs 1040 ez form   Complete all worksheets that apply to your situation. Irs 1040 ez form The worksheets will help you figure the maximum number of withholding allowances you are entitled to claim so that the amount of income tax withheld from your wages will match, as closely as possible, the amount of income tax you will owe at the end of the year. Irs 1040 ez form Multiple jobs. Irs 1040 ez form   If you have income from more than one job at the same time, complete only one set of Form W-4 worksheets. Irs 1040 ez form Then split your allowances between the Forms W-4 for each job. Irs 1040 ez form You cannot claim the same allowances with more than one employer at the same time. Irs 1040 ez form You can claim all your allowances with one employer and none with the other(s), or divide them any other way. Irs 1040 ez form Married individuals. Irs 1040 ez form   If both you and your spouse are employed and expect to file a joint return, figure your withholding allowances using your combined income, adjustments, deductions, exemptions, and credits. Irs 1040 ez form Use only one set of worksheets. Irs 1040 ez form You can divide your total allowances any way, but you cannot claim an allowance that your spouse also claims. Irs 1040 ez form   If you and your spouse expect to file separate returns, figure your allowances using separate worksheets based on your own individual income, adjustments, deductions, exemptions, and credits. Irs 1040 ez form Alternative method of figuring withholding allowances. Irs 1040 ez form   You do not have to use the Form W-4 worksheets if you use a more accurate method of figuring the number of withholding allowances. Irs 1040 ez form   The method you use must be based on withholding schedules, the tax rate schedules, and the 2014 Estimated Tax Worksheet in chapter 2. Irs 1040 ez form It must take into account only the items of income, adjustments to income, deductions, and tax credits that are taken into account on Form W-4. Irs 1040 ez form   You can use the number of withholding allowances determined under an alternative method rather than the number determined using the Form W-4 worksheets. Irs 1040 ez form You still must give your employer a Form W-4 claiming your withholding allowances. Irs 1040 ez form Employees who are not citizens or residents. Irs 1040 ez form   If you are neither a citizen nor a resident of the United States, you usually can claim only one withholding allowance. Irs 1040 ez form However, this rule does not apply if you are a resident of Canada or Mexico, or if you are a U. Irs 1040 ez form S. Irs 1040 ez form national. Irs 1040 ez form It also does not apply if your spouse is a U. Irs 1040 ez form S. Irs 1040 ez form citizen or resident and you have chosen to be treated as a resident of the United States for tax purposes. Irs 1040 ez form Special rules apply to residents of South Korea and India. Irs 1040 ez form For more information, see Withholding From Compensation in chapter 8 of Publication 519. Irs 1040 ez form Personal Allowances Worksheet Use the Personal Allowances Worksheet on page 1 of Form W-4 to figure your withholding allowances based on all of the following that apply. Irs 1040 ez form Exemptions. Irs 1040 ez form Only one job. Irs 1040 ez form Head of household filing status. Irs 1040 ez form Child and dependent care credit. Irs 1040 ez form Child tax credit. Irs 1040 ez form Exemptions (worksheet lines A, C, and D). Irs 1040 ez form   You can claim one withholding allowance for each exemption you expect to claim on your tax return. Irs 1040 ez form Self. Irs 1040 ez form   You can claim an allowance for your exemption on line A unless another person can claim an exemption for you on his or her tax return. Irs 1040 ez form If another person is entitled to claim an exemption for you, you cannot claim an allowance for your exemption even if the other person will not claim your exemption. Irs 1040 ez form Spouse. Irs 1040 ez form   You can claim an allowance for your spouse's exemption on line C unless your spouse is claiming his or her own exemption or another person can claim an exemption for your spouse. Irs 1040 ez form Do not claim this allowance if you and your spouse expect to file separate returns. Irs 1040 ez form Dependents. Irs 1040 ez form   You can claim one allowance on line D for each exemption you will claim for a dependent on your tax return. Irs 1040 ez form Only one job (worksheet line B). Irs 1040 ez form    You can claim an additional withholding allowance if any of the following apply for 2014. Irs 1040 ez form You are single and you have only one job at a time. Irs 1040 ez form You are married, you have only one job at a time, and your spouse does not work. Irs 1040 ez form Your wages from a second job or your spouse's wages (or the total of both) are $1,500 or less. Irs 1040 ez form If you qualify for this allowance, enter “1” on line B of the worksheet. Irs 1040 ez form Head of household filing status (worksheet line E). Irs 1040 ez form   Generally, you can file as head of household if you are unmarried and pay more than half the cost of keeping up a home that: Was the main home for all of 2014 of your parent whom you can claim as a dependent, or You lived in for more than half the year with your qualifying child or any other person you can claim as a dependent. Irs 1040 ez form For more information, see Publication 501. Irs 1040 ez form   If you expect to file as head of household on your 2014 tax return, enter “1” on line E of the worksheet. Irs 1040 ez form Reduction of personal allowances. Irs 1040 ez form   For 2014, your deduction for personal exemptions on your tax return is reduced if your adjusted gross income (AGI) is more than the AGI shown next for your filing status. Irs 1040 ez form Personal Allowance Phaseout Threshold Single $254,200 Married filing jointly or qualifying widow(er) $305,050 Married filing separately $152,525 Head of household $279,650   If you expect your AGI to be more than the amount listed, use Worksheet 1-1 to figure your reduced number of personal allowances on lines A, C, and D of the Personal Allowances Worksheet. Irs 1040 ez form Worksheet 1-1. Irs 1040 ez form Personal Allowances Worksheet (Form W-4) Reduction of Personal Allowances if AGI Above Phaseout Threshold 1. Irs 1040 ez form Enter the total amount of allowances on lines A, C, and D of the Personal Allowance Worksheet without regard to the phaseout rule 1. Irs 1040 ez form   2. Irs 1040 ez form Enter your expected AGI 2. Irs 1040 ez form       3. Irs 1040 ez form Enter $254,200 if single $305,050 if married filing jointly or qualifying widow(er) $152,525 if married filing separately $279,650 if head of household 3. Irs 1040 ez form       4. Irs 1040 ez form Subtract line 3 from line 2 4. Irs 1040 ez form       5. Irs 1040 ez form Divide line 4 by $125,000 ($62,500 if married filing separately). Irs 1040 ez form Enter the result as a decimal 5. Irs 1040 ez form   6. Irs 1040 ez form Multiply line 1 by line 5. Irs 1040 ez form If the result is not a whole number, increase it to the next higher whole number 6. Irs 1040 ez form   7. Irs 1040 ez form Subtract line 6 from line 1. Irs 1040 ez form The total of the numbers you enter on A, C, and D of the Personal Allowances Worksheet can not be more than this amount 7. Irs 1040 ez form     Child and dependent care credit (worksheet line F). Irs 1040 ez form   Enter “1” on line F if you expect to claim a credit for at least $2,000 of qualifying child or dependent care expenses on your 2014 return. Irs 1040 ez form Generally, qualifying expenses are those you pay for the care of your dependent who is your qualifying child under age 13 or for your spouse or dependent who is not able to care for himself or herself so that you can work or look for work. Irs 1040 ez form For more information, see Publication 503, Child and Dependent Care Expenses. Irs 1040 ez form   Instead of using line F, you can choose to take the credit into account on line 5 of the Deductions and Adjustments Worksheet, as explained under Tax credits , later. Irs 1040 ez form Child tax credit (worksheet line G). Irs 1040 ez form   If your total income will be less than $65,000 ($95,000 if married), enter “2” on line G for each eligible child. Irs 1040 ez form Subtract “1” from that amount if you have three to six eligible children. Irs 1040 ez form Subtract “2” from that amount if you have seven or more eligible children. Irs 1040 ez form   If your total income will be between $65,000 and $84,000 ($95,000 and $119,000 if married), enter “1” on line G for each eligible child. Irs 1040 ez form   An eligible child is any child: Who is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew), Who will be under age 17 at the end of 2014, Who is younger than you (or your spouse if filing jointly) or permanently and totally disabled, Who will not provide over half of his or her own support for 2014, Who will not file a joint return, unless the return is filed only as a claim for refund, Who will live with you for more than half of 2014, Who is a U. Irs 1040 ez form S. Irs 1040 ez form citizen, U. Irs 1040 ez form S. Irs 1040 ez form national, or U. Irs 1040 ez form S. Irs 1040 ez form resident alien, and Who will be claimed as a dependent on your return. Irs 1040 ez form If you are a U. Irs 1040 ez form S. Irs 1040 ez form citizen or U. Irs 1040 ez form S. Irs 1040 ez form national and your adopted child lived with you all year as a member of your household, that child meets the citizenship test. Irs 1040 ez form   Also, if any other person can claim the child as an eligible child, see Qualifying child of more than one person in the 2013 instructions for Form 1040 or 1040A, line 6c. Irs 1040 ez form   For more information about the child tax credit, see the instructions for Form 1040 or Form 1040A. Irs 1040 ez form   Instead of using line G, you can choose to take the credit into account on line 5 of the Deductions and Adjustments Worksheet, as explained under Tax credits , later. Irs 1040 ez form Total personal allowances (worksheet line H). Irs 1040 ez form    Add lines A through G and enter the total on line H. Irs 1040 ez form If you do not use either of the worksheets on the back of Form W-4, enter the number from line H on line 5 of Form W-4. Irs 1040 ez form Deductions and Adjustments Worksheet Use the Deductions and Adjustments Worksheet on page 2 of Form W-4 if you plan to itemize your deductions, claim certain credits, or claim adjustments to the income on your 2014 tax return and you want to reduce your withholding. Irs 1040 ez form Also, complete this worksheet when you have changes to those items to see if you need to change your withholding. Irs 1040 ez form Use the amount of each item you reasonably can expect to show on your return. Irs 1040 ez form However, do not use more than: The amount shown for that item on your 2013 return (or your 2012 return if you have not yet filed your 2013 return), plus Any additional amount related to a transaction or occurrence (such as payments already made, the signing of an agreement, or the sale of property) that you can prove has happened or will happen during 2013 or 2014. Irs 1040 ez form Do not include any amount shown on your last tax return that has been disallowed by the IRS. Irs 1040 ez form Example. Irs 1040 ez form On June 30, 2013, you bought your first home. Irs 1040 ez form On your 2013 tax return, you claimed itemized deductions of $6,600, the total mortgage interest and real estate tax you paid during the 6 months you owned your home. Irs 1040 ez form Based on your mortgage payment schedule and your real estate tax assessment, you reasonably can expect to claim deductions of $13,200 for those items on your 2014 return. Irs 1040 ez form You can use $13,200 to figure the number