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Tax Amendments 2013 14

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Tax Amendments 2013 14

Tax amendments 2013 14 2. Tax amendments 2013 14   Simplified Employee Pensions (SEPs) Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Setting Up a SEPWhen not to use Form 5305-SEP. Tax amendments 2013 14 How Much Can I Contribute?Contribution Limits Deducting ContributionsDeduction Limit for Contributions for Participants Deduction Limit for Self-Employed Individuals Carryover of Excess SEP Contributions When To Deduct Contributions Where To Deduct Contributions Salary Reduction Simplified Employee Pensions (SARSEPs)SARSEP ADP test. Tax amendments 2013 14 Deferral percentage. Tax amendments 2013 14 Employee compensation. Tax amendments 2013 14 Compensation of self-employed individuals. Tax amendments 2013 14 Choice not to treat deferrals as compensation. Tax amendments 2013 14 Limit on Elective Deferrals Tax Treatment of Deferrals Distributions (Withdrawals) Additional TaxesEffects on employee. Tax amendments 2013 14 Reporting and Disclosure Requirements Topics - This chapter discusses: Setting up a SEP How much can I contribute Deducting contributions Salary reduction simplified employee pensions (SARSEPs) Distributions (withdrawals) Additional taxes Reporting and disclosure requirements Useful Items - You may want to see: Publication 590 Individual Retirement Arrangements (IRAs) 3998 Choosing A Retirement Solution for Your Small Business 4285 SEP Checklist 4286 SARSEP Checklist 4333 SEP Retirement Plans for Small Businesses 4336 SARSEP for Small Businesses 4407 SARSEP—Key Issues and Assistance Forms (and Instructions) W-2 Wage and Tax Statement 1040 U. Tax amendments 2013 14 S. Tax amendments 2013 14 Individual Income Tax Return 5305-SEP Simplified Employee Pension—Individual Retirement Accounts Contribution Agreement 5305A-SEP Salary Reduction Simplified Employee Pension—Individual Retirement Accounts Contribution Agreement 8880 Credit for Qualified Retirement Savings Contributions 8881 Credit for Small Employer Pension Plan Startup Costs A SEP is a written plan that allows you to make contributions toward your own retirement and your employees' retirement without getting involved in a more complex qualified plan. Tax amendments 2013 14 Under a SEP, you make contributions to a traditional individual retirement arrangement (called a SEP-IRA) set up by or for each eligible employee. Tax amendments 2013 14 A SEP-IRA is owned and controlled by the employee, and you make contributions to the financial institution where the SEP-IRA is maintained. Tax amendments 2013 14 SEP-IRAs are set up for, at a minimum, each eligible employee (defined below). Tax amendments 2013 14 A SEP-IRA may have to be set up for a leased employee (defined in chapter 1), but does not need to be set up for excludable employees (defined later). Tax amendments 2013 14 Eligible employee. Tax amendments 2013 14   An eligible employee is an individual who meets all the following requirements. Tax amendments 2013 14 Has reached age 21. Tax amendments 2013 14 Has worked for you in at least 3 of the last 5 years. Tax amendments 2013 14 Has received at least $550 in compensation from you in 2013. Tax amendments 2013 14 This amount remains the same in 2014. Tax amendments 2013 14    You can use less restrictive participation requirements than those listed, but not more restrictive ones. Tax amendments 2013 14 Excludable employees. Tax amendments 2013 14   The following employees can be excluded from coverage under a SEP. Tax amendments 2013 14 Employees covered by a union agreement and whose retirement benefits were bargained for in good faith by the employees' union and you. Tax amendments 2013 14 Nonresident alien employees who have received no U. Tax amendments 2013 14 S. Tax amendments 2013 14 source wages, salaries, or other personal services compensation from you. Tax amendments 2013 14 For more information about nonresident aliens, see Publication 519, U. Tax amendments 2013 14 S. Tax amendments 2013 14 Tax Guide for Aliens. Tax amendments 2013 14 Setting Up a SEP There are three basic steps in setting up a SEP. Tax amendments 2013 14 You must execute a formal written agreement to provide benefits to all eligible employees. Tax amendments 2013 14 You must give each eligible employee certain information about the SEP. Tax amendments 2013 14 A SEP-IRA must be set up by or for each eligible employee. Tax amendments 2013 14 Many financial institutions will help you set up a SEP. Tax amendments 2013 14 Formal written agreement. Tax amendments 2013 14   You must execute a formal written agreement to provide benefits to all eligible employees under a SEP. Tax amendments 2013 14 You can satisfy the written agreement requirement by adopting an IRS model SEP using Form 5305-SEP. Tax amendments 2013 14 However, see When not to use Form 5305-SEP, below. Tax amendments 2013 14   If you adopt an IRS model SEP using Form 5305-SEP, no prior IRS approval or determination letter is required. Tax amendments 2013 14 Keep the original form. Tax amendments 2013 14 Do not file it with the IRS. Tax amendments 2013 14 Also, using Form 5305-SEP will usually relieve you from filing annual retirement plan information returns