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Turbotax 2011

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Turbotax 2011

Turbotax 2011 Publication 504 - Main Content Table of Contents Filing StatusUnmarried persons. Turbotax 2011 Married persons. Turbotax 2011 Same-sex marriage. Turbotax 2011 Exception. Turbotax 2011 Married Filing Jointly Married Filing Separately Head of Household ExemptionsPersonal Exemptions Exemptions for Dependents Phaseout of Exemptions AlimonyInvalid decree. Turbotax 2011 Amended instrument. Turbotax 2011 General Rules Instruments Executed After 1984 Instruments Executed Before 1985 Qualified Domestic Relations OrderRollovers. Turbotax 2011 Individual Retirement Arrangements Property SettlementsTransfer Between Spouses Gift Tax on Property Settlements Sale of Jointly-Owned Property Costs of Getting a Divorce Tax Withholding and Estimated Tax Community PropertyCommunity Income Alimony (Community Income) How To Get Tax Help Filing Status Your filing status is used in determining whether you must file a return, your standard deduction, and the correct tax. Turbotax 2011 It may also be used in determining whether you can claim certain other deductions and credits. Turbotax 2011 The filing status you can choose depends partly on your marital status on the last day of your tax year. Turbotax 2011 Marital status. Turbotax 2011   If you are unmarried, your filing status is single or, if you meet certain requirements, head of household or qualifying widow(er). Turbotax 2011 If you are married, your filing status is either married filing a joint return or married filing a separate return. Turbotax 2011 For information about the single and qualifying widow(er) filing statuses, see Publication 501. Turbotax 2011 Unmarried persons. Turbotax 2011   You are unmarried for the whole year if either of the following applies. Turbotax 2011 You have obtained a final decree of divorce or separate maintenance by the last day of your tax year. Turbotax 2011 You must follow your state law to determine if you are divorced or legally separated. Turbotax 2011 Exception. Turbotax 2011 If you and your spouse obtain a divorce in one year for the sole purpose of filing tax returns as unmarried individuals, and at the time of divorce you intend to remarry each other and do so in the next tax year, you and your spouse must file as married individuals. Turbotax 2011 You have obtained a decree of annulment, which holds that no valid marriage ever existed. Turbotax 2011 You must file amended returns (Form 1040X, Amended U. Turbotax 2011 S. Turbotax 2011 Individual Income Tax Return) for all tax years affected by the annulment that are not closed by the statute of limitations. Turbotax 2011 The statute of limitations generally does not end until 3 years (including extensions) after the date you file your original return or within 2 years after the date you pay the tax. Turbotax 2011 On the amended return you will change your filing status to single or, if you meet certain requirements, head of household. Turbotax 2011 Married persons. Turbotax 2011   You are married for the whole year if you are separated but you have not obtained a final decree of divorce or separate maintenance by the last day of your tax year. Turbotax 2011 An interlocutory decree is not a final decree. Turbotax 2011 Same-sex marriage. Turbotax 2011   For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. Turbotax 2011 The term "spouse" includes an individual married to a person of the same sex if the couple is lawfully married under state (or foreign) law. Turbotax 2011 However, individuals who have entered into a registered domestic partnership, civil union, or other similar relationship that is not considered a marriage under state (or foreign) law are not considered married for federal tax purposes. Turbotax 2011 For more details, see Publication 501. Turbotax 2011 Exception. Turbotax 2011   If you live apart from your spouse, under certain circumstances, you may be considered unmarried and can file as head of household. Turbotax 2011 See Head of Household , later. Turbotax 2011 Married Filing Jointly If you are married, you and your spouse can choose to file a joint return. Turbotax 2011 If you file jointly, you both must include all your income, exemptions, deductions, and credits on that return. Turbotax 2011 You can file a joint return even if one of you had no income or deductions. Turbotax 2011 If both you and your spouse have income, you should usually figure your tax on both a joint return and separate returns (using the filing status of married filing separately) to see which gives the two of you the lower combined tax. Turbotax 2011 Nonresident alien. Turbotax 2011   To file a joint return, at least one of you must be a U. Turbotax 2011 S. Turbotax 2011 citizen or resident alien at the end of the tax year. Turbotax 2011 If either of you was a nonresident alien at any time during the tax year, you can file a joint return only if you agree to treat the nonresident spouse as a resident of the United States. Turbotax 2011 This means that your combined worldwide incomes are subject to U. Turbotax 2011 S. Turbotax 2011 income tax. Turbotax 2011 These rules are explained in Publication 519, U. Turbotax 2011 S. Turbotax 2011 Tax Guide for Aliens. Turbotax 2011 Signing a joint return. Turbotax 2011   Both you and your spouse generally must sign the return, or it will not be considered a joint return. Turbotax 2011 Joint and individual liability. Turbotax 2011   Both you and your spouse may be held responsible, jointly and individually, for the tax and any interest or penalty due on your joint return. Turbotax 2011 This means that one spouse may be held liable for all the tax due even if all the income was earned by the other spouse. Turbotax 2011 Divorced taxpayers. Turbotax 2011   If you are divorced, you are jointly and individually responsible for any tax, interest, and penalties due on a joint return for a tax year ending before your divorce. Turbotax 2011 This responsibility applies even if your divorce decree states that your former spouse will be responsible for any amounts due on previously filed joint returns. Turbotax 2011 Relief from joint liability. Turbotax 2011   In some cases, a spouse may be relieved of the tax, interest, and penalties on a joint return. Turbotax 2011 You can ask for relief no matter how small the liability. Turbotax 2011   There are three types of relief available. Turbotax 2011 Innocent spouse relief. Turbotax 2011 Separation of liability, which applies to joint filers who are divorced, widowed, legally separated, or who have not lived together for the 12 months ending on the date election of this relief is filed. Turbotax 2011 Equitable relief. Turbotax 2011   Married persons who live in community property states, but who did not file joint returns, may also qualify for relief from liability arising from community property law or for equitable relief. Turbotax 2011 See Relief from liability arising from community property law , later, under Community Property. Turbotax 2011    Each kind of relief has different requirements. Turbotax 2011 You must file Form 8857 to request relief under any of these categories. Turbotax 2011 Publication 971 explains these kinds of relief and who may qualify for them. Turbotax 2011 You can also find information on our website at IRS. Turbotax 2011 gov. Turbotax 2011 Tax refund applied to spouse's debts. Turbotax 2011   The overpayment shown on your joint return may be used to pay the past-due amount of your spouse's debts. Turbotax 2011 This includes your spouse's federal tax, state income tax, child or spousal support payments, or a federal nontax debt, such as a student loan. Turbotax 2011 You can get a refund of your share of the overpayment if you qualify as an injured spouse. Turbotax 2011 Injured spouse. Turbotax 2011   You are an injured spouse if you file a joint return and all or part of your share of the overpayment was, or is expected to be, applied against your spouse's past-due debts. Turbotax 2011 An injured spouse can get a refund for his or her share of the overpayment that would otherwise be used to pay the past-due amount. Turbotax 2011   To be considered an injured spouse, you must: Have made and reported tax payments (such as federal income tax withheld from wages or estimated tax payments), or claimed a refundable tax credit, such as the earned income credit or additional child tax credit on the joint return, and Not be legally obligated to pay the past-due amount. Turbotax 2011 Note. Turbotax 2011 If the injured spouse's permanent home is in a community property state, then the injured spouse must only meet (2). Turbotax 2011 For more information, see Publication 555. Turbotax 2011    Refunds that involve community property states must be divided according to local law. Turbotax 2011 If you live in a community property state in which all community property is subject to the debts of either spouse, your entire refund is generally used to pay those debts. Turbotax 2011   If you are an injured spouse, you must file Form 8379 to have your portion of the overpayment refunded to you. Turbotax 2011 Follow the instructions for the form. Turbotax 2011   If you have not filed your joint return and you know that your joint refund will be offset, file Form 8379 with your return. Turbotax 2011 You should receive your refund within 14 weeks from the date the paper return is filed or within 11 weeks from the date the return is filed electronically. Turbotax 2011   If you filed your joint return and your joint refund was offset, file Form 8379 by itself. Turbotax 2011 When filed after offset, it can take up to 8 weeks to receive your refund. Turbotax 2011 Do not attach the previously filed tax return, but do include copies of all Forms W-2, Wage and Tax Statement, and W-2G, Certain Gambling Winnings, for both spouses and any Forms 1099 that show income tax withheld. Turbotax 2011    An injured spouse claim is different from an innocent spouse relief request. Turbotax 2011 An injured spouse uses Form 8379 to request an allocation of the tax overpayment attributed to each spouse. Turbotax 2011 An innocent spouse uses Form 8857 to request relief from joint liability for tax, interest, and penalties on a joint return for items of the other spouse (or former spouse) that were incorrectly reported on or omitted from the joint return. Turbotax 2011 For information on innocent spouses, see Relief from joint liability, earlier. Turbotax 2011 Married Filing Separately If you and your spouse file separate returns, you should each report only your own income, exemptions, deductions, and credits on your individual return. Turbotax 2011 You can file a separate return even if only one of you had income. Turbotax 2011 For information on exemptions you can claim on your separate return, see Exemptions , later. Turbotax 2011 Community or separate income. Turbotax 2011   If you live in a community property state and file a separate return, your income may be separate income or community income for income tax purposes. Turbotax 2011 For more information, see Community Income under Community Property, later. Turbotax 2011 Separate liability. Turbotax 2011   If you and your spouse file separately, you each are responsible only for the tax due on your own return. Turbotax 2011 Itemized deductions. Turbotax 2011   If you and your spouse file separate returns and one of you itemizes deductions, the other spouse cannot use the standard deduction and should also itemize deductions. Turbotax 2011 Table 1. Turbotax 2011 Itemized Deductions on Separate Returns This table shows itemized deductions you can claim on your married filing separate return whether you paid the expenses separately with your own funds or jointly with your spouse. Turbotax 2011  Caution: If you live in a community property state, these