of your withholding allowances for itemized deductions. Irs 1040 ez form Not itemizing deductions. Irs 1040 ez form   If you expect to claim the standard deduction on your tax return, skip lines 1 and 2, and enter “0” on line 3 of the worksheet. Irs 1040 ez form Itemized deductions (worksheet line 1). Irs 1040 ez form   Enter your estimated total itemized deductions on line 1 of the worksheet. Irs 1040 ez form   Listed below are some of the deductions you can take into account when figuring additional withholding allowances for 2014. Irs 1040 ez form You normally claim these deductions on Schedule A of Form 1040. Irs 1040 ez form Medical and dental expenses that are more than 10% (7. Irs 1040 ez form 5% if either you or your spouse was born before January 2, 1950) of your 2014 AGI (defined under AGI , later). Irs 1040 ez form State and local income or property taxes. Irs 1040 ez form Deductible home mortgage interest. Irs 1040 ez form Investment interest up to net investment income. Irs 1040 ez form Charitable contributions. Irs 1040 ez form Casualty and theft losses that are more than $100 and 10% of your AGI. Irs 1040 ez form Fully deductible miscellaneous itemized deductions, including: Impairment-related work expenses of persons with disabilities, Federal estate tax on income in respect of a decedent, Repayment of more than $3,000 of income held under a claim of right that you included in income in an earlier year because at the time you thought you had an unrestricted right to it, Unrecovered investments in an annuity contract under which payments have ceased because of the annuitant's death, Gambling losses up to the amount of gambling winnings reported on your return, and Casualty and theft losses from  income-producing property. Irs 1040 ez form Other miscellaneous itemized deductions that are more than 2% of your AGI, including: Unreimbursed employee business expenses, such as education expenses, work clothes and uniforms, union dues and fees, and the cost of work-related small tools and supplies, Safe deposit box rental, Tax counsel and assistance, and Certain fees paid to an IRA trustee or custodian. Irs 1040 ez form AGI. Irs 1040 ez form   For the purpose of estimating your itemized deductions, your AGI is your estimated total income for 2014 minus any estimated adjustments to income (discussed later) that you include on line 4 of the Deductions and Adjustments Worksheet. Irs 1040 ez form Phaseout of itemized deductions. Irs 1040 ez form   For 2014, your total itemized deductions may be phased out (reduced) if your AGI is more than the following thresholds. Irs 1040 ez form    Itemized Deduction Phaseout Threshold Single $254,200 Married filing jointly or qualifying widow(er) $305,050 Married filing separately $152,525 Head of household $279,650   If you expect your AGI to be more than the amount listed, use Worksheet 1–2 to figure your reduction in itemized deductions. Irs 1040 ez form Worksheet 1-2. Irs 1040 ez form Deductions and Adjustments Worksheet (Form W-4)—Line 1 Phaseout of Itemized Deductions 1. Irs 1040 ez form Enter the estimated total of your itemized deductions 1. Irs 1040 ez form   2. Irs 1040 ez form Enter the amount included in line 1 for medical and dental expenses, investment interest, casualty or theft losses, and gambling losses 2. Irs 1040 ez form   3. Irs 1040 ez form Is the amount on line 2 less than the amount on line 1? ❑ No. Irs 1040 ez form Stop here. Irs 1040 ez form Your deduction is not limited. Irs 1040 ez form Enter the amount from line 1 above on line 1 of the Deductions and Adjustments Worksheet. Irs 1040 ez form  ❑ Yes. Irs 1040 ez form Subtract line 2 from line 1. Irs 1040 ez form 3. Irs 1040 ez form       4. Irs 1040 ez form Multiply line 3 by 80% (. Irs 1040 ez form 80) 4. Irs 1040 ez form       5. Irs 1040 ez form Enter your expected AGI 5. Irs 1040 ez form       6. Irs 1040 ez form Enter $305,050 If married filing jointly or qualifying widow(er), $279,650 if head of household, $254,200 if single, or $152,525 if married filing separately 6. Irs 1040 ez form   7. Irs 1040 ez form Is the amount on line 6 less than the amount on line 5? ❑ No. Irs 1040 ez form Stop here. Irs 1040 ez form Your deduction is not limited. Irs 1040 ez form Enter the amount from line 1 above on line 1 of the Deductions and Adjustments Worksheet. Irs 1040 ez form  ❑ Yes. Irs 1040 ez form Subtract line 6 from line 5. Irs 1040 ez form 7. Irs 1040 ez form       8. Irs 1040 ez form Multiply line 7 by 3% (. Irs 1040 ez form 03) 8. Irs 1040 ez form       9. Irs 1040 ez form Enter the smaller of line 4 or line 8 9. Irs 1040 ez form     10. Irs 1040 ez form Subtract line 9 from line 1. Irs 1040 ez form Enter the result here and on line 1 of the Deductions and Adjustments Worksheet 10. Irs 1040 ez form     Adjustments to income (worksheet line 4). Irs 1040 ez form   Enter your estimated total adjustments to income on line 4 of the Deductions and Adjustments Worksheet. Irs 1040 ez form   You can take the following adjustments to income into account when figuring additional withholding allowances for 2014. Irs 1040 ez form These adjustments appear on page 1 of your Form 1040 or 1040A. Irs 1040 ez form Net losses from Schedules C, D, E, and F of Form 1040 and from Part II of Form 4797, line 18b. Irs 1040 ez form Net operating loss carryovers. Irs 1040 ez form Certain business expenses of reservists, performing artists, and fee-based government officials. Irs 1040 ez form Health savings account or medical savings account deduction. Irs 1040 ez form Certain moving expenses. Irs 1040 ez form Deduction for self-employment tax. Irs 1040 ez form Deduction for contributions to self-employed SEP, and qualified SIMPLE plans. Irs 1040 ez form Self-employed health insurance deduction. Irs 1040 ez form Penalty on early withdrawal of savings. Irs 1040 ez form Alimony paid. Irs 1040 ez form IRA deduction. Irs 1040 ez form Student loan interest deduction. Irs 1040 ez form Jury duty pay given to your employer. Irs 1040 ez form Reforestation amortization and expenses. Irs 1040 ez form Deductible expenses related to income reported on line 21 from the rental of personal property engaged in for profit. Irs 1040 ez form Repayment of certain supplemental unemployment benefits. Irs 1040 ez form Contributions to IRC 501(c)(18)(D) pension plans. Irs 1040 ez form Contributions by certain chaplains to IRC 403(b) plans. Irs 1040 ez form Attorney fees and court costs for certain unlawful discrimination claims. Irs 1040 ez form Attorney fees and court costs for certain whistleblower awards. Irs 1040 ez form Estimated amount of decrease in tax attributable to income averaging using Schedule J (Form 1040). Irs 1040 ez form Tax credits (worksheet line 5). Irs 1040 ez form   Although you can take most tax credits into account when figuring withholding allowances, the Personal Allowances Worksheet uses only the child and dependent care credit (line F) and the child tax credit (line G). Irs 1040 ez form But you can take these credits and others into account by adding an extra amount on line 5 of the Deductions and Adjustments Worksheet. Irs 1040 ez form   If you take the child and dependent care credit into account on line 5, do not use line F. Irs 1040 ez form If you take the child tax credit into account on line 5, do not use line G. Irs 1040 ez form   In addition to the child and dependent care credit and the child tax credit, you can generally take into account the following credits. Irs 1040 ez form See the individual tax form instructions for more details. Irs 1040 ez form Foreign tax credit, except any credit that applies to wages not subject to U. Irs 1040 ez form S. Irs 1040 ez form income tax withholding because they are subject to income tax withholding by a foreign country. Irs 1040 ez form See Publication 514, Foreign Tax Credit for Individuals. Irs 1040 ez form Credit for the elderly or the disabled. Irs 1040 ez form See Publication 524, Credit for the Elderly or the Disabled. Irs 1040 ez form Education credits. Irs 1040 ez form See Publication 970, Tax Benefits for Education. Irs 1040 ez form Retirement savings contributions credit (saver's credit). Irs 1040 ez form See Publication 590. Irs 1040 ez form Mortgage interest credit. Irs 1040 ez form See Publication 530, Tax Information for Homeowners. Irs 1040 ez form Adoption credit. Irs 1040 ez form See the Instructions for Form 8839. Irs 1040 ez form Credit for nonrefundable portion of prior year minimum tax if you paid alternative minimum tax in an earlier year. Irs 1040 ez form See the Instructions for Form 8801. Irs 1040 ez form General business credit. Irs 1040 ez form See the Instructions for Form 3800. Irs 1040 ez form Earned income credit. Irs 1040 ez form See Publication 596. Irs 1040 ez form Figuring line 5 entry. Irs 1040 ez form   To figure the amount to add on line 5 for tax credits, multiply your estimated total credits by the appropriate number from Table 1-3 . Irs 1040 ez form Example. Irs 1040 ez form You are married and expect to file a joint return for 2014. Irs 1040 ez form Your combined estimated wages are $68,000. Irs 1040 ez form Your estimated tax credits include a child and dependent care credit of $960 and a mortgage interest credit of $1,700 (total credits = $2,660). Irs 1040 ez form In Table 1-3, the number corresponding to your combined estimated wages ($42,001 – $98,000) is 6. Irs 1040 ez form 7. Irs 1040 ez form Multiply your total estimated tax credits of $2,660 by 6. Irs 1040 ez form 7. Irs 1040 ez form Add the result, $17,822, to the amount you otherwise would show on line 5 of the Deductions and Adjustments Worksheet and enter the total on line 5. Irs 1040 ez form Because you choose to account for your child and dependent care credit this way, do not make an entry on line F of the Personal Allowances Worksheet. Irs 1040 ez form Nonwage income (worksheet line 6). Irs 1040 ez form   Enter on line 6 your estimated total nonwage income (other than tax-exempt income). Irs 1040 ez form Nonwage income includes interest, dividends, net rental income, unemployment compensation, alimony, gambling winnings, prizes and awards, hobby income, capital gains, royalties, and partnership income. Irs 1040 ez form   If line 6 is more than line 5, you may not have enough income tax withheld from your wages. Irs 1040 ez form See Getting the Right Amount of Tax Withheld , later. Irs 1040 ez form Net deductions and adjustments (worksheet line 8). Irs 1040 ez form    If line 7 is less than $3,950, enter “0” on line 8. Irs 1040 ez form If line 7 is $3,950 or more, divide it by $3,950, drop any fraction, and enter the result on line 8. Irs 1040 ez form Example. Irs 1040 ez form If line 7 is $5,200, $5,200 ÷ $3,950 = 1. Irs 1040 ez form 32. Irs 1040 ez form Drop the fraction (. Irs 1040 ez form 32) and enter “1” on line 8. Irs 1040 ez form Two-Earners/Multiple Jobs Worksheet Complete the Two-Earners/Multiple Jobs Worksheet on page 2 of Form W-4 if you have more than one job or are married and you and your spouse both work and the combined earnings from all jobs are more than $50,000 ($20,000 if married). Irs 1040 ez form Reducing your allowances (worksheet lines 1-3). Irs 1040 ez form   On line 1 of the worksheet, enter the number from line H of the Personal Allowances Worksheet (or line 10 of the Deductions and Adjustments Worksheet, if used). Irs 1040 ez form Using Table 1 in the Two-Earners/Multiple Jobs Worksheet, find the number listed beside the amount of your estimated wages for the year from your lowest paying job (or if lower and you are filing jointly, your spouse's job). Irs 1040 ez form Enter that number on line 2. Irs 1040 ez form However, if you are married filing jointly and estimated wages from the highest paying job are $65,000 or less, do not enter more than “3. Irs 