with the IRS and the Department of Labor. Tax amendments 2013 14 See the Form 5305-SEP instructions for details. Tax amendments 2013 14 If you choose not to use Form 5305-SEP, you should seek professional advice in adopting a SEP. Tax amendments 2013 14 When not to use Form 5305-SEP. Tax amendments 2013 14   You cannot use Form 5305-SEP if any of the following apply. Tax amendments 2013 14 You currently maintain any other qualified retirement plan other than another SEP. Tax amendments 2013 14 You have any eligible employees for whom IRAs have not been set up. Tax amendments 2013 14 You use the services of leased employees, who are not your common-law employees (as described in chapter 1). Tax amendments 2013 14 You are a member of any of the following unless all eligible employees of all the members of these groups, trades, or businesses participate under the SEP. Tax amendments 2013 14 An affiliated service group described in section 414(m). Tax amendments 2013 14 A controlled group of corporations described in section 414(b). Tax amendments 2013 14 Trades or businesses under common control described in section 414(c). Tax amendments 2013 14 You do not pay the cost of the SEP contributions. Tax amendments 2013 14 Information you must give to employees. Tax amendments 2013 14   You must give each eligible employee a copy of Form 5305-SEP, its instructions, and the other information listed in the Form 5305-SEP instructions. Tax amendments 2013 14 An IRS model SEP is not considered adopted until you give each employee this information. Tax amendments 2013 14 Setting up the employee's SEP-IRA. Tax amendments 2013 14   A SEP-IRA must be set up by or for each eligible employee. Tax amendments 2013 14 SEP-IRAs can be set up with banks, insurance companies, or other qualified financial institutions. Tax amendments 2013 14 You send SEP contributions to the financial institution where the SEP-IRA is maintained. Tax amendments 2013 14 Deadline for setting up a SEP. Tax amendments 2013 14   You can set up a SEP for any year as late as the due date (including extensions) of your income tax return for that year. Tax amendments 2013 14 Credit for startup costs. Tax amendments 2013 14   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SEP that first became effective in 2013. Tax amendments 2013 14 For more information, see Credit for startup costs under Reminders, earlier. Tax amendments 2013 14 How Much Can I Contribute? The SEP rules permit you to contribute a limited amount of money each year to each employee's SEP-IRA. Tax amendments 2013 14 If you are self-employed, you can contribute to your own SEP-IRA. Tax amendments 2013 14 Contributions must be in the form of money (cash, check, or money order). Tax amendments 2013 14 You cannot contribute property. Tax amendments 2013 14 However, participants may be able to transfer or roll over certain property from one retirement plan to another. Tax amendments 2013 14 See Publication 590 for more information about rollovers. Tax amendments 2013 14 You do not have to make contributions every year. Tax amendments 2013 14 But if you make contributions, they must be based on a written allocation formula and must not discriminate in favor of highly compensated employees (defined in chapter 1). Tax amendments 2013 14 When you contribute, you must contribute to the SEP-IRAs of all participants who actually performed personal services during the year for which the contributions are made, including employees who die or terminate employment before the contributions are made. Tax amendments 2013 14 Contributions are deductible within limits, as discussed later, and generally are not taxable to the plan participants. Tax amendments 2013 14 A SEP-IRA cannot be a Roth IRA. Tax amendments 2013 14 Employer contributions to a SEP-IRA will not affect the amount an individual can contribute to a Roth or traditional IRA. Tax amendments 2013 14 Unlike regular contributions to a traditional IRA, contributions under a SEP can be made to participants over age 70½. Tax amendments 2013 14 If you are self-employed, you can also make contributions under the SEP for yourself even if you are over 70½. Tax amendments 2013 14 Participants age 70½ or over must take required minimum distributions. Tax amendments 2013 14 Time limit for making contributions. Tax amendments 2013 14   To deduct contributions for a year, you must make the contributions by the due date (including extensions) of your tax return for the year. Tax amendments 2013 14 Contribution Limits Contributions you make for 2013 to a common-law employee's SEP-IRA cannot exceed the lesser of 25% of the employee's compensation or $51,000. Tax amendments 2013 14 Compensation generally does not include your contributions to the SEP. Tax amendments 2013 14 The SEP plan document will specify how the employer contribution is determined and how it will be allocated to participants. Tax amendments 2013 14 Example. Tax amendments 2013 14 Your employee, Mary Plant, earned $21,000 for 2013. Tax amendments 2013 14 The maximum contribution you can make to her SEP-IRA is $5,250 (25% x $21,000). Tax amendments 2013 14 Contributions for yourself. Tax amendments 2013 14   The annual limits on your contributions to a common-law employee's SEP-IRA also apply to contributions you