File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

Irs Form 1040 Ez Instructions

State Taxes2010 Tax Form 1040ez1040 Tax Forms For 2011Example Of Form 1040x Amended Tax ReturnAmend Turbotax ReturnEz 1040 Form 2011E File TaxesFile Taxes For 2012 FreeE File Tax ExtensionWww Irs Gov E PayHow To Do State Taxes For Free2011 1040 FormWww State Tax ReturnWww FreetaxusaFile Free State Tax1040ez Fill In FormFederal Tax Forms And State Forms1040ez Instruction BookletState Income Tax QuestionsInternational Student Tax ReturnHr Block Online Free Tax FilingHow To Fill Out 1040 EzAmend Income Tax2014 1040ez Form1040nr Online Filing2013 Tax ReturnFree Amended Tax ReturnTaxact 2011 Free Federal EditionTax Forms For 2011H&r OnlineH And R Block Free MilitaryFile Taxes For 20112012 Irs 1040ez10 40 Ez Form1040 Ez FormHow To Amend Federal TaxesMy Free TaxesIrs Tax Forms For 2010Form 1040nr SoftwareFile Taxes For 2010

Irs Form 1040 Ez Instructions

Irs form 1040 ez instructions Publication 1544 - Introductory Material Table of Contents What's New Introduction What's New Future developments. Irs form 1040 ez instructions  For the latest information about developments related to Publication 1544, such as legislation enacted after it was published, go to www. Irs form 1040 ez instructions irs. Irs form 1040 ez instructions gov/pub1544. Irs form 1040 ez instructions Amending a report. Irs form 1040 ez instructions  You can amend a prior report by checking box 1a at the top of Form 8300. Irs form 1040 ez instructions See Amending a report, later. Irs form 1040 ez instructions Introduction If, in a 12-month period, you receive more than $10,000 in cash from one buyer as a result of a transaction in your trade or business, you must report it to the Internal Revenue Service (IRS) and the Financial Crimes Enforcement Network (FinCEN) on Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business. Irs form 1040 ez instructions This publication explains why, when, and where to report these cash payments. Irs form 1040 ez instructions It also discusses the substantial penalties for not reporting them. Irs form 1040 ez instructions Some organizations do not have to file Form 8300, including financial institutions who must file FinCEN Form 104 (formerly Form 4789), Currency Transaction Report, and casinos who must file FinCEN Form 103 (formerly Form 8362), Currency Transaction Report by Casinos. Irs form 1040 ez instructions They are not discussed in this publication. Irs form 1040 ez instructions This publication explains key issues and terms related to Form 8300. Irs form 1040 ez instructions You should also read the instructions attached to the form. Irs form 1040 ez instructions They explain what to enter on each line. Irs form 1040 ez instructions Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Small Business Health Care Tax Credit for Small Employers

 

 

Small employer? Get the credit you deserve.

     If you are a small employer. . .

              with fewer than 25 full-time equivalent employees,
              pay an average wage of less than $50,000 a year, and
               pay at least half of employee health insurance premiums

 

                               . . .then there is a tax credit that may put money in your pocket.

 

 

What You Need to Know about the Small Business Health Care Tax Credit

How will the credit make a difference for you?                 

For tax years 2010 through 2013, the maximum credit is 35 percent of premiums paid for small business employers and 25 percent of premiums paid for small tax-exempt employers such as charities.

 

For tax years beginning in 2014 or later, there will be changes to the credit:

 

  • The maximum credit will increase to 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers. 
  • To be eligible for the credit, a small employer must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace.
  • The credit will be available to eligible employers for two consecutive taxable years.

 

Here’s what this means for you. If you pay $50,000 a year toward workers’ health care premiums — and if you qualify for a 15 percent credit, you save... $7,500. If you save $7,500 a year from tax year 2010 through 2013, that’s total savings of $30,000. If, in 2014, you qualify for a slightly larger credit, say 20 percent, your savings go from $7,500 a year to $10,000 a year.

 

Even if you are a small business employer who did not owe tax during the year, you can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments is more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit. That’s both a credit and a deduction for employee premium payments.

 

There is good news for small tax-exempt employers too. The credit is refundable, so even if you have no taxable income, you may be eligible to receive the credit as a refund so long as it does not exceed your income tax withholding and Medicare tax liability.

 

And finally, if you can benefit from the credit this year but forgot to claim it on your tax return, there’s still time to file an amended return.

 

Click here if you want more examples of how the credit applies in different circumstances.

Can you claim the credit?

Now that you know how the credit can make a difference for your business, let’s determine if you can claim it.

To be eligible, you must cover at least 50 percent of the cost of single (not family) health care coverage for each of your employees. You must also have fewer than 25 full-time equivalent employees (FTEs). Those employees must have average wages of less than $50,000 (as adjusted for inflation beginning in 2014) per year. Remember, you will have to purchase insurance through the SHOP Marketplace to be eligible for the credit for tax years 2014 and beyond.

Let us break it down for you even more.

You are probably wondering: what IS an FTE. Basically, two half-time workers count as one FTE. That means 20 half-time employees are equivalent to 10 FTEs, which makes the number of FTEs 10, not 20.

Now let’s talk about average annual wages. Say you pay total wages of $200,000 and have 10 FTEs. To figure average annual wages you divide $200,000 by 10 — the number of FTEs — and the result is your average annual wage. The average annual wage would be $20,000.

Also, the amount of the credit you receive works on a sliding scale. The smaller the business or charity, the bigger the credit. So if you have more than 10 FTEs or if the average wage is more than $25,000 (as adjusted for inflation beginning in 2014), the amount of the credit you receive will be less.

How do you claim the credit?

You must use Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the credit. For detailed information on filling out this form, see the Instructions for Form 8941.

 

If you are a small business, include the amount as part of the general business credit on your income tax return.

 

If you are a tax-exempt organization, include the amount on line 44f of the Form 990-T, Exempt Organization Business Income Tax Return. You must file the Form 990-T in order to claim the credit, even if you don't ordinarily do so.
 

Don’t forget... if you are a small business employer, you may be able to carry the credit back or forward. And if you are a tax-exempt employer, you may be eligible for a refundable credit.

 

          

Versión en Español

Información acerca del Crédito Tributario por Cuidados de Salud para Pequeñas Empresas

Questions and Answers

Got questions? We have answers.

Small Business Health Care Tax Credit Estimator

Use the estimator to find out whether you may be eligible and get an estimate of how much you might receive.

Forms and Step-by-Step Instructions

Form 8941, Credit for Small Employer Health Insurance Premiums and Instructions for Form 8941

Additional Guidance

Additional guidance on the credit is available in Notices 2010-44, 2010-82 and Notice 2014-6. Find guidance for the 2014 changes in REG-113792-13

News Releases

Affordable Care Act News Releases, Multimedia and Legal Guidance

Widgets

IRS small business health care tax credit Widgets available on Marketing Express.

Information Flyer

Flyer on the Small Business Health Care Tax Credit for small employers.

 

 

 

 

 

 

 

Page Last Reviewed or Updated: 07-Feb-2014

The Irs Form 1040 Ez Instructions

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