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2010 1040 Form

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2010 1040 Form

2010 1040 form 28. 2010 1040 form   Miscellaneous Deductions Table of Contents What's New Introduction Useful Items - You may want to see: Deductions Subject to the 2% LimitUnreimbursed Employee Expenses (Line 21) Tax Preparation Fees (Line 22) Other Expenses (Line 23) Deductions Not Subject to the 2% LimitList of Deductions Nondeductible ExpensesList of Nondeductible Expenses What's New Standard mileage rate. 2010 1040 form  The 2013 rate for business use of a vehicle is 56½ cents per mile. 2010 1040 form Introduction This chapter explains which expenses you can claim as miscellaneous itemized deductions on Schedule A (Form 1040). 2010 1040 form You must reduce the total of most miscellaneous itemized deductions by 2% of your adjusted gross income. 2010 1040 form This chapter covers the following topics. 2010 1040 form Deductions subject to the 2% limit. 2010 1040 form Deductions not subject to the 2% limit. 2010 1040 form Expenses you cannot deduct. 2010 1040 form You must keep records to verify your deductions. 2010 1040 form You should keep receipts, canceled checks, substitute checks, financial account statements, and other documentary evidence. 2010 1040 form For more information on recordkeeping, get Publication 552, Record- keeping for Individuals. 2010 1040 form Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 525 Taxable and Nontaxable Income 529 Miscellaneous Deductions 535 Business Expenses 587 Business Use of Your Home (Including Use by Daycare Providers) 946 How To Depreciate Property Form (and Instructions) Schedule A (Form 1040) Itemized Deductions 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses Deductions Subject to the 2% Limit You can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040). 2010 1040 form You can claim the amount of expenses that is more than 2% of your adjusted gross income. 2010 1040 form You figure your deduction on Schedule A by subtracting 2% of your adjusted gross income from the total amount of these expenses. 2010 1040 form Your adjusted gross income is the amount on Form 1040, line 38. 2010 1040 form Generally, you apply the 2% limit after you apply any other deduction limit. 2010 1040 form For example, you apply the 50% (or 80%) limit on business-related meals and entertainment (discussed in chapter 26) before you apply the 2% limit. 2010 1040 form Deductions subject to the 2% limit are discussed in the three categories in which you report them on Schedule A (Form 1040). 2010 1040 form Unreimbursed employee expenses (line 21). 2010 1040 form Tax preparation fees (line 22). 2010 1040 form Other expenses (line 23). 2010 1040 form Unreimbursed Employee Expenses (Line 21) Generally, you can deduct on Schedule A (Form 1040), line 21, unreimbursed employee expenses that are: Paid or incurred during your tax year, For carrying on your trade or business of being an employee, and Ordinary and necessary. 2010 1040 form An expense is ordinary if it is common and accepted in your trade, business, or profession. 2010 1040 form An expense is necessary if it is appropriate and helpful to your business. 2010 1040 form An expense does not have to be required to be considered necessary. 2010 1040 form Examples of unreimbursed employee expenses are listed next. 2010 1040 form The list is followed by discussions of additional unreimbursed employee expenses. 2010 1040 form Business bad debt of an employee. 2010 1040 form Education that is work related. 2010 1040 form (See chapter 27. 2010 1040 form ) Legal fees related to your job. 2010 1040 form Licenses and regulatory fees. 2010 1040 form Malpractice insurance premiums. 2010 1040 form Medical examinations required by an employer. 2010 1040 form Occupational taxes. 2010 1040 form Passport for a business trip. 2010 1040 form Subscriptions to professional journals and trade magazines related to your work. 2010 1040 form Travel, transportation, entertainment, and gifts related to your work. 2010 1040 form (See chapter 26. 2010 1040 form ) Business Liability Insurance You can deduct insurance premiums you paid for protection against personal liability for wrongful acts on the job. 2010 1040 form Damages for Breach of Employment Contract If you break an employment contract, you can deduct damages you pay your former employer that are attributable to the pay you received from that employer. 2010 1040 form Depreciation on Computers You can claim a depreciation deduction for a computer that you use in your work as an employee if its use is: For the convenience of your employer, and Required as a condition of your employment. 2010 1040 form For more information about the rules and exceptions to the rules affecting the allowable deductions for a home computer, see Publication 529. 2010 1040 form Dues to Chambers of Commerce and Professional Societies You may be able to deduct dues paid to professional organizations (such as bar associations and medical associations) and to chambers of commerce and similar organizations, if membership helps you carry out the duties of your job. 2010 1040 form Similar organizations include: Boards of trade, Business leagues, Civic or public service organizations, Real estate boards, and Trade associations. 2010 1040 form Lobbying and political activities. 2010 1040 form   You may not be able to deduct that part of your dues that is for certain lobbying and political activities. 2010 1040 form See Dues used for lobbying under Nondeductible Expenses, later. 2010 1040 form Educator Expenses If you were an eligible educator in 2013, you can deduct up to $250 of qualified expenses you paid in 2013 as an adjustment to gross income on Form 1040, line 23, rather than as a miscellaneous itemized deduction. 2010 1040 form If you file Form 1040A, you can deduct these expenses on line 16. 