make to your own SEP-IRA. Tax amendments 2013 14 However, special rules apply when figuring your maximum deductible contribution. Tax amendments 2013 14 See Deduction Limit for Self-Employed Individuals , later. Tax amendments 2013 14 Annual compensation limit. Tax amendments 2013 14   You cannot consider the part of an employee's compensation over $255,000 when figuring your contribution limit for that employee. Tax amendments 2013 14 However, $51,000 is the maximum contribution for an eligible employee. Tax amendments 2013 14 These limits are $260,000 and $52,000, respectively, in 2014. Tax amendments 2013 14 Example. Tax amendments 2013 14 Your employee, Susan Green, earned $210,000 for 2013. Tax amendments 2013 14 Because of the maximum contribution limit for 2013, you can only contribute $51,000 to her SEP-IRA. Tax amendments 2013 14 More than one plan. Tax amendments 2013 14   If you contribute to a defined contribution plan (defined in chapter 4), annual additions to an account are limited to the lesser of $51,000 or 100% of the participant's compensation. Tax amendments 2013 14 When you figure this limit, you must add your contributions to all defined contribution plans maintained by you. Tax amendments 2013 14 Because a SEP is considered a defined contribution plan for this limit, your contributions to a SEP must be added to your contributions to other defined contribution plans you maintain. Tax amendments 2013 14 Tax treatment of excess contributions. Tax amendments 2013 14   Excess contributions are your contributions to an employee's SEP-IRA (or to your own SEP-IRA) for 2013 that exceed the lesser of the following amounts. Tax amendments 2013 14 25% of the employee's compensation (or, for you, 20% of your net earnings from self-employment). Tax amendments 2013 14 $51,000. Tax amendments 2013 14 Excess contributions are included in the employee's income for the year and are treated as contributions by the employee to his or her SEP-IRA. Tax amendments 2013 14 For more information on employee tax treatment of excess contributions, see chapter 1 in Publication 590. Tax amendments 2013 14 Reporting on Form W-2. Tax amendments 2013 14   Do not include SEP contributions on your employee's Form W-2 unless contributions were made under a salary reduction arrangement (discussed later). Tax amendments 2013 14 Deducting Contributions Generally, you can deduct the contributions you make each year to each employee's SEP-IRA. Tax amendments 2013 14 If you are self-employed, you can deduct the contributions you make each year to your own SEP-IRA. Tax amendments 2013 14 Deduction Limit for Contributions for Participants The most you can deduct for your contributions to you or your employee's SEP-IRA is the lesser of the following amounts. Tax amendments 2013 14 Your contributions (including any excess contributions carryover). Tax amendments 2013 14 25% of the compensation (limited to $255,000 per participant) paid to the participants during 2013 from the business that has the plan, not to exceed $51,000 per participant. Tax amendments 2013 14 In 2014, the amounts in (2) above are $260,000 and $52,000, respectively. Tax amendments 2013 14 Deduction Limit for Self-Employed Individuals If you contribute to your own SEP-IRA, you must make a special computation to figure your maximum deduction for these contributions. Tax amendments 2013 14 When figuring the deduction for contributions made to your own SEP-IRA, compensation is your net earnings from self-employment (defined in chapter 1), which takes into account both the following deductions. Tax amendments 2013 14 The deduction for the deductible part of your self-employment tax. Tax amendments 2013 14 The deduction for contributions to your own SEP-IRA. Tax amendments 2013 14 The deduction for contributions to your own SEP-IRA and your net earnings depend on each other. Tax amendments 2013 14 For this reason, you determine the deduction for contributions to your own SEP-IRA indirectly by reducing the contribution rate called for in your plan. Tax amendments 2013 14 To do this, use the Rate Table for Self-Employed or the Rate Worksheet for Self-Employed, whichever is appropriate for your plan's contribution rate, in chapter 5. Tax amendments 2013 14 Then figure your maximum deduction by using the Deduction Worksheet for Self-Employed in chapter 5. Tax amendments 2013 14 Carryover of Excess SEP Contributions If you made SEP contributions that are more than the deduction limit (nondeductible contributions), you can carry over and deduct the difference in later years. Tax amendments 2013 14 However, the carryover, when combined with the contribution for the later year, is subject to the deduction limit for that year. Tax amendments 2013 14 If you also contributed to a defined benefit plan or defined contribution plan, see Carryover of Excess Contributions under Employer Deduction in chapter 4 for the carryover limit. Tax amendments 2013 14 Excise tax. Tax amendments 2013 14   If you made nondeductible (excess) contributions to a SEP, you may be subject to a 10% excise tax. Tax amendments 2013 14 For information about the excise tax, see Excise Tax for Nondeductible (Excess) Contributions under Employer Deduction in chapter 4. Tax amendments 2013 14 When To Deduct Contributions When