1040 ez form ”    Table 1-3. Irs 1040 ez form Deductions and Adjustments Worksheet (Form W-4)—Line 5 a. Irs 1040 ez form  Married Filing Jointly or Qualifying Widow(er) If combined income from all sources is:   Multiply credits by: $0 – 42,000 10. Irs 1040 ez form 0 $42,001 – 98,000 6. Irs 1040 ez form 7 $98,001 – 180,000 4. Irs 1040 ez form 0 $180,001 – 270,000 3. Irs 1040 ez form 6 $270,001 – 440,000 3. Irs 1040 ez form 0 $440,001 – 490,000. Irs 1040 ez form . Irs 1040 ez form . Irs 1040 ez form . Irs 1040 ez form 2. Irs 1040 ez form 9 $490,001 and over 2. Irs 1040 ez form 5 b. Irs 1040 ez form  Single If combined income from all sources is:   Multiply credits by: $0 – 19,000 10. Irs 1040 ez form 0 $19,001 – 47,000 6. Irs 1040 ez form 7 $47,001 – 104,000 4. Irs 1040 ez form 0 $104,001 – 205,000 3. Irs 1040 ez form 6 $205,001 – 430,000 3. Irs 1040 ez form 0 $430,001 and over 2. Irs 1040 ez form 5 c. Irs 1040 ez form  Head of Household If combined income from all sources is:   Multiply credits by: $0 – 30,000 10. Irs 1040 ez form 0 $30,001 – 66,000 6. Irs 1040 ez form 7 $66,001 – 150,000 4. Irs 1040 ez form 0 $150,001 – 235,000 3. Irs 1040 ez form 6 $235,001 – 430,000 3. Irs 1040 ez form 0 $430,001 – 460,000 2. Irs 1040 ez form 9 $460,001 and over 2. Irs 1040 ez form 5 d. Irs 1040 ez form  Married Filing Separately   If combined income from all sources is:   Multiply credits by: $0 – 21,000 10. Irs 1040 ez form 0 $21,001 – 49,000 6. Irs 1040 ez form 7 $49,001 – 90,000 4. Irs 1040 ez form 0 $90,001 – 135,000 3. Irs 1040 ez form 6 $135,001 – 220,000 3. Irs 1040 ez form 0 $220,001 – 245,000 2. Irs 1040 ez form 9 $245,001 and over 2. Irs 1040 ez form 5   Subtract line 2 from line 1 and enter the result (but not less than zero) on line 3 and on Form W-4, line 5. Irs 1040 ez form If line 1 is more than or equal to line 2, do not use the rest of the worksheet. Irs 1040 ez form   If line 1 is less than line 2, enter “0” on Form W-4, line 5. Irs 1040 ez form Then complete lines 4 through 9 of the worksheet to figure the additional withholding needed to avoid underwithholding. Irs 1040 ez form Other amounts owed. Irs 1040 ez form   If you expect to owe amounts other than income tax, such as self-employment tax, include them on line 8. Irs 1040 ez form The total is the additional withholding needed for the year. Irs 1040 ez form Getting the Right Amount of Tax Withheld In most situations, the tax withheld from your pay will be close to the tax you figure on your return if you follow these two rules. Irs 1040 ez form You accurately complete all the Form W-4 worksheets that apply to you. Irs 1040 ez form You give your employer a new Form W-4 when changes occur. Irs 1040 ez form But because the worksheets and withholding methods do not account for all possible situations, you may not be getting the right amount withheld. Irs 1040 ez form This is most likely to happen in the following situations. Irs 1040 ez form You are married and both you and your spouse work. Irs 1040 ez form You have more than one job at a time. Irs 1040 ez form You have nonwage income, such as interest, dividends, alimony, unemployment compensation, or self-employment income. Irs 1040 ez form You will owe additional amounts with your return, such as self-employment tax. Irs 1040 ez form Your withholding is based on obsolete Form W-4 information for a substantial part of the year. Irs 1040 ez form Your earnings are more than $130,000 if you are single or $180,000 if you are married. Irs 1040 ez form You work only part of the year. Irs 1040 ez form You change the number of your withholding allowances during the year. Irs 1040 ez form You are subject to Additional Medicare Tax or Net Investment Income Tax. Irs 1040 ez form If you anticipate liability for Additional Medicare Tax or Net Investment Income Tax, you may request that your employer withhold an additional amount of income tax withholding on Form W-4. Irs 1040 ez form Part-Year Method If you work only part of the year and your employer agrees to use the part-year withholding method, less tax will be withheld from each wage payment than would be withheld if you worked all year. Irs 1040 ez form To be eligible for the part-year method, you must meet both of the following requirements. Irs 1040 ez form You must use the calendar year (the 12 months from January 1 through December 31) as your tax year. Irs 1040 ez form You cannot use a fiscal year. Irs 1040 ez form You must not expect to be employed for more than 245 days during the year. Irs 1040 ez form To figure this limit, count all calendar days that you are employed (including weekends, vacations, and sick days) beginning with the first day you are on the job for pay and ending with your last day of work. Irs 1040 ez form If you are temporarily laid off for 30 days or less, count those days too. Irs 1040 ez form If you are laid off for more than 30 days, do not count those days. Irs 1040 ez form You will not meet this requirement if you begin working before May 1 and expect to work for the rest of the year. Irs 1040 ez form How to apply for the part-year method. Irs 1040 ez form   You must ask your employer in writing to use this method. Irs 1040 ez form The request must state all three of the following. Irs 1040 ez form The date of your last day of work for any prior employer during the current calendar year. Irs 1040 ez form That you do not expect to be employed more than 245 days during the current calendar year. Irs 1040 ez form That you use the calendar year as your tax year. Irs 1040 ez form Cumulative Wage Method If you change the number of your withholding allowances during the year, too much or too little tax may have been withheld for the period before you made the change. Irs 1040 ez form You may be able to compensate for this if your employer agrees to use the cumulative wage withholding method for the rest of the year. Irs 1040 ez form You must ask your employer in writing to use this method. Irs 1040 ez form To be eligible, you must have been paid for the same kind of payroll period (weekly, biweekly, etc. Irs 1040 ez form ) since the beginning of the year. Irs 1040 ez form Aids for Figuring Your Withholding IRS Withholding Calculator. Irs 1040 ez form   If you had too much or too little income tax withheld from your pay, the IRS provides a withholding calculator on its website. Irs 1040 ez form Go to www. Irs 1040 ez form irs. Irs 1040 ez form gov/Individuals/IRS-Withholding-Calculator. Irs 1040 ez form It can help you determine the correct amount to be withheld any time during the year. Irs 1040 ez form Rules Your Employer Must Follow It may be helpful for you to know some of the withholding rules your employer must follow. Irs 1040 ez form These rules can affect how to fill out your Form W-4 and how to handle problems that may arise. Irs 1040 ez form New Form W-4. Irs 1040 ez form   When you start a new job, your employer should give you a Form W-4 to fill out. Irs 1040 ez form Beginning with your first payday, your employer will use the information you give on the form to figure your withholding. Irs 1040 ez form   If you later fill out a new Form W-4, your employer can put it into effect as soon as possible. Irs 1040 ez form The deadline for putting it into effect is the start of the first payroll period ending 30 or more days after you turn it in. Irs 1040 ez form No Form W-4. Irs 1040 ez form   If you do not give your employer a completed Form W-4, your employer must withhold at the highest rate, as if you were single and claimed no withholding allowances. Irs 1040 ez form Repaying withheld tax. Irs 1040 ez form   If you find you are having too much tax withheld because you did not claim all the withholding allowances you are entitled to, you should give your employer a new Form W-4. Irs 1040 ez form Your employer cannot repay any of the tax previously withheld. Irs 1040 ez form Instead, claim the full amount withheld when you file your tax return. Irs 1040 ez form   However, if your employer has withheld more than the correct amount of tax for the Form W-4 you have in effect, you do not have to fill out a new Form W-4 to have your withholding lowered to the correct amount. Irs 1040 ez form Your employer can repay the amount that was withheld incorrectly. Irs 1040 ez form If you are not repaid, your Form W-2 will reflect the full amount actually withheld, which you would claim when you file your tax return. Irs 1040 ez form IRS review of your withholding. Irs 1040 ez form   Whether you are entitled to claim a certain number of allowances or a complete exemption from withholding is subject to review by the IRS. Irs 1040 ez form Your employer may be required to send a copy of the Form W-4 to the IRS. Irs 1040 ez form There is a penalty for supplying false information on Form W-4. Irs 1040 ez form See Penalties , later. Irs 1040 ez form   If the IRS determines that you cannot claim more than a specified number of withholding allowances or claim a complete exemption from withholding, the IRS will issue a notice of the maximum number of withholding allowances permitted (commonly referred to as a “lock-in letter”) to both you and your employer. Irs 1040 ez form   The IRS will provide a period of time during which you can dispute the determination before your employer adjusts your withholding. Irs 1040 ez form If you believe that you are entitled to claim complete exemption from withholding or claim more withholding allowances than the maximum number specified by the IRS in the lock-in letter, you must submit a new Form W-4 and a written statement to support your claims to the IRS. Irs 1040 ez form Contact information (a toll-free number and an IRS office address) will be provided in the lock-in letter. Irs 1040 ez form At the end of this period, if you have not responded or if your response is not adequate, your employer will be required to withhold based on the original lock-in letter. Irs 1040 ez form   After the lock-in letter takes effect, your employer must withhold tax on the basis of the withholding rate (marital status) and maximum number of withholding allowances specified in that letter. Irs 1040 ez form   If you later believe that you are entitled to claim exemption from withholding or more allowances than the IRS determined, you can complete a new Form W-4 and a written statement to support the claims made on the Form W-4 and send them directly to the IRS address shown on the lock-in letter. Irs 1040 ez form Your employer must continue to figure your withholding on the basis of the number of allowances previously determined by the IRS until the IRS advises your employer otherwise. Irs 1040 ez form   At any time, either before or after the lock-in letter becomes effective, you may give your employer a new Form W-4 that does not claim complete exemption from withholding and results in more income tax withheld than specified in the lock-in letter. Irs 1040 ez form Your employer must then withhold tax based on this new Form W-4. Irs 1040 ez form   Additional information is available at IRS. Irs 1040 ez form gov. Irs 1040 ez form Enter “withholding compliance questions” in the search box. Irs 1040 ez form Exemption From Withholding If you claim exemption from withholding, your employer will not withhold federal income tax from your wages. Irs 1040 ez form The exemption applies only to income tax, not to social security or Medicare tax. Irs 1040 ez form You can claim exemption from withholding for 2014 only if both of the following situations apply. Irs 1040 ez form For 2013 you had a right to a refund of all federal income tax withheld because you had no tax liability. Irs 1040 ez form For 2014 you expect a refund of all federal income tax withheld because you expect to have no tax liability. Irs 1040 ez form Use Figure 1-A to help you decide