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Turbotax 2010 download Publication 575 - Main Content Table of Contents General InformationPension. Turbotax 2010 download Annuity. Turbotax 2010 download Qualified employee plan. Turbotax 2010 download Qualified employee annuity. Turbotax 2010 download Designated Roth account. Turbotax 2010 download Tax-sheltered annuity plan. Turbotax 2010 download Fixed-period annuities. Turbotax 2010 download Annuities for a single life. Turbotax 2010 download Joint and survivor annuities. Turbotax 2010 download Variable annuities. Turbotax 2010 download Disability pensions. Turbotax 2010 download Variable Annuities Section 457 Deferred Compensation Plans Disability Pensions Insurance Premiums for Retired Public Safety Officers Railroad Retirement Benefits Withholding Tax and Estimated Tax Cost (Investment in the Contract)Foreign employment contributions while a nonresident alien. Turbotax 2010 download Taxation of Periodic PaymentsPeriod of participation. Turbotax 2010 download Fully Taxable Payments Partly Taxable Payments Taxation of Nonperiodic PaymentsFiguring the Taxable Amount Loans Treated as Distributions Transfers of Annuity Contracts Lump-Sum Distributions RolloversExceptions. Turbotax 2010 download No tax withheld. Turbotax 2010 download Partial rollovers. Turbotax 2010 download Frozen deposits. Turbotax 2010 download Reasonable period of time. Turbotax 2010 download 20% Mandatory withholding. Turbotax 2010 download How to report. Turbotax 2010 download How to report. Turbotax 2010 download Special rule for Roth IRAs and designated Roth accounts. Turbotax 2010 download Special Additional TaxesTax on Early Distributions Tax on Excess Accumulation Survivors and BeneficiariesGuaranteed payments. Turbotax 2010 download How To Get Tax HelpLow Income Taxpayer Clinics General Information Definitions. Turbotax 2010 download   Some of the terms used in this publication are defined in the following paragraphs. Turbotax 2010 download Pension. Turbotax 2010 download   A pension is generally a series of definitely determinable payments made to you after you retire from work. Turbotax 2010 download Pension payments are made regularly and are based on such factors as years of service and prior compensation. Turbotax 2010 download Annuity. Turbotax 2010 download   An annuity is a series of payments under a contract made at regular intervals over a period of more than one full year. Turbotax 2010 download They can be either fixed (under which you receive a definite amount) or variable (not fixed). Turbotax 2010 download You can buy the contract alone or with the help of your employer. Turbotax 2010 download Qualified employee plan. Turbotax 2010 download   A qualified employee plan is an employer's stock bonus, pension, or profit-sharing plan that is for the exclusive benefit of employees or their beneficiaries and that meets Internal Revenue Code requirements. Turbotax 2010 download It qualifies for special tax benefits, such as tax deferral for employer contributions and capital gain treatment or the 10-year tax option for lump-sum distributions (if participants qualify). Turbotax 2010 download To determine whether your plan is a qualified plan, check with your employer or the plan administrator. Turbotax 2010 download Qualified employee annuity. Turbotax 2010 download   A qualified employee annuity is a retirement annuity purchased by an employer for an employee under a plan that meets Internal Revenue Code requirements. Turbotax 2010 download Designated Roth account. Turbotax 2010 download   A designated Roth account is a separate account created under a qualified Roth contribution program to which participants may elect to have part or all of their elective deferrals to a 401(k), 403(b), or 457(b) plan designated as Roth contributions. Turbotax 2010 download Elective deferrals that are designated as Roth contributions are included in your income. Turbotax 2010 download However, qualified distributions (explained later) are not included in your income. Turbotax 2010 download You should check with your plan administrator to determine if your plan will accept designated Roth contributions. Turbotax 2010 download Tax-sheltered annuity plan. Turbotax 2010 download   A tax-sheltered annuity plan (often referred to as a 403(b) plan or a tax-deferred annuity plan) is a retirement plan for employees of public schools and certain tax-exempt organizations. Turbotax 2010 download Generally, a tax-sheltered annuity plan provides retirement benefits by purchasing annuity contracts for its participants. Turbotax 2010 download Types of pensions and annuities. Turbotax 2010 download   Pensions and annuities include the following types. Turbotax 2010 download Fixed-period annuities. Turbotax 2010 download   You receive definite amounts at regular intervals for a specified length of time. Turbotax 2010 download Annuities for a single life. Turbotax 2010 download   You receive definite amounts at regular intervals for life. Turbotax 2010 download The payments end at death. Turbotax 2010 download Joint and survivor annuities. Turbotax 2010 download   The first annuitant receives a definite amount at regular intervals for life. Turbotax 2010 download After he or she dies, a second annuitant receives a definite amount at regular intervals for life. Turbotax 2010 download The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant. Turbotax 2010 download Variable annuities. Turbotax 2010 download   You receive payments that may vary in amount for a specified length of time or for life. Turbotax 2010 download The amounts you receive may depend upon such variables as profits earned by the pension or annuity funds, cost-of-living indexes, or earnings from a mutual fund. Turbotax 2010 download Disability pensions. Turbotax 2010 download   You receive disability payments because you retired on disability and have not reached minimum retirement age. Turbotax 2010 download More than one program. Turbotax 2010 download   You may receive employee plan benefits from more than one program under a single trust or plan of your employer. Turbotax 2010 download If you participate in more than one program, you may have to treat each as a separate pension or annuity contract, depending upon the facts in each case. Turbotax 2010 download Also, you may be considered to have received more than one pension or annuity. Turbotax 2010 download Your former employer or the plan administrator should be able to tell you if you have more than one contract. Turbotax 2010 download Example. Turbotax 2010 download Your employer set up a noncontributory profit-sharing plan for its employees. Turbotax 2010 download The plan provides that the amount held in the account of each participant will be paid when that participant retires. Turbotax 2010 download Your employer also set up a contributory defined benefit pension plan for its employees providing for the payment of a lifetime pension to each participant after retirement. Turbotax 2010 download The amount of any distribution from the profit-sharing plan depends on the contributions (including allocated forfeitures) made for the participant and the earnings from those contributions. Turbotax 2010 download Under the pension plan, however, a formula determines the amount of the pension benefits. Turbotax 2010 download The amount of contributions is the amount necessary to provide that pension. Turbotax 2010 download Each plan is a separate program and a separate contract. Turbotax 2010 download If you get benefits from these plans, you must account for each separately, even though the benefits from both may be included in the same check. Turbotax 2010 download Distributions from a designated Roth account are treated separately from other distributions from the plan. Turbotax 2010 download Qualified domestic relations order (QDRO). Turbotax 2010 download   A QDRO is a judgment, decree, or order relating to payment of child support, alimony, or marital property rights to a spouse, former spouse, child, or other dependent of a participant in a retirement plan. Turbotax 2010 download The QDRO must contain certain specific information, such as the name and last known mailing address of the participant and each alternate payee, and the amount or percentage of the participant's benefits to be paid to each alternate payee. Turbotax 2010 download A QDRO may not award an amount or form of benefit that is not available under the plan. Turbotax 2010 download   A spouse or former spouse who receives part of the benefits from a retirement plan under a QDRO reports the payments received as if he or she were a plan participant. Turbotax 2010 download The spouse or former spouse is allocated a share of the participant's cost (investment in the contract) equal to the cost times a fraction. Turbotax 2010 download The numerator of the fraction is the present value of the benefits payable to the spouse or former spouse. Turbotax 2010 download The denominator is the present value of all benefits payable to the participant. Turbotax 2010 download   A distribution that is paid to a child or other dependent under a QDRO is taxed to the plan participant. Turbotax 2010 download Variable Annuities The tax rules in this publication apply both to annuities that provide fixed payments and to annuities that provide payments that vary in amount based on investment results or other factors. Turbotax 2010 download For example, they apply to commercial variable annuity contracts, whether bought by an employee retirement plan for its participants or bought directly from the issuer by an individual investor. Turbotax 2010 download Under these contracts, the owner can generally allocate the purchase payments among several types of investment portfolios or mutual funds and the contract value is determined by the performance of those investments. Turbotax 2010 download The earnings are not taxed until distributed either in a withdrawal or in annuity payments. Turbotax 2010 download The taxable part of a distribution is treated as ordinary income. Turbotax 2010 download Net investment income tax. Turbotax 2010 download   Beginning in 2013, annuities under a nonqualified plan are included in calculating your net investment income for the net investment income tax (NIIT). Turbotax 2010 download For information see the Instructions for Form 8960, Net Investment Income Tax — Individuals, Estates and Trusts. Turbotax 2010 download For information on the tax treatment of a transfer or exchange of a variable annuity contract, see Transfers of Annuity Contracts under Taxation of Nonperiodic Payments, later. Turbotax 2010 download Withdrawals. Turbotax 2010 download   If you withdraw funds before your annuity starting date and your annuity is under a qualified retirement plan, a ratable part of the amount withdrawn is tax free. Turbotax 2010 download The tax-free part is based on the ratio of your cost (investment in the contract) to your account balance under the plan. Turbotax 2010 download   If your annuity is under a nonqualified plan (including a contract you bought directly from the issuer), the amount withdrawn is allocated first to earnings (the taxable part) and then to your cost (the tax-free part). Turbotax 2010 download However, if you bought your annuity contract before August 14, 1982, a different allocation applies to the investment before that date and the earnings on that investment. Turbotax 2010 download To the extent the amount withdrawn does not exceed that investment and earnings, it is allocated first to your cost (the tax-free part) and then to earnings (the taxable part). Turbotax 2010 download   If you withdraw funds (other than as an annuity) on or after your annuity starting date, the entire amount withdrawn is generally taxable. Turbotax 2010 download   The amount you receive in a full surrender of your annuity contract at any time is tax free to the extent of any cost that you have not previously recovered tax free. Turbotax 2010 download The rest is taxable. Turbotax 2010 download   For more information on the tax treatment of withdrawals, see Taxation of Nonperiodic Payments , later. Turbotax 2010 download If you withdraw funds from your annuity before you reach age 59½, also see Tax on Early Distributions under Special Additional Taxes, later. Turbotax 2010 download Annuity payments. Turbotax 2010 download   If you receive annuity payments under a variable annuity plan or contract, you recover your cost tax free under either the Simplified Method or the General Rule, as explained under Taxation of Periodic Payments , later. Turbotax 2010 download For a variable annuity paid under a qualified plan, you generally must use