you can deduct contributions made for a year depends on the tax year on which the SEP is maintained. Tax amendments 2013 14 If the SEP is maintained on a calendar year basis, you deduct the yearly contributions on your tax return for the year within which the calendar year ends. Tax amendments 2013 14 If you file your tax return and maintain the SEP using a fiscal year or short tax year, you deduct contributions made for a year on your tax return for that year. Tax amendments 2013 14 Example. Tax amendments 2013 14 You are a fiscal year taxpayer whose tax year ends June 30. Tax amendments 2013 14 You maintain a SEP on a calendar year basis. Tax amendments 2013 14 You deduct SEP contributions made for calendar year 2013 on your tax return for your tax year ending June 30, 2014. Tax amendments 2013 14 Where To Deduct Contributions Deduct the contributions you make for your common-law employees on your tax return. Tax amendments 2013 14 For example, sole proprietors deduct them on Schedule C (Form 1040) or Schedule F (Form 1040), Profit or Loss From Farming; partnerships deduct them on Form 1065, U. Tax amendments 2013 14 S. Tax amendments 2013 14 Return of Partnership Income; and corporations deduct them on Form 1120, U. Tax amendments 2013 14 S. Tax amendments 2013 14 Corporation Income Tax Return, or Form 1120S, U. Tax amendments 2013 14 S. Tax amendments 2013 14 Income Tax Return for an S Corporation. Tax amendments 2013 14 Sole proprietors and partners deduct contributions for themselves on line 28 of Form 1040. Tax amendments 2013 14 (If you are a partner, contributions for yourself are shown on the Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Tax amendments 2013 14 , you receive from the partnership. Tax amendments 2013 14 ) Remember that sole proprietors and partners can't deduct as a business expense contributions made to a SEP for themselves, only those made for their common-law employees. Tax amendments 2013 14 Salary Reduction Simplified Employee Pensions (SARSEPs) A SARSEP is a SEP set up before 1997 that includes a salary reduction arrangement. Tax amendments 2013 14 (See the Caution, next. Tax amendments 2013 14 ) Under a SARSEP, your employees can choose to have you contribute part of their pay to their SEP-IRAs rather than receive it in cash. Tax amendments 2013 14 This contribution is called an “elective deferral” because employees choose (elect) to set aside the money, and they defer the tax on the money until it is distributed to them. Tax amendments 2013 14 You are not allowed to set up a SARSEP after 1996. Tax amendments 2013 14 However, participants (including employees hired after 1996) in a SARSEP set up before 1997 can continue to have you contribute part of their pay to the plan. Tax amendments 2013 14 If you are interested in setting up a retirement plan that includes a salary reduction arrangement, see chapter 3. Tax amendments 2013 14 Who can have a SARSEP?   A SARSEP set up before 1997 is available to you and your eligible employees only if all the following requirements are met. Tax amendments 2013 14 At least 50% of your employees eligible to participate choose to make elective deferrals. Tax amendments 2013 14 You have 25 or fewer employees who were eligible to participate in the SEP at any time during the preceding year. Tax amendments 2013 14 The elective deferrals of your highly compensated employees meet the SARSEP ADP test. Tax amendments 2013 14 SARSEP ADP test. Tax amendments 2013 14   Under the SARSEP ADP test, the amount deferred each year by each eligible highly compensated employee as a percentage of pay (the deferral percentage) cannot be more than 125% of the average deferral percentage (ADP) of all non-highly compensated employees eligible to participate. Tax amendments 2013 14 A highly compensated employee is defined in chapter 1. Tax amendments 2013 14 Deferral percentage. Tax amendments 2013 14   The deferral percentage for an employee for a year is figured as follows. Tax amendments 2013 14   The elective employer contributions (excluding certain catch-up contributions)  paid to the SEP for the employee for the year     The employee's compensation (limited to $255,000 in 2013)   The instructions for Form 5305A-SEP have a worksheet you can use to determine whether the elective deferrals of your highly compensated employees meet the SARSEP ADP test. Tax amendments 2013 14 Employee compensation. Tax amendments 2013 14   For figuring the deferral percentage, compensation is generally the amount you pay to the employee for the year. Tax amendments 2013 14 Compensation includes the elective deferral and other amounts deferred in certain employee benefit plans. Tax amendments 2013 14 See Compensation in chapter 1. Tax amendments 2013 14 Elective deferrals under the SARSEP are included in figuring your employees' deferral percentage even though they are not included in the income of your employees for income tax purposes. Tax amendments 2013 14 Compensation of self-employed individuals. Tax amendments 2013 14   If you are self-employed, compensation is your net earnings from self-employment as defined in chapter 1. Tax amendments 2013 14   Compensation does not include tax-free items (or deductions related to them) other than foreign earned income and housing cost amounts. Tax