whether you can claim exemption from withholding. Irs 1040 ez form Do not use Figure 1-A if you: Are 65 or older, Are blind, Will itemize deductions on your 2014 return, Will claim an exemption for a dependent on your 2014 return, or Will claim any tax credits on your 2014 return. Irs 1040 ez form These situations are discussed later. Irs 1040 ez form Students. Irs 1040 ez form   If you are a student, you are not automatically exempt. Irs 1040 ez form If you work only part time or during the summer, you may qualify for exemption from withholding. Irs 1040 ez form Example 1. Irs 1040 ez form You are a high school student and expect to earn $2,500 from a summer job. Irs 1040 ez form You do not expect to have any other income during the year, and your parents will be able to claim an exemption for you on their tax return. Irs 1040 ez form You worked last summer and had $375 federal income tax withheld from your pay. Irs 1040 ez form The entire $375 was refunded when you filed your 2013 return. Irs 1040 ez form Using Figure 1-A, you find that you can claim exemption from withholding. Irs 1040 ez form Please click here for the text description of the image. Irs 1040 ez form Figure 1-A: Exemption From Withholding on Form W-4 Example 2. Irs 1040 ez form The facts are the same as in Example 1, except that you also have a savings account and expect to have $400 interest income during the year. Irs 1040 ez form Using Figure 1-A, you find that you cannot claim exemption from withholding because your unearned income will be more than $350 and your total income will be more than $1,000. Irs 1040 ez form    You may have to file a tax return, even if you are exempt from withholding. Irs 1040 ez form See Publication 501 to see whether you must file a return. Irs 1040 ez form    Age 65 or older or blind. Irs 1040 ez form If you are 65 or older or blind, use Worksheet 1-3 or Worksheet 1-4, to help you decide whether you can claim exemption from withholding. Irs 1040 ez form Do not use either worksheet if you will itemize deductions, claim exemptions for dependents, or claim tax credits on your 2014 return. Irs 1040 ez form Instead, see Itemizing deductions or claiming exemptions or credits, next. Irs 1040 ez form Itemizing deductions or claiming exemptions or credits. Irs 1040 ez form   If you had no tax liability for 2013, and you will: Itemize deductions, Claim an exemption for a dependent, or Claim a tax credit, use the 2014 Estimated Tax Worksheet (also see chapter 2), to figure your 2014 expected tax liability. Irs 1040 ez form You can claim exemption from withholding only if your total expected tax liability (line 13c of the worksheet) is zero. Irs 1040 ez form Claiming exemption from withholding. Irs 1040 ez form   To claim exemption, you must give your employer a Form W-4. Irs 1040 ez form Do not complete lines 5 and 6. Irs 1040 ez form Enter “Exempt” on line 7. Irs 1040 ez form   If you claim exemption, but later your situation changes so that you will have to pay income tax after all, you must file a new Form W-4 within 10 days after the change. Irs 1040 ez form If you claim exemption in 2014 but you expect to owe income tax for 2015, you must file a new Form W-4 by December 1, 2014. Irs 1040 ez form   Your claim of exempt status may be reviewed by the IRS. Irs 1040 ez form See IRS review of your withholding , earlier. Irs 1040 ez form An exemption is good for only 1 year. Irs 1040 ez form   You must give your employer a new Form W-4 by February 15 each year to continue your exemption. Irs 1040 ez form Supplemental Wages Supplemental wages include bonuses, commissions, overtime pay, vacation allowances, certain sick pay, and expense allowances under certain plans. Irs 1040 ez form The payer can figure withholding on supplemental wages using the same method used for your regular wages. Irs 1040 ez form However, if these payments are identified separately from regular wages, your employer or other payer of supplemental wages can withhold income tax from these wages at a flat rate. Irs 1040 ez form Expense allowances. Irs 1040 ez form   Reimbursements or other expense allowances paid by your employer under a nonaccountable plan are treated as supplemental wages. Irs 1040 ez form A nonaccountable plan is a reimbursement arrangement that does not require you to account for, or prove, your business expenses to your employer or does not require you to return your employer's payments that are more than your proven expenses. Irs 1040 ez form   Reimbursements or other expense allowances paid under an accountable plan that are more than your proven expenses are treated as paid under a nonaccountable plan if you do not return the excess payments within a reasonable period of time. Irs 1040 ez form Accountable plan. Irs 1040 ez form   To be an accountable plan, your employer's reimbursement or allowance arrangement must include all three of the following rules. Irs 1040 ez form Your expenses must have a business connection. Irs 1040 ez form That is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. Irs 1040 ez form You must adequately account to your employer for these expenses within a reasonable period of time. Irs 1040 ez form You must return any excess reimbursement or allowance within a reasonable period of time. Irs 1040 ez form    An excess reimbursement or allowance is any amount you are paid that is more than the business-related expenses that you adequately accounted for to your employer. Irs 1040 ez form   The definition of reasonable period of time depends on the facts and circumstances of your situation. Irs 1040 ez form However, regardless of those facts and circumstances, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time. Irs 1040 ez form You receive an advance within 30 days of the time you have an expense. Irs 1040 ez form You adequately account for your expenses within 60 days after they were paid or incurred. Irs 1040 ez form You return any excess reimbursement within 120 days after the expense was paid or incurred. Irs 1040 ez form You are given a periodic statement (at least quarterly) that asks you to either return or adequately account for outstanding advances and you comply within 120 days of the statement. Irs 1040 ez form Nonaccountable plan. Irs 1040 ez form   Any plan that does not meet the definition of an accountable plan is considered a nonaccountable plan. Irs 1040 ez form For more information about accountable and nonaccountable plans, see chapter 6 of Publication 463, Travel, Entertainment, Gift, and Car Expenses. Irs 1040 ez form Penalties You may have to pay a penalty of $500 if both of the following apply. Irs 1040 ez form You make statements or claim withholding allowances on your Form W-4 that reduce the amount of tax withheld. Irs 1040 ez form You have no reasonable basis for those statements or allowances at the time you prepare your Form W-4. Irs 1040 ez form There is also a criminal penalty for willfully supplying false or fraudulent information on your Form W-4 or for willfully failing to supply information that would increase the amount withheld. Irs 1040 ez form The penalty upon conviction can be either a fine of up to $1,000 or imprisonment for up to 1 year, or both. Irs 1040 ez form These penalties will apply if you deliberately and knowingly falsify your Form W-4 in an attempt to reduce or eliminate the proper withholding of taxes. Irs 1040 ez form A simple error or an honest mistake will not result in one of these penalties. Irs 1040 ez form For example, a person who has tried to figure the number of withholding allowances correctly, but claims seven when the proper number is six, will not be charged a Form W-4 penalty. Irs 1040 ez form However, see chapter 4 for information on the penalty for underpaying your tax. Irs 1040 ez form Tips The tips you receive while working on your job are considered part of your pay. Irs 1040 ez form You must include your tips on your tax return on the same line as your regular pay. Irs 1040 ez form However, tax is not withheld directly from tip income, as it is from your regular pay. Irs 1040 ez form Nevertheless, your employer will take into account the tips you report when figuring how much to withhold from your regular pay. Irs 1040 ez form Reporting tips to your employer. Irs 1040 ez form   If you receive tips of $20 or more in a month while working for any one employer, you must report to your employer the total amount of tips you receive on the job during the month. Irs 1040 ez form The report is due by the 10th day of the following month. Irs 1040 ez form   If you have more than one job, make a separate report to each employer. Irs 1040 ez form Report only the tips you received while working for that employer, and only if they total $20 or more for the month. Irs 1040 ez form How employer figures amount to withhold. Irs 1040 ez form   The tips you report to your employer are counted as part of your income for the month you report them. Irs 1040 ez form Your employer can figure your withholding in either of two ways. Irs 1040 ez form By withholding at the regular rate on the sum of your pay plus your reported tips. Irs 1040 ez form By withholding at the regular rate on your pay plus a percentage of your reported tips. Irs 1040 ez form Not enough pay to cover taxes. Irs 1040 ez form   If your regular pay is not enough for your employer to withhold all the tax (including income tax and social security and Medicare taxes (or the equivalent railroad retirement tax)) due on your pay plus your tips, you can give your employer money to cover the shortage. Irs 1040 ez form   If you do not give your employer money to cover the shortage, your employer first withholds as much Medicare tax and social security or railroad retirement tax as possible, up to the proper amount, and then withholds income tax up to the full amount of your pay. Irs 1040 ez form If not enough tax is withheld, you may have to pay estimated tax. Irs 1040 ez form When you file your return, you also may have to pay any Medicare and social security tax or railroad retirement tax your employer could not withhold. Irs 1040 ez form Tips not reported to your employer. Irs 1040 ez form   On your tax return, you must report all the tips you receive during the year, even tips you do not report to your employer (this includes the value of any noncash tips you received, such as tickets, passes, or other items of value). Irs 1040 ez form Make sure you are having enough tax withheld, or are paying enough estimated tax (see chapter 2), to cover all your tip income. Irs 1040 ez form Allocated tips. Irs 1040 ez form   If you work in a large food or beverage establishment, your employer may have to report an allocated amount of tips on your Form W-2. Irs 1040 ez form   Your employer should not withhold income tax, Medicare tax, and social security or railroad retirement tax on the allocated amount. Irs 1040 ez form Withholding is based only on your pay plus your reported tips. Irs 1040 ez form Your employer should refund to you any incorrectly withheld tax. Irs 1040 ez form More information. Irs 1040 ez form   For more information on the reporting and withholding rules for tip income and on tip allocation, see Publi
 
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In accordance with the Equal Employment Opportunity Commission’s regulations (29 CFR Part 1614) and procedures established by the Department of the Treasury, a person who believes he/she has been discriminated against in connection with employment with the Internal Revenue Service must normally contact an EEO counselor with the IRS, in order to initiate a complaint, within 45 calendar days of the date of the matter alleged to be discriminatory, or in the case of a personnel action within 45 calendar days of the effective date of the action.