2010 1040 form If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. 2010 1040 form However, neither spouse can deduct more than $250 of his or her qualified expenses. 2010 1040 form Home Office If you use a part of your home regularly and exclusively for business purposes, you may be able to deduct a part of the operating expenses and depreciation of your home. 2010 1040 form You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively: As your principal place of business for any trade or business, As a place to meet or deal with your patients, clients, or customers in the normal course of your trade or business, or In the case of a separate structure not attached to your home, in connection with your trade or business. 2010 1040 form The regular and exclusive business use must be for the convenience of your employer and not just appropriate and helpful in your job. 2010 1040 form See Publication 587 for more detailed information and a worksheet. 2010 1040 form Job Search Expenses You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. 2010 1040 form You cannot deduct these expenses if: You are looking for a job in a new occupation, There was a substantial break between the ending of your last job and your looking for a new one, or You are looking for a job for the first time. 2010 1040 form Employment and outplacement agency fees. 2010 1040 form   You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation. 2010 1040 form Employer pays you back. 2010 1040 form   If, in a later year, your employer pays you back for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year. 2010 1040 form (See Recoveries in chapter 12. 2010 1040 form ) Employer pays the employment agency. 2010 1040 form   If your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross income. 2010 1040 form Résumé. 2010 1040 form   You can deduct amounts you spend for preparing and mailing copies of a résumé to prospective employers if you are looking for a new job in your present occupation. 2010 1040 form Travel and transportation expenses. 2010 1040 form   If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. 2010 1040 form You can deduct the travel expenses if the trip is primarily to look for a new job. 2010 1040 form The amount of time you spend on personal activity compared to the amount of time you spend in looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job. 2010 1040 form   Even if you cannot deduct the travel expenses to and from an area, you can deduct the expenses of looking for a new job in your present occupation while in the area. 2010 1040 form   You can choose to use the standard mileage rate to figure your car expenses. 2010 1040 form The 2013 rate for business use of a vehicle is 56½ cents per mile. 2010 1040 form See chapter 26 for more information. 2010 1040 form Licenses and Regulatory Fees You can deduct the amount you pay each year to state or local governments for licenses and regulatory fees for your trade, business, or profession. 2010 1040 form Occupational Taxes You can deduct an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. 2010 1040 form If you are an employee, you can claim occupational taxes only as a miscellaneous deduction subject to the 2% limit; you cannot claim them as a deduction for taxes elsewhere on your return. 2010 1040 form Repayment of Income Aid Payment An “income aid payment” is one that is received under an employer's plan to aid employees who lose their jobs because of lack of work. 2010 1040 form If you repay a lump-sum income aid payment that you received and included in income in an earlier year, you can deduct the repayment. 2010 1040 form Research Expenses of a College Professor If you are a college professor, you can deduct research expenses, including travel expenses, for teaching, lecturing, or writing and publishing on subjects that relate directly to your teaching duties. 2010 1040 form You must have undertaken the research as a means of carrying out the duties expected of a professor and without expectation of profit apart from salary. 2010 1040 form However, you cannot deduct the cost of travel as a form of education. 2010 1040 form Tools Used in Your Work Generally, you can deduct amounts you spend for tools used in your work if the tools wear out and are thrown away within 1 year from the date of purchase. 2010 1040 form You can depreciate the cost of tools that have a useful life substantially beyond the tax year. 2010 1040 form For more information about depreciation, see Publication 946. 2010 1040 form Union Dues and Expenses You can deduct dues and initiation fees you pay for union membership. 2010 1040 form You can also deduct assessments for benefit payments to unemployed union members. 2010 1040 form However, you cannot deduct the part of the assessments or contributions that provides funds for the payment of sick, accident, or death benefits. 2010 1040 form Also, you cannot deduct contributions to a pension fund, even if the union requires you to make the contributions. 2010 1040 form You may not be able to deduct amounts you pay to the union that are related to certain lobbying and political activities. 2010 1040 form See Lobbying Expenses under Nondeductible Expenses, later. 2010 1040 form Work Clothes and Uniforms You can deduct the cost and upkeep of work clothes if the following two requirements are met. 2010 1040 form You must wear them as a condition of your employment. 2010 1040 form The clothes are not suitable for everyday wear. 2010 1040 form It is not enough that you wear distinctive clothing. 2010 1040 form The clothing must be specifically required by your employer. 2010 1040 form Nor is it enough that you do not, in fact, wear your work clothes away from work. 2010 1040 form The clothing must not be suitable for taking the place of your regular clothing. 2010 1040 form Examples of workers who may be able to deduct the cost and upkeep of work clothes are: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc. 2010 1040 form ). 