amendments 2013 14 Choice not to treat deferrals as compensation. Tax amendments 2013 14   You can choose not to treat elective deferrals (and other amounts deferred in certain employee benefit plans) for a year as compensation under your SARSEP. Tax amendments 2013 14 Limit on Elective Deferrals The most a participant can choose to defer for calendar year 2013 is the lesser of the following amounts. Tax amendments 2013 14 25% of the participant's compensation (limited to $255,000 of the participant's compensation). Tax amendments 2013 14 $17,500. Tax amendments 2013 14 The $17,500 limit applies to the total elective deferrals the employee makes for the year to a SEP and any of the following. Tax amendments 2013 14 Cash or deferred arrangement (section 401(k) plan). Tax amendments 2013 14 Salary reduction arrangement under a tax-sheltered annuity plan (section 403(b) plan). Tax amendments 2013 14 SIMPLE IRA plan. Tax amendments 2013 14 In 2014, the $255,000 limit increases to $260,000 and the $17,500 limit remains at $17,500. Tax amendments 2013 14 Catch-up contributions. Tax amendments 2013 14   A SARSEP can permit participants who are age 50 or over at the end of the calendar year to also make catch-up contributions. Tax amendments 2013 14 The catch-up contribution limit for 2013 is $5,500 and remains at $5,500 for 2014. Tax amendments 2013 14 Elective deferrals are not treated as catch-up contributions for 2013 until they exceed the elective deferral limit (the lesser of 25% of compensation or $17,500), the SARSEP ADP test limit discussed earlier, or the plan limit (if any). Tax amendments 2013 14 However, the catch-up contribution a participant can make for a year cannot exceed the lesser of the following amounts. Tax amendments 2013 14 The catch-up contribution limit. Tax amendments 2013 14 The excess of the participant's compensation over the elective deferrals that are not catch-up contributions. Tax amendments 2013 14   Catch-up contributions are not subject to the elective deferral limit (the lesser of 25% of compensation or $17,500 in 2013 and in 2014). Tax amendments 2013 14 Overall limit on SEP contributions. Tax amendments 2013 14   If you also make nonelective contributions to a SEP-IRA, the total of the nonelective and elective contributions to that SEP-IRA cannot exceed the lesser of 25% of the employee's compensation or $51,000 for 2013 ($52,000 for 2014). Tax amendments 2013 14 The same rule applies to contributions you make to your own SEP-IRA. Tax amendments 2013 14 See Contribution Limits , earlier. Tax amendments 2013 14 Figuring the elective deferral. Tax amendments 2013 14   For figuring the 25% limit on elective deferrals, compensation does not include SEP contributions, including elective deferrals or other amounts deferred in certain employee benefit plans. Tax amendments 2013 14 Tax Treatment of Deferrals Elective deferrals that are not more than the limits discussed earlier under Limit on Elective Deferrals are excluded from your employees' wages subject to federal income tax in the year of deferral. Tax amendments 2013 14 However, these deferrals are included in wages for social security, Medicare, and federal unemployment (FUTA) tax. Tax amendments 2013 14 Excess deferrals. Tax amendments 2013 14   For 2013, excess deferrals are the elective deferrals for the year that are more than the $17,500 limit discussed earlier. Tax amendments 2013 14 For a participant who is eligible to make catch-up contributions, excess deferrals are the elective deferrals that are more than $23,000. Tax amendments 2013 14 The treatment of excess deferrals made under a SARSEP is similar to the treatment of excess deferrals made under a qualified plan. Tax amendments 2013 14 See Treatment of Excess Deferrals under Elective Deferrals (401(k) Plans) in chapter 4. Tax amendments 2013 14 Excess SEP contributions. Tax amendments 2013 14   Excess SEP contributions are elective deferrals of highly compensated employees that are more than the amount permitted under the SARSEP ADP test. Tax amendments 2013 14 You must notify your highly compensated employees within 2½ months after the end of the plan year of their excess SEP contributions. Tax amendments 2013 14 If you do not notify them within this time period, you must pay a 10% tax on the excess. Tax amendments 2013 14 For an explanation of the notification requirements, see Rev. Tax amendments 2013 14 Proc. Tax amendments 2013 14 91-44, 1991-2 C. Tax amendments 2013 14 B. Tax amendments 2013 14 733. Tax amendments 2013 14 If you adopted a SARSEP using Form 5305A-SEP, the notification requirements are explained in the instructions for that form. Tax amendments 2013 14 Reporting on Form W-2. Tax amendments 2013 14   Do not include elective deferrals in the “Wages, tips, other compensation” box of Form W-2. Tax amendments 2013 14 You must, however, include them in the “Social security wages” and “Medicare wages and tips” boxes. Tax amendments 2013 14 You must also include them in box 12. Tax amendments 2013 14 Mark the “Retirement plan” checkbox in box 13. Tax amendments 2013 14 For more information, see the Form W-2 instructions. Tax amendments 2013 14 Distributions (Withdrawals) As an employer, you cannot prohibit distributions from a SEP-IRA. Tax amendments 2013 14 