Any applicant for employment with the Department of Treasury – Internal Revenue Service who believes he/she has been discriminated against on any of the above-listed bases should contact:

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Page Last Reviewed or Updated: 13-Mar-2014

The Irs 1040 Ez Form

Irs 1040 ez form 1. Irs 1040 ez form   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. Irs 1040 ez form When repayment contributions can be made. Irs 1040 ez form No deduction. Irs 1040 ez form Reserve component. Irs 1040 ez form Figuring your IRA deduction. Irs 1040 ez form Reporting the repayment. Irs 1040 ez form Example. Irs 1040 ez form 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. Irs 1040 ez form 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. Irs 1040 ez form Can You Move Retirement Plan Assets?Transfers to Roth IRAs from other retirement plans. Irs 1040 ez form 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. Irs 1040 ez form 2013 Reporting. Irs 1040 ez form Additional reporting requirements if you made the election to treat a January 2013 QCD as made in 2012. Irs 1040 ez form One-time transfer. Irs 1040 ez form Testing period rules apply. Irs 1040 ez form More information. Irs 1040 ez form 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. Irs 1040 ez form  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. Irs 1040 ez form 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. Irs 1040 ez form For more information, see How Much Can Be Contributed? in this chapter. Irs 1040 ez form Modified AGI limit for traditional IRA contributions increased. Irs 1040 ez form  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. Irs 1040 ez form 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. Irs 1040 ez form If your modified AGI is $188,000 or more, you cannot take a deduction for contributions to a traditional IRA. Irs 1040 ez form See How Much Can You Deduct? in this chapter. Irs 1040 ez form Net Investment Income Tax. Irs 1040 ez form  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). Irs 1040 ez form However, these distributions are taken into account when determining the modified adjusted gross income threshold. Irs 1040 ez form Distributions from a nonqualified retirement plan are included in net investment income. Irs 1040 ez form See Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions for more information. Irs 1040 ez form What's New for 2014 Modified AGI limit for traditional IRA contributions increased. Irs 1040 ez form  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. Irs 1040 ez form 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. Irs 1040 ez form If your modified AGI is $191,000 or more, you cannot take a deduction for contributions to a traditional IRA. Irs 1040 ez form Introduction This chapter discusses the original IRA. Irs 1040 ez form In this publication the original IRA (sometimes called an ordinary or regular IRA) is referred to as a “traditional IRA. Irs 1040 ez form ” A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA. Irs 1040 ez form 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. Irs 1040 ez form Generally, amounts in your IRA, including earnings and gains, are not taxed until they are distributed. Irs 1040 ez form 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. Irs 1040 ez form You can have a traditional IRA whether or not you are covered by any other retirement plan. Irs 1040 ez form However, you may not be able to deduct all of your contributions if you or your spouse is covered by an employer retirement plan. Irs 1040 ez form See How Much Can You Deduct , later. Irs 1040 ez form Both spouses have compensation. Irs 1040 ez form   If both you and your spouse have compensation and are under age 70½, each of you can open an IRA. Irs 1040 ez form You cannot both participate in the same IRA. Irs 1040 ez form If you file a joint return, only one of you needs to have compensation. Irs 1040 ez form What Is Compensation? Generally, compensation is what you earn from working. Irs 1040 ez form For a summary of what compensation does and does not include, see Table 1-1. Irs 1040 ez form Compensation includes all of the items discussed next (even if you have more than one type). Irs 1040 ez form Wages, salaries, etc. Irs 1040 ez form   Wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services are compensation. Irs 1040 ez form 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). Irs 1040 ez form Scholarship and fellowship payments are compensation for IRA purposes only if shown in box 1 of Form W-2. Irs 1040 ez form Commissions. Irs 1040 ez form   An amount you receive that is a percentage of profits or sales price is compensation. Irs 1040 ez form Self-employment income. Irs 1040 ez form   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. Irs 1040 ez form   Compensation includes earnings from self-employment even if they are not subject to self-employment tax because of your religious beliefs. Irs 1040 ez form Self-employment loss. Irs 1040 ez form   If you have a net loss from self-employment, do not subtract the loss from your salaries or wages when figuring your total compensation. Irs 1040 ez form Alimony and separate maintenance. Irs 1040 ez form   For IRA purposes, compensation includes any taxable alimony and separate maintenance payments you receive under a decree of divorce or separate maintenance. Irs 1040 ez form Nontaxable combat pay. Irs 1040 ez form   If you were a member of the U. Irs 1040 ez form S. Irs 1040 ez form Armed Forces, compensation includes any nontaxable combat pay you received. Irs 1040 ez form This amount should be reported in box 12 of your 2013 Form W-2 with code Q. Irs 1040 ez form Table 1-1. Irs 1040 ez form Compensation for Purposes of an IRA Includes . Irs 1040 ez form . Irs 1040 ez form . Irs 1040 ez form Does not include . Irs 1040 ez form . Irs 1040 ez form . Irs 1040 ez form   earnings and profits from property. Irs 1040 ez form wages, salaries, etc. Irs 1040 ez form     interest and dividend income. Irs 1040 ez form commissions. Irs 1040 ez form     pension or annuity income. Irs 1040 ez form self-employment income. Irs 1040 ez form     deferred compensation. Irs 1040 ez form alimony and separate maintenance. Irs 1040 ez form     income from certain  partnerships. Irs 1040 ez form nontaxable combat pay. Irs 1040 ez form     any amounts you exclude from income. Irs 1040 ez form     What Is Not Compensation? Compensation does not include any of the following items. Irs 1040 ez form Earnings and profits from property, such as rental income, interest income, and dividend income. Irs 1040 ez form Pension or annuity income. Irs 1040 ez form Deferred compensation received (compensation payments postponed from a past year). Irs 1040 ez form Income from a partnership for which you do not provide services that are a material income-producing factor. Irs 1040 ez form Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b. Irs 1040 ez form Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs. Irs 1040 ez form When Can a Traditional IRA Be Opened? You can open a traditional IRA at any time. Irs 1040 ez form However, the time for making contributions for any year is limited. Irs 1040 ez form See When Can Contributions Be Made , later. Irs 1040 ez form How Can a Traditional IRA Be Opened? You can open different kinds of IRAs with a variety of organizations. Irs 1040 ez form You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. Irs 1040 ez form You can also open an IRA through your stockbroker. Irs 1040 ez form Any IRA must meet Internal Revenue Code requirements. Irs 1040 ez form The requirements for the various arrangements are discussed below. Irs 1040 ez form Kinds of traditional IRAs. Irs 1040 ez form   Your traditional IRA can be an individual retirement account or annuity. Irs 1040 ez form It can be part of either a simplified employee pension (SEP) or an employer or employee association trust account. Irs 1040 ez form 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. Irs 1040 ez form The account is created by a written document. Irs 1040 ez form The document must show that the account meets all of the following requirements. Irs 1040 ez form 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. Irs 1040 ez form The trustee or custodian generally cannot accept contributions of more than the deductible amount for the year. Irs 1040 ez form However, rollover contributions and employer contributions to a simplified employee pension (SEP) can be more than this amount. Irs 1040 ez form Contributions, except for rollover contributions, must be in cash. Irs 1040 ez form See Rollovers , later. Irs 1040 ez form You must have a nonforfeitable right to the amount at all times. Irs 1040 ez form Money in your account cannot be used to buy a life insurance policy. Irs 1040 ez form Assets in your account cannot be combined with other property, except in a common trust fund or common investment fund. Irs 1040 ez form You must start receiving distributions by April 1 of the year following the year in which you reach age 70½. Irs 1040 ez form See When Must You Withdraw Assets? (Required Minimum Distributions) , later. Irs 1040 ez form Individual Retirement Annuity You can open an individual retirement annuity by purchasing an annuity contract or an endowment contract from a life insurance company. Irs 1040 ez form 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. Irs 1040 ez form An individual retirement annuity must meet all the following requirements. Irs 1040 ez form Your entire interest in the contract must be nonforfeitable. Irs 1040 ez form The contract must provide that you cannot transfer any portion of it to any person other than the issuer. Irs 1040 ez form There must be flexible premiums so that if your compensation changes, your payment can also change. Irs 1040 ez form This provision applies to contracts issued after November 6, 1978. Irs 1040 ez form 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. Irs 1040 ez form Distributions must begin by April 1 of the year following the year in which you reach age 70½. Irs 1040 ez form See When Must You Withdraw Assets? (Required Minimum Distributions) , later. Irs 1040 ez form Individual Retirement Bonds The sale of individual retirement bonds issued by the federal government was suspended after April 30, 1982. Irs 1040 ez form The bonds have the following features. Irs 1040 ez form They stop earning interest when you reach age 70½. Irs 1040 ez form If you die, interest will stop 5 years after your death, or on the date you would have reached age 70½, whichever is earlier. Irs 1040 ez form You cannot transfer the bonds. Irs 1040 ez form If you cash (redeem) the bonds before the year in which you reach age 59½, you may be subject to a 10% additional tax. Irs 1040 ez form See Age 59½ Rule under Early Distributions, later. Irs 1040 ez form You can roll over redemption proceeds into IRAs. Irs 1040 ez form 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. Irs 1040 ez form Generally, distributions from SEP IRAs are subject to the withdrawal and tax rules that apply to traditional IRAs. Irs 1040 ez form See Publication 560 for more information about SEPs. Irs 1040 ez form 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. Irs 1040 ez form The requirements for individual retirement accounts apply to these traditional IRAs. Irs 1040 ez form 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. Irs 1040 ez form 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. Irs 1040 ez form The disclosure statement must explain certain items in plain language. Irs 1040 ez form 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. Irs 1040 ez form This explanation must appear at the beginning of the disclosure statement. Irs 1040 ez form If you revoke your IRA within the revocation period, the sponsor must return to you the entire amount you paid. Irs 1040 ez form 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. Irs 1040 ez form These requirements apply to all sponsors. Irs 1040 ez form How Much Can Be Contributed? There are limits and other rules that affect the amount that can be contributed to a traditional IRA. Irs 1040 ez form These limits and rules are explained below. Irs 1040 ez form Community property laws. Irs 1040 ez form   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. Irs 1040 ez form This is the rule even in states with community property laws. Irs 1040 ez form Brokers' commissions. Irs 1040 ez form   Brokers' commissions paid in connection with your traditional IRA are subject to the contribution limit. Irs 1040 ez form For information about whether you can deduct brokers' commissions, see Brokers' commissions , later, under How Much Can You Deduct. Irs 1040 ez form Trustees' fees. Irs 1040 ez form   Trustees' administrative fees are not subject to the contribution limit. Irs 1040 ez form For information about whether you can deduct trustees' fees, see Trustees' fees , later, under How Much Can You Deduct. Irs 1040 ez form Qualified reservist repayments. Irs 1040 ez form   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. Irs 1040 ez form 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. Irs 1040 ez form 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. Irs 1040 ez form Limit. Irs 1040 ez form   Your qualified reservist repayments cannot be more than your qualified reservist distributions, explained under Early Distributions , later. Irs 1040 ez form When repayment contributions can be made. Irs 1040 ez form   You cannot