2010 1040 form Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear. 2010 1040 form However, work clothing consisting of white cap, white shirt or white jacket, white bib overalls, and standard work shoes, which a painter is required by his union to wear on the job, is not distinctive in character or in the nature of a uniform. 2010 1040 form Similarly, the costs of buying and maintaining blue work clothes worn by a welder at the request of a foreman are not deductible. 2010 1040 form Protective clothing. 2010 1040 form   You can deduct the cost of protective clothing required in your work, such as safety shoes or boots, safety glasses, hard hats, and work gloves. 2010 1040 form   Examples of workers who may be required to wear safety items are: carpenters, cement workers, chemical workers, electricians, fishing boat crew members, machinists, oil field workers, pipe fitters, steamfitters, and truck drivers. 2010 1040 form Military uniforms. 2010 1040 form   You generally cannot deduct the cost of your uniforms if you are on full-time active duty in the armed forces. 2010 1040 form However, if you are an armed forces reservist, you can deduct the unreimbursed cost of your uniform if military regulations restrict you from wearing it except while on duty as a reservist. 2010 1040 form In figuring the deduction, you must reduce the cost by any nontaxable allowance you receive for these expenses. 2010 1040 form   If local military rules do not allow you to wear fatigue uniforms when you are off duty, you can deduct the amount by which the cost of buying and keeping up these uniforms is more than the uniform allowance you receive. 2010 1040 form   You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school. 2010 1040 form Tax Preparation Fees (Line 22) You can usually deduct tax preparation fees in the year you pay them. 2010 1040 form Thus, on your 2013 return, you can deduct fees paid in 2013 for preparing your 2012 return. 2010 1040 form These fees include the cost of tax preparation software programs and tax publications. 2010 1040 form They also include any fee you paid for electronic filing of your return. 2010 1040 form Other Expenses (Line 23) You can deduct certain other expenses as miscellaneous itemized deductions subject to the 2% limit. 2010 1040 form On Schedule A (Form 1040), line 23, you can deduct expenses that you pay: To produce or collect income that must be included in your gross income, To manage, conserve, or maintain property held for producing such income, or To determine, contest, pay, or claim a refund of any tax. 2010 1040 form You can deduct expenses you pay for the purposes in (1) and (2) above only if they are reasonably and closely related to these purposes. 2010 1040 form Some of these other expenses are explained in the following discussions. 2010 1040 form If the expenses you pay produce income that is only partially taxable, see Tax-Exempt Income Expenses , later, under Nondeductible Expenses. 2010 1040 form Appraisal Fees You can deduct appraisal fees if you pay them to figure a casualty loss or the fair market value of donated property. 2010 1040 form Casualty and Theft Losses You can deduct a casualty or theft loss as a miscellaneous itemized deduction subject to the 2% limit if you used the damaged or stolen property in performing services as an employee. 2010 1040 form First report the loss in Section B of Form 4684, Casualties and Thefts. 2010 1040 form You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. 2010 1040 form To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. 2010 1040 form For other casualty and theft losses, see chapter 25. 2010 1040 form Clerical Help and Office Rent You can deduct office expenses, such as rent and clerical help, that you have in connection with your investments and collecting the taxable income on them. 2010 1040 form Credit or Debit Card Convenience Fees You can deduct the convenience fee charged by the card processor for paying your income tax (including estimated tax payments) by credit or debit card. 2010 1040 form The fees are deductible in the year paid. 2010 1040 form Depreciation on Home Computer You can deduct depreciation on your home computer if you use it to produce income (for example, to manage your investments that produce taxable income). 2010 1040 form You generally must depreciate the computer using the straight line method over the Alternative Depreciation System (ADS) recovery period. 2010 1040 form But if you work as an employee and also use the computer in that work, see Publication 946. 2010 1040 form Excess Deductions of an Estate If an estate's total deductions in its last tax year are more than its gross income for that year, the beneficiaries succeeding to the estate's property can deduct the excess. 2010 1040 form Do not include deductions for the estate's personal exemption and charitable contributions when figuring the estate's total deductions. 2010 1040 form The beneficiaries can claim the deduction only for the tax year in which, or with which, the estate terminates, whether the year of termination is a normal year or a short tax year. 2010 1040 form For more information, see Termination of Estate in Publication 559, Survivors, Executors, and Administrators. 2010 1040 form Fees to Collect Interest and Dividends You can deduct fees you pay to a broker, bank, trustee, or similar agent to collect your taxable bond interest or dividends on shares of stock. 2010 1040 form But you cannot deduct a fee you pay to a broker to buy investment property, such as stocks or bonds. 2010 1040 form You must add the fee to the cost of the property. 2010 1040 form You cannot deduct the fee you pay to a broker to sell securities. 