Also, you cannot make your contributions on the condition that any part of them must be kept in the account after you have made your contributions to the employee's accounts. Tax amendments 2013 14 Distributions are subject to IRA rules. Tax amendments 2013 14 Generally, you or your employee must begin to receive distributions from a SEP-IRA by April 1 of the first year after the calendar year in which you or your employee reaches age 70½. Tax amendments 2013 14 For more information about IRA rules, including the tax treatment of distributions, rollovers, required distributions, and income tax withholding, see Publication 590. Tax amendments 2013 14 Additional Taxes The tax advantages of using SEP-IRAs for retirement savings can be offset by additional taxes that may be imposed for all the following actions. Tax amendments 2013 14 Making excess contributions. Tax amendments 2013 14 Making early withdrawals. Tax amendments 2013 14 Not making required withdrawals. Tax amendments 2013 14 For information about these taxes, see chapter 1 in Publication 590. Tax amendments 2013 14 Also, a SEP-IRA may be disqualified, or an excise tax may apply, if the account is involved in a prohibited transaction, discussed next. Tax amendments 2013 14 Prohibited transaction. Tax amendments 2013 14   If an employee improperly uses his or her SEP-IRA, such as by borrowing money from it, the employee has engaged in a prohibited transaction. Tax amendments 2013 14 In that case, the SEP-IRA will no longer qualify as an IRA. Tax amendments 2013 14 For a list of prohibited transactions, see Prohibited Transactions in chapter 4. Tax amendments 2013 14 Effects on employee. Tax amendments 2013 14   If a SEP-IRA is disqualified because of a prohibited transaction, the assets in the account will be treated as having been distributed to the employee on the first day of the year in which the transaction occurred. Tax amendments 2013 14 The employee must include in income the fair market value of the assets (on the first day of the year) that is more than any cost basis in the account. Tax amendments 2013 14 Also, the employee may have to pay the additional tax for making early withdrawals. Tax amendments 2013 14 Reporting and Disclosure Requirements If you set up a SEP using Form 5305-SEP, you must give your eligible employees certain information about the SEP when you set it up. Tax amendments 2013 14 See Setting Up a SEP , earlier. Tax amendments 2013 14 Also, you must give your eligible employees a statement each year showing any contributions to their SEP-IRAs. Tax amendments 2013 14 You must also give them notice of any excess contributions. Tax amendments 2013 14 For details about other information you must give them, see the instructions for Form 5305-SEP or Form 5305A-SEP (for a salary reduction SEP). Tax amendments 2013 14 Even if you did not use Form 5305-SEP or Form 5305A-SEP to set up your SEP, you must give your employees information similar to that described above. Tax amendments 2013 14 For more information, see the instructions for either Form 5305-SEP or Form 5305A-SEP. Tax amendments 2013 14 Prev  Up  Next   Home   More Online Publications
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The Tax Amendments 2013 14

Tax amendments 2013 14 Index A Abatement of interest and penalties, Abatement of interest and penalties. Tax amendments 2013 14 Accidents, Deductible losses. Tax amendments 2013 14 , Nondeductible losses. Tax amendments 2013 14 Adjusted basis, Adjusted Basis Adjustments to basis, Basis adjustment to corporation's property. Tax amendments 2013 14 , Adjustments to Basis Amended returns, Amended return. Tax amendments 2013 14 Appraisals, Appraisal. Tax amendments 2013 14 , Costs of photographs and appraisals. Tax amendments 2013 14 Assistance (see Tax help) B Bad debts, Nonbusiness bad debt. Tax amendments 2013 14 Basis Adjusted, Adjusted Basis Adjustments to, Basis adjustment to corporation's property. Tax amendments 2013 14 , Adjustments to Basis Replacement property, Basis of replacement property. Tax amendments 2013 14 Business or income-producing property, Business or income-producing property. Tax amendments 2013 14 Business purposes, property used partly for, Property used partly for business and partly for personal purposes. Tax amendments 2013 14 C Cars Accidents, Deductible losses. Tax amendments 2013 14 Fair market value of, Car value. Tax amendments 2013 14 Cash gifts, Cash gifts. Tax amendments 2013 14 Casualty losses, Table 3. Tax amendments 2013 14 When To Deduct a Casualty or Theft Loss Deductible losses, Deductible losses. Tax amendments 2013 14 Definition, Casualty Deposits, loss on, Casualty loss or ordinary loss. Tax amendments 2013 14 Nondeductible losses, Nondeductible losses. Tax amendments 2013 14 Progressive deterioration, Progressive deterioration. Tax amendments 2013 14 Proof of, Casualty loss proof. Tax amendments 2013 14 When to report, Losses. Tax amendments 2013 14 Workbooks for listing property, Workbooks for casualties and thefts. Tax amendments 2013 14 Clean up costs, Cost of cleaning up or making repairs. Tax amendments 2013 14 Condemnation, Condemnations. Tax amendments 2013 14 Corrosive drywall, Special Procedure for Damage From Corrosive Drywall Costs Appraisals, Costs of photographs and