make these repayment contributions later than the date that is 2 years after your active duty period ends. Irs 1040 ez form No deduction. Irs 1040 ez form   You cannot deduct qualified reservist repayments. Irs 1040 ez form Reserve component. Irs 1040 ez form   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. Irs 1040 ez form Figuring your IRA deduction. Irs 1040 ez form   The repayment of qualified reservist distributions does not affect the amount you can deduct as an IRA contribution. Irs 1040 ez form Reporting the repayment. Irs 1040 ez form   If you repay a qualified reservist distribution, include the amount of the repayment with nondeductible contributions on line 1 of Form 8606. Irs 1040 ez form Example. Irs 1040 ez form   In 2013, your IRA contribution limit is $5,500. Irs 1040 ez form However, because of your filing status and AGI, the limit on the amount you can deduct is $3,500. Irs 1040 ez form You can make a nondeductible contribution of $2,000 ($5,500 - $3,500). Irs 1040 ez form In an earlier year you received a $3,000 qualified reservist distribution, which you would like to repay this year. Irs 1040 ez form   For 2013, you can contribute a total of $8,500 to your IRA. Irs 1040 ez form 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. Irs 1040 ez form You contribute the maximum allowable for the year. Irs 1040 ez form 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. Irs 1040 ez form The qualified reservist repayment is not deductible. Irs 1040 ez form Contributions on your behalf to a traditional IRA reduce your limit for contributions to a Roth IRA. Irs 1040 ez form See chapter 2 for information about Roth IRAs. Irs 1040 ez form 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. Irs 1040 ez form Note. Irs 1040 ez form 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). Irs 1040 ez form 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. Irs 1040 ez form (See Nondeductible Contributions , later. Irs 1040 ez form ) Qualified reservist repayments do not affect this limit. Irs 1040 ez form Examples. Irs 1040 ez form George, who is 34 years old and single, earns $24,000 in 2013. Irs 1040 ez form His IRA contributions for 2013 are limited to $5,500. Irs 1040 ez form Danny, an unmarried college student working part time, earns $3,500 in 2013. Irs 1040 ez form His IRA contributions for 2013 are limited to $3,500, the amount of his compensation. Irs 1040 ez form More than one IRA. Irs 1040 ez form   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. Irs 1040 ez form Annuity or endowment contracts. Irs 1040 ez form   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. Irs 1040 ez form If more than this amount is contributed, the annuity or endowment contract is disqualified. Irs 1040 ez form 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. Irs 1040 ez form Your spouse's IRA contribution for the year to a traditional IRA. Irs 1040 ez form Any contributions for the year to a Roth IRA on behalf of your spouse. Irs 1040 ez form 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). Irs 1040 ez form Note. Irs 1040 ez form 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). Irs 1040 ez form Example. Irs 1040 ez form Kristin, a full-time student with no taxable compensation, marries Carl during the year. Irs 1040 ez form Neither of them was age 50 by the end of 2013. Irs 1040 ez form For the year, Carl has taxable compensation of $30,000. Irs 1040 ez form He plans to contribute (and deduct) $5,500 to a traditional IRA. Irs 1040 ez form If he and Kristin file a joint return, each can contribute $5,500 to a traditional IRA. Irs 1040 ez form 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. Irs 1040 ez form 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). Irs 1040 ez form 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. Irs 1040 ez form 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. Irs 1040 ez form See How Much Can You Deduct , later. Irs 1040 ez form Example. Irs 1040 ez form Tom and Darcy are married and both are 53. Irs 1040 ez form They both work and each has a traditional IRA. Irs 1040 ez form Tom earned $3,800 and Darcy earned $48,000 in 2013. Irs 1040 ez form 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. Irs 1040 ez form They can contribute up to $6,500 to Darcy's IRA. Irs 1040 ez form If they file separate returns, the amount that can be contributed to Tom's IRA is limited by his earned income, $3,800. Irs 1040 ez form 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. Irs 1040 ez form Example. Irs 1040 ez form Rafael, who is 40, earns $30,000 in 2013. Irs 1040 ez form Although he can contribute up to $5,500 for 2013, he contributes only $3,000. Irs 1040 ez form After April 15, 2014, Rafael cannot make up the difference between his actual contributions for 2013 ($3,000) and his 2013 limit ($5,500). Irs 1040 ez form He cannot contribute $2,500 more than the limit for any later year. Irs 1040 ez form 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. Irs 1040 ez form However, a penalty or additional tax may apply. Irs 1040 ez form See Excess Contributions , later, under What Acts Result in Penalties or Additional Taxes. Irs 1040 ez form 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). Irs 1040 ez form Contributions must be in the form of money (cash, check, or money order). Irs 1040 ez form Property cannot be contributed. Irs 1040 ez form Although property cannot be contributed, your IRA may invest in certain property. Irs 1040 ez form For example, your IRA may purchase shares of stock. Irs 1040 ez form For other restrictions on the use of funds in your IRA, see Prohibited Transactions , later in this chapter. Irs 1040 ez form You may be able to transfer or roll over certain property from one retirement plan to another. Irs 1040 ez form See the discussion of rollovers and other transfers later in this chapter under Can You Move Retirement Plan Assets . Irs 1040 ez form 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. Irs 1040 ez form For details, see the instructions for your income tax return or Form 8888, Allocation of Refund (Including Savings Bond Purchases). Irs 1040 ez form Contributions can be made to your traditional IRA for each year that you receive compensation and have not reached age 70½. Irs 1040 ez form 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. Irs 1040 ez form See Who Can Open a Traditional IRA , earlier. Irs 1040 ez form 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. Irs 1040 ez form Contributions can resume for any years that you qualify. Irs 1040 ez form Contributions must be made by due date. Irs 1040 ez form   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. Irs 1040 ez form 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. Irs 1040 ez form Age 70½ rule. Irs 1040 ez form   Contributions cannot be made to your traditional IRA for the year in which you reach age 70½ or for any later year. Irs 1040 ez form   You attain age 70½ on the date that is 6 calendar months after the 70th anniversary of your birth. Irs 1040 ez form If you were born on or before June 30, 1943, you cannot contribute for 2013 or any later year. Irs 1040 ez form Designating year for which contribution is made. Irs 1040 ez form   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. Irs 1040 ez form 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). Irs 1040 ez form Filing before a contribution is made. Irs 1040 ez form    You can file your return claiming a traditional IRA contribution before the contribution is actually made. Irs 1040 ez form Generally, the contribution must be made by the due date of your return, not including extensions. Irs 1040 ez form Contributions not required. Irs 1040 ez form   You do not have to contribute to your traditional IRA for every tax year, even if you can. Irs 1040 ez form 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 . Irs 1040 ez form However, if you or your spouse was covered by an employer retirement plan, you may not be able to deduct this amount. Irs 1040 ez form See Limit if Covered by Employer Plan , later. Irs 1040 ez form You may be able to claim a credit for contributions to your traditional IRA. Irs 1040 ez form For more information, see chapter 4. Irs 1040 ez form Trustees' fees. Irs 1040 ez form   Trustees' administrative fees that are billed separately and paid in connection with your traditional IRA are not deductible as IRA contributions. Irs 1040 ez form However, they may be deductible as a miscellaneous itemized deduction on Schedule A (Form 1040). Irs 1040 ez form For information about miscellaneous itemized deductions, see Publication 529, Miscellaneous Deductions. Irs 1040 ez form Brokers' commissions. Irs 1040 ez form   These commissions are part of your IRA contribution and, as such, are deductible subject to the limits. Irs 1040 ez form Full deduction. Irs 1040 ez form   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. Irs 1040 ez form   This limit is reduced by any contributions made to a 501(c)(18) plan on your behalf. Irs 1040 ez form Kay Bailey Hutchison Spousal IRA. Irs 1040 ez form   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. Irs 1040 ez form The IRA deduction for the year of the spouse with the greater compensation. Irs 1040 ez form Any designated nondeductible contribution for the year made on behalf of the spouse with the greater compensation. Irs 1040 ez form Any contributions for the year to a Roth IRA on behalf of the spouse with the greater compensation. Irs 1040 ez form   This limit is reduced by any contributions to a section 501(c)(18) plan on behalf of the spouse with the lesser compensation. Irs 1040 ez form Note. Irs 1040 ez form 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. Irs 1040 ez form After a divorce or legal separation, you can deduct only the contributions to your own IRA. Irs 1040 ez form Your deductions are subject to the rules for single individuals. Irs 1040 ez form Covered by an employer retirement plan. Irs 1040 ez form   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. Irs 1040 ez form This is discussed later under Limit if Covered by Employer Plan . Irs 1040 ez form Limits on the amount you can deduct do not affect the amount that can be contributed. Irs 1040 ez form 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. Irs 1040 ez form The “Retirement Plan” box should be checked if you were covered. Irs 1040 ez form Reservists and volunteer firefighters should also see Situations in Which You Are Not Covered , later. Irs 1040 ez form If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer. Irs 1040 ez form Federal judges. Irs 1040 ez form   For purposes of the IRA deduction, federal judges are covered by an employer plan. Irs 1040 ez form For Which Year(s) Are You Covered? Special rules apply to determine the tax years for which you are covered by an employer plan. Irs 1040 ez form These rules differ depending on whether the plan is a defined contribution plan or a defined benefit plan. Irs 1040 ez form Tax year. Irs 1040 ez form   Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. Irs 1040 ez form For almost all people, the tax year is the calendar year. Irs 1040 ez form Defined contribution plan. Irs 1040 ez form   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. Irs 1040 ez form However, also see Situations in Which You Are Not Covered , later. Irs 1040 ez form   A defined contribution plan is a plan that provides for a separate account for each person covered by the plan. Irs 1040 ez form In a defined contribution plan, the amount to be contributed to each participant's account is spelled out in the plan. Irs 1040 ez form 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. Irs 1040 ez form Types of defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans. Irs 1040 ez form Example. Irs 1040 ez form Company A has a money purchase pension plan. Irs 1040 ez form Its plan year is from July 1 to June 30. Irs 1040 ez form The plan provides that contributions must be allocated as of June 30. Irs 1040 ez form Bob, an employee, leaves Company A on December 31, 2012. Irs 1040 ez form The contribution for the plan year ending on June 30, 2013, is made February 15, 2014. Irs 1040 ez form Because an amount is contributed to Bob's account for the plan year, Bob is covered by the plan for his 2013 tax year. Irs 1040 ez form   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. Irs 1040 ez form 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. Irs 1040 ez form 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. Irs 1040 ez form Example. Irs 1040 ez form Mickey was covered by a profit-sharing plan and left the company on December 31, 2012. Irs 1040 ez form The plan year runs from July 1 to June 30. Irs 1040 ez form 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. Irs 1040 ez form 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. Irs 1040 ez form 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. Irs 1040 ez form 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. Irs 1040 ez form On December 31, 2013, the company decided to contribute to the plan for the plan year ending June 30, 2013. Irs 1040 ez form That contribution was made on February 15, 2014. Irs 1040 ez form Mickey is an active participant in the plan for his 2014 tax year but not for his 2013 tax year. Irs 1040 ez form No vested interest. Irs 1040 ez form   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. Irs 1040 ez form Defined benefit plan. Irs 1040 ez form   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. Irs 