2010 1040 form You can use the fee only to figure gain or loss from the sale. 2010 1040 form See the Instructions for Form 8949 for information on how to report the fee. 2010 1040 form Hobby Expenses You can generally deduct hobby expenses, but only up to the amount of hobby income. 2010 1040 form A hobby is not a business because it is not carried on to make a profit. 2010 1040 form See Activity not for profit in chapter 12 under Other Income. 2010 1040 form Indirect Deductions of Pass-Through Entities Pass-through entities include partnerships, S corporations, and mutual funds that are not publicly offered. 2010 1040 form Deductions of pass-through entities are passed through to the partners or shareholders. 2010 1040 form The partners or shareholders can deduct their share of passed-through deductions for investment expenses as miscellaneous itemized deductions subject to the 2% limit. 2010 1040 form Example. 2010 1040 form You are a member of an investment club that is formed solely to invest in securities. 2010 1040 form The club is treated as a partnership. 2010 1040 form The partnership's income is solely from taxable dividends, interest, and gains from sales of securities. 2010 1040 form In this case, you can deduct your share of the partnership's operating expenses as miscellaneous itemized deductions subject to the 2% limit. 2010 1040 form However, if the investment club partnership has investments that also produce nontaxable income, you cannot deduct your share of the partnership's expenses that produce the nontaxable income. 2010 1040 form Publicly offered mutual funds. 2010 1040 form   Publicly offered mutual funds do not pass deductions for investment expenses through to shareholders. 2010 1040 form A mutual fund is “publicly offered” if it is: Continuously offered pursuant to a public offering, Regularly traded on an established securities market, or Held by or for at least 500 persons at all times during the tax year. 2010 1040 form   A publicly offered mutual fund will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing the net amount of dividend income (gross dividends minus investment expenses). 2010 1040 form This net figure is the amount you report on your return as income. 2010 1040 form You cannot further deduct investment expenses related to publicly offered mutual funds because they are already included as part of the net income amount. 2010 1040 form Information returns. 2010 1040 form   You should receive information returns from pass-through entities. 2010 1040 form Partnerships and S corporations. 2010 1040 form   These entities issue Schedule K-1, which lists the items and amounts you must report and identifies the tax return schedules and lines to use. 2010 1040 form Nonpublicly offered mutual funds. 2010 1040 form   These funds will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing your share of gross income and investment expenses. 2010 1040 form You can claim the expenses only as a miscellaneous itemized deduction subject to the 2% limit. 2010 1040 form Investment Fees and Expenses You can deduct investment fees, custodial fees, trust administration fees, and other expenses you paid for managing your investments that produce taxable income. 2010 1040 form Legal Expenses You can usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax. 2010 1040 form You can also deduct legal expenses that are: Related to either doing or keeping your job, such as those you paid to defend yourself against criminal charges arising out of your trade or business, For tax advice related to a divorce, if the bill specifies how much is for tax advice and it is determined in a reasonable way, or To collect taxable alimony. 2010 1040 form You can deduct expenses of resolving tax issues relating to profit or loss from business (Schedule C or C-EZ), rentals or royalties (Schedule E), or farm income and expenses (Schedule F), on the appropriate schedule. 2010 1040 form You deduct expenses of resolving nonbusiness tax issues on Schedule A (Form 1040). 2010 1040 form See Tax Preparation Fees , earlier. 2010 1040 form Loss on Deposits For information on whether, and if so, how, you may deduct a loss on your deposit in a qualified financial institution, see Loss on Deposits in chapter 25. 2010 1040 form Repayments of Income If you had to repay an amount that you included in income in an earlier year, you may be able to deduct the amount you repaid. 2010 1040 form If the amount you had to repay was ordinary income of $3,000 or less, the deduction is subject to the 2% limit. 2010 1040 form If it was more than $3,000, see Repayments Under Claim of Right under Deductions Not Subject to the 2% Limit, later. 2010 1040 form Repayments of Social Security Benefits For information on how to deduct your repayments of certain social security benefits, see Repayments More Than Gross Benefits in chapter 11. 2010 1040 form Safe Deposit Box Rent You can deduct safe deposit box rent if you use the box to store taxable income-producing stocks, bonds, or investment-related papers and documents. 2010 1040 form You cannot deduct the rent if you use the box only for jewelry, other personal items, or tax-exempt securities. 2010 1040 form Service Charges on Dividend Reinvestment Plans You can deduct service charges you pay as a subscriber in a dividend reinvestment plan. 2010 1040 form These service charges include payments for: Holding shares acquired through a plan, Collecting and reinvesting cash dividends, and Keeping individual records and providing detailed statements of accounts. 2010 1040 form Trustee's Administrative Fees for IRA Trustee's administrative fees that are billed separately and paid by you in connection with your individual retirement arrangement (IRA) are deductible (if they are ordinary and necessary) as a miscellaneous itemized deduction subject to the 2% limit. 2010 1040 form For more information about IRAs, see chapter 17. 2010 1040 form Deductions Not Subject to the 2% Limit You can deduct the items listed below as miscellaneous itemized deductions. 