rules do not apply. Turbotax 2011 See Community Property. Turbotax 2011 IF you paid . Turbotax 2011 . Turbotax 2011 . Turbotax 2011 AND you . Turbotax 2011 . Turbotax 2011 . Turbotax 2011 THEN you can deduct on your separate federal return. Turbotax 2011 . Turbotax 2011 . Turbotax 2011   medical expenses   paid with funds deposited in a joint checking account in which you and your spouse have an equal interest     half of the total medical expenses, subject to certain limits, unless you can show that you alone paid the expenses. Turbotax 2011     state income tax   file a separate state income tax return     the state income tax you alone paid during the year. Turbotax 2011         file a joint state income tax return and you and your spouse are jointly and individually liable for the full amount of the state income tax     the state income tax you alone paid during the year. Turbotax 2011         file a joint state income tax return and you  are liable for only your own share of state  income tax     the smaller of: the state income tax you alone paid during the year, or the total state income tax you and your spouse paid during the year multiplied by the following fraction. Turbotax 2011 The numerator is your gross income and the denominator  is your combined gross income. Turbotax 2011     property tax   paid the tax on property held as tenants by the entirety     the property tax you alone paid. Turbotax 2011     mortgage interest   paid the interest on a qualified home1 held  as tenants by the entirety     the mortgage interest you alone paid. Turbotax 2011     casualty loss   have a casualty loss on a home you own  as tenants by the entirety     half of the loss, subject to the deduction limits. Turbotax 2011 Neither spouse may report the total casualty loss. Turbotax 2011 1 For more information on a qualified home and deductible mortgage interest, see Publication 936, Home Mortgage Interest Deduction. Turbotax 2011 Dividing itemized deductions. Turbotax 2011   You may be able to claim itemized deductions on a separate return for certain expenses that you paid separately or jointly with your spouse. Turbotax 2011 See Table 1, later. Turbotax 2011 Separate returns may give you a higher tax. Turbotax 2011   Some married couples file separate returns because each wants to be responsible only for his or her own tax. Turbotax 2011 There is no joint liability. Turbotax 2011 But in almost all instances, if you file separate returns, you will pay more combined federal tax than you would with a joint return. Turbotax 2011 This is because the following special rules apply if you file a separate return. Turbotax 2011 Your tax rate generally will be higher than it would be on a joint return. Turbotax 2011 Your exemption amount for figuring the alternative minimum tax will be half of that allowed a joint return filer. Turbotax 2011 You cannot take the credit for child and dependent care expenses in most cases. Turbotax 2011 You cannot take the earned income credit. Turbotax 2011 You cannot take the exclusion or credit for adoption expenses in most cases. Turbotax 2011 You cannot take the credit for higher education expenses (American opportunity and lifetime learning credits), the deduction for student loan interest, or the tuition and fees deduction. Turbotax 2011 You cannot exclude the interest from qualified savings bonds that you used for higher education expenses. Turbotax 2011 If you lived with your spouse at any time during the tax year: You cannot claim the credit for the elderly or the disabled, and You will have to include in income more (up to 85%) of any social security or equivalent railroad retirement benefits you received. Turbotax 2011 Your income limits that reduce the child tax credit, the retirement savings contributions credit, itemized deductions, and the deduction for personal exemptions are half of the limits for a joint return filer. Turbotax 2011 Your capital loss deduction limit is $1,500 (instead of $3,000 on a joint return). Turbotax 2011 Your basic standard deduction, if allowable, is half of that allowed a joint return filer. Turbotax 2011 See Itemized deductions , earlier. Turbotax 2011 Joint return after separate returns. Turbotax 2011   If either you or your spouse (or both of you) file a separate return, you generally can change to a joint return within 3 years from the due date (not including extensions) of the separate return or returns. Turbotax 2011 This applies to a return either of you filed claiming married filing separately, single, or head of household filing status. Turbotax 2011 Use Form 1040X to change your filing status. Turbotax 2011 Separate returns after joint return. Turbotax 2011   After the due date of your return, you and your spouse cannot file separate returns if you previously filed a joint return. Turbotax 2011 Exception. Turbotax 2011   A personal representative for a decedent can change from a joint return elected by the surviving spouse to a separate return for the decedent. Turbotax 2011 The personal representative has 1 year from the due date (including extensions) of the joint return to make the change. Turbotax 2011 Head of Household Filing as head of household has the following advantages. Turbotax 2011 You can claim the standard deduction even if your spouse files a separate return and itemizes deductions. Turbotax 2011 Your standard deduction is higher than is allowed if you claim a filing status of single or married filing separately. Turbotax 2011 Your tax rate usually will be lower than it is if you claim a filing status of single or married filing separately. Turbotax 2011 You may be able to claim certain credits (such as the dependent care credit and the earned income credit) you cannot claim if your filing status is married filing separately. Turbotax 2011 Income limits that reduce your child tax credit, retirement savings contributions credit, itemized deductions, and the deduction for personal exemptions are higher than the income limits if you claim a filing status of married filing separately. Turbotax 2011 Requirements. Turbotax 2011   You may be able to file as head of household if you meet all the following requirements. Turbotax 2011 You are unmarried or “considered unmarried” on the last day of the year. Turbotax 2011 You paid more than half the cost of keeping up a home for the year. Turbotax 2011 A “qualifying person” lived with you in the home for more than half the year (except for temporary absences, such as school). Turbotax 2011 However, if the “qualifying person” is your dependent parent, he or she does not have to live with you. Turbotax 2011 See Special rule for parent , later, under Qualifying person. Turbotax 2011 Considered unmarried. Turbotax 2011   You are considered unmarried on the last day of the tax year if you meet all the following tests. Turbotax 2011 You file a separate return. Turbotax 2011 A separate return includes a return claiming married filing separately, single, or head of household filing status. Turbotax 2011 You paid more than half the cost of keeping up your home for the tax year. Turbotax 2011 Your spouse did not live in your home during the last 6 months of the tax year. Turbotax 2011 Your spouse is considered to live in your home even if he or she is temporarily absent due to special circumstances. Turbotax 2011 See Temporary absences , later. Turbotax 2011 Your home was the main home of your child, stepchild, or foster child for more than half the year. Turbotax 2011 (See Qualifying person , later, for rules applying to a child's birth, death, or temporary absence during the year. Turbotax 2011 ) You must be able to claim an exemption for the child. Turbotax 2011 However, you meet this test if you cannot claim the exemption only because the noncustodial parent can claim the child using the rule described later in Special rule for divorced or separated parents (or parents who live apart) under Exemptions for Dependents. Turbotax 2011 The general rules for claiming an exemption for a dependent are shown later in Table 3. Turbotax 2011    If you were considered married for part of the year and lived in a community property state (one of the states listed later under Community Property), special rules may apply in determining your income and expenses. Turbotax 2011 See Publication 555 for more information. Turbotax 2011 Nonresident alien spouse. Turbotax 2011   If your spouse was a nonresident alien at any time during the tax year, and you have not chosen to treat your spouse as a resident alien, you are considered unmarried for head of household purposes. Turbotax 2011 However, your spouse is not a qualifying person for head of household purposes. Turbotax 2011 You must have another qualifying person and meet the other requirements to file as head of household. Turbotax 2011 Keeping up a home. Turbotax 2011   You are keeping up a home only if you pay more than half the cost of its upkeep for the year. Turbotax 2011 This includes rent, mortgage interest, real estate taxes, insurance on the home, repairs, utilities, and food eaten in the home. Turbotax 2011 This does not include the cost of clothing, education, medical treatment, vacations, life insurance, or transportation for any member of the household. Turbotax 2011 Qualifying person. Turbotax 2011    Table 2, later, shows who can be a qualifying person. Turbotax 2011 Any person not described in Table 2 is not a qualifying person. Turbotax 2011   Generally, the qualifying person must live with you for more than half of the year. Turbotax 2011 Table 2. Turbotax 2011 Who Is a Qualifying Person Qualifying You To File as Head of Household?1 Caution. Turbotax 2011 See the text of this publication for the other requirements you must meet to claim head of household filing status. Turbotax 2011 IF the person is your . Turbotax 2011 . Turbotax 2011 . Turbotax 2011 AND . Turbotax 2011 . Turbotax 2011 . Turbotax 2011 THEN that person is . Turbotax 2011 . Turbotax 2011 . Turbotax 2011   qualifying child (such as a son, daughter, or grandchild who lived with you more than half the year and meets certain other tests)2 he or she is single a qualifying person, whether or not you can claim an exemption for the person. Turbotax 2011     he or she is married and you can claim an exemption for him or her a qualifying person. Turbotax 2011     he or she is married and you cannot claim an exemption for him or her not a qualifying person. Turbotax 2011 3     qualifying relative4 who is your father or mother you can claim an exemption for him or her5 a qualifying person. Turbotax 2011 6     you cannot claim an exemption for him or her not a qualifying person. Turbotax 2011     qualifying relative4 other than your father or mother (such as a grandparent, brother, or sister who meets certain tests) he or she lived with you more than half the year, and he or she is related to you in one of the ways listed under Relatives who do not have to live with you in Publication 501 and you can claim an exemption for him or her5 a qualifying person. Turbotax 2011     he or she did not live with you more than half the year not a qualifying person. Turbotax 2011     he or she is not related to you in one of the ways listed under Relatives who do not have to live with you in Publication 501 and is your qualifying relative only because he or she lived with you all year as a member of your household not a qualifying person. Turbotax 2011     you cannot claim an exemption for him or her not a qualifying person. Turbotax 2011   1 A person cannot qualify more than one taxpayer to use the head of household filing status for the year. Turbotax 2011 2 See Table 3, later, for the tests that must be met to be a qualifying child. Turbotax 2011 Note. Turbotax 2011 If you are a noncustodial parent, the term “qualifying child” for head of household filing status does not include a child who is your qualifying