the Simplified Method. Turbotax 2010 download For a variable annuity paid under a nonqualified plan (including a contract you bought directly from the issuer), you must use a special computation under the General Rule. Turbotax 2010 download For more information, see Variable annuities in Publication 939 under Computation Under the General Rule. Turbotax 2010 download Death benefits. Turbotax 2010 download    If you receive a single-sum distribution from a variable annuity contract because of the death of the owner or annuitant, the distribution is generally taxable only to the extent it is more than the unrecovered cost of the contract. Turbotax 2010 download If you choose to receive an annuity, the payments are subject to tax as described above. Turbotax 2010 download If the contract provides a joint and survivor annuity and the primary annuitant had received annuity payments before death, you figure the tax-free part of annuity payments you receive as the survivor in the same way the primary annuitant did. Turbotax 2010 download See Survivors and Beneficiaries , later. Turbotax 2010 download Section 457 Deferred Compensation Plans If you work for a state or local government or for a tax-exempt organization, you may be able to participate in a section 457 deferred compensation plan. Turbotax 2010 download If your plan is an eligible plan, you are not taxed currently on pay that is deferred under the plan or on any earnings from the plan's investment of the deferred pay. Turbotax 2010 download You are generally taxed on amounts deferred in an eligible state or local government plan only when they are distributed from the plan. Turbotax 2010 download You are taxed on amounts deferred in an eligible tax-exempt organization plan when they are distributed or otherwise made available to you. Turbotax 2010 download Your 457(b) plan may have a designated Roth account option. Turbotax 2010 download If so, you may be able to roll over amounts to the designated Roth account or make contributions. Turbotax 2010 download Elective deferrals to a designated Roth account are included in your income. Turbotax 2010 download Qualified distributions (explained later) are not included in your income. Turbotax 2010 download See the Designated Roth accounts discussion under Taxation of Periodic Payments, later. Turbotax 2010 download This publication covers the tax treatment of benefits under eligible section 457 plans, but it does not cover the treatment of deferrals. Turbotax 2010 download For information on deferrals under section 457 plans, see Retirement Plan Contributions under Employee Compensation in Publication 525. Turbotax 2010 download Is your plan eligible?   To find out if your plan is an eligible plan, check with your employer. Turbotax 2010 download Plans that are not eligible section 457 plans include the following: Bona fide vacation leave, sick leave, compensatory time, severance pay, disability pay, or death benefit plans. Turbotax 2010 download Nonelective deferred compensation plans for nonemployees (independent contractors). Turbotax 2010 download Deferred compensation plans maintained by churches. Turbotax 2010 download Length of service award plans for bona fide volunteer firefighters and emergency medical personnel. Turbotax 2010 download An exception applies if the total amount paid to a volunteer exceeds $3,000 for any year of service. Turbotax 2010 download Disability Pensions If you retired on disability, you generally must include in income any disability pension you receive under a plan that is paid for by your employer. Turbotax 2010 download You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A or on line 8 of Form 1040NR until you reach minimum retirement age. Turbotax 2010 download Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. Turbotax 2010 download You may be entitled to a tax credit if you were permanently and totally disabled when you retired. Turbotax 2010 download For information on this credit, see Publication 524. Turbotax 2010 download Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. Turbotax 2010 download Report the payments on Form 1040, lines 16a and 16b; Form 1040A, lines 12a and 12b; or on Form 1040NR, lines 17a and 17b. Turbotax 2010 download Disability payments for injuries incurred as a direct result of a terrorist attack directed against the United States (or its allies) are not included in income. Turbotax 2010 download For more information about payments to survivors of terrorist attacks, see Publication 3920, Tax Relief for Victims of Terrorist Attacks. Turbotax 2010 download Insurance Premiums for Retired Public Safety Officers If you are an eligible retired public safety officer (law enforcement officer, firefighter, chaplain, or member of a rescue squad or ambulance crew), you can elect to exclude from income distributions made from your eligible retirement plan that are used to pay the premiums for accident or health insurance or long-term care insurance. Turbotax 2010 download The premiums can be for coverage for you, your spouse, or dependents. Turbotax 2010 download The distribution must be made directly from the plan to the insurance provider. Turbotax 2010 download You can exclude from income the smaller of the amount of the insurance premiums or $3,000. Turbotax 2010 download You can only make this election for amounts that would otherwise be included in your income. Turbotax 2010 download The amount excluded from your income cannot be used to claim a medical expense deduction. Turbotax 2010 download An eligible retirement plan is a governmental plan that is: a qualified trust, a section 403(a) plan, a section 403(b) annuity, or a section 457(b) plan. Turbotax 2010 download If you make this election, reduce the otherwise taxable amount of your pension or annuity by the amount excluded. Turbotax 2010 download The amount shown in box 2a of Form 1099-R does not reflect this exclusion. Turbotax 2010 download Report your total distributions on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. Turbotax 2010 download Report the taxable amount on Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Turbotax 2010 download Enter “PSO” next to the appropriate line on which you report the taxable amount. Turbotax 2010 download If you are retired on disability and reporting your disability pension on line 7 of Form 1040 or Form 1040A, or line 8 of Form 1040NR, include only the taxable amount on that line and enter “PSO” and the amount excluded on the dotted line next to the applicable line. Turbotax 2010 download Railroad Retirement Benefits Benefits paid under the Railroad Retirement Act fall into two categories. Turbotax 2010 download These categories are treated differently for income tax purposes. Turbotax 2010 download The first category is the amount of tier 1 railroad retirement benefits that equals the social security benefit that a railroad employee or beneficiary would have been entitled to receive under the social security system. Turbotax 2010 download This part of the tier 1 benefit is the social security equivalent benefit (SSEB) and you treat it for tax purposes like social security benefits. Turbotax 2010 download If you received, repaid, or had tax withheld from the SSEB portion of tier 1 benefits during 2013, you will receive Form RRB-1099, Payments by the Railroad Retirement Board (or Form RRB-1042S, Statement for Nonresident Alien Recipients of Payments by the Railroad Retirement Board, if you are a nonresident alien) from the U. Turbotax 2010 download S. Turbotax 2010 download Railroad Retirement Board (RRB). Turbotax 2010 download For more information about the tax treatment of the SSEB portion of tier 1 benefits and Forms RRB-1099 and RRB-1042S, see Publication 915. Turbotax 2010 download The second category contains the rest of the tier 1 railroad retirement benefits, called the non-social security equivalent benefit (NSSEB). Turbotax 2010 download It also contains any tier 2 benefit, vested dual benefit (VDB), and supplemental annuity benefit. Turbotax 2010 download Treat this category of benefits, shown on Form RRB-1099-R, as an amount received from a qualified employee plan. Turbotax 2010 download This allows for the tax-free (nontaxable) recovery of employee contributions from the tier 2 benefits and the NSSEB part of the tier 1 benefits. Turbotax 2010 download (The NSSEB and tier 2 benefits, less certain repayments, are combined into one amount called the Contributory Amount Paid on Form RRB-1099-R. Turbotax 2010 download ) Vested dual benefits and supplemental annuity benefits are non-contributory pensions and are fully taxable. Turbotax 2010 download See Taxation of Periodic Payments , later, for information on how to report your benefits and how to recover the employee contributions tax free. Turbotax 2010 download Form RRB-1099-R is used for U. Turbotax 2010 download S. Turbotax 2010 download citizens, resident aliens, and nonresident aliens. Turbotax 2010 download Nonresident aliens. Turbotax 2010 download   A nonresident alien is an individual who is not a citizen or a resident alien of the United States. Turbotax 2010 download Nonresident aliens are subject to mandatory U. Turbotax 2010 download S. Turbotax 2010 download tax withholding unless exempt under a tax treaty between the United States and their country of legal residency. Turbotax 2010 download A tax treaty exemption may reduce or eliminate tax withholding from railroad retirement benefits. Turbotax 2010 download See Tax withholding next for more information. Turbotax 2010 download   If you are a nonresident alien and your tax withholding rate changed or your country of legal residence changed during the year, you may receive more than one Form RRB-1042S or Form RRB-1099-R. Turbotax 2010 download To determine your total benefits paid or repaid and total tax withheld for the year, you should add the amounts shown on all forms you received for that year. Turbotax 2010 download For information on filing requirements for aliens, see Publication 519, U. Turbotax 2010 download S. Turbotax 2010 download Tax Guide for Aliens. Turbotax 2010 download For information on tax treaties between the United States and other countries that may reduce or eliminate U. Turbotax 2010 download S. Turbotax 2010 download tax on your benefits, see Publication 901, U. Turbotax 2010 download S. Turbotax 2010 download Tax Treaties. Turbotax 2010 download Tax withholding. Turbotax 2010 download   To request or change your income tax withholding from SSEB payments, U. Turbotax 2010 download S. Turbotax 2010 download citizens should contact the IRS for Form W-4V, Voluntary Withholding Request, and file it with the RRB. Turbotax 2010 download To elect, revoke, or change your income tax withholding from NSSEB, tier 2, VDB, and supplemental annuity payments received, use Form RRB W-4P, Withholding Certificate for Railroad Retirement Payments. Turbotax 2010 download If you are a nonresident alien or a U. Turbotax 2010 download S. Turbotax 2010 download citizen living abroad, you should provide Form RRB-1001, Nonresident Questionnaire, to the RRB to furnish citizenship and residency information and to claim any treaty exemption from U. Turbotax 2010 download S. Turbotax 2010 download tax withholding. Turbotax 2010 download Nonresident U. Turbotax 2010 download S. Turbotax 2010 download citizens cannot elect to be exempt from withholding on payments delivered outside of the U. Turbotax 2010 download S. Turbotax 2010 download Help from the RRB. Turbotax 2010 download   To request an RRB form or to get help with questions about an RRB benefit, you should contact your nearest RRB field office if you reside in the United States (call 1-877-772-5772 for the nearest field office) or U. Turbotax 2010 download S. Turbotax 2010 download consulate/Embassy if you reside outside the United States. Turbotax 2010 download You can visit the RRB on the Internet at www. Turbotax 2010 download rrb. Turbotax 2010 download gov. Turbotax 2010 download Form RRB-1099-R. Turbotax 2010 download   The following discussion explains the items shown on Form RRB-1099-R. Turbotax 2010 download The amounts shown on this form are before any deduction for: Federal income tax withholding, Medicare premiums, Legal process garnishment payments, Recovery of a prior year overpayment of an NSSEB, tier 2 benefit, VDB, or supplemental annuity benefit, or Recovery of Railroad Unemployment Insurance Act benefits received while awaiting payment of your railroad retirement annuity. Turbotax 2010 download   The amounts shown on this form are after any offset for: Social Security benefits, Age reduction, Public Service pensions or public disability benefits, Dual railroad