2010 1040 form They are not subject to the 2% limit. 2010 1040 form Report these items on Schedule A (Form 1040), line 28. 2010 1040 form List of Deductions Each of the following items is discussed in detail after the list (except where indicated). 2010 1040 form Amortizable premium on taxable bonds. 2010 1040 form Casualty and theft losses from income- producing property. 2010 1040 form Federal estate tax on income in respect of a decedent. 2010 1040 form Gambling losses up to the amount of gambling winnings. 2010 1040 form Impairment-related work expenses of persons with disabilities. 2010 1040 form Loss from other activities from Schedule K-1 (Form 1065-B), box 2. 2010 1040 form Losses from Ponzi-type investment schemes. 2010 1040 form See Losses from Ponzi-type investment schemes under Theft in chapter 25. 2010 1040 form Repayments of more than $3,000 under a claim of right. 2010 1040 form Unrecovered investment in an annuity. 2010 1040 form Amortizable Premium on Taxable Bonds In general, if the amount you pay for a bond is greater than its stated principal amount, the excess is bond premium. 2010 1040 form You can elect to amortize the premium on taxable bonds. 2010 1040 form The amortization of the premium is generally an offset to interest income on the bond rather than a separate deduction item. 2010 1040 form Part of the premium on some bonds may be a miscellaneous deduction not subject to the 2% limit. 2010 1040 form For more information, see Amortizable Premium on Taxable Bonds in Publication 529, and Bond Premium Amortization in chapter 3 of Publication 550, Investment Income and Expenses. 2010 1040 form Casualty and Theft Losses of Income-Producing Property You can deduct a casualty or theft loss as a miscellaneous itemized deduction not subject to the 2% limit if the damaged or stolen property was income-producing property (property held for investment, such as stocks, notes, bonds, gold, silver, vacant lots, and works of art). 2010 1040 form First, report the loss in Form 4684, Section B. 2010 1040 form You may also have to include the loss on Form 4797, Sales of Business Property if you are otherwise required to file that form. 2010 1040 form To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. 2010 1040 form For more information on casualty and theft losses, see chapter 25. 2010 1040 form Federal Estate Tax on Income in Respect of a Decedent You can deduct the federal estate tax attributable to income in respect of a decedent that you as a beneficiary include in your gross income. 2010 1040 form Income in respect of the decedent is gross income that the decedent would have received had death not occurred and that was not properly includible in the decedent's final income tax return. 2010 1040 form See Publication 559 for more information. 2010 1040 form Gambling Losses Up to the Amount of Gambling Winnings You must report the full amount of your gambling winnings for the year on Form 1040, line 21. 2010 1040 form You deduct your gambling losses for the year on Schedule A (Form 1040), line 28. 2010 1040 form You cannot deduct gambling losses that are more than your winnings. 2010 1040 form You cannot reduce your gambling winnings by your gambling losses and report the difference. 2010 1040 form You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. 2010 1040 form Therefore, your records should show your winnings separately from your losses. 2010 1040 form Diary of winnings and losses. 2010 1040 form You must keep an accurate diary or similar record of your losses and winnings. 2010 1040 form Your diary should contain at least the following information. 2010 1040 form The date and type of your specific wager or wagering activity. 2010 1040 form The name and address or location of the gambling establishment. 2010 1040 form The names of other persons present with you at the gambling establishment. 2010 1040 form The amount(s) you won or lost. 2010 1040 form See Publication 529 for more information. 2010 1040 form Impairment-Related Work Expenses If you have a physical or mental disability that limits your being employed, or substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, and working, you can deduct your impairment-related work expenses. 2010 1040 form Impairment-related work expenses are ordinary and necessary business expenses for attendant care services at your place of work and for other expenses in connection with your place of work that are necessary for you to be able to work. 2010 1040 form Self-employed. 2010 1040 form   If you are self-employed, enter your impairment-related work expenses on the appropriate form (Schedule C, C-EZ, E, or F) used to report your business income and expenses. 2010 1040 form Loss From Other Activities From Schedule K-1 (Form 1065-B), Box 2 If the amount reported in Schedule K-1 (Form 1065-B), box 2, is a loss, report it on Schedule A (Form 1040), line 28. 2010 1040 form It is not subject to the passive activity limitations. 2010 1040 form Repayments Under Claim of Right If you had to repay more than $3,000 that you included in your income in an earlier year because at the time you thought you had an unrestricted right to it, you may be able to deduct the amount you repaid or take a credit against your tax. 2010 1040 form See Repayments in chapter 12 for more information. 2010 1040 form Unrecovered Investment in Annuity A retiree who contributed to the cost of an annuity can exclude from income a part of each payment received as a tax-free return of the retiree's investment. 2010 1040 form If the retiree dies before the entire investment is recovered tax free, any unrecovered investment can be deducted on the retiree's final income tax return. 2010 1040 form See chapter 10 for more information about the tax treatment of pensions and annuities. 