1040 ez form 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. Irs 1040 ez form   A defined benefit plan is any plan that is not a defined contribution plan. Irs 1040 ez form In a defined benefit plan, the level of benefits to be provided to each participant is spelled out in the plan. Irs 1040 ez form The plan administrator figures the amount needed to provide those benefits and those amounts are contributed to the plan. Irs 1040 ez form Defined benefit plans include pension plans and annuity plans. Irs 1040 ez form Example. Irs 1040 ez form 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. Irs 1040 ez form Nick leaves Company B on December 31, 2012. Irs 1040 ez form 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. Irs 1040 ez form No vested interest. Irs 1040 ez form   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. Irs 1040 ez form 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. Irs 1040 ez form Social security or railroad retirement. Irs 1040 ez form   Coverage under social security or railroad retirement is not coverage under an employer retirement plan. Irs 1040 ez form Benefits from previous employer's plan. Irs 1040 ez form   If you receive retirement benefits from a previous employer's plan, you are not covered by that plan. Irs 1040 ez form Reservists. Irs 1040 ez form   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. Irs 1040 ez form You are not covered by the plan if both of the following conditions are met. Irs 1040 ez form 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. Irs 1040 ez form You did not serve more than 90 days on active duty during the year (not counting duty for training). Irs 1040 ez form Volunteer firefighters. Irs 1040 ez form   If the only reason you participate in a plan is because you are a volunteer firefighter, you may not be covered by the plan. Irs 1040 ez form You are not covered by the plan if both of the following conditions are met. Irs 1040 ez form 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. Irs 1040 ez form Your accrued retirement benefits at the beginning of the year will not provide more than $1,800 per year at retirement. Irs 1040 ez form 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. Irs 1040 ez form Your deduction is also affected by how much income you had and by your filing status. Irs 1040 ez form Your deduction may also be affected by social security benefits you received. Irs 1040 ez form Reduced or no deduction. Irs 1040 ez form   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. Irs 1040 ez form   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. Irs 1040 ez form These amounts vary depending on your filing status. Irs 1040 ez form   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 . Irs 1040 ez form 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. Irs 1040 ez form 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. Irs 1040 ez form You received social security benefits. Irs 1040 ez form You received taxable compensation. Irs 1040 ez form Contributions were made to your traditional IRA. Irs 1040 ez form You or your spouse was covered by an employer retirement plan. Irs 1040 ez form 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. Irs 1040 ez form Appendix B includes an example with filled-in worksheets to assist you. Irs 1040 ez form Table 1-2. Irs 1040 ez form 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. Irs 1040 ez form IF your filing status is . Irs 1040 ez form . Irs 1040 ez form . Irs 1040 ez form AND your modified adjusted gross income (modified AGI) is . Irs 1040 ez form . Irs 1040 ez form . Irs 1040 ez form THEN you can take . Irs 1040 ez form . Irs 1040 ez form . Irs 1040 ez form single or head of household $59,000 or less a full deduction. Irs 1040 ez form more than $59,000 but less than $69,000 a partial deduction. Irs 1040 ez form $69,000 or more no deduction. Irs 1040 ez form married filing jointly or  qualifying widow(er) $95,000 or less a full deduction. Irs 1040 ez form more than $95,000 but less than $115,000 a partial deduction. Irs 1040 ez form $115,000 or more no deduction. Irs 1040 ez form married filing separately2 less than $10,000 a partial deduction. Irs 1040 ez form $10,000 or more no deduction. Irs 1040 ez form 1 Modified AGI (adjusted gross income). Irs 1040 ez form See Modified adjusted gross income (AGI) , later. Irs 1040 ez form  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). Irs 1040 ez form Table 1-3. Irs 1040 ez form 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. Irs 1040 ez form IF your filing status is . Irs 1040 ez form . Irs 1040 ez form . Irs 1040 ez form AND your modified adjusted gross income (modified AGI) is . Irs 1040 ez form . Irs 1040 ez form . Irs 1040 ez form THEN you can take . Irs 1040 ez form . Irs 1040 ez form . Irs 1040 ez form single, head of household, or qualifying widow(er) any amount a full deduction. Irs 1040 ez form married filing jointly or separately with a spouse who is not covered by a plan at work any amount a full deduction. Irs 1040 ez form married filing jointly with a spouse who is covered by a plan at work $178,000 or less a full deduction. Irs 1040 ez form more than $178,000 but less than $188,000 a partial deduction. Irs 1040 ez form $188,000 or more no deduction. Irs 1040 ez form married filing separately with a spouse who is covered by a plan at work2 less than $10,000 a partial deduction. Irs 1040 ez form $10,000 or more no deduction. Irs 1040 ez form 1 Modified AGI (adjusted gross income). Irs 1040 ez form See Modified adjusted gross income (AGI) , later. Irs 1040 ez form  2 You are entitled to the full deduction if you did not live with your spouse at any time during the year. Irs 1040 ez form 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. Irs 1040 ez form If your AGI is $191,000 or more, you cannot take a deduction for a contribution to a traditional IRA. Irs 1040 ez form 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. Irs 1040 ez form Covered by a retirement plan. Irs 1040 ez form   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. Irs 1040 ez form 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. Irs 1040 ez form If your spouse is covered. Irs 1040 ez form   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. Irs 1040 ez form Filing status. Irs 1040 ez form   Your filing status depends primarily on your marital status. Irs 1040 ez form 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. Irs 1040 ez form If you need more information on filing status, see Publication 501, Exemptions, Standard Deduction, and Filing Information. Irs 1040 ez form Lived apart from spouse. Irs 1040 ez form   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. Irs 1040 ez form Modified adjusted gross income (AGI). Irs 1040 ez form   You can use Worksheet 1-1 to figure your modified AGI. Irs 1040 ez form 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. Irs 1040 ez form    Do not assume that your modified AGI is the same as your compensation. Irs 1040 ez form Your modified AGI may include income in addition to your compensation (discussed earlier) such as interest, dividends, and income from IRA distributions. Irs 1040 ez form Form 1040. Irs 1040 ez form   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. Irs 1040 ez form IRA deduction. Irs 1040 ez form Student loan interest deduction. Irs 1040 ez form Tuition and fees deduction. Irs 1040 ez form Domestic production activities deduction. Irs 1040 ez form Foreign earned income exclusion. Irs 1040 ez form Foreign housing exclusion or deduction. Irs 1040 ez form Exclusion of qualified savings bond interest shown on Form 8815. Irs 1040 ez form Exclusion of employer-provided adoption benefits shown on Form 8839. Irs 1040 ez form This is your modified AGI. Irs 1040 ez form Form 1040A. Irs 1040 ez form   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. Irs 1040 ez form IRA deduction. Irs 1040 ez form Student loan interest deduction. Irs 1040 ez form Tuition and fees deduction. Irs 1040 ez form Exclusion of qualified savings bond interest shown on Form 8815. Irs 1040 ez form This is your modified AGI. Irs 1040 ez form Form 1040NR. Irs 1040 ez form   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. Irs 1040 ez form IRA deduction. Irs 1040 ez form Student loan interest deduction. Irs 1040 ez form Domestic production activities deduction. Irs 1040 ez form Exclusion of qualified savings bond interest shown on Form 8815. Irs 1040 ez form Exclusion of employer-provided adoption benefits shown on Form 8839. Irs 1040 ez form This is your modified AGI. Irs 1040 ez form Income from IRA distributions. Irs 1040 ez form   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. Irs 1040 ez form Both contributions for 2013 and distributions in 2013. Irs 1040 ez form   If all three of the following apply, any IRA distributions you received in 2013 may be partly tax free and partly taxable. Irs 1040 ez form 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. Irs 1040 ez form (See Nondeductible Contributions and Worksheet 1-2, later. Irs 1040 ez form ) If this is your situation, you must figure the taxable part of the traditional IRA distribution before you can figure your modified AGI. Irs 1040 ez form To do this, you can use Worksheet 1-5, later. Irs 1040 ez form   If at least one of the above does not apply, figure your modified AGI using Worksheet 1-1, later. Irs 1040 ez form 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. Irs 1040 ez form Figuring Your Reduced IRA Deduction for 2013. Irs 1040 ez form The Instructions for Form 1040, Form 1040A, and Form 1040NR include similar worksheets that you can use instead of the worksheet in this publication. Irs 1040 ez form If you or your spouse is covered by an employer retirement plan, and you received any social security benefits, see Social Security Recipients , earlier. Irs 1040 ez form Note. Irs 1040 ez form If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Irs 1040 ez form Worksheet 1-1. Irs 1040 ez form Figuring Your Modified AGI Use this worksheet to figure your modified AGI for traditional IRA purposes. Irs 1040 ez form 1. Irs 1040 ez form 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. Irs 1040 ez form   2. Irs 1040 ez form Enter any student loan interest deduction from Form 1040, line 33; Form 1040A, line 18; or Form 1040NR, line 33 2. Irs 1040 ez form   3. Irs 1040 ez form Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 3. Irs 1040 ez form   4. Irs 1040 ez form Enter any domestic production activities deduction from Form 1040, line 35, or Form 1040NR, line 34 4. Irs 1040 ez form   5. Irs 1040 ez form Enter any foreign earned income exclusion and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 5. Irs 1040 ez form   6. Irs 1040 ez form Enter any foreign housing deduction from Form 2555, line 50 6. Irs 1040 ez form   7. Irs 1040 ez form Enter any excludable savings bond interest from Form 8815, line 14 7. Irs 1040 ez form   8. Irs 1040 ez form Enter any excluded employer-provided adoption benefits from Form 8839, line 28 8. Irs 1040 ez form   9. Irs 1040 ez form Add lines 1 through 8. Irs 1040 ez form This is your Modified AGI for traditional IRA purposes 9. Irs 1040 ez form   Reporting Deductible Contributions If you file Form 1040, enter your IRA deduction on line 32 of that form. Irs 1040 ez form If you file Form 1040A, enter your IRA deduction on line 17 of that form. Irs 1040 ez form If you file Form 1040NR, enter your IRA deduction on line 32 of that form. Irs 1040 ez form You cannot deduct IRA contributions on Form 1040EZ or Form 1040NR-EZ. Irs 1040 ez form Self-employed. Irs 1040 ez form   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. Irs 1040 ez form If you file Form 1040NR, enter your deduction on line 28 of that form. Irs 1040 ez form 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. Irs 1040 ez form The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. Irs 1040 ez form Example. Irs 1040 ez form Tony is 29 years old and single. Irs 1040 ez form In 2013, he was covered by a retirement plan at work. Irs 1040 ez form His salary is $62,000. Irs 1040 ez form His modified AGI is $70,000. Irs 1040 ez form Tony makes a $5,500 IRA contribution for 2013. Irs 1040 ez form Because he was covered by a retirement plan and his modified AGI is above $69,000, he cannot deduct his $5,500 IRA contribution. Irs 1040 ez form He must designate this contribution as a nondeductible contribution by reporting it on Form 8606. Irs 1040 ez form Repayment of reservist distributions. Irs 1040 ez form   Nondeductible contributions may include repayments of qualified reservist distributions. Irs 1040 ez form For more information, see Qualified reservist repayments under How Much Can Be Contributed, earlier. Irs 1040 ez form Form 8606. Irs 1040 ez form   To designate contributions as nondeductible, you must file Form 8606. Irs 1040 ez form (See the filled-in Forms 8606 in this chapter. Irs 1040 ez form )   You do not have to designate a contribution as nondeductible until you file your tax return. Irs 1040 ez form When you file, you can even designate otherwise deductible contributions as nondeductible contributions. Irs 1040 ez form   You must file Form 8606 to report nondeductible contributions even if you do not have to file a tax return for the year. Irs 1040 ez form    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. Irs 1040 ez form In those situations, a Form 8606 is completed for the year you take a distribution from that IRA. Irs 1040 ez form