retirement entitlement under another RRB claim number, Work deductions, Legal process partition deductions, Actuarial adjustment, Annuity waiver, or Recovery of a current-year overpayment of NSSEB, tier 2, VDB, or supplemental annuity benefits. Turbotax 2010 download   The amounts shown on Form RRB-1099-R do not reflect any special rules, such as capital gain treatment or the special 10-year tax option for lump-sum payments, or tax-free rollovers. Turbotax 2010 download To determine if any of these rules apply to your benefits, see the discussions about them later. Turbotax 2010 download   Generally, amounts shown on your Form RRB-1099-R are considered a normal distribution. Turbotax 2010 download Use distribution code “7” if you are asked for a distribution code. Turbotax 2010 download Distribution codes are not shown on Form RRB-1099-R. Turbotax 2010 download   There are three copies of this form. Turbotax 2010 download Copy B is to be included with your income tax return if federal income tax is withheld. Turbotax 2010 download Copy C is for your own records. Turbotax 2010 download Copy 2 is filed with your state, city, or local income tax return, when required. Turbotax 2010 download See the illustrated Copy B (Form RRB-1099-R) above. Turbotax 2010 download       Each beneficiary will receive his or her own Form RRB-1099-R. Turbotax 2010 download If you receive benefits on more than one railroad retirement record, you may get more than one Form RRB-1099-R. Turbotax 2010 download So that you get your form timely, make sure the RRB always has your current mailing address. Turbotax 2010 download Please click here for the text description of the image. Turbotax 2010 download Form RRB-1099-R Box 1—Claim Number and Payee Code. Turbotax 2010 download   Your claim number is a six- or nine-digit number preceded by an alphabetical prefix. Turbotax 2010 download This is the number under which the RRB paid your benefits. Turbotax 2010 download Your payee code follows your claim number and is the last number in this box. Turbotax 2010 download It is used by the RRB to identify you under your claim number. Turbotax 2010 download In all your correspondence with the RRB, be sure to use the claim number and payee code shown in this box. Turbotax 2010 download Box 2—Recipient's Identification Number. Turbotax 2010 download   This is the recipient's U. Turbotax 2010 download S. Turbotax 2010 download taxpayer identification number. Turbotax 2010 download It is the social security number (SSN), individual taxpayer identification number (ITIN), or employer identification number (EIN), if known, for the person or estate listed as the recipient. Turbotax 2010 download If you are a resident or nonresident alien who must furnish a taxpayer identification number to the IRS and are not eligible to obtain an SSN, use Form W-7, Application for IRS Individual Taxpayer Identification Number, to apply for an ITIN. Turbotax 2010 download The Instructions for Form W-7 explain how and when to apply. Turbotax 2010 download Box 3—Employee Contributions. Turbotax 2010 download   This is the amount of taxes withheld from the railroad employee's earnings that exceeds the amount of taxes that would have been withheld had the earnings been covered under the social security system. Turbotax 2010 download This amount is the employee's cost that you use to figure the tax-free part of the NSSEB and tier 2 benefit you received (the amount shown in box 4). Turbotax 2010 download (For information on how to figure the tax-free part, see Partly Taxable Payments under Taxation of Periodic Payments, later. Turbotax 2010 download ) The amount shown is the total employee contribution amount, not reduced by any amounts that the RRB calculated as previously recovered. Turbotax 2010 download It is the latest amount reported for 2013 and may have increased or decreased from a previous Form RRB-1099-R. Turbotax 2010 download If this amount has changed, the change is retroactive. Turbotax 2010 download You may need to refigure the tax-free part of your NSSEB/tier 2 benefit for 2013 and prior tax years. Turbotax 2010 download If this box is blank, it means that the amount of your NSSEB and tier 2 payments shown in box 4 is fully taxable. Turbotax 2010 download    If you had a previous annuity entitlement that ended and you are figuring the tax-free part of your NSSEB/tier 2 benefit for your current annuity entitlement, you should contact the RRB for confirmation of your correct employee contribution amount. Turbotax 2010 download Box 4—Contributory Amount Paid. Turbotax 2010 download   This is the gross amount of the NSSEB and tier 2 benefit you received in 2013, less any 2013 benefits you repaid in 2013. Turbotax 2010 download (Any benefits you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. Turbotax 2010 download ) This amount is the total contributory pension paid in 2013. Turbotax 2010 download It may be partly taxable and partly tax free or fully taxable. Turbotax 2010 download If you determine you are eligible to compute a tax-free part as explained later in Partly Taxable Payments under Taxation of Periodic Payments, use the latest reported employee contribution amount shown in box 3 as the cost. Turbotax 2010 download Box 5—Vested Dual Benefit. Turbotax 2010 download   This is the gross amount of vested dual benefit (VDB) payments paid in 2013, less any 2013 VDB payments you repaid in 2013. Turbotax 2010 download It is fully taxable. Turbotax 2010 download VDB payments you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. Turbotax 2010 download Note. Turbotax 2010 download The amounts shown in boxes 4 and 5 may represent payments for 2013 and/or other years after 1983. Turbotax 2010 download Box 6—Supplemental Annuity. Turbotax 2010 download   This is the gross amount of supplemental annuity benefits paid in 2013, less any 2013 supplemental annuity benefits you repaid in 2013. Turbotax 2010 download It is fully taxable. Turbotax 2010 download Supplemental annuity benefits you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. Turbotax 2010 download Box 7—Total Gross Paid. Turbotax 2010 download   This is the sum of boxes 4, 5, and 6. Turbotax 2010 download The amount represents the total pension paid in 2013. Turbotax 2010 download Include this amount on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. Turbotax 2010 download Box 8—Repayments. Turbotax 2010 download   This amount represents any NSSEB, tier 2 benefit, VDB, and supplemental annuity benefit you repaid to the RRB in 2013 for years before 2013 or for unknown years. Turbotax 2010 download The amount shown in this box has not been deducted from the amounts shown in boxes 4, 5, and 6. Turbotax 2010 download It only includes repayments of benefits that were taxable to you. Turbotax 2010 download This means it only includes repayments in 2013 of NSSEB benefits paid after 1985, tier 2 and VDB benefits paid after 1983, and supplemental annuity benefits paid in any year. Turbotax 2010 download If you included the benefits in your income in the year you received them, you may be able to deduct the repaid amount. Turbotax 2010 download For more information about repayments, see Repayment of benefits received in an earlier year , later. Turbotax 2010 download    You may have repaid an overpayment of benefits by returning a payment, by making a payment, or by having an amount withheld from your railroad retirement annuity payment. Turbotax 2010 download Box 9—Federal Income Tax Withheld. Turbotax 2010 download   This is the total federal income tax withheld from your NSSEB, tier 2 benefit, VDB, and supplemental annuity benefit. Turbotax 2010 download Include this on your income tax return as tax withheld. Turbotax 2010 download If you are a nonresident alien and your tax withholding rate and/or country of legal residence changed during 2013, you will receive more than one Form RRB-1099-R for 2013. Turbotax 2010 download Determine the total amount of U. Turbotax 2010 download S. Turbotax 2010 download federal income tax withheld from your 2013 RRB NSSEB, tier 2, VDB, and supplemental annuity payments by adding the amounts in box 9 of all original 2013 Forms RRB-1099-R, or the latest corrected or duplicate Forms RRB-1099-R you receive. Turbotax 2010 download Box 10—Rate of Tax. Turbotax 2010 download   If you are taxed as a U. Turbotax 2010 download S. Turbotax 2010 download citizen or resident alien, this box does not apply to you. Turbotax 2010 download If you are a nonresident alien, an entry in this box indicates the rate at which tax was withheld on the NSSEB, tier 2, VDB, and supplemental annuity payments that were paid to you in 2013. Turbotax 2010 download If you are a nonresident alien whose tax was withheld at more than one rate during 2013, you will receive a separate Form RRB-1099-R for each rate change during 2013. Turbotax 2010 download Box 11—Country. Turbotax 2010 download   If you are taxed as a U. Turbotax 2010 download S. Turbotax 2010 download citizen or resident alien, this box does not apply to you. Turbotax 2010 download If you are a nonresident alien, an entry in this box indicates the country of which you were a resident for tax purposes at the time you received railroad retirement payments in 2013. Turbotax 2010 download If you are a nonresident alien who was a resident of more than one country during 2013, you will receive a separate Form RRB-1099-R for each country of residence during 2013. Turbotax 2010 download Box 12—Medicare Premium Total. Turbotax 2010 download   This is for information purposes only. Turbotax 2010 download The amount shown in this box represents the total amount of Part B Medicare premiums deducted from your railroad retirement annuity payments in 2013. Turbotax 2010 download Medicare premium refunds are not included in the Medicare total. Turbotax 2010 download The Medicare total is normally shown on Form RRB-1099 (if you are a citizen or resident alien of the United States) or Form RRB-1042S (if you are a nonresident alien). Turbotax 2010 download However, if Form RRB-1099 or Form RRB-1042S is not required for 2013, then this total will be shown on Form RRB-1099-R. Turbotax 2010 download If your Medicare premiums were deducted from your social security benefits, paid by a third party, refunded to you, and/or you paid the premiums by direct billing, your Medicare total will not be shown in this box. Turbotax 2010 download Repayment of benefits received in an earlier year. Turbotax 2010 download   If you had to repay any railroad retirement benefits that you had included in your income in an earlier year because at that time you thought you had an unrestricted right to it, you can deduct the amount you repaid in the year in which you repaid it. Turbotax 2010 download   If you repaid $3,000 or less in 2013, deduct it on Schedule A (Form 1040), line 23. Turbotax 2010 download The 2%-of-adjusted-gross-income limit applies to this deduction. Turbotax 2010 download You cannot take this deduction if you file Form 1040A. Turbotax 2010 download    If you repaid more than $3,000 in 2013, you can either take a deduction for the amount repaid on Schedule A (Form 1040), line 28 or you can take a credit against your tax. Turbotax 2010 download For more information, see Repayments in Publication 525. Turbotax 2010 download Withholding Tax and Estimated Tax Your retirement plan distributions are subject to federal income tax withholding. Turbotax 2010 download However, you can choose not to have tax withheld on payments you receive unless they are eligible rollover distributions. Turbotax 2010 download (These are distributions, described later under Rollovers, that are eligible for rollover treatment but are not paid directly to another qualified retirement plan or to a traditional IRA. Turbotax 2010 download ) If you choose not to have tax withheld or if you do not have enough tax withheld, you may have to make estimated tax payments. Turbotax 2010 download See Estimated tax , later. Turbotax 2010 download The withholding rules apply to the taxable part of payments you receive from: An employer pension, annuity, profit-sharing, or stock bonus plan, Any other deferred compensation plan, A traditional individual retirement arrangement (IRA), or A commercial annuity. Turbotax 2010 download For this purpose, a commercial annuity means an annuity, endowment, or life insurance contract issued by an insurance company. Turbotax 2010 download There will be no withholding on any part of a distribution where it is reasonable to believe that it will not be includible in gross income. Turbotax 2010 download Choosing no withholding. Turbotax 2010 download   You can choose not to have income tax