2010 1040 form Nondeductible Expenses Examples of nondeductible expenses are listed next. 2010 1040 form The list is followed by discussions of additional nondeductible expenses. 2010 1040 form List of Nondeductible Expenses Broker's commissions that you paid in connection with your IRA or other investment property. 2010 1040 form Burial or funeral expenses, including the cost of a cemetery lot. 2010 1040 form Capital expenses. 2010 1040 form Fees and licenses, such as car licenses, marriage licenses, and dog tags. 2010 1040 form Hobby losses, but see Hobby Expenses , earlier. 2010 1040 form Home repairs, insurance, and rent. 2010 1040 form Illegal bribes and kickbacks. 2010 1040 form See Bribes and kickbacks in chapter 11 of Publication 535. 2010 1040 form Losses from the sale of your home, furniture, personal car, etc. 2010 1040 form Personal disability insurance premiums. 2010 1040 form Personal, living, or family expenses. 2010 1040 form The value of wages never received or lost vacation time. 2010 1040 form Adoption Expenses You cannot deduct the expenses of adopting a child, but you may be able to take a credit for those expenses. 2010 1040 form See chapter 37. 2010 1040 form Campaign Expenses You cannot deduct campaign expenses of a candidate for any office, even if the candidate is running for reelection to the office. 2010 1040 form These include qualification and registration fees for primary elections. 2010 1040 form Legal fees. 2010 1040 form   You cannot deduct legal fees paid to defend charges that arise from participation in a political campaign. 2010 1040 form Check-Writing Fees on Personal Account If you have a personal checking account, you cannot deduct fees charged by the bank for the privilege of writing checks, even if the account pays interest. 2010 1040 form Club Dues Generally, you cannot deduct the cost of membership in any club organized for business, pleasure, recreation, or other social purpose. 2010 1040 form This includes business, social, athletic, luncheon, sporting, airline, hotel, golf, and country clubs. 2010 1040 form You cannot deduct dues paid to an organization if one of its main purposes is to: Conduct entertainment activities for members or their guests, or Provide members or their guests with access to entertainment facilities. 2010 1040 form Dues paid to airline, hotel, and luncheon clubs are not deductible. 2010 1040 form Commuting Expenses You cannot deduct commuting expenses (the cost of transportation between your home and your main or regular place of work). 2010 1040 form If you haul tools, instruments, or other items, in your car to and from work, you can deduct only the additional cost of hauling the items such as the rent on a trailer to carry the items. 2010 1040 form Fines or Penalties You cannot deduct fines or penalties you pay to a governmental unit for violating a law. 2010 1040 form This includes an amount paid in settlement of your actual or potential liability for a fine or penalty (civil or criminal). 2010 1040 form Fines or penalties include parking tickets, tax penalties, and penalties deducted from teachers' paychecks after an illegal strike. 2010 1040 form Health Spa Expenses You cannot deduct health spa expenses, even if there is a job requirement to stay in excellent physical condition, such as might be required of a law enforcement officer. 2010 1040 form Home Security System You cannot deduct the cost of a home security system as a miscellaneous deduction. 2010 1040 form However, you may be able to claim a deduction for a home security system as a business expense if you have a home office. 2010 1040 form See Home Office under Unreimbursed Employee Expenses, earlier, and Security System under Deducting Expenses in Publication 587. 2010 1040 form Investment-Related Seminars You cannot deduct any expenses for attending a convention, seminar, or similar meeting for investment purposes. 2010 1040 form Life Insurance Premiums You cannot deduct premiums you pay on your life insurance. 2010 1040 form You may be able to deduct, as alimony, premiums you pay on life insurance policies assigned to your former spouse. 2010 1040 form See chapter 18 for information on alimony. 2010 1040 form Lobbying Expenses You generally cannot deduct amounts paid or incurred for lobbying expenses. 2010 1040 form These include expenses to: Influence legislation, Participate or intervene in any political campaign for, or against, any candidate for public office, Attempt to influence the general public, or segments of the public, about elections, legislative matters, or referendums, or Communicate directly with covered executive branch officials in any attempt to influence the official actions or positions of those officials. 2010 1040 form Lobbying expenses also include any amounts paid or incurred for research, preparation, planning, or coordination of any of these activities. 2010 1040 form Dues used for lobbying. 2010 1040 form   If a tax-exempt organization notifies you that part of the dues or other amounts you pay to the organization are used to pay nondeductible lobbying expenses, you cannot deduct that part. 2010 1040 form See Lobbying Expenses in Publication 529 for information on exceptions. 2010 1040 form Lost or Mislaid Cash or Property You cannot deduct a loss based on the mere disappearance of money or property. 2010 1040 form However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. 2010 1040 form See chapter 25. 2010 1040 form Example. 2010 1040 form A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. 2010 1040 form The diamond falls from the ring and is never found. 2010 1040 form The loss of the diamond is a casualty. 2010 1040 form Lunches with Co-workers You cannot deduct the expenses of lunches with co-workers, except while traveling away from home on business. 