child for exemption purposes only because of the rules described under Children of Divorced or Separated Parents (or Parents Who Live Apart) under Exemptions for Dependents, later. Turbotax 2011 If you are the custodial parent and those rules apply, the child is generally your qualifying child for head of household filing status even though the child is not a qualifying child for whom you can claim an exemption. Turbotax 2011 3 This person is a qualifying person if the only reason you cannot claim the exemption is that you can be claimed as a dependent on someone else's return. Turbotax 2011 4 See Table 3, later, for the tests that must be met to be a qualifying relative. Turbotax 2011 5 If you can claim an exemption for a person only because of a multiple support agreement, that person is not a qualifying person. Turbotax 2011 See Multiple Support Agreement in Publication 501. Turbotax 2011 6 See Special rule for parent . Turbotax 2011 Special rule for parent. Turbotax 2011   If your qualifying person is your father or mother, you may be eligible to file as head of household even if your father or mother does not live with you. Turbotax 2011 However, you must be able to claim an exemption for your father or mother. Turbotax 2011 Also, you must pay more than half the cost of keeping up a home that was the main home for the entire year for your father or mother. Turbotax 2011 You are keeping up a main home for your father or mother if you pay more than half the cost of keeping your parent in a rest home or home for the elderly. Turbotax 2011 Death or birth. Turbotax 2011   If the person for whom you kept up a home was born or died in 2013, you still may be able to file as head of household. Turbotax 2011 If the person is your qualifying child, the child must have lived with you for more than half the part of the year he or she was alive. Turbotax 2011 If the person is anyone else, see Publication 501. Turbotax 2011 Temporary absences. Turbotax 2011   You and your qualifying person are considered to live together even if one or both of you are temporarily absent from your home due to special circumstances such as illness, education, business, vacation, or military service. Turbotax 2011 It must be reasonable to assume that the absent person will return to the home after the temporary absence. Turbotax 2011 You must continue to keep up the home during the absence. Turbotax 2011 Kidnapped child. Turbotax 2011   You may be eligible to file as head of household even if the child who is your qualifying person has been kidnapped. Turbotax 2011 You can claim head of household filing status if all the following statements are true. Turbotax 2011 The child must be presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or the child's family. Turbotax 2011 In the year of the kidnapping, the child lived with you for more than half the part of the year before the kidnapping. Turbotax 2011 You would have qualified for head of household filing status if the child had not been kidnapped. Turbotax 2011   This treatment applies for all years until the earlier of: The year the child is returned, The year there is a determination that the child is dead, or The year the child would have reached age 18. Turbotax 2011 More information. Turbotax 2011   For more information on filing as head of household, see Publication 501. Turbotax 2011 Exemptions You can deduct $3,900 for each exemption you claim in 2013. Turbotax 2011 However, if your adjusted gross income is more than $150,000, see Phaseout of Exemptions , later. Turbotax 2011 There are two types of exemptions: personal exemptions and exemptions for dependents. Turbotax 2011 If you are entitled to claim an exemption for a dependent (such as your child), that dependent cannot claim his or her personal exemption on his or her own tax return. Turbotax 2011 Personal Exemptions You can claim your own exemption unless someone else can claim it. Turbotax 2011 If you are married, you may be able to take an exemption for your spouse. Turbotax 2011 These are called personal exemptions. Turbotax 2011 Exemption for Your Spouse Your spouse is never considered your dependent. Turbotax 2011 Joint return. Turbotax 2011   On a joint return, you can claim one exemption for yourself and one for your spouse. Turbotax 2011   If your spouse had any gross income, you can claim his or her exemption only if you file a joint return. Turbotax 2011 Separate return. Turbotax 2011   If you file a separate return, you can take an exemption for your spouse only if your spouse had no gross income, is not filing a return, and was not the dependent of another taxpayer. Turbotax 2011 If your spouse is the dependent of another taxpayer, you cannot claim an exemption for your spouse even if the other taxpayer does not actually claim your spouse's exemption. Turbotax 2011 Alimony paid. Turbotax 2011   If you paid alimony to your spouse, you cannot take an exemption for your spouse. Turbotax 2011 This is because alimony is gross income to the spouse who received it. Turbotax 2011 Divorced or separated spouse. Turbotax 2011   If you obtained a final decree of divorce or separate maintenance during the year, you cannot take your former spouse's exemption. Turbotax 2011 This rule applies even if you provided all of your former spouse's support. Turbotax 2011 Exemptions for Dependents You are allowed one exemption for each person you can claim as a dependent. Turbotax 2011 You can claim an exemption for a dependent even if your dependent files a return. Turbotax 2011 The term “dependent” means: A qualifying child, or A qualifying relative. Turbotax 2011 Table 3 shows the tests that must be met to be either a qualifying child or qualifying relative, plus the additional requirements for claiming an exemption for a dependent. Turbotax 2011 For detailed information, see Publication 501. Turbotax 2011   Dependent not allowed a personal exemption. Turbotax 2011 If you can claim an exemption for your dependent, the dependent cannot claim his or her own exemption on his or her own tax return. Turbotax 2011 This is true even if you do not claim the dependent's exemption on your return. Turbotax 2011 It is also true if the decedent's exemption on your return is reduced or eliminated under the phaseout rule described under Phaseout of Exemptions, later. Turbotax 2011 Table 3. Turbotax 2011 Overview of the Rules for Claiming an Exemption for a Dependent Caution. Turbotax 2011 This table is only an overview of the rules. Turbotax 2011 For details, see Publication 501. Turbotax 2011 • You cannot claim any dependents if you, or your spouse if filing jointly, could be claimed as a dependent by another taxpayer. Turbotax 2011 • You cannot claim a married person who files a joint return as a dependent unless that joint return is only a claim for refund and there would be no tax liability for either spouse on separate returns. Turbotax 2011 • You cannot claim a person as a dependent unless that person is a U. Turbotax 2011 S. Turbotax 2011 citizen, U. Turbotax 2011 S. Turbotax 2011 resident alien, U. Turbotax 2011 S. Turbotax 2011 national, or a resident of Canada or Mexico. Turbotax 2011 1 • You cannot claim a person as a dependent unless that person is your qualifying child or qualifying relative. Turbotax 2011   Tests To Be a Qualifying Child   Tests To Be a Qualifying Relative 1. Turbotax 2011     2. Turbotax 2011       3. Turbotax 2011    4. Turbotax 2011    5. Turbotax 2011    The child must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them. Turbotax 2011   The child must be (a) under age 19 at the end of the year and younger than you (or your spouse if filing jointly), (b) under age 24 at the end of the year, a student, and younger than you (or your spouse if filing jointly), or (c) any age if permanently and totally disabled. Turbotax 2011   The child must have lived with you for more than half of the year. Turbotax 2011 2   The child must not have provided more than half of his or her own support for the year. Turbotax 2011   The child is not filing a joint return for the year (unless that joint return is filed only as a claim for refund of withheld income tax or estimated tax paid). Turbotax 2011   1. Turbotax 2011    2. Turbotax 2011       3. Turbotax 2011    4. Turbotax 2011 The person cannot be your qualifying child or the qualifying child of anyone else. Turbotax 2011   The person either (a) must be related to you in one of the ways listed under Relatives who do not have to live with you in Publication 501 or (b) must live with you all year as a member of your household 2 (and your relationship must not violate local law). Turbotax 2011   The person's gross income for the year must be less than $3,900. Turbotax 2011 3   You must provide more than half of the person's total support for the year. Turbotax 2011 4 If the child meets the rules to be a qualifying child of more than one person, only one person can actually treat the child as a qualifying child. Turbotax 2011 See Special Rule for Qualifying Child of More Than One Person , later, to find out which person is the person entitled to claim the child as a qualifying child. Turbotax 2011     1 Exception exists for certain adopted children. Turbotax 2011 2 Exceptions exist for temporary absences, children who were born or died during the year, children of divorced or separated parents (or parents who live apart), and kidnapped children. Turbotax 2011 3 Exception exists for persons who are disabled and have income from a sheltered workshop. Turbotax 2011 4 Exceptions exist for multiple support agreements, children of divorced or separated parents (or parents who live apart), and kidnapped children. Turbotax 2011 See Publication 501. Turbotax 2011 You may be entitled to a child tax credit for each qualifying child who was under age 17 at the end of the year if you claimed an exemption for that child. Turbotax 2011 For more information, see the instructions for your tax return if you file Form 1040A or 1040. Turbotax 2011 Children of Divorced or Separated Parents (or Parents Who Live Apart) In most cases, because of the residency test (see item 3 under Tests To Be a Qualifying Child in Table 3), a child of divorced or separated parents is the qualifying child of the custodial parent. Turbotax 2011 However, the child will be treated as the qualifying child of the noncustodial parent if the special rule (discussed next) applies. Turbotax 2011 Special rule for divorced or separated parents (or parents who live apart). Turbotax 2011   A child will be treated as the qualifying child of his or her noncustodial parent if all four of the following statements are true. Turbotax 2011 The parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Lived apart at all times during the last 6 months of the year, whether or not they are or were married. Turbotax 2011 The child received over half of his or her support for the year from the parents. Turbotax 2011 The child is in the custody of one or both parents for more than half of the year. Turbotax 2011 Either of the following applies. Turbotax 2011 The custodial parent signs a written declaration, discussed later, that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches this written declaration to his or her return. Turbotax 2011 (If the decree or agreement went into effect after 1984, see Divorce decree or separation agreement that went into effect after 1984 and before 2009 , later. Turbotax 2011 A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2013 states that the noncustodial parent can claim the child as a dependent, the decree or agreement was not changed after 1984 to say the noncustodial parent cannot claim the child as a dependent, and the noncustodial parent provides at least $600 for the child's support during 2013. Turbotax 2011 See Child support under pre-1985 agreement , later. Turbotax 2011 Custodial parent and noncustodial