withheld from retirement plan payments unless they are eligible rollover distributions. Turbotax 2010 download You can make this choice on Form W-4P for periodic and nonperiodic payments. Turbotax 2010 download This choice generally remains in effect until you revoke it. Turbotax 2010 download   The payer will ignore your choice not to have tax withheld if: You do not give the payer your social security number (in the required manner), or The IRS notifies the payer, before the payment is made, that you gave an incorrect social security number. Turbotax 2010 download   To choose not to have tax withheld, a U. Turbotax 2010 download S. Turbotax 2010 download citizen or resident alien must give the payer a home address in the United States or its possessions. Turbotax 2010 download Without that address, the payer must withhold tax. Turbotax 2010 download For example, the payer has to withhold tax if the recipient has provided a U. Turbotax 2010 download S. Turbotax 2010 download address for a nominee, trustee, or agent to whom the benefits are delivered, but has not provided his or her own U. Turbotax 2010 download S. Turbotax 2010 download home address. Turbotax 2010 download   If you do not give the payer a home address in the United States or its possessions, you can choose not to have tax withheld only if you certify to the payer that you are not a U. Turbotax 2010 download S. Turbotax 2010 download citizen, a U. Turbotax 2010 download S. Turbotax 2010 download resident alien, or someone who left the country to avoid tax. Turbotax 2010 download But if you so certify, you may be subject to the 30% flat rate withholding that applies to nonresident aliens. Turbotax 2010 download This 30% rate will not apply if you are exempt or subject to a reduced rate by treaty. Turbotax 2010 download For details, get Publication 519. Turbotax 2010 download Periodic payments. Turbotax 2010 download   Unless you choose no withholding, your annuity or similar periodic payments (other than eligible rollover distributions) will be treated like wages for withholding purposes. Turbotax 2010 download Periodic payments are amounts paid at regular intervals (such as weekly, monthly, or yearly) for a period of time greater than one year (such as for 15 years or for life). Turbotax 2010 download You should give the payer a completed withholding certificate (Form W-4P or a similar form provided by the payer). Turbotax 2010 download If you do not, tax will be withheld as if you were married and claiming three withholding allowances. Turbotax 2010 download   Tax will be withheld as if you were single and were claiming no withholding allowances if: You do not give the payer your social security number (in the required manner), or The IRS notifies the payer (before any payment is made) that you gave an incorrect social security number. Turbotax 2010 download   You must file a new withholding certificate to change the amount of withholding. Turbotax 2010 download Nonperiodic distributions. Turbotax 2010 download    Unless you choose no withholding, the withholding rate for a nonperiodic distribution (a payment other than a periodic payment) that is not an eligible rollover distribution is 10% of the distribution. Turbotax 2010 download You can also ask the payer to withhold an additional amount using Form W-4P. Turbotax 2010 download The part of any loan treated as a distribution (except an offset amount to repay the loan), explained later, is subject to withholding under this rule. Turbotax 2010 download Eligible rollover distribution. Turbotax 2010 download    If you receive an eligible rollover distribution, 20% of it generally will be withheld for income tax. Turbotax 2010 download You cannot choose not to have tax withheld from an eligible rollover distribution. Turbotax 2010 download However, tax will not be withheld if you have the plan administrator pay the eligible rollover distribution directly to another qualified plan or an IRA in a direct rollover. Turbotax 2010 download For more information about eligible rollover distributions, see Rollovers , later. Turbotax 2010 download Estimated tax. Turbotax 2010 download   Your estimated tax is the total of your expected income tax, self-employment tax, and certain other taxes for the year, minus your expected credits and withheld tax. Turbotax 2010 download Generally, you must make estimated tax payments for 2014 if you expect to owe at least $1,000 in tax (after subtracting your withholding and credits) and you expect your withholding and credits to be less than the smaller of: 90% of the tax to be shown on your 2014 return, or 100% of the tax shown on your 2013 return. Turbotax 2010 download If your adjusted gross income for 2013 was more than $150,000 ($75,000 if your filing status for 2014 is married filing separately), substitute 110% for 100% in (2) above. Turbotax 2010 download For more information, get Publication 505, Tax Withholding and Estimated Tax. Turbotax 2010 download In figuring your withholding or estimated tax, remember that a part of your monthly social security or equivalent tier 1 railroad retirement benefits may be taxable. Turbotax 2010 download See Publication 915. Turbotax 2010 download You can choose to have income tax withheld from those benefits. Turbotax 2010 download Use Form W-4V to make this choice. Turbotax 2010 download Cost (Investment in the Contract) Distributions from your pension or annuity plan may include amounts treated as a recovery of your cost (investment in the contract). Turbotax 2010 download If any part of a distribution is treated as a recovery of your cost under the rules explained in this publication, that part is tax free. Turbotax 2010 download Therefore, the first step in figuring how much of a distribution is taxable is to determine the cost of your pension or annuity. Turbotax 2010 download In general, your cost is your net investment in the contract as of the annuity starting date (or the date of the distribution, if earlier). Turbotax 2010 download To find this amount, you must first figure the total premiums, contributions, or other amounts you paid. Turbotax 2010 download This includes the amounts your employer contributed that were taxable to you when paid. Turbotax 2010 download (However, see Foreign employment contributions , later. Turbotax 2010 download ) It does not include amounts withheld from your pay on a tax-deferred basis (money that was taken out of your gross pay before taxes were deducted). Turbotax 2010 download It also does not include amounts you contributed for health and accident benefits (including any additional premiums paid for double indemnity or disability benefits). Turbotax 2010 download From this total cost you must subtract the following amounts. Turbotax 2010 download Any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income and that you received by the later of the annuity starting date or the date on which you received your first payment. Turbotax 2010 download Any other tax-free amounts you received under the contract or plan by the later of the dates in (1). Turbotax 2010 download If you must use the Simplified Method for your annuity payments, the tax-free part of any single-sum payment received in connection with the start of the annuity payments, regardless of when you received it. Turbotax 2010 download (See Simplified Method , later, for information on its required use. Turbotax 2010 download ) If you use the General Rule for your annuity payments, the value of the refund feature in your annuity contract. Turbotax 2010 download (See General Rule , later, for information on its use. Turbotax 2010 download ) Your annuity contract has a refund feature if the annuity payments are for your life (or the lives of you and your survivor) and payments in the nature of a refund of the annuity's cost will be made to your beneficiary or estate if all annuitants die before a stated amount or a stated number of payments are made. Turbotax 2010 download For more information, see Publication 939. Turbotax 2010 download The tax treatment of the items described in (1) through (3) is discussed later under Taxation of Nonperiodic Payments . Turbotax 2010 download Form 1099-R. Turbotax 2010 download If you began receiving periodic payments of a life annuity in 2013, the payer should show your total contributions to the plan in box 9b of your 2013 Form 1099-R. Turbotax 2010 download Annuity starting date defined. Turbotax 2010 download   Your annuity starting date is the later of the first day of the first period for which you received a payment or the date the plan's obligations became fixed. Turbotax 2010 download Example. Turbotax 2010 download On January 1, you completed all your payments required under an annuity contract providing for monthly payments starting on August 1 for the period beginning July 1. Turbotax 2010 download The annuity starting date is July 1. Turbotax 2010 download This is the date you use in figuring the cost of the contract and selecting the appropriate number from Table 1 for line 3 of the Simplified Method Worksheet. Turbotax 2010 download Designated Roth accounts. Turbotax 2010 download   Your cost in these accounts is your designated Roth contributions that were included in your income as wages subject to applicable withholding requirements. Turbotax 2010 download Your cost will also include any in-plan Roth rollovers you included in income. Turbotax 2010 download Foreign employment contributions. Turbotax 2010 download   If you worked abroad, your cost may include contributions by your employer to the retirement plan, but only if those contributions would be excludible from your gross income had they been paid directly to you as compensation. Turbotax 2010 download The contributions that apply are: Contributions before 1963 by your employer, Contributions after 1962 by your employer if the contributions would be excludible from your gross income (not including the foreign earned income exclusion) had they been paid directly to you, or Contributions after 1996 by your employer if you performed the services of a foreign missionary (a duly ordained, commissioned, or licensed minister of a church or a lay person) but only if the contributions would be excludible from your gross income had they been paid directly to you. Turbotax 2010 download Foreign employment contributions while a nonresident alien. Turbotax 2010 download   In determining your cost, special rules apply if you are a U. Turbotax 2010 download S. Turbotax 2010 download citizen or resident alien who received distributions in 2013 from a plan to which contributions were made while you were a nonresident alien. Turbotax 2010 download Your contributions and your employer's contributions are not included in your cost if the contribution: Was made based on compensation which was for services performed outside the United States while you were a nonresident alien, and Was not subject to income tax under the laws of the United States or any foreign country, but only if the contribution would have been subject to income tax if paid as cash compensation when the services were performed. Turbotax 2010 download Taxation of Periodic Payments This section explains how the periodic payments you receive from a pension or annuity plan are taxed. Turbotax 2010 download Periodic payments are amounts paid at regular intervals (such as weekly, monthly, or yearly) for a period of time greater than one year (such as for 15 years or for life). Turbotax 2010 download These payments are also known as amounts received as an annuity. Turbotax 2010 download If you receive an amount from your plan that is not a periodic payment, see Taxation of Nonperiodic Payments , later. Turbotax 2010 download In general, you can recover the cost of your pension or annuity tax free over the period you are to receive the payments. Turbotax 2010 download The amount of each payment that is more than the part that represents your cost is taxable (however, see Insurance Premiums for Retired Public Safety Officers , earlier). Turbotax 2010 download Designated Roth accounts. Turbotax 2010 download   If you receive a qualified distribution from a designated Roth account, the distribution is not included in your gross income. Turbotax 2010 download This applies to both your cost in the account and income earned on that account. Turbotax 2010 download A qualified distribution is generally a distribution that is: Made after a 5-tax-year period of participation, and Made on or after the date you reach age 59½, made to a beneficiary or your estate on or after your death, or attributable to your being disabled. Turbotax 2010 download   If the distribution is not a qualified distribution, the rules