appraisals. Tax amendments 2013 14 Clean up, Cost of cleaning up or making repairs. Tax amendments 2013 14 Incidental expenses, Related expenses. Tax amendments 2013 14 Landscaping, Landscaping. Tax amendments 2013 14 Photographs taken after loss, Costs of photographs and appraisals. Tax amendments 2013 14 Protection, Cost of protection. Tax amendments 2013 14 Repair, Cost of cleaning up or making repairs. Tax amendments 2013 14 Replacement, Replacement cost. Tax amendments 2013 14 D Death of taxpayer Postponement of gain, Death of a taxpayer. Tax amendments 2013 14 Deductible losses, Deductible losses. Tax amendments 2013 14 Deduction limits, Deduction Limits $100 rule, $100 Rule 10% rule, 10% Rule 2% rule, 2% Rule Deposit losses, Mislaid or lost property. Tax amendments 2013 14 , Table 3. Tax amendments 2013 14 When To Deduct a Casualty or Theft Loss Reporting of (Table 1), Table 1. Tax amendments 2013 14 Reporting Loss on Deposits When to report, Loss on deposits. Tax amendments 2013 14 Disaster area losses, Lessee's loss. Tax amendments 2013 14 Claiming on amended return, Claiming a disaster loss on an amended return. Tax amendments 2013 14 Federal loan canceled, Federal loan canceled. Tax amendments 2013 14 Federally declared disaster, Business or income-producing property located in a federally declared disaster area. Tax amendments 2013 14 , Disaster Area Losses Figuring loss deduction, Figuring the loss deduction. Tax amendments 2013 14 Form 1040X, How to report the loss on Form 1040X. Tax amendments 2013 14 Home made unsafe, Home made unsafe by disaster. Tax amendments 2013 14 How to deduct loss in preceding year, How to deduct your loss in the preceding year. Tax amendments 2013 14 Inventory, Disaster loss to inventory. Tax amendments 2013 14 Main home rules, Main home in disaster area. Tax amendments 2013 14 , Gains. Tax amendments 2013 14 Qualified disaster mitigation payments, Qualified disaster mitigation payments. Tax amendments 2013 14 Qualified disaster relief payments, Qualified disaster relief payments. Tax amendments 2013 14 Records to keep, Records. Tax amendments 2013 14 Tax deadlines postponed, Covered disaster area. Tax amendments 2013 14 When to deduct, When to deduct the loss. Tax amendments 2013 14 Table 3, Table 3. Tax amendments 2013 14 When To Deduct a Casualty or Theft Loss Disaster mitigation payments, Qualified disaster mitigation payments. Tax amendments 2013 14 Disaster relief grants, Disaster relief. Tax amendments 2013 14 Drywall, corrosive, Special Procedure for Damage From Corrosive Drywall Due dates Tax deadlines postponed, Postponed Tax Deadlines E Employer's emergency disaster fund, Employer's emergency disaster fund. Tax amendments 2013 14 F Fair market value (FMV) Decline in value of property in or near casualty area, Decline in market value of property in or near casualty area. Tax amendments 2013 14 Measuring decrease in, Decrease in Fair Market Value Items not to consider, Figuring Decrease in FMV — Items Not To Consider Items to consider, Figuring Decrease in FMV — Items To Consider Federal disaster relief grants, Federal disaster relief grants. Tax amendments 2013 14 Federal Emergency Management Agency (FEMA), contacting, Contacting the Federal Emergency Management Agency (FEMA) Federally declared disasters, Business or income-producing property located in a federally declared disaster area. Tax amendments 2013 14 , Disaster Area Losses Figuring gain, Property used partly for business and partly for personal purposes. Tax amendments 2013 14 Figuring loss, Theft loss proof. Tax amendments 2013 14 , Figuring the Deduction Adjusted basis, Adjusted Basis Disaster area losses, Figuring the loss deduction. Tax amendments 2013 14 Insurance and other reimbursements, Insurance and Other Reimbursements Form 1040, Schedule A, Personal-use property. Tax amendments 2013 14 Form 1040, Schedule D, Personal-use property. Tax amendments 2013 14 Form 1040X Disaster area losses, How to report the loss on Form 1040X. Tax amendments 2013 14 Form 4684 Reporting gains and losses on personal-use property, Personal-use property. Tax amendments 2013 14 Free tax services, Free help with your tax return. Tax amendments 2013 14 G Gains Figuring, Figuring a Gain Postponement of, Postponement of Gain, How To Postpone a Gain Reimbursements, Gain from reimbursement. Tax amendments 2013 14 Reporting of, Contacting the Federal Emergency Management Agency (FEMA) When to report, Changing your mind. Tax amendments 2013 14 H Help (see Tax help) I Incidental expenses, Related expenses. Tax amendments 2013 14 Insurance, Insurance and Other Reimbursements Living expenses, payments for, Insurance payments for living expenses. Tax amendments 2013 14 Interest abatement, Abatement of interest and penalties. Tax amendments 2013 14 Inventory losses, Loss of inventory. Tax amendments 2013 14 Disaster area losses, Disaster loss to inventory. Tax amendments 2013 14 L Landscaping, Landscaping. Tax amendments 2013 14 Leased property, Leased property. Tax amendments 2013 14 When to report, Lessee's loss. Tax amendments 2013 14 Losses Casualty (see Casualty losses) Deposits (see Deposit losses) Disaster areas (see Disaster area losses) Figuring amount (see Figuring loss) Proof of, Deducted loss recovered. Tax amendments 2013 14 Records