2010 1040 form See chapter 26 for information on deductible expenses while traveling away from home. 2010 1040 form Meals While Working Late You cannot deduct the cost of meals while working late. 2010 1040 form However, you may be able to claim a deduction if the cost of meals is a deductible entertainment expense, or if you are traveling away from home. 2010 1040 form See chapter 26 for information on deductible entertainment expenses and expenses while traveling away from home. 2010 1040 form Personal Legal Expenses You cannot deduct personal legal expenses such as those for the following. 2010 1040 form Custody of children. 2010 1040 form Breach of promise to marry suit. 2010 1040 form Civil or criminal charges resulting from a personal relationship. 2010 1040 form Damages for personal injury, except for certain unlawful discrimination and whistleblower claims. 2010 1040 form Preparation of a title (or defense or perfection of a title). 2010 1040 form Preparation of a will. 2010 1040 form Property claims or property settlement in a divorce. 2010 1040 form You cannot deduct these expenses even if a result of the legal proceeding is the loss of income-producing property. 2010 1040 form Political Contributions You cannot deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. 2010 1040 form Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate are not deductible. 2010 1040 form Professional Accreditation Fees You cannot deduct professional accreditation fees such as the following. 2010 1040 form Accounting certificate fees paid for the initial right to practice accounting. 2010 1040 form Bar exam fees and incidental expenses in securing initial admission to the bar. 2010 1040 form Medical and dental license fees paid to get initial licensing. 2010 1040 form Professional Reputation You cannot deduct expenses of radio and TV appearances to increase your personal prestige or establish your professional reputation. 2010 1040 form Relief Fund Contributions You cannot deduct contributions paid to a private plan that pays benefits to any covered employee who cannot work because of any injury or illness not related to the job. 2010 1040 form Residential Telephone Service You cannot deduct any charge (including taxes) for basic local telephone service for the first telephone line to your residence, even if it is used in a trade or business. 2010 1040 form Stockholders' Meetings You cannot deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you own stock but have no other interest. 2010 1040 form You cannot deduct these expenses even if you are attending the meeting to get information that would be useful in making further investments. 2010 1040 form Tax-Exempt Income Expenses You cannot deduct expenses to produce tax-exempt income. 2010 1040 form You cannot deduct interest on a debt incurred or continued to buy or carry  tax-exempt securities. 2010 1040 form If you have expenses to produce both taxable and tax-exempt income, but you cannot identify the expenses that produce each type of income, you must divide the expenses based on the amount of each type of income to determine the amount that you can deduct. 2010 1040 form Example. 2010 1040 form During the year, you received taxable interest of $4,800 and tax-exempt interest of $1,200. 2010 1040 form In earning this income, you had total expenses of $500 during the year. 2010 1040 form You cannot identify the amount of each expense item that is for each income item. 2010 1040 form Therefore, 80% ($4,800/$6,000) of the expense is for the taxable interest and 20% ($1,200/$6,000) is for the tax-exempt interest. 2010 1040 form You can deduct, subject to the 2% limit, expenses of $400 (80% of $500). 2010 1040 form Travel Expenses for Another Individual You generally cannot deduct travel expenses you pay or incur for a spouse, dependent, or other individual who accompanies you (or your employee) on business or personal travel unless the spouse, dependent, or other individual is an employee of the taxpayer, the travel is for a bona fide business purpose, and such expenses would otherwise be deductible by the spouse, dependent, or other individual. 2010 1040 form See chapter 26 for more information on deductible travel expenses. 2010 1040 form Voluntary Unemployment Benefit Fund Contributions You cannot deduct voluntary unemployment benefit fund contributions you make to a union fund or a private fund. 2010 1040 form However, you can deduct contributions as taxes if state law requires you to make them to a state unemployment fund that covers you for the loss of wages from unemployment caused by business conditions. 2010 1040 form Wristwatches You cannot deduct the cost of a wristwatch, even if there is a job requirement that you know the correct time to properly perform your duties. 2010 1040 form Prev  Up  Next   Home   More Online Publications
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The 2010 1040 Form

2010 1040 form 10. 2010 1040 form   Retirement Plans, Pensions, and Annuities Table of Contents What's New Reminder IntroductionThe General Rule. 2010 1040 form Individual retirement arrangements (IRAs). 2010 1040 form Civil service retirement benefits. 2010 1040 form Useful Items - You may want to see: General InformationIn-plan rollovers to designated Roth accounts. 2010 1040 form How To Report Cost (Investment in the Contract) Taxation of Periodic PaymentsExclusion limited to cost. 2010 1040 form Exclusion not limited to cost. 2010 1040 form Simplified Method Taxation of Nonperiodic PaymentsLump-Sum Distributions RolloversIn-plan rollovers to designated Roth accounts. 2010 1040 form Special Additional TaxesTax on Early Distributions Tax on Excess Accumulation Survivors and Beneficiaries What's New For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan (for example, 401(a), 403(a), 403(b), 408, 408A, or 457(b) plans). 2010 1040 form However, these distributions are taken into account when determining the modified adjusted gross income threshold. 2010 1040 form Distributions from a nonqualified retirement plan are included in net investment income. 