discussed in this section apply. Turbotax 2010 download The designated Roth account is treated as a separate contract. Turbotax 2010 download Period of participation. Turbotax 2010 download   The 5-tax-year period of participation is the 5-tax-year period beginning with the first tax year for which the participant made a designated Roth contribution to the plan. Turbotax 2010 download Therefore, for designated Roth contributions made for 2013, the first year for which a qualified distribution can be made is 2018. Turbotax 2010 download   However, if a direct rollover is made to the plan from a designated Roth account under another plan, the 5-tax-year period for the recipient plan begins with the first tax year for which the participant first had designated Roth contributions made to the other plan. Turbotax 2010 download   Your 401(k), 403(b), or 457(b) plan may permit you to roll over amounts from those plans to a designated Roth account within the same plan. Turbotax 2010 download This is known as an in-plan Roth rollover. Turbotax 2010 download For more details, see In-plan Roth rollovers , later. Turbotax 2010 download Fully Taxable Payments The pension or annuity payments that you receive are fully taxable if you have no cost in the contract because any of the following situations applies to you (however, see Insurance Premiums for Retired Public Safety Officers , earlier). Turbotax 2010 download You did not pay anything or are not considered to have paid anything for your pension or annuity. Turbotax 2010 download Amounts withheld from your pay on a tax-deferred basis are not considered part of the cost of the pension or annuity payment. Turbotax 2010 download Your employer did not withhold contributions from your salary. Turbotax 2010 download You got back all of your contributions tax free in prior years (however, see Exclusion not limited to cost under Partly Taxable Payments, later). Turbotax 2010 download Report the total amount you got on Form 1040, line 16b; Form 1040A, line 12b; or on Form 1040NR, line 17b. Turbotax 2010 download You should make no entry on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. Turbotax 2010 download Deductible voluntary employee contributions. Turbotax 2010 download   Distributions you receive that are based on your accumulated deductible voluntary employee contributions are generally fully taxable in the year distributed to you. Turbotax 2010 download Accumulated deductible voluntary employee contributions include net earnings on the contributions. Turbotax 2010 download If distributed as part of a lump sum, they do not qualify for the 10-year tax option or capital gain treatment, explained later. Turbotax 2010 download Partly Taxable Payments If you have a cost to recover from your pension or annuity plan (see Cost (Investment in the Contract) , earlier), you can exclude part of each annuity payment from income as a recovery of your cost. Turbotax 2010 download This tax-free part of the payment is figured when your annuity starts and remains the same each year, even if the amount of the payment changes. Turbotax 2010 download The rest of each payment is taxable (however, see Insurance Premiums for Retired Public Safety Officers , earlier). Turbotax 2010 download You figure the tax-free part of the payment using one of the following methods. Turbotax 2010 download Simplified Method. Turbotax 2010 download You generally must use this method if your annuity is paid under a qualified plan (a qualified employee plan, a qualified employee annuity, or a tax-sheltered annuity plan or contract). Turbotax 2010 download You cannot use this method if your annuity is paid under a nonqualified plan. Turbotax 2010 download General Rule. Turbotax 2010 download You must use this method if your annuity is paid under a nonqualified plan. Turbotax 2010 download You generally cannot use this method if your annuity is paid under a qualified plan. Turbotax 2010 download You determine which method to use when you first begin receiving your annuity, and you continue using it each year that you recover part of your cost. Turbotax 2010 download If you had more than one partly taxable pension or annuity, figure the tax-free part and the taxable part of each separately. Turbotax 2010 download Qualified plan annuity starting before November 19, 1996. Turbotax 2010 download   If your annuity is paid under a qualified plan and your annuity starting date (defined earlier under Cost (Investment in the Contract) ) is after July 1, 1986, and before November 19, 1996, you could have chosen to use either the Simplified Method or the General Rule. Turbotax 2010 download If your annuity starting date is before July 2, 1986, you use the General Rule unless your annuity qualified for the Three-Year Rule. Turbotax 2010 download If you used the Three-Year Rule (which was repealed for annuities starting after July 1, 1986), your annuity payments are generally now fully taxable. Turbotax 2010 download Exclusion limit. Turbotax 2010 download   Your annuity starting date determines the total amount of annuity payments that you can exclude from income over the years. Turbotax 2010 download Once your annuity starting date is determined, it does not change. Turbotax 2010 download If you calculate the taxable portion of your annuity payments using the simplified method worksheet, the annuity starting date determines the recovery period for your cost. Turbotax 2010 download That recovery period begins on your annuity starting date and is not affected by the date you first complete the worksheet. Turbotax 2010 download Exclusion limited to cost. Turbotax 2010 download   If your annuity starting date is after 1986, the total amount of annuity income that you can exclude over the years as a recovery of the cost cannot exceed your total cost. Turbotax 2010 download Any unrecovered cost at your (or the last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. Turbotax 2010 download This deduction is not subject to the 2%-of-adjusted-gross-income limit. Turbotax 2010 download Example 1. Turbotax 2010 download Your annuity starting date is after 1986, and you exclude $100 a month ($1,200 a year) under the Simplified Method. Turbotax 2010 download The total cost of your annuity is $12,000. Turbotax 2010 download Your exclusion ends when you have recovered your cost tax free, that is, after 10 years (120 months). Turbotax 2010 download After that, your annuity payments are generally fully taxable. Turbotax 2010 download Example 2. Turbotax 2010 download The facts are the same as in Example 1, except you die (with no surviving annuitant) after the eighth year of retirement. Turbotax 2010 download You have recovered tax free only $9,600 (8 × $1,200) of your cost. Turbotax 2010 download An itemized deduction for your unrecovered cost of $2,400 ($12,000 – $9,600) can be taken on your final return. Turbotax 2010 download Exclusion not limited to cost. Turbotax 2010 download   If your annuity starting date is before 1987, you can continue to take your monthly exclusion for as long as you receive your annuity. Turbotax 2010 download If you chose a joint and survivor annuity, your survivor can continue to take the survivor's exclusion figured as of the annuity starting date. Turbotax 2010 download The total exclusion may be more than your cost. Turbotax 2010 download Simplified Method Under the Simplified Method, you figure the tax-free part of each annuity payment by dividing your cost by the total number of anticipated monthly payments. Turbotax 2010 download For an annuity that is payable for the lives of the annuitants, this number is based on the annuitants' ages on the annuity starting date and is determined from a table. Turbotax 2010 download For any other annuity, this number is the number of monthly annuity payments under the contract. Turbotax 2010 download Who must use the Simplified Method. Turbotax 2010 download   You must use the Simplified Method if your annuity starting date is after November 18, 1996, and you meet both of the following conditions. Turbotax 2010 download You receive your pension or annuity payments from any of the following plans. Turbotax 2010 download A qualified employee plan. Turbotax 2010 download A qualified employee annuity. Turbotax 2010 download A tax-sheltered annuity plan (403(b) plan). Turbotax 2010 download On your annuity starting date, at least one of the following conditions applies to you. Turbotax 2010 download You are under age 75. Turbotax 2010 download You are entitled to less than 5 years of guaranteed payments. Turbotax 2010 download Guaranteed payments. Turbotax 2010 download   Your annuity contract provides guaranteed payments if a minimum number of payments or a minimum amount (for example, the amount of your investment) is payable even if you and any survivor annuitant do not live to receive the minimum. Turbotax 2010 download If the minimum amount is less than the total amount of the payments you are to receive, barring death, during the first 5 years after payments begin (figured by ignoring any payment increases), you are entitled to less than 5 years of guaranteed payments. Turbotax 2010 download Annuity starting before November 19, 1996. Turbotax 2010 download   If your annuity starting date is after July 1, 1986, and before November 19, 1996, and you chose to use the Simplified Method, you must continue to use it each year that you recover part of your cost. Turbotax 2010 download You could have chosen to use the Simplified Method if your annuity is payable for your life (or the lives of you and your survivor annuitant) and you met both of the conditions listed earlier under Who must use the Simplified Method . Turbotax 2010 download Who cannot use the Simplified Method. Turbotax 2010 download   You cannot use the Simplified Method if you receive your pension or annuity from a nonqualified plan or otherwise do not meet the conditions described in the preceding discussion. Turbotax 2010 download See General Rule , later. Turbotax 2010 download How to use the Simplified Method. Turbotax 2010 download    Complete Worksheet A in the back of this publication to figure your taxable annuity for 2013. Turbotax 2010 download Be sure to keep the completed worksheet; it will help you figure your taxable annuity next year. Turbotax 2010 download   To complete line 3 of the worksheet, you must determine the total number of expected monthly payments for your annuity. Turbotax 2010 download How you do this depends on whether the annuity is for a single life, multiple lives, or a fixed period. Turbotax 2010 download For this purpose, treat an annuity that is payable over the life of an annuitant as payable for that annuitant's life even if the annuity has a fixed-period feature or also provides a temporary annuity payable to the annuitant's child under age 25. Turbotax 2010 download    You do not need to complete line 3 of the worksheet or make the computation on line 4 if you received annuity payments last year and used last year's worksheet to figure your taxable annuity. Turbotax 2010 download Instead, enter the amount from line 4 of last year's worksheet on line 4 of this year's worksheet. Turbotax 2010 download Single-life annuity. Turbotax 2010 download   If your annuity is payable for your life alone, use Table 1 at the bottom of the worksheet to determine the total number of expected monthly payments. Turbotax 2010 download Enter on line 3 the number shown for your age on your annuity starting date. Turbotax 2010 download This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. Turbotax 2010 download Multiple-lives annuity. Turbotax 2010 download   If your annuity is payable for the lives of more than one annuitant, use Table 2 at the bottom of the worksheet to determine the total number of expected monthly payments. Turbotax 2010 download Enter on line 3 the number shown for the annuitants' combined ages on the annuity starting date. Turbotax 2010 download For an annuity payable to you as the primary annuitant and to more than one survivor annuitant, combine your age and the age of the youngest survivor annuitant. Turbotax 2010 download For an annuity that has no primary annuitant and is payable to you and others as survivor annuitants, combine the ages of the oldest and youngest annuitants. Turbotax 2010 download Do not treat as a survivor annuitant anyone whose entitlement to payments depends on an event other than the primary annuitant's death. Turbotax 2010 download   However, if your annuity starting date is before 1998, do not use Table 2 and do not combine the annuitants' ages. Turbotax 2010 download Instead, you must use Table 1 at the bottom of the worksheet and enter on line 3 