parent. Turbotax 2011   The custodial parent is the parent with whom the child lived for the greater number of nights during the year. Turbotax 2011 The other parent is the noncustodial parent. Turbotax 2011   If the parents divorced or separated during the year and the child lived with both parents before the separation, the custodial parent is the one with whom the child lived for the greater number of nights during the rest of the year. Turbotax 2011   A child is treated as living with a parent for a night if the child sleeps: At that parent's home, whether or not the parent is present, or In the company of the parent, when the child does not sleep at a parent's home (for example, the parent and child are on vacation together). Turbotax 2011 Equal number of nights. Turbotax 2011   If the child lived with each parent for an equal number of nights during the year, the custodial parent is the parent with the higher adjusted gross income. Turbotax 2011 December 31. Turbotax 2011   The night of December 31 is treated as part of the year in which it begins. Turbotax 2011 For example, December 31, 2013, is treated as part of 2013. Turbotax 2011 Emancipated child. Turbotax 2011   If a child is emancipated under state law, the child is treated as not living with either parent. Turbotax 2011 See Examples 5 and 6 . Turbotax 2011 Absences. Turbotax 2011    If a child was not with either parent on a particular night (because, for example, the child was staying at a friend's house), the child is treated as living with the parent with whom the child normally would have lived for that night, except for the absence. Turbotax 2011 But if it cannot be determined with which parent the child normally would have lived or if the child would not have lived with either parent that night, the child is treated as not living with either parent that night. Turbotax 2011 Parent works at night. Turbotax 2011   If, due to a parent's nighttime work schedule, a child lives for a greater number of days but not nights with the parent who works at night, that parent is treated as the custodial parent. Turbotax 2011 On a school day, the child is treated as living at the primary residence registered with the school. Turbotax 2011 Example 1 – child lived with one parent greater number of nights. Turbotax 2011 You and your child’s other parent are divorced. Turbotax 2011 In 2013, your child lived with you 210 nights and with the other parent 156 nights. Turbotax 2011 You are the custodial parent. Turbotax 2011 Example 2 – child is away at camp. Turbotax 2011 In 2013, your daughter lives with each parent for alternate weeks. Turbotax 2011 In the summer, she spends 6 weeks at summer camp. Turbotax 2011 During the time she is at camp, she is treated as living with you for 3 weeks and with her other parent, your ex-spouse, for 3 weeks because this is how long she would have lived with each parent if she had not attended summer camp. Turbotax 2011 Example 3 – child lived same number of days with each parent. Turbotax 2011 Your son lived with you 180 nights during the year and lived the same number of nights with his other parent, your ex-spouse. Turbotax 2011 Your adjusted gross income is $40,000. Turbotax 2011 Your ex-spouse's adjusted gross income is $25,000. Turbotax 2011 You are treated as your son's custodial parent because you have the higher adjusted gross income. Turbotax 2011 Example 4 – child is at parent’s home but with other parent. Turbotax 2011 Your son normally lives with you during the week and with his other parent, your ex-spouse, every other weekend. Turbotax 2011 You become ill and are hospitalized. Turbotax 2011 The other parent lives in your home with your son for 10 consecutive days while you are in the hospital. Turbotax 2011 Your son is treated as living with you during this 10-day period because he was living in your home. Turbotax 2011 Example 5 – child emancipated in May. Turbotax 2011 When your son turned age 18 in May 2013, he became emancipated under the law of the state where he lives. Turbotax 2011 As a result, he is not considered in the custody of his parents for more than half of the year. Turbotax 2011 The special rule for children of divorced or separated parents (or parents who live apart) does not apply. Turbotax 2011 Example 6 – child emancipated in August. Turbotax 2011 Your daughter lives with you from January 1, 2013, until May 31, 2013, and lives with her other parent, your ex-spouse, from June 1, 2013, through the end of the year. Turbotax 2011 She turns 18 and is emancipated under state law on August 1, 2013. Turbotax 2011 Because she is treated as not living with either parent beginning on August 1, she is treated as living with you the greater number of nights in 2013. Turbotax 2011 You are the custodial parent. Turbotax 2011 Written declaration. Turbotax 2011    The custodial parent must use either Form 8332 or a similar statement (containing the same information required by the form) to make the written declaration to release the exemption to the noncustodial parent. Turbotax 2011 The noncustodial parent must attach a copy of the form or statement to his or her tax return. Turbotax 2011   The exemption can be released for 1 year, for a number of specified years (for example, alternate years), or for all future years, as specified in the declaration. Turbotax 2011 Divorce decree or separation agreement that went into effect after 1984 and before 2009. Turbotax 2011   If the divorce decree or separation agreement went into effect after 1984 and before 2009, the noncustodial parent may be able to attach certain pages from the decree or agreement instead of Form 8332. Turbotax 2011 To be able to do this, the decree or agreement must state all three of the following. Turbotax 2011 The noncustodial parent can claim the child as a dependent without regard to any condition, such as payment of support. Turbotax 2011 The custodial parent will not claim the child as a dependent for the year. Turbotax 2011 The years for which the noncustodial parent, rather than the custodial parent, can claim the child as a dependent. Turbotax 2011   The noncustodial parent must attach all of the following pages of the decree or agreement to his or her return. Turbotax 2011 The cover page (write the other parent's social security number on this page). Turbotax 2011 The pages that include all of the information identified in items (1) through (3) above. Turbotax 2011 The signature page with the other parent's signature and the date of the agreement. Turbotax 2011 Post-2008 divorce decree or separation agreement. Turbotax 2011   If the decree or agreement went into effect after 2008, a noncustodial parent claiming an exemption for a child cannot attach pages from a divorce decree or separation agreement instead of Form 8332. Turbotax 2011 The custodial parent must sign either a Form 8332 or a similar statement. Turbotax 2011 The only purpose of this statement must be to release the custodial parent's claim to the child's exemption. Turbotax 2011 The noncustodial parent must attach a copy to his or her return. Turbotax 2011 The form or statement must release the custodial parent's claim to the child without any conditions. Turbotax 2011 For example, the release must not depend on the noncustodial parent paying support. Turbotax 2011    The noncustodial parent must attach the required information even if it was filed with a return in an earlier year. Turbotax 2011 Revocation of release of claim to an exemption. Turbotax 2011   The custodial parent can revoke a release of claim to exemption that he or she previously released to the noncustodial parent on Form 8332 or a similar statement. Turbotax 2011 In order for the revocation to be effective for 2013, the custodial parent must have given (or made reasonable efforts to give) written notice of the revocation to the noncustodial parent in 2012 or earlier. Turbotax 2011 The custodial parent can use Part III of Form 8332 for this purpose and must attach a copy of the revocation to his or her return for each tax year he or she claims the child as a dependent as a result of the revocation. Turbotax 2011 Remarried parent. Turbotax 2011   If you remarry, the support provided by your new spouse is treated as provided by you. Turbotax 2011 Child support under pre-1985 agreement. Turbotax 2011   All child support payments actually received from the noncustodial parent under a pre-1985 agreement are considered used for the support of the child, even if such amounts are not actually spent for child support. Turbotax 2011 Example. Turbotax 2011 Under a pre-1985 agreement, the noncustodial parent provides $1,200 for the child's support. Turbotax 2011 This amount is considered support provided by the noncustodial parent even if the $1,200 was actually spent on things other than support. Turbotax 2011 Parents who never married. Turbotax 2011   The special rule for divorced or separated parents also applies to parents who never married and lived apart at all times during the last 6 months of the year. Turbotax 2011 Alimony. Turbotax 2011   Payments to your spouse that are includible in his or her gross income as either alimony, separate maintenance payments, or similar payments from an estate or trust, are not treated as a payment for the support of a dependent. Turbotax 2011 Special Rule for Qualifying Child of More Than One Person If your qualifying child is not a qualifying child of anyone else, this special rule does not apply to you and you do not need to read about it. Turbotax 2011 This is also true if your qualifying child is not a qualifying child of anyone else except your spouse with whom you file a joint return. Turbotax 2011 If a child is treated as the qualifying child of the noncustodial parent under the Special rule for divorced or separated parents (or parents who live apart), earlier, see Applying this special rule to divorced or separated parents (or parents who live apart), later. Turbotax 2011 Sometimes, a child meets the relationship, age, residency, support, and joint return tests to be a qualifying child of more than one person. Turbotax 2011 (For a description of these tests, see list items 1 through 5 under Tests To Be a Qualifying Child in Table 3). Turbotax 2011 Although the child meets the conditions to be a qualifying child of each of these persons, only one person can actually use the child as a qualifying child to take all of the following tax benefits (provided the person is eligible for each benefit). Turbotax 2011 The exemption for the child. Turbotax 2011 The child tax credit. Turbotax 2011 Head of household filing status. Turbotax 2011 The credit for child and dependent care expenses. Turbotax 2011 The exclusion from income for dependent care benefits. Turbotax 2011 The earned income credit. Turbotax 2011 The other person cannot take any of these benefits based on this qualifying child. Turbotax 2011 In other words, you and the other person cannot agree to divide these tax benefits between you. Turbotax 2011 The other person cannot take any of these tax benefits unless he or she has a different qualifying child. Turbotax 2011 Tiebreaker rules. Turbotax 2011   To determine which person can treat the child as a qualifying child to claim these six tax benefits, the following tiebreaker rules apply. Turbotax 2011 If only one of the persons is the child's parent, the child is treated as the qualifying child of the parent. Turbotax 2011 If the parents do not file a joint return together but both parents claim the child as a qualifying child, the IRS will treat the child as the qualifying child of the parent with whom the child lived for the longer period of time during the year. Turbotax 2011 If the child lived with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who had the higher adjusted gross income (AGI) for the year. Turbotax 2011 If no parent can claim the child as a qualifying