See Form 8606 under Distributions Fully or Partly Taxable, later. Irs 1040 ez form Failure to report nondeductible contributions. Irs 1040 ez form   If you do not report nondeductible contributions, all of the contributions to your traditional IRA will be treated like deductible contributions when withdrawn. Irs 1040 ez form All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. Irs 1040 ez form Penalty for overstatement. Irs 1040 ez form   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. Irs 1040 ez form Penalty for failure to file Form 8606. Irs 1040 ez form   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. Irs 1040 ez form Tax on earnings on nondeductible contributions. Irs 1040 ez form   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. Irs 1040 ez form Cost basis. Irs 1040 ez form   You will have a cost basis in your traditional IRA if you made any nondeductible contributions. Irs 1040 ez form Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions. Irs 1040 ez form    Commonly, distributions from your traditional IRAs will include both taxable and nontaxable (cost basis) amounts. Irs 1040 ez form See Are Distributions Taxable, later, for more information. Irs 1040 ez form Recordkeeping. Irs 1040 ez form There is a recordkeeping worksheet, Appendix A. Irs 1040 ez form Summary Record of Traditional IRA(s) for 2013 , that you can use to keep a record of deductible and nondeductible IRA contributions. Irs 1040 ez form 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. Irs 1040 ez form Example 1. Irs 1040 ez form For 2013, Tom and Betty file a joint return on Form 1040. Irs 1040 ez form They are both 39 years old. Irs 1040 ez form They are both employed and Tom is covered by his employer's retirement plan. Irs 1040 ez form Tom's salary is $59,000 and Betty's is $32,555. Irs 1040 ez form They each have a traditional IRA and their combined modified AGI, which includes $5,000 interest and dividend income, is $96,555. Irs 1040 ez form 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 . Irs 1040 ez form For 2013, Tom contributed $5,500 to his IRA and Betty contributed $5,500 to hers. Irs 1040 ez form Even though they file a joint return, they must use separate worksheets to figure the IRA deduction for each of them. Irs 1040 ez form Tom can take a deduction of only $5,080. Irs 1040 ez form He can choose to treat the $5,080 as either deductible or nondeductible contributions. Irs 1040 ez form He can either leave the $420 ($5,500 − $5,080) of nondeductible contributions in his IRA or withdraw them by April 15, 2014. Irs 1040 ez form He decides to treat the $5,080 as deductible contributions and leave the $420 of nondeductible contributions in his IRA. Irs 1040 ez form Using Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, Tom figures his deductible and nondeductible amounts as shown on Worksheet 1-2. Irs 1040 ez form Figuring Your Reduced IRA Deduction for 2013—Example 1 Illustrated. Irs 1040 ez form Betty figures her IRA deduction as follows. Irs 1040 ez form Betty can treat all or part of her contributions as either deductible or nondeductible. Irs 1040 ez form 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 . Irs 1040 ez form 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. Irs 1040 ez form Betty decides to treat her $5,500 IRA contributions as deductible. Irs 1040 ez form The IRA deductions of $5,080 and $5,500 on the joint return for Tom and Betty total $10,580. Irs 1040 ez form Example 2. Irs 1040 ez form For 2013, Ed and Sue file a joint return on Form 1040. Irs 1040 ez form They are both 39 years old. Irs 1040 ez form Ed is covered by his employer's retirement plan. Irs 1040 ez form Ed's salary is $45,000. Irs 1040 ez form Sue had no compensation for the year and did not contribute to an IRA. Irs 1040 ez form Sue is not covered by an employer plan. Irs 1040 ez form Ed contributed $5,500 to his traditional IRA and $5,500 to a traditional IRA for Sue (a Kay Bailey Hutchison Spousal IRA). Irs 1040 ez form 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. Irs 1040 ez form Because the combined modified AGI is $115,000 or more, Ed cannot deduct any of the contribution to his traditional IRA. Irs 1040 ez form He can either leave the $5,500 of nondeductible contributions in his IRA or withdraw them by April 15, 2014. Irs 1040 ez form Sue figures her IRA deduction as shown on Worksheet 1-2. Irs 1040 ez form Figuring Your Reduced IRA Deduction for 2013—Example 2 Illustrated. Irs 1040 ez form Worksheet 1-2. Irs 1040 ez form 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. Irs 1040 ez form ) Note. Irs 1040 ez form If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Irs 1040 ez form IF you . Irs 1040 ez form . Irs 1040 ez form . Irs 1040 ez form AND your  filing status is . Irs 1040 ez form . Irs 1040 ez form . Irs 1040 ez form AND your modified AGI is over . Irs 1040 ez form . Irs 1040 ez form . Irs 1040 ez form THEN enter on  line 1 below . Irs 1040 ez form . Irs 1040 ez form . Irs 1040 ez form       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. Irs 1040 ez form Enter applicable amount from table above 1. Irs 1040 ez form   2. Irs 1040 ez form Enter your modified AGI (that of both spouses, if married filing jointly) 2. Irs 1040 ez form     Note. Irs 1040 ez form If line 2 is equal to or more than the amount on line 1, stop here. Irs 1040 ez form  Your IRA contributions are not deductible. Irs 1040 ez form See Nondeductible Contributions , earlier. Irs 1040 ez form     3. Irs 1040 ez form Subtract line 2 from line 1. Irs 1040 ez form 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. Irs 1040 ez form 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. Irs 1040 ez form   4. Irs 1040 ez form Multiply line 3 by the percentage below that applies to you. Irs 1040 ez form If the result is not a multiple of $10, round it to the next highest multiple of $10. Irs 1040 ez form (For example, $611. Irs 1040 ez form 40 is rounded to $620. Irs 1040 ez form ) However, if the result is less than $200, enter $200. Irs 1040 ez form         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Irs 1040 ez form 5% (. Irs 1040 ez form 275) (by 32. Irs 1040 ez form 5% (. Irs 1040 ez form 325) if you are age 50 or older). Irs 1040 ez form All others, multiply line 3 by 55% (. Irs 1040 ez form 55) (by 65% (. Irs 1040 ez form 65) if you are age 50 or older). Irs 1040 ez form 4. Irs 1040 ez form   5. Irs 1040 ez form 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). Irs 1040 ez form 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. Irs 1040 ez form If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Irs 1040 ez form   6. Irs 1040 ez form 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). Irs 1040 ez form If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Irs 1040 ez form 6. Irs 1040 ez form   7. Irs 1040 ez form IRA deduction. Irs 1040 ez form Compare lines 4, 5, and 6. Irs 1040 ez form 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. Irs 1040 ez form If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Irs 1040 ez form   8. Irs 1040 ez form Nondeductible contribution. Irs 1040 ez form Subtract line 7 from line 5 or 6, whichever is smaller. Irs 1040 ez form  Enter the result here and on line 1 of your Form 8606 8. Irs 1040 ez form   Worksheet 1-2. Irs 1040 ez form 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. Irs 1040 ez form ) Note. Irs 1040 ez form If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Irs 1040 ez form IF you . Irs 1040 ez form . Irs 1040 ez form . Irs 1040 ez form AND your  filing status is . Irs 1040 ez form . Irs 1040 ez form . Irs 1040 ez form AND your modified AGI is over . Irs 1040 ez form . Irs 1040 ez form . Irs 1040 ez form THEN enter on  line 1 below . Irs 1040 ez form . Irs 1040 ez form . Irs 1040 ez form       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. Irs 1040 ez form Enter applicable amount from table above 1. Irs 1040 ez form 115,000 2. Irs 1040 ez form Enter your modified AGI (that of both spouses, if married filing jointly) 2. Irs 1040 ez form 96,555   Note. Irs 1040 ez form If line 2 is equal to or more than the amount on line 1, stop here. Irs 1040 ez form  Your IRA contributions are not deductible. Irs 1040 ez form See Nondeductible Contributions , earlier. Irs 1040 ez form     3. Irs 1040 ez form Subtract line 2 from line 1. Irs 1040 ez form 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. Irs 1040 ez form 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. Irs 1040 ez form 18,445 4. Irs 1040 ez form Multiply line 3 by the percentage below that applies to you. Irs 1040 ez form If the result is not a multiple of $10, round it to the next highest multiple of $10. Irs 1040 ez form (For example, $611. Irs 1040 ez form 40 is rounded to $620. Irs 1040 ez form ) However, if the result is less than $200, enter $200. Irs 1040 ez form         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Irs 1040 ez form 5% (. Irs 1040 ez form 275) (by 32. Irs 1040 ez form 5% (. Irs 1040 ez form 325) if you are age 50 or older). Irs 1040 ez form All others, multiply line 3 by 55% (. Irs 1040 ez form 55) (by 65% (. Irs 1040 ez form 65) if you are age 50 or older). Irs 1040 ez form 4. Irs 1040 ez form 5,080 5. Irs 1040 ez form 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). Irs 1040 ez form 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. Irs 1040 ez form If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Irs 1040 ez form 59,000 6. Irs 1040 ez form 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). Irs 1040 ez form If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Irs 1040 ez form 6. Irs 1040 ez form 5,500 7. Irs 1040 ez form IRA deduction. Irs 1040 ez form Compare lines 4, 5, and 6. Irs 1040 ez form 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. Irs 1040 ez form If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Irs 1040 ez form 5,080 8. Irs 1040 ez form Nondeductible contribution. Irs 1040 ez form Subtract line 7 from line 5 or 6, whichever is smaller. Irs 1040 ez form  Enter the result here and on line 1 of your Form 8606 8. Irs 1040 ez form 420 Worksheet 1-2. Irs 1040 ez form 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. Irs 1040 ez form ) Note. Irs 1040 ez form If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Irs 1040 ez form IF you . Irs 1040 ez form . Irs 1040 ez form . Irs 1040 ez form AND your  filing status is . Irs 1040 ez form . Irs 1040 ez form . Irs 1040 ez form AND your modified AGI is over . Irs 1040 ez form . Irs 1040 ez form . Irs 1040 ez form THEN enter on  line 1 below . Irs 1040 ez form . Irs 1040 ez form . Irs 1040 ez form       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. Irs 1040 ez form Enter applicable amount from table above 1. Irs 1040 ez form 188,000 2. Irs 1040 ez form Enter your modified AGI (that of both spouses, if married filing jointly) 2. Irs 1040 ez form 180,555   Note. Irs 1040 ez form If line 2 is equal to or more than the amount on line 1, stop here. Irs 1040 ez form  Your IRA contributions are not deductible. Irs 1040 ez form See Nondeductible Contributions , earlier. Irs 1040 ez form     3. Irs 1040 ez form Subtract line 2 from line 1. Irs 1040 ez form 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. Irs 1040 ez form 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. Irs 1040 ez form 7,445 4. Irs 1040 ez form Multiply line 3 by the percentage below that applies to you. Irs 1040 ez form If the result is not a multiple of $10, round it to the next highest multiple of $10. Irs 1040 ez form (For example, $611. Irs 1040 ez form 40 is rounded to $620. Irs 1040 ez form ) However, if the result is less than $200, enter $200. Irs 1040 ez form         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Irs 1040 ez form 5% (. Irs 1040 ez form 275) (by 32. Irs 1040 ez form 5% (. Irs 1040 ez form 325) if you are age 50 or older). Irs 1040 ez form All others, multiply line 3 by 55% (. Irs 1040 ez form 55) (by 65% (. Irs 1040 ez form 65) if you are age 50 or older). Irs 1040 ez form 4. Irs 1040 ez form 4,100 5. Irs 1040 ez form 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). Irs 1040 ez form 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. Irs 1040 ez form If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Irs 1040 ez form 39,500 6. Irs 1040 ez form 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). Irs 1040 ez form If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Irs 1040 ez form 6. Irs 1040 ez form 5,500 7. Irs 1040 ez form IRA deduction. Irs 1040 ez form Compare lines 4, 5, and 6. Irs 1040 ez form 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. Irs 1040 ez form If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Irs 1040 ez form 4,100 8. Irs 1040 ez form Nondeductible contribution. Irs 1040 ez form Subtract line 7 from line 5 or 6, whichever is smaller. Irs 1040 ez form  Enter the result here and on line 1 of your Form 8606 8. Irs 1040 ez form 1,400 What if You Inherit an IRA? If you inherit a traditional IRA, you are called a beneficiary. Irs 1040 ez form A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. Irs 1040 ez form Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive. Irs 1040 ez form Inherited from spouse. Irs 1040 ez form   If you inherit a traditional IRA from your spouse, you generally have the following three choices. Irs 1040 ez form You can: Treat it as your own IRA by designating yourself as the account owner. Irs 1040 ez form 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