the number shown for the primary annuitant's age on the annuity starting date. Turbotax 2010 download This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. Turbotax 2010 download Fixed-period annuity. Turbotax 2010 download   If your annuity does not depend in whole or in part on anyone's life expectancy, the total number of expected monthly payments to enter on line 3 of the worksheet is the number of monthly annuity payments under the contract. Turbotax 2010 download Line 6. Turbotax 2010 download   The amount on line 6 should include all amounts that could have been recovered in prior years. Turbotax 2010 download If you did not recover an amount in a prior year, you may be able to amend your returns for the affected years. Turbotax 2010 download Example. Turbotax 2010 download Bill Smith, age 65, began receiving retirement benefits in 2013 under a joint and survivor annuity. Turbotax 2010 download Bill's annuity starting date is January 1, 2013. Turbotax 2010 download The benefits are to be paid for the joint lives of Bill and his wife, Kathy, age 65. Turbotax 2010 download Bill had contributed $31,000 to a qualified plan and had received no distributions before the annuity starting date. Turbotax 2010 download Bill is to receive a retirement benefit of $1,200 a month, and Kathy is to receive a monthly survivor benefit of $600 upon Bill's death. Turbotax 2010 download Bill must use the Simplified Method to figure his taxable annuity because his payments are from a qualified plan and he is under age 75. Turbotax 2010 download Because his annuity is payable over the lives of more than one annuitant, he uses his and Kathy's combined ages and Table 2 at the bottom of Worksheet A in completing line 3 of the worksheet. Turbotax 2010 download His completed worksheet is shown later. Turbotax 2010 download Bill's tax-free monthly amount is $100 ($31,000 ÷ 310) as shown on line 4 of the worksheet. Turbotax 2010 download Upon Bill's death, if Bill has not recovered the full $31,000 investment, Kathy will also exclude $100 from her $600 monthly payment. Turbotax 2010 download The full amount of any annuity payments received after 310 payments are paid must be included in gross income. Turbotax 2010 download If Bill and Kathy die before 310 payments are made, a miscellaneous itemized deduction will be allowed for the unrecovered cost on the final income tax return of the last to die. Turbotax 2010 download This deduction is not subject to the 2%-of-adjusted-gross-income limit. Turbotax 2010 download Worksheet A. Turbotax 2010 download Simplified Method Worksheet for Bill Smith 1. Turbotax 2010 download Enter the total pension or annuity payments received this year. Turbotax 2010 download Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a 1. Turbotax 2010 download $14,400 2. Turbotax 2010 download Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion. Turbotax 2010 download * See Cost (Investment in the Contract) , earlier 2. Turbotax 2010 download 31,000   Note. Turbotax 2010 download If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year's worksheet on line 4 below (even if the amount of your pension or annuity has changed). Turbotax 2010 download Otherwise, go to line 3. Turbotax 2010 download     3. Turbotax 2010 download Enter the appropriate number from Table 1 below. Turbotax 2010 download But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, enter the appropriate number from Table 2 below 3. Turbotax 2010 download 310 4. Turbotax 2010 download Divide line 2 by the number on line 3 4. Turbotax 2010 download 100 5. Turbotax 2010 download Multiply line 4 by the number of months for which this year's payments were made. Turbotax 2010 download If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. Turbotax 2010 download Otherwise, go to line 6 5. Turbotax 2010 download 1,200 6. Turbotax 2010 download Enter any amount previously recovered tax free in years after 1986. Turbotax 2010 download This is the amount shown on line 10 of your worksheet for last year 6. Turbotax 2010 download -0- 7. Turbotax 2010 download Subtract line 6 from line 2 7. Turbotax 2010 download 31,000 8. Turbotax 2010 download Enter the smaller of line 5 or line 7 8. Turbotax 2010 download 1,200 9. Turbotax 2010 download Taxable amount for year. Turbotax 2010 download Subtract line 8 from line 1. Turbotax 2010 download Enter the result, but not less than zero. Turbotax 2010 download Also, add this amount to the total for Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Turbotax 2010 download Note: If your Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. Turbotax 2010 download If you are a retired public safety officer, see Insurance Premiums for Retired Public Safety Officers , earlier, before entering an amount on your tax return 9. Turbotax 2010 download $13,200 10. Turbotax 2010 download Was your annuity starting date before 1987? □ Yes. Turbotax 2010 download STOP. Turbotax 2010 download Do not complete the rest of this worksheet. Turbotax 2010 download  ☑ No. Turbotax 2010 download Add lines 6 and 8. Turbotax 2010 download This is the amount you have recovered tax free through 2013. Turbotax 2010 download You will need this number if you need to fill out this worksheet next year 10. Turbotax 2010 download 1,200 11. Turbotax 2010 download Balance of cost to be recovered. Turbotax 2010 download Subtract line 10 from line 2. Turbotax 2010 download If zero, you will not have to complete this worksheet next year. Turbotax 2010 download The payments you receive next year will generally be fully taxable 11. Turbotax 2010 download $29,800         * A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996. Turbotax 2010 download           Table 1 for Line 3 Above       AND your annuity starting date was—     IF the age at annuity starting date was. Turbotax 2010 download . Turbotax 2010 download . Turbotax 2010 download BEFORE November 19, 1996, enter on line 3. Turbotax 2010 download . Turbotax 2010 download . Turbotax 2010 download AFTER November 18, 1996, enter on line 3. Turbotax 2010 download . Turbotax 2010 download . Turbotax 2010 download     55 or under 300 360     56-60 260 310     61-65 240 260     66-70 170 210     71 or older 120 160     Table 2 for Line 3 Above     IF the combined ages at  annuity starting date were. Turbotax 2010 download . Turbotax 2010 download . Turbotax 2010 download THEN enter on line 3. Turbotax 2010 download . Turbotax 2010 download . Turbotax 2010 download     110 or under   410     111-120   360     121-130   310     131-140   260     141 or older   210   Multiple annuitants. Turbotax 2010 download   If you and one or more other annuitants receive payments at the same time, you exclude from each annuity payment a pro rata share of the monthly tax-free amount. Turbotax 2010 download Figure your share by taking the following steps. Turbotax 2010 download Complete your worksheet through line 4 to figure the monthly tax-free amount. Turbotax 2010 download Divide the amount of your monthly payment by the total amount of the monthly payments to all annuitants. Turbotax 2010 download Multiply the amount on line 4 of your worksheet by the amount figured in (2) above. Turbotax 2010 download The result is your share of the monthly tax-free amount. Turbotax 2010 download   Replace the amount on line 4 of the worksheet with the result in (3) above. Turbotax 2010 download Enter that amount on line 4 of your worksheet each year. Turbotax 2010 download General Rule Under the General Rule, you determine the tax-free part of each annuity payment based on the ratio of the cost of the contract to the total expected return. Turbotax 2010 download Expected return is the total amount you and other eligible annuitants can expect to receive under the contract. Turbotax 2010 download To figure it, you must use life expectancy (actuarial) tables prescribed by the IRS. Turbotax 2010 download Who must use the General Rule. Turbotax 2010 download   You must use the General Rule if you receive pension or annuity payments from: A nonqualified plan (such as a private annuity, a purchased commercial annuity, or a nonqualified employee plan), or A qualified plan if you are age 75 or older on your annuity starting date and your annuity payments are guaranteed for at least 5 years. Turbotax 2010 download Annuity starting before November 19, 1996. Turbotax 2010 download   If your annuity starting date is after July 1, 1986, and before November 19, 1996, you had to use the General Rule for either circumstance just described. Turbotax 2010 download You also had to use it for any fixed-period annuity. Turbotax 2010 download If you did not have to use the General Rule, you could have chosen to use it. Turbotax 2010 download If your annuity starting date is before July 2, 1986, you had to use the General Rule unless you could use the Three-Year Rule. Turbotax 2010 download   If you had to use the General Rule (or chose to use it), you must continue to use it each year that you recover your cost. Turbotax 2010 download Who cannot use the General Rule. Turbotax 2010 download   You cannot use the General Rule if you receive your pension or annuity from a qualified plan and none of the circumstances described in the preceding discussions apply to you. Turbotax 2010 download See Simplified Method , earlier. Turbotax 2010 download More information. Turbotax 2010 download   For complete information on using the General Rule, including the actuarial tables you need, see Publication 939. Turbotax 2010 download Taxation of Nonperiodic Payments This section of the publication explains how any nonperiodic distributions you receive under a pension or annuity plan are taxed. Turbotax 2010 download Nonperiodic distributions are also known as amounts not received as an annuity. Turbotax 2010 download They include all payments other than periodic payments and corrective distributions. Turbotax 2010 download For example, the following items are treated as nonperiodic distributions. Turbotax 2010 download Cash withdrawals. Turbotax 2010 download Distributions of current earnings (dividends) on your investment. Turbotax 2010 download However, do not include these distributions in your income to the extent the insurer keeps them to pay premiums or other consideration for the contract. Turbotax 2010 download Certain loans. Turbotax 2010 download See Loans Treated as Distributions , later. Turbotax 2010 download The value of annuity contracts transferred without full and adequate consideration. Turbotax 2010 download See Transfers of Annuity Contracts , later. Turbotax 2010 download Corrective distributions of excess plan contributions. Turbotax 2010 download   Generally, if the contributions made for you during the year to certain retirement plans exceed certain limits, the excess is taxable to you. Turbotax 2010 download To correct an excess, your plan may distribute it to you (along with any income earned on the excess). Turbotax 2010 download Although the plan reports the corrective distributions on Form 1099-R, the distribution is not treated as a nonperiodic distribution from the plan. Turbotax 2010 download It is not subject to the allocation rules explained in the following discussion, it cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. Turbotax 2010 download    If your retirement plan made a corrective distribution of excess amounts (excess deferrals, excess contributions, or excess annual additions), your Form 1099-R should have the code “8,” “B,” “P,” or “E” in box 7. Turbotax 2010 download   For information on plan contribution limits and how to report corrective distributions of excess contributions, see Retirement Plan Contributions under Employee Compensation in Publication 525. Turbotax 2010 download Figuring the Taxable Amount How you figure the taxable amount of a nonperiodic distribution depends on whether it is made before the annuity starting date, or on or after the annuity starting date. Turbotax 2010 download If it is made before the annuity starting date, its tax treatment also depends on whether it is made under a qualified or nonqualified plan. Turbotax 2010 download If it is made under a nonqualified plan, its tax treatment depends on whether it fully discharges the contract, is received under certain life insurance or endowment contracts, or is allocable to an investment you made before August 14, 1982. Turbotax 2010 download You may be able to roll over the taxable amount of a nonperiodic distribution from a qualified retirement plan into another qualified retirement plan or a traditional IRA tax free. Turbotax 2010 download See Rollovers, later. Turbotax 2010 download If you do not make a tax-free rollover and the distribution qualifies