child, the child is treated as the qualifying child of the person who had the highest AGI for the year. Turbotax 2011 If a parent can claim the child as a qualifying child but no parent does so claim the child, the child is treated as the qualifying child of the person who had the highest AGI for the year, but only if that person's AGI is higher than the highest AGI of any of the child's parents who can claim the child. Turbotax 2011 If the child's parents file a joint return with each other, this rule can be applied by dividing the parents' total AGI evenly between them; see Publication 501 for details. Turbotax 2011   Subject to these tiebreaker rules, you and the other person may be able to choose which of you claims the child as a qualifying child. Turbotax 2011 Example 1—separated parents. Turbotax 2011 You, your husband, and your 10-year-old son lived together until August 1, 2013, when your husband moved out of the household. Turbotax 2011 In August and September, your son lived with you. Turbotax 2011 For the rest of the year, your son lived with your husband, the boy's father. Turbotax 2011 Your son is a qualifying child of both you and your husband because your son lived with each of you for more than half the year and because he met the relationship, age, support, and joint return tests for both of you. Turbotax 2011 At the end of the year, you and your husband still were not divorced, legally separated, or separated under a written separation agreement, so the special rule for divorced or separated parents (or parents who live apart) does not apply. Turbotax 2011 You and your husband will file separate returns. Turbotax 2011 Your husband agrees to let you treat your son as a qualifying child. Turbotax 2011 This means, if your husband does not claim your son as a qualifying child, you can claim your son as a dependent and treat him as a qualifying child for the child tax credit and exclusion for dependent care benefits, if you qualify for each of those tax benefits. Turbotax 2011 However, you cannot claim head of household filing status because you and your husband did not live apart the last 6 months of the year. Turbotax 2011 And, as a result of your filing status being married filing separately, you cannot claim the earned income credit or the credit for child and dependent care expenses. Turbotax 2011 Example 2—separated parents claim same child. Turbotax 2011 The facts are the same as in Example 1 except that you and your husband both claim your son as a qualifying child. Turbotax 2011 In this case, only your husband will be allowed to treat your son as a qualifying child. Turbotax 2011 This is because, during 2013, the boy lived with him longer than with you. Turbotax 2011 If you claimed an exemption, the child tax credit, or the exclusion for dependent care benefits for your son, the IRS will disallow your claim to all these tax benefits, unless you have another qualifying child. Turbotax 2011 In addition, because you and your husband did not live apart the last 6 months of the year, your husband cannot claim head of household filing status. Turbotax 2011 And, as a result of his filing status being married filing separately, he cannot claim the earned income credit or the credit for child and dependent care expenses. Turbotax 2011 Applying this special rule to divorced or separated parents (or parents who live apart). Turbotax 2011   If a child is treated as the qualifying child of the noncustodial parent under the special rule for divorced or separated parents (or parents who live apart) described earlier, only the noncustodial parent can claim an exemption and the child tax credit for the child. Turbotax 2011 However, the noncustodial parent cannot claim the child as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, and the earned income credit. Turbotax 2011 Only the custodial parent, if eligible, or another eligible taxpayer can claim the child as a qualifying child for those four tax benefits. Turbotax 2011 If the child is the qualifying child of more than one person for those tax benefits, the tiebreaker rules determine which person can treat the child as a qualifying child. Turbotax 2011 Example 1. Turbotax 2011 You and your 5-year-old son lived all year with your mother, who paid the entire cost of keeping up the home. Turbotax 2011 Your AGI is $10,000. Turbotax 2011 Your mother's AGI is $25,000. Turbotax 2011 Your son's father does not live with you or your son. Turbotax 2011 Under the rules for children of divorced or separated parents (or parents who live apart), your son is treated as the qualifying child of his father, who can claim an exemption and the child tax credit for the child if he meets all the requirements to do so. Turbotax 2011 Because of this, you cannot claim an exemption or the child tax credit for your son. Turbotax 2011 However, your son's father cannot claim your son as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, or the earned income credit. Turbotax 2011 You and your mother did not have any child care expenses or dependent care benefits, but the boy is a qualifying child of both you and your mother for head of household filing status and the earned income credit because he meets the relationship, age, residency, support, and joint return tests for both you and your mother. Turbotax 2011 (Note: The support test does not apply for the earned income credit. Turbotax 2011 ) However, you agree to let your mother claim your son. Turbotax 2011 This means she can claim him for head of household filing status and the earned income credit if she qualifies for each and if you do not claim him as a qualifying child for the earned income credit. Turbotax 2011 (You cannot claim head of household filing status because your mother paid the entire cost of keeping up the home. Turbotax 2011 ) Example 2. Turbotax 2011 The facts are the same as in Example 1 except that your AGI is $25,000 and your mother's AGI is $21,000. Turbotax 2011 Your mother cannot claim your son as a qualifying child for any purpose because her AGI is not higher than yours. Turbotax 2011 Example 3. Turbotax 2011 The facts are the same as in Example 1 except that you and your mother both claim your son as a qualifying child for the earned income credit. Turbotax 2011 Your mother also claims him as a qualifying child for head of household filing status. Turbotax 2011 You, as the child's parent, will be the only one allowed to claim your son as a qualifying child for the earned income credit. Turbotax 2011 The IRS will disallow your mother's claim to the earned income credit and head of household filing status unless she has another qualifying child. Turbotax 2011 Phaseout of Exemptions The amount you can claim as a deduction for exemptions is reduced once your adjusted gross income (AGI) goes above a certain level for your filing status. Turbotax 2011 These levels are as follows:    Filing Status AGI Level That Reduces Exemption Amount Married filing separately $150,000 Single 250,000 Head of household 275,000 Married filing jointly 300,000 Qualifying widow(er) 300,000 You must reduce the dollar amount of your exemptions by 2% for each $2,500, or part of $2,500 ($1,250 if you are married filing separately), that your AGI exceeds the amount shown above for your filing status. Turbotax 2011 If your AGI exceeds the amount shown above by more than $122,500 ($61,250 if married filing separately), the amount of your deduction for exemptions is reduced to zero. Turbotax 2011 If your AGI exceeds the level for your filing status, use the Deduction for Exemptions Worksheet found in the instructions for Form 1040 or Form 1040NR to figure the amount of your deduction for exemptions. Turbotax 2011 Alimony Alimony is a payment to or for a spouse or former spouse under a divorce or separation instrument. Turbotax 2011 It does not include voluntary payments that are not made under a divorce or separation instrument. Turbotax 2011 Alimony is deductible by the payer and must be included in the spouse's or former spouse's income. Turbotax 2011 Although this discussion is generally written for the payer of the alimony, the recipient can use the information to determine whether an amount received is alimony. Turbotax 2011 To be alimony, a payment must meet certain requirements. Turbotax 2011 There are some differences between the requirements that apply to payments under instruments executed after 1984 and to payments under instruments executed before 1985. Turbotax 2011 The general requirements that apply to payments regardless of when the divorce or separation instrument was executed and the specific requirements that apply to post-1984 instruments (and, in certain cases, some pre-1985 instruments) are discussed in this publication. Turbotax 2011 See, Instruments Executed Before 1985 , later, if you are looking for information on where to find the specific requirements that apply to pre-1985 instruments. Turbotax 2011 Spouse or former spouse. Turbotax 2011   Unless otherwise stated, the term “spouse” includes former spouse. Turbotax 2011 Divorce or separation instrument. Turbotax 2011   The term “divorce or separation instrument” means: A decree of divorce or separate maintenance or a written instrument incident to that decree, A written separation agreement, or A decree or any type of court order requiring a spouse to make payments for the support or maintenance of the other spouse. Turbotax 2011 This includes a temporary decree, an interlocutory (not final) decree, and a decree of alimony pendente lite (while awaiting action on the final decree or agreement). Turbotax 2011 Invalid decree. Turbotax 2011   Payments under a divorce decree can be alimony even if the decree's validity is in question. Turbotax 2011 A divorce decree is valid for tax purposes until a court having proper jurisdiction holds it invalid. Turbotax 2011 Amended instrument. Turbotax 2011   An amendment to a divorce decree may change the nature of your payments. Turbotax 2011 Amendments are not ordinarily retroactive for federal tax purposes. Turbotax 2011 However, a retroactive amendment to a divorce decree correcting a clerical error to reflect the original intent of the court will generally be effective retroactively for federal tax purposes. Turbotax 2011 Example 1. Turbotax 2011 A court order retroactively corrected a mathematical error under your divorce decree to express the original intent to spread the payments over more than 10 years. Turbotax 2011 This change also is effective retroactively for federal tax purposes. Turbotax 2011 Example 2. Turbotax 2011 Your original divorce decree did not fix any part of the payment as child support. Turbotax 2011 To reflect the true intention of the court, a court order retroactively corrected the error by designating a part of the payment as child support. Turbotax 2011 The amended order is effective retroactively for federal tax purposes. Turbotax 2011 Deducting alimony paid. Turbotax 2011   You can deduct alimony you paid, whether or not you itemize deductions on your return. Turbotax 2011 You must file Form 1040. Turbotax 2011 You cannot use Form 1040A, 1040EZ, or 1040NR. Turbotax 2011 Enter the amount of alimony you paid on Form 1040, line 31a. Turbotax 2011 In the space provided on line 31b, enter your spouse's social security number (SSN) or IRS individual taxpayer identification number (ITIN). Turbotax 2011 If you paid alimony to more than one person, enter the SSN or ITIN of one of the recipients. Turbotax 2011 Show the SSN or ITIN and amount paid to each other recipient on an attached statement. Turbotax 2011 Enter your total payments on line 31a. Turbotax 2011 If you do not provide your spouse's SSN or ITIN, you may have to pay a $50 penalty and your deduction may be disallowed. Turbotax 2011 Reporting alimony received. Turbotax 2011   Report alimony you received as income on Form 1040, line 11, or