of, Theft loss proof. Tax amendments 2013 14 Reporting of, Contacting the Federal Emergency Management Agency (FEMA) Theft (see Theft losses) When to report, Changing your mind. Tax amendments 2013 14 (Table 3), Table 3. Tax amendments 2013 14 When To Deduct a Casualty or Theft Loss M Married taxpayers Deduction limits, Married taxpayers. Tax amendments 2013 14 , Married taxpayers. Tax amendments 2013 14 Mislaid or lost property, Mislaid or lost property. Tax amendments 2013 14 Missing children, photographs of, Reminders N Nonbusiness bad debts, Nonbusiness bad debt. Tax amendments 2013 14 Nondeductible losses, Nondeductible losses. Tax amendments 2013 14 P Payments for living expenses, Insurance payments for living expenses. Tax amendments 2013 14 Penalty abatement, Abatement of interest and penalties. Tax amendments 2013 14 Personal property Loss deduction, figuring of, Personal property. Tax amendments 2013 14 Personal-use property Reporting gains and losses, Personal-use property. Tax amendments 2013 14 Personal-use real property, Exception for personal-use real property. Tax amendments 2013 14 Photographs Documentation of loss, Costs of photographs and appraisals. Tax amendments 2013 14 Ponzi-type investment schemes, Losses from Ponzi-type investment schemes. Tax amendments 2013 14 Postponed tax deadlines, Postponed Tax Deadlines Postponement of gain, Postponement of Gain, How To Postpone a Gain Amended return, Amended return. Tax amendments 2013 14 Changing mind, Changing your mind. Tax amendments 2013 14 Replacement property acquired after return filed, Replacement property acquired after return filed. Tax amendments 2013 14 Replacement property acquired before return filed, Replacement property acquired before return filed. Tax amendments 2013 14 Required statement, Required statement. Tax amendments 2013 14 Substituting replacement property, Substituting replacement property. Tax amendments 2013 14 Three-year limit, Three-year limit. Tax amendments 2013 14 Proof of loss, Proof of Loss Protection costs, Cost of protection. Tax amendments 2013 14 Publications (see Tax help) R Records of loss, Theft loss proof. Tax amendments 2013 14 Recovered stolen property, Recovered stolen property. Tax amendments 2013 14 Reimbursements Cash gifts, Cash gifts. Tax amendments 2013 14 Disaster relief, Disaster relief. Tax amendments 2013 14 Employer's emergency disaster fund, Employer's emergency disaster fund. Tax amendments 2013 14 Failure to file a claim, Failure to file a claim for reimbursement. Tax amendments 2013 14 Received after deducting loss, Reimbursement Received After Deducting Loss Types of, Types of Reimbursements Related expenses, Related expenses. Tax amendments 2013 14 Related person, replacement property bought from, Buying replacement property from a related person. Tax amendments 2013 14 Repair costs, Cost of cleaning up or making repairs. Tax amendments 2013 14 Replacement cost, Replacement cost. Tax amendments 2013 14 Replacement period, Replacement Period Extension of, Extension. Tax amendments 2013 14 Replacement property, Replacement Property Advance payment, Advance payment. Tax amendments 2013 14 Basis adjustment to corporation's property, Basis adjustment to corporation's property. Tax amendments 2013 14 Basis of, Basis of replacement property. Tax amendments 2013 14 Main home, Main home replaced. Tax amendments 2013 14 In disaster area, Main home in disaster area. Tax amendments 2013 14 Postponement of gain, Replacement property acquired before return filed. Tax amendments 2013 14 Reporting gains and losses, Reporting a gain. Tax amendments 2013 14 , How To Report Gains and Losses Basis, adjustments to, Adjustments to Basis Business and income-producing property, Business and income-producing property. Tax amendments 2013 14 Deductions exceeding income, If Deductions Are More Than Income Deposits, How to report. Tax amendments 2013 14 Table 1, Table 1. Tax amendments 2013 14 Reporting Loss on Deposits Disaster area losses, How to report the loss on Form 1040X. Tax amendments 2013 14 Personal-use property, Personal-use property. Tax amendments 2013 14 Timing of, When To Report Gains and Losses S Sentimental value, Sentimental value. Tax amendments 2013 14 State disaster relief grants for businesses, State disaster relief grants for businesses. Tax amendments 2013 14 Stolen property (see Theft losses) T Tables and figures Reporting loss on deposits (Table 1), Table 1. Tax amendments 2013 14 Reporting Loss on Deposits When to deduct losses (Table 3), Table 3. Tax amendments 2013 14 When To Deduct a Casualty or Theft Loss Tax help, How To Get Tax Help Theft losses, Theft FMV of stolen property, FMV of stolen property. Tax amendments 2013 14 Mislaid or lost property, Mislaid or lost property. Tax amendments 2013 14 Proof of, Theft loss proof. Tax amendments 2013 14 When to deduct (Table 3), Table 3. Tax amendments 2013 14 When To Deduct a Casualty or Theft Loss When to report, Losses. Tax amendments 2013 14 Workbooks for listing property, Workbooks for casualties and thefts. Tax amendments 2013 14 Timber loss, Timber loss. Tax amendments 2013 14 W Workbooks for property lost due to casualties and thefts, Workbooks for casualties and thefts. Tax amendments 2013 14 Prev  Up     Home   More Online Publications