as a lump-sum distribution, you may be able to elect an optional method of figuring the tax on the taxable amount. Turbotax 2010 download See Lump-Sum Distributions, later. Turbotax 2010 download Annuity starting date. Turbotax 2010 download   The annuity starting date is either the first day of the first period for which you receive an annuity payment under the contract or the date on which the obligation under the contract becomes fixed, whichever is later. Turbotax 2010 download Distributions of employer securities. Turbotax 2010 download    If you receive a distribution of employer securities from a qualified retirement plan, you may be able to defer the tax on the net unrealized appreciation (NUA) in the securities. Turbotax 2010 download The NUA is the net increase in the securities' value while they were in the trust. Turbotax 2010 download This tax deferral applies to distributions of the employer corporation's stocks, bonds, registered debentures, and debentures with interest coupons attached. Turbotax 2010 download   If the distribution is a lump-sum distribution, tax is deferred on all of the NUA unless you choose to include it in your income for the year of the distribution. Turbotax 2010 download    A lump-sum distribution for this purpose is the distribution or payment of a plan participant's entire balance (within a single tax year) from all of the employer's qualified plans of one kind (pension, profit-sharing, or stock bonus plans), but only if paid: Because of the plan participant's death, After the participant reaches age 59½, Because the participant, if an employee, separates from service, or After the participant, if a self-employed individual, becomes totally and permanently disabled. Turbotax 2010 download    If you choose to include NUA in your income for the year of the distribution and the participant was born before January 2, 1936, you may be able to figure the tax on the NUA using the optional methods described und
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Turbotax 2010 download 10. Turbotax 2010 download   Self-Employment (SE) Tax Table of Contents Who Must Pay SE Tax?Special Rules and Exceptions Figuring Earnings Subject to SE Tax Farm Optional Method Using Both Optional Methods Reporting Self-Employment Tax The SE tax rules apply no matter how old you are and even if you are already receiving social security and Medicare benefits. Turbotax 2010 download Who Must Pay SE Tax? Generally, you must pay SE tax and file Schedule SE (Form 1040) if your net earnings from self-employment were $400 or more. Turbotax 2010 download Use Schedule SE to figure net earnings from self-employment. Turbotax 2010 download Sole proprietor or independent contractor. Turbotax 2010 download   If you are self-employed as a sole proprietor or independent contractor, you generally use Schedule C or C-EZ (Form 1040) to figure your earnings subject to SE tax. Turbotax 2010 download SE tax rate. Turbotax 2010 download    For 2013, the SE tax rate on net earnings is 15. Turbotax 2010 download 3% (12. Turbotax 2010 download 4% social security tax plus 2. Turbotax 2010 download 9% Medicare tax). Turbotax 2010 download Maximum earnings subject to self-employment tax. Turbotax 2010 download    Only the first $113,700 of your combined wages, tips, and net earnings in 2013 is subject to any combination of the 12. Turbotax 2010 download 4% social security part of SE tax, social security tax, or railroad retirement (tier 1) tax. Turbotax 2010 download   All of your combined wages, tips, and net earnings in 2013 are subject to any combination of the 2. Turbotax 2010 download 9% Medicare part of SE tax, social security tax, or railroad retirement (tier 1) tax. Turbotax 2010 download   If your wages and tips are subject to either social security or railroad retirement (tier 1) tax, or both, and total at least $113,700, do not pay the 12. Turbotax 2010 download 4% social security part of the SE tax on any of your net earnings. Turbotax 2010 download However, you must pay the 2. Turbotax 2010 download 9% Medicare part of the SE tax on all your net earnings. Turbotax 2010 download Special Rules and Exceptions Aliens. Turbotax 2010 download   Generally, resident aliens must pay self-employment tax under the same rules that apply to U. Turbotax 2010 download S. Turbotax 2010 download citizens. Turbotax 2010 download Nonresident aliens are not subject to SE tax unless an international social security agreement in effect determines that they are covered under the U. Turbotax 2010 download S. Turbotax 2010 download social security system. Turbotax 2010 download However, residents of the Virgin Islands, Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, or American Samoa are subject to self-employment tax, as they are considered U. Turbotax 2010 download S. Turbotax 2010 download residents for self-employment tax purposes. Turbotax 2010 download For more information on aliens, see Publication 519, U. Turbotax 2010 download S. Turbotax 2010 download Tax Guide for Aliens. Turbotax 2010 download Child employed by parent. Turbotax 2010 download   You are not subject to SE tax if you are under age 18 and you are working for your father or mother. Turbotax 2010 download Church employee. Turbotax 2010 download    If you work for a church or a qualified church-controlled organization (other than as a minister or member of a religious order) that elected an exemption from social security and Medicare taxes, you are subject to SE tax if you receive $108. Turbotax 2010 download 28 or more in wages from the church or organization. Turbotax 2010 download For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. Turbotax 2010 download Fishing crew member. Turbotax 2010 download   If you are a member of the crew on a boat that catches fish or other water life, your earnings are subject to SE tax if all the following conditions apply. Turbotax 2010 download You do not get any pay for the work except your share of the catch or a share of the proceeds from the sale of the catch, unless the pay meets all the following conditions. Turbotax 2010 download The pay is not more than $100 per trip. Turbotax 2010 download The pay is received only if there is a minimum catch. Turbotax 2010 download The pay is solely for additional duties (such as mate, engineer, or cook) for which additional cash pay is traditional in the fishing industry. Turbotax 2010 download You get a share of the catch or a share of the proceeds from the sale of the catch. Turbotax 2010 download Your share depends on the amount of the catch. Turbotax 2010 download The boat's operating crew normally numbers fewer than 10 individuals. Turbotax 2010 download (An operating crew is considered as normally made up of fewer than 10 if the average size of the crew on trips made during the last four calendar quarters is fewer than 10. Turbotax 2010 download ) Notary public. Turbotax 2010 download   Fees you receive for services you perform as a notary public are reported on Schedule C or C-EZ but are not subject to self-employment tax (see the Instructions for Schedule SE (Form 1040)). Turbotax 2010 download State or local government employee. Turbotax 2010 download   You are subject to SE tax if you are an employee of a state or local government, are paid solely on a fee basis, and your services are not covered under a federal-state social security agreement. Turbotax 2010 download Foreign government or international organization employee. Turbotax 2010 download   You are subject to SE tax if both the following conditions are true. Turbotax 2010 download You are a U. Turbotax 2010 download S. Turbotax 2010 download citizen employed in the United States, Puerto Rico, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, or the Virgin Islands by: A foreign government, A wholly-owned agency of a foreign government, or An international organization. Turbotax 2010 download Your employer is not required to withhold social security and Medicare taxes from your wages. Turbotax 2010 download U. Turbotax 2010 download S. Turbotax 2010 download citizen or resident alien residing abroad. Turbotax 2010 download    If you are a self-employed U. Turbotax 2010 download S. Turbotax 2010 download citizen or resident alien living outside the United States, in most cases you must pay SE tax. Turbotax 2010 download Do not reduce your foreign earnings from self-employment by your foreign earned income exclusion. Turbotax 2010 download Exception. Turbotax 2010 download    The United States has social security agreements with many countries to eliminate double taxation under two social security systems. Turbotax 2010 download Under these agreements, you generally must only pay social security and Medicare taxes to the country in which you live. Turbotax 2010 download The country to which you must pay the tax will issue a certificate which serves as proof of exemption from social security tax in the other country. Turbotax 2010 download   For more information, see the Instructions for Schedule SE (Form 1040). Turbotax 2010 download More Than One Business If you have earnings subject to SE tax from more than one trade, business, or profession, you must combine the net profit (or loss) from each to determine your total earnings subject to SE tax. Turbotax 2010 download A loss from one business reduces your profit from another business. Turbotax 2010 download Community Property Income If any of the income from a trade or business, other than a partnership, is community property income under state law, it is included in the earnings subject to SE tax of the spouse carrying on the trade or business. Turbotax 2010 download Gain or Loss Do not include in earnings subject to SE tax a gain or loss from the disposition of property that is neither stock in trade nor held primarily for sale to customers. Turbotax 2010 download It does not matter whether the disposition is a sale, exchange, or an involuntary conversion. Turbotax 2010 download Lost Income Payments If you are self-employed and reduce or stop your business activities, any payment you receive from insurance or other sources for the lost business income is included in earnings subject to SE tax. Turbotax 2010 download If you are not working when you receive the payment, it still relates to your business and is included in earnings subject to SE tax, even though your business is temporarily inactive. Turbotax 2010 download Figuring Earnings Subject to SE Tax Methods for Figuring Net Earnings There are three ways to figure your net earnings from self-employment. Turbotax 2010 download The regular method. Turbotax 2010 download The nonfarm optional method. Turbotax 2010 download The farm optional method. Turbotax 2010 download You must use the regular method unless you are eligible to use one or both of the optional methods. Turbotax 2010 download Why use an optional method?    