on Schedule NEC (Form 1040NR), line 12. Turbotax 2011 You cannot use Form 1040A, 1040EZ, or 1040NR-EZ. Turbotax 2011    You must give the person who paid the alimony your SSN or ITIN. Turbotax 2011 If you do not, you may have to pay a $50 penalty. Turbotax 2011 Withholding on nonresident aliens. Turbotax 2011   If you are a U. Turbotax 2011 S. Turbotax 2011 citizen or resident alien and you pay alimony to a nonresident alien spouse, you may have to withhold income tax at a rate of 30% on each payment. Turbotax 2011 However, many tax treaties provide for an exemption from withholding for alimony payments. Turbotax 2011 For more information, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities. Turbotax 2011 General Rules The following rules apply to alimony regardless of when the divorce or separation instrument was executed. Turbotax 2011 Payments not alimony. Turbotax 2011   Not all payments under a divorce or separation instrument are alimony. Turbotax 2011 Alimony does not include: Child support, Noncash property settlements, Payments that are your spouse's part of community income, as explained later under Community Property , Payments to keep up the payer's property, or Use of the payer's property. Turbotax 2011 Example. Turbotax 2011 Under your written separation agreement, your spouse lives rent-free in a home you own and you must pay the mortgage, real estate taxes, insurance, repairs, and utilities for the home. Turbotax 2011 Because you own the home and the debts are yours, your payments for the mortgage, real estate taxes, insurance, and repairs are not alimony. Turbotax 2011 Neither is the value of your spouse's use of the home. Turbotax 2011 If they otherwise qualify, you can deduct the payments for utilities as alimony. Turbotax 2011 Your spouse must report them as income. Turbotax 2011 If you itemize deductions, you can deduct the real estate taxes and, if the home is a qualified home, you can also include the interest on the mortgage in figuring your deductible interest. Turbotax 2011 However, if your spouse owned the home, see Example 2 under Payments to a third party, later. Turbotax 2011 If you owned the home jointly with your spouse, see Table 4. Turbotax 2011 For more information on a qualified home and deductible mortgage interest, see Publication 936, Home Mortgage Interest Deduction. Turbotax 2011 Child support. Turbotax 2011   To determine whether a payment is child support, see the discussion under Instruments Executed After 1984 , later. Turbotax 2011 If your divorce or separation agreement was executed before 1985, see the 2004 revision of Publication 504 available at www. Turbotax 2011 irs. Turbotax 2011 gov/formspubs. Turbotax 2011 Underpayment. Turbotax 2011   If both alimony and child support payments are called for by your divorce or separation instrument, and you pay less than the total required, the payments apply first to child support and then to alimony. Turbotax 2011 Example. Turbotax 2011 Your divorce decree calls for you to pay your former spouse $200 a month ($2,400 ($200 x 12) a year) as child support and $150 a month ($1,800 ($150 x 12) a year) as alimony. Turbotax 2011 If you pay the full amount of $4,200 ($2,400 + $1,800) during the year, you can deduct $1,800 as alimony and your former spouse must report $1,800 as alimony received. Turbotax 2011 If you pay only $3,600 during the year, $2,400 is child support. Turbotax 2011 You can deduct only $1,200 ($3,600 – $2,400) as alimony and your former spouse must report $1,200 as alimony received. Turbotax 2011 Payments to a third party. Turbotax 2011   Cash payments, checks, or money orders to a third party on behalf of your spouse under the terms of your divorce or separation instrument can be alimony, if they otherwise qualify. Turbotax 2011 These include payments for your spouse's medical expenses, housing costs (rent, utilities, etc. Turbotax 2011 ), taxes, tuition, etc. Turbotax 2011 The payments are treated as received by your spouse and then paid to the third party. Turbotax 2011 Example 1. Turbotax 2011 Under your divorce decree, you must pay your former spouse's medical and dental expenses. Turbotax 2011 If the payments otherwise qualify, you can deduct them as alimony on your return. Turbotax 2011 Your former spouse must report them as alimony received and can include them in figuring deductible medical expenses. Turbotax 2011 Example 2. Turbotax 2011 Under your separation agreement, you must pay the real estate taxes, mortgage payments, and insurance premiums on a home owned by your spouse. Turbotax 2011 If they otherwise qualify, you can deduct the payments as alimony on your return, and your spouse must report them as alimony received. Turbotax 2011 If itemizing deductions, your spouse can deduct the real estate taxes and, if the home is a qualified home, also include the interest on the mortgage in figuring deductible interest. Turbotax 2011 However, if you owned the home, see the example under Payments not alimony , earlier. Turbotax 2011 If you owned the home jointly with your spouse, see Table 4. Turbotax 2011 Life insurance premiums. Turbotax 2011   Alimony includes premiums you must pay under your divorce or separation instrument for insurance on your life to the extent your spouse owns the policy. Turbotax 2011 Payments for jointly-owned home. Turbotax 2011   If your divorce or separation instrument states that you must pay expenses for a home owned by you and your spouse or former spouse, some of your payments may be alimony. Turbotax 2011 See Table 4. Turbotax 2011   However, if your spouse owned the home, see Example 2 under Payments to a third party, earlier. Turbotax 2011 If you owned the home, see the example under Payments not alimony , earlier. Turbotax 2011 Table 4. Turbotax 2011 Expenses for a Jointly-Owned Home Use the table below to find how much of your payment is alimony and how much you can claim as an itemized deduction. Turbotax 2011 IF you must pay all of the . Turbotax 2011 . Turbotax 2011 . Turbotax 2011 AND your home is . Turbotax 2011 . Turbotax 2011 . Turbotax 2011 THEN you can deduct and your spouse (or former spouse) must include as alimony . Turbotax 2011 . Turbotax 2011 . Turbotax 2011 AND you can claim as an itemized deduction . Turbotax 2011 . Turbotax 2011 . Turbotax 2011   mortgage payments (principal and interest) jointly owned half of the total payments half of the interest as interest expense (if the home is a qualified home). Turbotax 2011 1   real estate taxes and home insurance held as tenants in common half of the total payments half of the real estate taxes2 and none of the home insurance. Turbotax 2011     held as tenants by the entirety or in joint tenancy none of the payments all of the real estate taxes and none of the home insurance. Turbotax 2011 1 Your spouse (or former spouse) can deduct the other half of the interest if the home is a qualified home. Turbotax 2011  2 Your spouse (or former spouse) can deduct the other half of the real estate taxes. Turbotax 2011 Instruments Executed After 1984 The following rules for alimony apply to payments under divorce or separation instruments executed after 1984. Turbotax 2011 Exception for instruments executed before 1985. Turbotax 2011   There are two situations where the rules for instruments executed after 1984 apply to instruments executed before 1985. Turbotax 2011 A divorce or separation instrument executed before 1985 and then modified after 1984 to specify that the after-1984 rules will apply. Turbotax 2011 A temporary divorce or separation instrument executed before 1985 and incorporated into, or adopted by, a final decree executed after 1984 that: Changes the amount or period of payment, or Adds or deletes any contingency or condition. Turbotax 2011   For the rules for alimony payments under pre-1985 instruments not meeting these exceptions, see the 2004 revision of Publication 504 available at www. Turbotax 2011 irs. Turbotax 2011 gov/formspubs. Turbotax 2011 Example 1. Turbotax 2011 In November 1984, you and your former spouse executed a written separation agreement. Turbotax 2011 In February 1985, a decree of divorce was substituted for the written separation agreement. Turbotax 2011 The decree of divorce did not change the terms for the alimony you pay your former spouse. Turbotax 2011 The decree of divorce is treated as executed before 1985. Turbotax 2011 Alimony payments under this decree are not subject to the rules for payments under instruments executed after 1984. Turbotax 2011 Example 2. Turbotax 2011 The facts are the same as in Example 1 except that the decree of divorce changed the amount of the alimony. Turbotax 2011 In this example, the decree of divorce is not treated as executed before 1985. Turbotax 2011 The alimony payments are subject to the rules for payments under instruments executed after 1984. Turbotax 2011 Alimony Requirements A payment to or for a spouse under a divorce or separation instrument is alimony if the spouses do not file a joint return with each other and all the following requirements are met. Turbotax 2011 The payment is in cash. Turbotax 2011 The instrument does not designate the payment as not alimony. Turbotax 2011 The spouses are not members of the same household at the time the payments are made. Turbotax 2011 This requirement applies only if the spouses are legally separated under a decree of divorce or separate maintenance. Turbotax 2011 There is no liability to make any payment (in cash or property) after the death of the recipient spouse. Turbotax 2011 The payment is not treated as child support. Turbotax 2011 Each of these requirements is discussed next. Turbotax 2011 Cash payment requirement. Turbotax 2011   Only cash payments, including checks and money orders, qualify as alimony. Turbotax 2011 The following do not qualify as alimony. Turbotax 2011 Transfers of services or property (including a debt instrument of a third party or an annuity contract). Turbotax 2011 Execution of a debt instrument by the payer. Turbotax 2011 The use of the payer's property. Turbotax 2011 Payments to a third party. Turbotax 2011   Cash payments to a third party under the terms of your divorce or separation instrument can qualify as cash payments to your spouse. Turbotax 2011 See Payments to a third party under General Rules, earlier. Turbotax 2011   Also, cash payments made to a third party at the written request of your spouse may qualify as alimony if all the following requirements are met. Turbotax 2011 The payments are in lieu of payments of alimony directly to your spouse. Turbotax 2011 The written request states that both spouses intend the payments to be treated as alimony. Turbotax 2011 You receive the written request from your spouse before you file your return for the year you made the payments. Turbotax 2011 Payments designated as not alimony. Turbotax 2011   You and your spouse can designate that otherwise qualifying payments are not alimony. Turbotax 2011 You do this by including a provision in your divorce or separation instrument that states the payments are not deductible as alimony by you and are excludable from your spouse's income. Turbotax 2011 For this purpose, any instrument (written statement) signed by both of you that makes this designation and that refers to a previous written separation agreement is treated as a written separation agreement (and therefore a divorce or separation instrument). Turbotax 2011 If you are subject to temporary support orders, the designation must be made in the original or a later temporary support order. Turbotax 2011   Your spouse can exclude the payments from income only if he or she attaches a copy of the instrument designating them as not alimony to his or her return. Turbotax 2011 The copy must be attached each year the designation applies. Turbotax 2011 Spouses cannot be members of the same household. Turbotax 2011   Payments to your spouse while you are members of the same household are not alimony if you are legally separated under a decree of divorce or separate maintenance. Turbotax 2011 A home you formerly shared is considered one household, even if you physically separate yourselves in the home. Turbotax 2011   You are not treated as members of the same household if one of you is preparing to leave the household and does leave no later than 1 month after the date of the payment. Turbotax 2011 Exception. Turbotax 2011   If you are not legally separated under a decree of divorce or separate maintenance, a payment under a written separation agreement, support decree, or other court order may qualify as alimony even if you are members of the same household when the payment is made. Turbotax 2011 Liability for payments after death of recipient spouse. Turbotax 2011   If any part of payments you make must continue to be made for any period after your spouse's death, that part of your payments is not alimony whether made before or after the death. Turbotax 2011 If all of the payments would continue, then none of the payments made before or after the death are alimony. Turbotax 2011   The divorce or separation instrument does not have to expressly state that the payments cease upon the
