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1040 Nr Tax Form

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1040 Nr Tax Form

1040 nr tax form 9. 1040 nr tax form   Education Exception to Additional Tax on Early IRA Distributions Table of Contents Introduction Who Is Eligible Figuring the Amount Not Subject to the 10% Tax Reporting Early Distributions Introduction Generally, if you take a distribution from your IRA before you reach age 59½, you must pay a 10% additional tax on the early distribution. 1040 nr tax form This applies to any IRA you own, whether it is a traditional IRA (including a SEP-IRA), a Roth IRA, or a SIMPLE IRA. 1040 nr tax form The additional tax on an early distribution from a SIMPLE IRA may be as high as 25%. 1040 nr tax form See Publication 560, Retirement Plans for Small Business, for information on SEP-IRAs, and Publication 590, for information about all other IRAs. 1040 nr tax form However, you can take distributions from your IRAs for qualified higher education expenses without having to pay the 10% additional tax. 1040 nr tax form You may owe income tax on at least part of the amount distributed, but you may not have to pay the 10% additional tax. 1040 nr tax form Generally, if the taxable part of the distribution is less than or equal to the adjusted qualified education expenses (AQEE), none of the distribution is subject to the additional tax. 1040 nr tax form If the taxable part of the distribution is more than the AQEE, only the excess is subject to the additional tax. 1040 nr tax form Who Is Eligible You can take a distribution from your IRA before you reach age 59½ and not have to pay the 10% additional tax if, for the year of the distribution, you pay qualified education expenses for: yourself, your spouse, or your or your spouse's child, foster child, adopted child, or descendant of any of them. 1040 nr tax form Qualified education expenses. 1040 nr tax form   For purposes of the 10% additional tax, these expenses are tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. 1040 nr tax form They also include expenses for special needs services incurred by or for special needs students in connection with their enrollment or attendance. 1040 nr tax form   In addition, if the student is at least a half-time student, room and board are qualified education expenses. 1040 nr tax form   The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. 1040 nr tax form The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. 1040 nr tax form The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. 1040 nr tax form You will need to contact the eligible educational institution for qualified room and board costs. 1040 nr tax form Eligible educational institution. 1040 nr tax form   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. 1040 nr tax form S. 1040 nr tax form Department of Education. 1040 nr tax form It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. 1040 nr tax form The educational institution should be able to tell you if it is an eligible educational institution. 1040 nr tax form   Certain educational institutions located outside the United States also participate in the U. 1040 nr tax form S. 1040 nr tax form Department of Education's Federal Student Aid (FSA) programs. 1040 nr tax form Half-time student. 1040 nr tax form   A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic work load for the course of study the student is pursuing as determined under the standards of the school where the student is enrolled. 1040 nr tax form Figuring the Amount Not Subject to the 10% Tax To determine the amount of your distribution that is not subject to the 10% additional tax, first figure your adjusted qualified education expenses. 1040 nr tax form You do this by reducing your total qualified education expenses by any tax-free educational assistance, which includes: Expenses used to figure the tax-free portion of distributions from a Coverdell education savings account (ESA) (see Distributions in chapter 7, Coverdell Education Savings Account), The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. 1040 nr tax form Do not reduce the qualified education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance given to either the student or the individual making the withdrawal, or A withdrawal from personal savings (including savings from a qualified tuition program (QTP)). 1040 nr tax form If your IRA distribution is equal to or less than your adjusted qualified education expenses, you are not subject to the 10% additional tax. 1040 nr tax form Example 1. 1040 nr tax form In 2013, Erin (age 32) took a year off from teaching to attend graduate school full-time. 1040 nr tax form She paid $5,800 of qualified education expenses from the following sources. 1040 nr tax form   Employer-provided educational assistance  (tax free) $5,000     Early distribution from IRA (includes $500 taxable earnings) 3,200           Before Erin can determine if she must pay the 10% additional tax on her IRA distribution, she must reduce her total qualified education expenses. 1040 nr tax form   Total qualified education expenses $5,800     Minus: Tax-free educational assistance −5,000     Equals: Adjusted qualified  education expenses (AQEE) $ 800   Because Erin's AQEE ($800) are more than the taxable portion of her IRA distribution ($500), she does not have to pay the 10% additional tax on any part of this distribution. 1040 nr tax form However, she must include the $500 taxable earnings in her gross income subject to income tax. 1040 nr tax form Example 2. 1040 nr tax form Assume the same facts as in Example 1 , except that Erin deducted some of the contributions to her IRA, so the taxable part of her early distribution is higher by $1,000. 1040 nr tax form This must be included in her income subject to income tax. 1040 nr tax form The taxable part of Erin's IRA distribution ($1,000) is larger than her $800 AQEE. 1040 nr tax form Therefore, she must pay the 10% additional tax on $200, the taxable part of her distribution ($1,000) that is more than her qualified education expenses ($800). 1040 nr tax form She does not have to pay the 10% additional tax on the remaining $800 of her taxable distribution. 1040 nr tax form Reporting Early Distributions By January 31, 2014, the payer of your IRA distribution should send you Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. 1040 nr tax form The information on this form will help you determine how much of your distribution is taxable for income tax purposes and how much is subject to the 10% additional tax. 1040 nr tax form If you received an early distribution from your IRA, you must report the taxable earnings on Form 1040, line 15b (Form 1040NR, line 16b). 1040 nr tax form Then, if you qualify for an exception for qualified higher education expenses, you must file Form 5329 to show how much, if any, of your early distribution is subject to the 10% additional tax. 1040 nr tax form See the Instructions for Form 5329, Part I, for help in completing the form and entering the results on Form 1040 or 1040NR. 1040 nr tax form There are many other situations in which Form 5329 is required. 1040 nr tax form If, during 2013, you had other distributions from IRAs or qualified retirement plans, or have made excess contributions to certain tax-favored accounts, see the instructions for line 58 (Form 1040) or line 56 (Form 1040NR) to determine if you must file Form 5329. 1040 nr tax form Prev  Up  Next   Home   More Online Publications
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The 1040 Nr Tax Form

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