You may want to use the optional methods (discussed later) when you have a loss or a small net profit and any one of the following applies. Turbotax 2010 download You want to receive credit for social security benefit coverage. Turbotax 2010 download You incurred child or dependent care expenses for which you could claim a credit. Turbotax 2010 download (An optional method may increase your earned income, which could increase your credit. Turbotax 2010 download ) You are entitled to the earned income credit. Turbotax 2010 download (An optional method may increase your earned income, which could increase your credit. Turbotax 2010 download ) You are entitled to the additional child tax credit. Turbotax 2010 download (An optional method may increase your earned income, which could increase your credit. Turbotax 2010 download ) Effects of using an optional method. Turbotax 2010 download   Using an optional method could increase your SE tax. Turbotax 2010 download Paying more SE tax could result in your getting higher benefits when you retire. Turbotax 2010 download   If you use either or both optional methods, you must figure and pay the SE tax due under these methods even if you would have had a smaller tax or no tax using the regular method. Turbotax 2010 download   The optional methods may be used only to figure your SE tax. Turbotax 2010 download To figure your income tax, include your actual earnings in gross income, regardless of which method you use to determine SE tax. Turbotax 2010 download Regular Method Multiply your total earnings subject to SE tax by 92. Turbotax 2010 download 35% (. Turbotax 2010 download 9235) to get your net earnings under the regular method. Turbotax 2010 download See Short Schedule SE, line 4, or Long Schedule SE, line 4a. Turbotax 2010 download Net earnings figured using the regular method are also called actual net earnings. Turbotax 2010 download Nonfarm Optional Method Use the nonfarm optional method only for earnings that do not come from farming. Turbotax 2010 download You may use this method if you meet all the following tests. Turbotax 2010 download You are self-employed on a regular basis. Turbotax 2010 download This means that your actual net earnings from self-employment were $400 or more in at least 2 of the 3 tax years before the one for which you use this method. Turbotax 2010 download The net earnings can be from either farm or nonfarm earnings or both. Turbotax 2010 download You have used this method less than 5 years. Turbotax 2010 download (There is a 5-year lifetime limit. Turbotax 2010 download ) The years do not have to be one after another. Turbotax 2010 download Your net nonfarm profits were: Less than $5,024, and Less than 72. Turbotax 2010 download 189% of your gross nonfarm income. Turbotax 2010 download Net nonfarm profits. Turbotax 2010 download   Net nonfarm profit generally is the total of the amounts from: Line 31, Schedule C (Form 1040), Line 3, Schedule C-EZ (Form 1040), Box 14, code A, Schedule K-1 (Form 1065) (from nonfarm partnerships), and Box 9, code J1, Schedule K-1 (Form 1065-B). Turbotax 2010 download   However, you may need to adjust the amount reported on Schedule K-1 if you are a general partner or if it is a loss. Turbotax 2010 download Gross nonfarm income. Turbotax 2010 download   Your gross nonfarm income generally is the total of the amounts from: Line 7, Schedule C (Form 1040), Line 1, Schedule C-EZ (Form 1040), Box 14, code C, Schedule K-1 (Form 1065) (from nonfarm partnerships), and Box 9, code J2, Schedule K-1 (Form 1065-B). Turbotax 2010 download Figuring Nonfarm Net Earnings If you meet the three tests explained earlier, use the following table to figure your net earnings from self-employment under the nonfarm optional method. Turbotax 2010 download Table 10-1. Turbotax 2010 download Figuring Nonfarm Net Earnings IF your gross nonfarm income is. Turbotax 2010 download . Turbotax 2010 download . Turbotax 2010 download THEN your net earnings are equal to. Turbotax 2010 download . Turbotax 2010 download . Turbotax 2010 download $6,960 or less Two-thirds of your gross nonfarm income. Turbotax 2010 download More than $6,960 $4,640 Actual net earnings. Turbotax 2010 download   Your actual net earnings are 92. Turbotax 2010 download 35% of your total earnings subject to SE tax (that is, multiply total earnings subject to SE tax by 92. Turbotax 2010 download 35% (. Turbotax 2010 download 9235) to get actual net earnings). Turbotax 2010 download Actual net earnings are equivalent to net earnings figured using the regular method. Turbotax 2010 download Optional net earnings less than actual net earnings. Turbotax 2010 download   You cannot use this method to report an amount less than your actual net earnings from self-employment. Turbotax 2010 download Gross nonfarm income of $6,960 or less. Turbotax 2010 download   The following examples illustrate how to figure net earnings when gross nonfarm income is $6,960 or less. Turbotax 2010 download Example 1. Turbotax 2010 download Net nonfarm profit less than $5,024 and less than 72. Turbotax 2010 download 189% of gross nonfarm income. Turbotax 2010 download Ann Green runs a craft business. Turbotax 2010 download Her actual net earnings from self-employment were $800 in 2011 and $900 in 2012. Turbotax 2010 download She meets the test for being self-employed on a regular basis. Turbotax 2010 download She has used the nonfarm optional method less than 5 years. Turbotax 2010 download Her gross income and net profit in 2013 are as follows: Gross nonfarm income $5,400 Net nonfarm profit $1,200 Ann's actual net earnings for 2013 are $1,108 ($1,200 × . Turbotax 2010 download 9235). Turbotax 2010 download Because her net profit is less than $5,024 and less than 72. Turbotax 2010 download 189% of her gross income, she can use the nonfarm optional method to figure net earnings of $3,600 (2/3 × $5,400). Turbotax 2010 download Because these net earnings are higher than her actual net earnings, she can report net earnings of $3,600 for 2013. Turbotax 2010 download Example 2. Turbotax 2010 download Net nonfarm profit less than $5,024 but not less than 72. Turbotax 2010 download 189% of gross nonfarm income. Turbotax 2010 download Assume that in Example 1 Ann's gross income is $1,000 and her net profit is $800. Turbotax 2010 download She must use the regular method to figure her net earnings. Turbotax 2010 download She cannot use the nonfarm optional method because her net profit is not less than 72. Turbotax 2010 download 189% of her gross income. Turbotax 2010 download Example 3. Turbotax 2010 download Net loss from a nonfarm business. Turbotax 2010 download Assume that in Example 1 Ann has a net loss of $700. Turbotax 2010 download She can use the nonfarm optional method and report $3,600 (2/3 × $5,400) as her net earnings. Turbotax 2010 download Example 4. Turbotax 2010 download Nonfarm net earnings less than $400. Turbotax 2010 download Assume that in Example 1 Ann has gross income of $525 and a net profit of $175. Turbotax 2010 download In this situation, she would not pay any SE tax under either the regular method or the nonfarm optional method because her net earnings under both methods are less than $400. Turbotax 2010 download Gross nonfarm income of more than $6,960. Turbotax 2010 download   The following examples illustrate how to figure net earnings when gross nonfarm income is more than $6,960. Turbotax 2010 download Example 1. Turbotax 2010 download Net nonfarm profit less than $5,024 and less than 72. Turbotax 2010 download 189% of gross nonfarm income. Turbotax 2010 download John White runs an appliance repair shop. Turbotax 2010 download His actual net earnings from self-employment were $10,500 in 2011 and $9,500 in 2012. Turbotax 2010 download He meets the test for being self-employed on a regular basis. Turbotax 2010 download He has used the nonfarm optional method less than 5 years. Turbotax 2010 download His gross income and net profit in 2013 are as follows: Gross nonfarm income $12,000 Net nonfarm profit $1,200 John's actual net earnings for 2013 are $1,108 ($1,200 × . Turbotax 2010 download 9235). Turbotax 2010 download Because his net profit is less than $5,024 and less than 72. Turbotax 2010 download 189% of his gross income, he can use the nonfarm optional method to figure net earnings of $4,640. Turbotax 2010 download Because these net earnings are higher than his actual net earnings, he can report net earnings of $4,640 for 2013. Turbotax 2010 download Example 2. Turbotax 2010 download Net nonfarm profit not less than $5,024. Turbotax 2010 download Assume that in Example 1 John's net profit is $5,400. Turbotax 2010 download He must use the regular method. Turbotax 2010 download He cannot use the nonfarm optional method because his net nonfarm profit is not less than $5,024. Turbotax 2010 download Example 3. Turbotax 2010 download Net loss from a nonfarm business. Turbotax 2010 download Assume that in Example 1 John has a net loss of $700. Turbotax 2010 download He can use the nonfarm optional method and report $4,640 as his net earnings from self-employment. Turbotax 2010 download Farm Optional Method Use the farm optional method only for earnings from a farming business. Turbotax 2010 download See Publication 225 for information about this method. Turbotax 2010 download Using Both Optional Methods If you have both farm and nonfarm earnings, you may be able to use both optional methods to determine your net earnings from self-employment. Turbotax 2010 download To figure your net earnings using both optional methods, you must: Figure your farm and nonfarm net earnings separately under each method. Turbotax 2010 download Do not combine farm earnings with nonfarm earnings to figure your net earnings under either method. Turbotax 2010 download Add the net earnings figured under each method to arrive at your total net earnings from self-employment. Turbotax 2010 download You can report less than your total actual farm and nonfarm net earnings but not less than actual nonfarm net earnings. Turbotax 2010 download If you use both optional methods, you can report no more than $4,640 as your combined net earnings from self-employment. Turbotax 2010 download Example. Turbotax 2010 download You are a self-employed farmer. Turbotax 2010 download You also operate a retail grocery store. Turbotax 2010 download Your gross income, actual net earnings from self-employment, and optional farm and optional nonfarm net earnings from self-employment are shown in Table 10-2. Turbotax 2010 download Table 10-2. Turbotax 2010 download Example—Farm and Nonfarm Earnings Income and Earnings Farm Nonfarm Gross income $3,000 $6,000 Actual net earnings $900 $500 Optional net earnings (2/3 of gross income) $2,000 $4,000 Table 10-3 shows four methods or combinations of methods you can use to figure net earnings from self-employment using the farm and nonfarm gross income and actual net earnings shown in Table 10-2. Turbotax 2010 download Method 1. Turbotax 2010 download Using the regular method for both farm and nonfarm income. Turbotax 2010 download Method 2. Turbotax 2010 download Using the optional method for farm income and the regular method for nonfarm income. Turbotax 2010 download Method 3. Turbotax 2010 download Using the regular method for farm income and the optional method for nonfarm income. Turbotax 2010 download Method 4. Turbotax 2010 download Using the optional method for both farm and nonfarm income. Turbotax 2010 download Note. Turbotax 2010 download Actual net earnings is the same as net earnings figured using the regular method. Turbotax 2010 download Table 10-3. Turbotax 2010 download Example—Net Earnings Net Earnings 1 2 3 4 Actual  farm $ 900   $ 900   Optional  farm   $ 2,000   $ 2,000 Actual nonfarm $ 500 $ 500     Optional nonfarm     $4,000 $4,000 Amount you can report: $1,400 $2,500 $4,900 $4,640* *Limited to $4,640 because you used both optional methods. Turbotax 2010 download Fiscal Year Filer If you use a tax year other than the calendar year, you must use the tax rate and maximum earnings limit in effect at the beginning of your tax year. Turbotax 2010 download Even if the tax rate or maximum earnings limit changes during your tax year, continue to use the same rate and limit throughout your tax year. Turbotax 2010 download Reporting Self-Employment Tax Use Schedule SE (Form 1040) to figure and report your SE tax. Turbotax 2010 download Then enter the SE tax on line 56 of Form 1040 and attach Schedule SE to Form 1040. Turbotax 2010 download Most taxpayers can use Section A—Short Schedule SE to figure their SE tax. Turbotax 2010 download However, certain taxpayers must use Section B—Long Schedule SE. Turbotax 2010 download If you have to pay SE tax, you must file Form 1040 (with Schedule SE attached) even if you do not otherwise have to file a federal income tax return. Turbotax 2010 download Joint return. Turbotax 2010 download   Even if you file a joint return, you cannot file a joint Schedule SE. Turbotax 2010 download This is true whether one spouse or both spouses have earnings subject to SE tax. Turbotax 2010 download If both of you have earnings subject to SE tax, each of you must complete a separate Schedule SE. Turbotax 2010 download However, if one spouse uses the Short Schedule SE and the other spouse has to use the Long Schedule SE, both can use the same form. Turbotax 2010 download Attach both schedules to the joint return. Turbotax 2010 download More than one business. Turbotax 2010 download   If you have more than one trade or business, you must combine the net profit (or loss) from each business to figure your SE tax. Turbotax 2010 download A loss from one business will reduce your profit from another business. Turbotax 2010 download File one Schedule SE showing the earnings from self-employment, but file a separate Schedule C, C-EZ, or F for each business. Turbotax 2010 download Example. Turbotax 2010 download You are the sole proprietor of two separate businesses. Turbotax 2010 download You operate a restaurant that made a net profit of $25,000. Turbotax 2010 download You also have a cabinetmaking business that had a net loss of $500. Turbotax 2010 download You must file a Schedule C for the restaurant showing your net profit of $25,000 and another Schedule C for the cabinetmaking business showing your net loss of $500. Turbotax 2010 download You file Schedule SE showing total earnings subject to SE tax of $24,500. Turbotax 2010 download Prev  Up  Next   Home   More Online Publications