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The Turbotax 2011

Turbotax 2011 3. Turbotax 2011   Limit on Annual Additions Table of Contents Ministers and church employees. Turbotax 2011 Includible Compensation for Your Most Recent Year of ServiceMost Recent Year of Service Includible Compensation The first component of MAC is the limit on annual additions. Turbotax 2011 This is a limit on the total contributions (elective deferrals, nonelective contributions, and after-tax contributions) that can be made to your 403(b) account. Turbotax 2011 The limit on annual additions generally is the lesser of: $51,000 for 2013 and $52,000 for 2014, or 100% of your includible compensation for your most recent year of service. Turbotax 2011 More than one 403(b) account. Turbotax 2011 If you contributed to more than one 403(b) account, you must combine the contributions made to all 403(b) accounts on your behalf by your employer. Turbotax 2011 Ministers and church employees. Turbotax 2011   If you are a minister or a church employee, you may be able to increase your limit on annual additions or use different rules when figuring your limit on annual additions. Turbotax 2011 For more information, see chapter 5. Turbotax 2011 Participation in a qualified plan. Turbotax 2011 If you participated in a 403(b) plan and a qualified plan, you must combine contributions made to your 403(b) account with contributions to a qualified plan and simplified employee pensions of all corporations, partnerships, and sole proprietorships in which you have more than 50% control. Turbotax 2011 You can use Part I of Worksheet 1 in chapter 9 to figure your limit on annual additions. Turbotax 2011 Includible Compensation for Your Most Recent Year of Service Definition. Turbotax 2011   Generally, includible compensation for your most recent year of service is the amount of taxable wages and benefits you received from the employer that maintained a 403(b) account for your benefit during your most recent year of service. Turbotax 2011 When figuring your includible compensation for your most recent year of service, keep in mind that your most recent year of service may not be the same as your employer's most recent annual work period. Turbotax 2011 This can happen if your tax year is not the same as your employer's annual work period. Turbotax 2011 When figuring includible compensation for your most recent year of service, do not mix compensation or service of one employer with compensation or service of another employer. Turbotax 2011 Most Recent Year of Service Your most recent year of service is your last full year of service, ending on the last day of your tax year that you worked for the employer that maintained a 403(b) account on your behalf. Turbotax 2011 Tax year different from employer's annual work period. Turbotax 2011   If your tax year is not the same as your employer's annual work period, your most recent year of service is made up of parts of at least two of your employer's annual work periods. Turbotax 2011 Example. Turbotax 2011 A professor who reports her income on a calendar-year basis is employed on a full-time basis by a university that operates on an academic year (October through May). Turbotax 2011 To figure her includible compensation for 2013, the professor's most recent year of service is her service from January through May 2013 and from October through December 2013. Turbotax 2011 Figuring Your Most Recent Year of Service To figure your most recent year of service, begin by determining what is a full year of service for your position. Turbotax 2011 A full year of service is equal to full-time employment for your employer's annual work period. Turbotax 2011 After identifying a full year of service, begin counting the service you have provided for your employer starting with the service provided in the current year. Turbotax 2011 Part-time or employed only part of the year. Turbotax 2011   If you are a part-time or a full-time employee who is employed for only part of the year, your most recent year of service is your service this year and your service for as many previous years as is necessary to total 1 full year of service. Turbotax 2011 To determine your most recent year of service, add the following periods of service: Your service during the year for which you are figuring the limit on annual additions, and Your service during your preceding tax years until the total service equals 1 year of service or you have figured all of your service with the employer. Turbotax 2011 Example. Turbotax 2011 You were employed on a full-time basis from July through December 2011 (1/2 year of service), July through December 2012 (1/2 year of service), and October through December 2013 (1/4 year of service). Turbotax 2011 Your most recent year of service for computing your limit on annual additions for 2013 is the total of your service during 2013 (1/4 year of service), your service during 2012 (1/2 year of service), and your service during the months October through December 2011 (1/4 year of service). Turbotax 2011 Not yet employed for 1 year. Turbotax 2011   If, at the close of the year, you have not yet worked for your employer for 1 year (including time you worked for the same employer in all earlier years), use the period of time you have worked for the employer as your most recent year of service. Turbotax 2011 Includible Compensation After identifying your most recent year of service, the next step is to identify the includible compensation associated with that full year of service. Turbotax 2011 Includible compensation is not the same as income included on your tax return. Turbotax 2011 Compensation is a combination of income and benefits received in exchange for services provided to your employer. Turbotax 2011 Generally, includible compensation is the amount of income and benefits: Received from the employer who maintains your 403(b) account, and Must be included in your income. Turbotax 2011 Includible compensation includes the following amounts. Turbotax 2011 Elective deferrals (employer's contributions made on your behalf under a salary reduction agreement). Turbotax 2011 Amounts contributed or deferred by your employer under a section 125 cafeteria plan. Turbotax 2011 Amounts contributed or deferred, at the election of the employee, under an eligible section 457 nonqualified deferred compensation plan (state or local government or tax-exempt organization plan). Turbotax 2011  Note. Turbotax 2011 For information about treating elective deferrals under section 457 plans as Roth contributions, see Publication 575. Turbotax 2011 Wages, salaries, and fees for personal services earned with the employer maintaining your 403(b) account. Turbotax 2011 Income otherwise excluded under the foreign earned income exclusion. Turbotax 2011 Pre-tax contributions (employer's contributions made on your behalf according to your election) to a qualified transportation fringe benefit plan. Turbotax 2011 Includible compensation does not include the following items. Turbotax 2011 Your employer's contributions to your 403(b) account. Turbotax 2011 Compensation earned while your employer was not an eligible employer. Turbotax 2011 Your employer's contributions to a qualified plan that: Are on your behalf, and Are excludable from income. Turbotax 2011 The cost of incidental life insurance. Turbotax 2011 See Cost of Incidental Life Insurance, later. Turbotax 2011 If you are a church employee or a foreign missionary, figure includible compensation using the rules explained in chapter 5. Turbotax 2011 Contributions after retirement. Turbotax 2011   Nonelective contributions may be made for an employee for up to 5 years after retirement. Turbotax 2011 These contributions would be based on includible compensation for the last year of service before retirement. Turbotax 2011 Cost of Incidental Life Insurance Includible compensation does not include the cost of incidental life insurance. Turbotax 2011 If all of your 403(b) accounts invest only in mutual funds, then you have no incidental life insurance. Turbotax 2011 If you have an annuity contract, a portion of the cost of that contract may be for incidental life insurance. Turbotax 2011 If so, the cost of the insurance is taxable to you in the year contributed and is considered part of your basis when distributed. Turbotax 2011 Your employer will include the cost of your insurance as taxable wages in box 1 of Form W-2. Turbotax 2011 Not all annuity contracts include life insurance. Turbotax 2011 Contact your plan administrator to determine if your contract includes incidental life insurance. Turbotax 2011 If it does, you will need to figure the cost of life insurance each year the policy is in effect. Turbotax 2011 Figuring the cost of incidental life insurance. Turbotax 2011 If you have determined that part of the cost of your annuity contract is for an incidental life insurance premium, you will need to determine the amount of the premium and subtract it from your includible compensation. Turbotax 2011 To determine the amount of the life insurance premiums, you will need to know the following information. Turbotax 2011 The value of your life insurance contract, which is the amount payable upon your death. Turbotax 2011 The cash value of your life insurance contract at the end of the tax year. Turbotax 2011 Your age on your birthday nearest the beginning of the policy year. Turbotax 2011 Your current life insurance protection under an ordinary retirement income life insurance policy, which is the amount payable upon your death minus the cash value of the contract at the end of the year. Turbotax 2011 You can use Worksheet A, in chapter 9, to determine the cost of your incidental life insurance. Turbotax 2011 Example. Turbotax 2011 Your new contract provides that your beneficiary will receive $10,000 if you should die before retirement. Turbotax 2011 Your cash value in the contract at the end of the first year is zero. Turbotax 2011 Your current life insurance protection for the first year is $10,000 ($10,000 − 0). Turbotax 2011 The cash value in the contract at the end of year two is $1,000, and the current life insurance protection for the second year is $9,000 ($10,000 – $1,000). Turbotax 2011 The 1-year cost of the protection can be calculated by using Figure 3-1, Table of One-Year Term Premiums for $1,000 Life Insurance Protection . Turbotax 2011 The premium rate is determined based on your age on your birthday nearest the beginning of the policy year. Turbotax 2011 Figure 3-1. Turbotax 2011 Table of One-Year Term Premiums for $1,000 Life Insurance Protection Age Cost   Age Cost   Age Cost 0 $0. Turbotax 2011 70   35 $0. Turbotax 2011 99   70 $20. Turbotax 2011 62 1 0. Turbotax 2011 41   36 1. Turbotax 2011 01   71 22. Turbotax 2011 72 2 0. Turbotax 2011 27   37 1. Turbotax 2011 04   72 25. Turbotax 2011 07 3 0. Turbotax 2011 19   38 1. Turbotax 2011 06   73 27. Turbotax 2011 57 4 0. Turbotax 2011 13   39 1. Turbotax 2011 07   74 30. Turbotax 2011 18 5 0. Turbotax 2011 13   40 1. Turbotax 2011 10   75 33. Turbotax 2011 05 6 0. Turbotax 2011 14   41 1. Turbotax 2011 13   76 36. Turbotax 2011 33 7 0. Turbotax 2011 15   42 1. Turbotax 2011 20   77 40. Turbotax 2011 17 8 0. Turbotax 2011 16   43 1. Turbotax 2011 29   78 44. Turbotax 2011 33 9 0. Turbotax 2011 16   44 1. Turbotax 2011 40   79 49. Turbotax 2011 23 10 0. Turbotax 2011 16   45 1. Turbotax 2011 53   80 54. Turbotax 2011 56 11 0. Turbotax 2011 19   46 1. Turbotax 2011 67   81 60. Turbotax 2011 51 12 0. Turbotax 2011 24   47 1. Turbotax 2011 83   82 66. Turbotax 2011 74 13 0. Turbotax 2011 28   48 1. Turbotax 2011 98   83 73. Turbotax 2011 07 14 0. Turbotax 2011 33   49 2. Turbotax 2011 13   84 80. Turbotax 2011 35 15 0. Turbotax 2011 38   50 2. Turbotax 2011 30   85 88. Turbotax 2011 76 16 0. Turbotax 2011 52   51 2. Turbotax 2011 52   86 99. Turbotax 2011 16 17 0. Turbotax 2011 57   52 2. Turbotax 2011 81   87 110. Turbotax 2011 40 18 0. Turbotax 2011 59   53 3. Turbotax 2011 20   88 121. Turbotax 2011 85 19 0. Turbotax 2011 61   54 3. Turbotax 2011 65   89 133. Turbotax 2011 40 20 0. Turbotax 2011 62   55 4. Turbotax 2011 15   90 144. Turbotax 2011 30 21 0. Turbotax 2011 62   56 4. Turbotax 2011 68   91 155. Turbotax 2011 80 22 0. Turbotax 2011 64   57 5. Turbotax 2011 20   92 168. Turbotax 2011 75 23 0. Turbotax 2011 66   58 5. Turbotax 2011 66   93 186. Turbotax 2011 44 24 0. Turbotax 2011 68   59 6. Turbotax 2011 06   94 206. Turbotax 2011 70 25 0. Turbotax 2011 71   60 6. Turbotax 2011 51   95 228. Turbotax 2011 35 26 0. Turbotax 2011 73   61 7. Turbotax 2011 11   96 250. Turbotax 2011 01 27 0. Turbotax 2011 76   62 7. Turbotax 2011 96   97 265. Turbotax 2011 09 28 0. Turbotax 2011 80   63 9. Turbotax 2011 08   98 270. Turbotax 2011 11 29 0. Turbotax 2011 83   64 10. Turbotax 2011 41   99 281. Turbotax 2011 05 30 0. Turbotax 2011 87   65 11. Turbotax 2011 90       31 0. Turbotax 2011 90   66 13. Turbotax 2011 51       32 0. Turbotax 2011 93   67 15. Turbotax 2011 20       33 0. Turbotax 2011 96   68 16. Turbotax 2011 92       34 0. Turbotax 2011 98   69 18. Turbotax 2011 70                       If the current published premium rates per $1,000 of insurance protection charged by an insurer for individual 1-year term life insurance premiums available to all standard risks are lower than those in the preceding table, you can use the lower rates for figuring the cost of insurance in connection with individual policies issued by the same insurer. Turbotax 2011 Example 1. Turbotax 2011 Lynne Green, age 44, and her employer enter into a 403(b) plan that will provide her with a $500 a month annuity upon retirement at age 65. Turbotax 2011 The agreement also provides that if she should die before retirement, her beneficiary will receive the greater of $20,000 or the cash surrender value in the life insurance contract. Turbotax 2011 Using the facts presented we can determine the cost of Lynne's life insurance protection as shown in Table 3-1. Turbotax 2011 Lynne's employer has included $28 for the cost of the life insurance protection in her current year's income. Turbotax 2011 When figuring her includible compensation for this year, Lynne will subtract $28. Turbotax 2011 Table 3-1. Turbotax 2011 Worksheet A. Turbotax 2011 Cost of Incidental Life Insurance Note. Turbotax 2011 Use this worksheet to figure the cost of incidental life insurance included in your annuity contract. Turbotax 2011 This amount will be used to figure includible compensation for your most recent year of service. Turbotax 2011 1. Turbotax 2011 Enter the value of the contract (amount payable upon your death) 1. Turbotax 2011 $20,000. Turbotax 2011 00 2. Turbotax 2011 Enter the cash value in the contract at the end of the year 2. Turbotax 2011 0. Turbotax 2011 00 3. Turbotax 2011 Subtract line 2 from line 1. Turbotax 2011 This is the value of your current life insurance protection 3. Turbotax 2011 $20,000. Turbotax 2011 00 4. Turbotax 2011 Enter your age on your birthday nearest the beginning of the policy year 4. Turbotax 2011 44 5. Turbotax 2011 Enter the 1-year term premium for $1,000 of life insurance based on your age. Turbotax 2011 (From Figure 3-1) 5. Turbotax 2011 $1. Turbotax 2011 40 6. Turbotax 2011 Divide line 3 by $1,000 6. Turbotax 2011 20 7. Turbotax 2011 Multiply line 6 by line 5. Turbotax 2011 This is the cost of your incidental life insurance 7. Turbotax 2011 $28. Turbotax 2011 00 Example 2. Turbotax 2011 Lynne's cash value in the contract at the end of the second year is $1,000. Turbotax 2011 In year two, the cost of Lynne's life insurance is calculated as shown in Table 3-2. Turbotax 2011 In year two, Lynne's employer will include $29. Turbotax 2011 07 in her current year's income. Turbotax 2011 Lynne will subtract this amount when figuring her includible compensation. Turbotax 2011 Table 3-2. Turbotax 2011 Worksheet A. Turbotax 2011 Cost of Incidental Life Insurance Note. Turbotax 2011 Use this worksheet to figure the cost of incidental life insurance included in your annuity contract. Turbotax 2011 This amount will be used to figure includible compensation for your most recent year of service. Turbotax 2011 1. Turbotax 2011 Enter the value of the contract (amount payable upon your death) 1. Turbotax 2011 $20,000. Turbotax 2011 00 2. Turbotax 2011 Enter the cash value in the contract at the end of the year 2. Turbotax 2011 $1,000. Turbotax 2011 00 3. Turbotax 2011 Subtract line 2 from line 1. Turbotax 2011 This is the value of your current life insurance protection 3. Turbotax 2011 $19,000. Turbotax 2011 00 4. Turbotax 2011 Enter your age on your birthday nearest the beginning of the policy year 4. Turbotax 2011 45 5. Turbotax 2011 Enter the 1-year term premium for $1,000 of life insurance based on your age. Turbotax 2011 (From Figure 3-1) 5. Turbotax 2011 $1. Turbotax 2011 53 6. Turbotax 2011 Divide line 3 by $1,000 6. Turbotax 2011 19 7. Turbotax 2011 Multiply line 6 by line 5. Turbotax 2011 This is the cost of your incidental life insurance 7. Turbotax 2011 $29. Turbotax 2011 07 Figuring Includible Compensation for Your Most Recent Year of Service You can use Worksheet B in chapter 9 to determine your includible compensation for your most recent year of service. Turbotax 2011 Example. Turbotax 2011 Floyd has been periodically working full-time for a local hospital since September 2011. Turbotax 2011 He needs to figure his limit on annual additions for 2014. Turbotax 2011 The hospital's normal annual work period for employees in Floyd's general type of work runs from January to December. Turbotax 2011 During the periods that Floyd was employed with the hospital, the hospital has always been eligible to provide a 403(b) plan to employees. Turbotax 2011 Additionally, the hospital has never provided the employees with a 457 deferred compensation plan, a transportation fringe benefit plan, or a cafeteria plan. Turbotax 2011 Floyd has never worked abroad and there is no life insurance provided under the plan. Turbotax 2011 Table 3-3 shows the service Floyd provided to his employer, his compensation for the periods worked, his elective deferrals, and his taxable wages. Turbotax 2011 Table 3-3. Turbotax 2011 Floyd's Compensation Note. Turbotax 2011 This table shows information Floyd will use to figure includible compensation for his most recent year of service. Turbotax 2011   Year Years of Service Taxable Wages Elective Deferrals 2014 6/12 of  a year $42,000 $2,000 2013 4/12 of  a year $16,000 $1,650 2012 4/12 of  a year $16,000 $1,650 Before Floyd can figure his limit on annual additions, he must figure includible compensation for his most recent year of service. Turbotax 2011 Because Floyd is not planning to work the entire 2014 year, his most recent year of service will include the time he is planning to work in 2014 plus time he worked in the preceding 3 years until the time he worked for the hospital totals 1 year. Turbotax 2011 If the total time he worked is less than 1 year, Floyd will treat it as if it were 1 year. Turbotax 2011 He figures his most recent year of service shown in the following list. Turbotax 2011 Time he will work in 2014 is 6/12 of a year. Turbotax 2011 Time worked in 2013 is 4/12 of a year. Turbotax 2011 All of this time will be used to determine Floyd's most recent year of service. Turbotax 2011 Time worked in 2012 is 4/12 of a year. Turbotax 2011 Floyd only needs 2 months of the 4 months he worked in 2012 to have enough time to total 1 full year. Turbotax 2011 Because he needs only one-half of the actual time he worked, Floyd will use only one-half of his income earned during that period to calculate wages that will be used in figuring his includible compensation. Turbotax 2011 Using the information provided in Table 3-3, wages for Floyd's most recent year of service are $66,000 ($42,000 + $16,000 + $8,000). Turbotax 2011 His includible compensation for his most recent year of service is figured as shown in Table 3-4. Turbotax 2011 After figuring his includible compensation, Floyd determines his limit on annual additions for 2014 to be $52,000, the lesser of his includible compensation, $70,475 (Table 3-4), and the maximum amount of $52,000. Turbotax 2011 Table 3-4. Turbotax 2011 Worksheet B. Turbotax 2011 Includible Compensation for Your Most Recent Year of Service1 Note. Turbotax 2011 Use this worksheet to figure includible compensation for your most recent year of service. Turbotax 2011 1. Turbotax 2011 Enter your includible wages from the employer maintaining your 403(b) account for your most recent year of service 1. Turbotax 2011 $66,000 2. Turbotax 2011 Enter elective deferrals excluded from your gross income for your most recent year of service2 2. Turbotax 2011 4,4753 3. Turbotax 2011 Enter amounts contributed or deferred by your employer under a cafeteria plan for your most recent year of service 3. Turbotax 2011 -0- 4. Turbotax 2011 Enter amounts contributed or deferred by your employer according to your election to your 457 account (a nonqualified plan of a state or local government, or of a tax-exempt organization) for your most recent year of service 4. Turbotax 2011 -0- 5. Turbotax 2011 Enter pre-tax contributions (employer's contributions made on your behalf according to your election) to a qualified transportation fringe benefit plan for your most recent year of service 5. Turbotax 2011 -0- 6. Turbotax 2011 Enter your foreign earned income exclusion for your most recent year of service 6. Turbotax 2011 -0- 7. Turbotax 2011 Add lines 1, 2, 3, 4, 5, and 6 7. Turbotax 2011 70,475 8. Turbotax 2011 Enter the cost of incidental life insurance that is part of your annuity contract for your most recent year of service 8. Turbotax 2011 -0- 9. Turbotax 2011 Enter compensation that was both: Earned during your most recent year of service, and Earned while your employer was not qualified to maintain a 403(b) plan 9. Turbotax 2011 -0- 10. Turbotax 2011 Add lines 8 and 9 10. Turbotax 2011 -0- 11. Turbotax 2011 Subtract line 10 from line 7. Turbotax 2011 This is your includible compensation for your most recent year of service 11. Turbotax 2011 70,475 1Use estimated amounts if figuring includible compensation before the end of the year. Turbotax 2011 2Elective deferrals made to a designated Roth account are not excluded from your gross income and should not be included on this line. Turbotax 2011  3$4,475 ($2,000 + $1,650 + $825). Turbotax 2011 Prev  Up  Next   Home   More Online Publications