2010 1040 form See Form 8960, Net Investment Income Tax - Individuals, Estates, and Trusts, and its instructions for more information. 2010 1040 form Reminder Starting in 2013, the American Taxpayer Relief Act of 2012 expanded the rules for in-plan Roth rollovers to include more taxpayers. 2010 1040 form For more information, see Designated Roth accounts discussed later. 2010 1040 form Introduction This chapter discusses the tax treatment of distributions you receive from: An employee pension or annuity from a qualified plan, A disability retirement, and A purchased commercial annuity. 2010 1040 form What is not covered in this chapter. 2010 1040 form   The following topics are not discussed in this chapter. 2010 1040 form The General Rule. 2010 1040 form   This is the method generally used to determine the tax treatment of pension and annuity income from nonqualified plans (including commercial annuities). 2010 1040 form For a qualified plan, you generally cannot use the General Rule unless your annuity starting date is before November 19, 1996. 2010 1040 form For more information about the General Rule, see Publication 939, General Rule for Pensions and Annuities. 2010 1040 form Individual retirement arrangements (IRAs). 2010 1040 form   Information on the tax treatment of amounts you receive from an IRA is in chapter 17. 2010 1040 form Civil service retirement benefits. 2010 1040 form    If you are retired from the federal government (regular, phased, or disability retirement), see Publication 721, Tax Guide to U. 2010 1040 form S. 2010 1040 form Civil Service Retirement Benefits. 2010 1040 form Publication 721 also covers the information that you need if you are the survivor or beneficiary of a federal employee or retiree who died. 2010 1040 form Useful Items - You may want to see: Publication 575 Pension and Annuity Income 721 Tax Guide to U. 2010 1040 form S. 2010 1040 form Civil Service Retirement Benefits 939 General Rule for Pensions and Annuities Form (and Instructions) W-4P Withholding Certificate for Pension or Annuity Payments 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. 2010 1040 form 4972 Tax on Lump-Sum Distributions 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts General Information Designated Roth accounts. 2010 1040 form   A designated Roth account is a separate account created under a qualified Roth contribution program to which participants may elect to have part or all of their elective deferrals to a 401(k), 403(b), or 457(b) plan designated as Roth contributions. 2010 1040 form Elective deferrals that are designated as Roth contributions are included in your income. 2010 1040 form However, qualified distributions are not included in your income. 2010 1040 form See Publication 575 for more information. 2010 1040 form In-plan rollovers to designated Roth accounts. 2010 1040 form   If you are a participant in a 401(k), 403(b), or 457(b) plan, your plan may permit you to roll over amounts in those plans to a designated Roth account within the same plan. 2010 1040 form The rollover of any untaxed amounts must be included in income. 2010 1040 form See Publication 575 for more information. 2010 1040 form More than one program. 2010 1040 form   If you receive benefits from more than one program under a single trust or plan of your employer, such as a pension plan and a profit-sharing plan, you may have to figure the taxable part of each pension or annuity contract separately. 2010 1040 form Your former employer or the plan administrator should be able to tell you if you have more than one pension or annuity contract. 2010 1040 form Section 457 deferred compensation plans. 2010 1040 form    If you work for a state or local government or for a tax-exempt organization, you may be able to participate in a section 457 deferred compensation plan. 2010 1040 form If your plan is an eligible plan, you are not taxed currently on pay that is deferred under the plan or on any earnings from the plan's investment of the deferred pay. 2010 1040 form You are generally taxed on amounts deferred in an eligible state or local government plan only when they are distributed from the plan. 2010 1040 form You are taxed on amounts deferred in an eligible tax-exempt organization plan when they are distributed or otherwise made available to you. 2010 1040 form   Your 457(b) plan may have a designated Roth account option. 2010 1040 form If so, you may be able to roll over amounts to the designated Roth account or make contributions. 2010 1040 form Elective deferrals to a designated Roth account are included in your income. 2010 1040 form Qualified distributions from a designated Roth account are not subject to tax. 2010 1040 form   This chapter covers the tax treatment of benefits under eligible section 457 plans, but it does not cover the treatment of deferrals. 2010 1040 form For information on deferrals under section 457 plans, see Retirement Plan Contributions under Employee Compensation in Publication 525, Taxable and Nontaxable Income. 2010 1040 form   For general information on these deferred compensation plans, see Section 457 Deferred Compensation Plans in Publication 575. 2010 1040 form Disability pensions. 2010 1040 form   If you retired on disability, you generally must include in income any disability pension you receive under a plan that is paid for by your employer. 2010 1040 form You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A until you reach minimum retirement age. 2010 1040 form Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. 2010 1040 form    You may be entitled to a tax credit if you were permanently and totally disabled when you retired. 2010 1040 form For information on the credit for the elderly or the disabled, see chapter 33. 2010 1040 form   Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. 2010 1040 form Report the payments on Form 1040, lines 16a and 16b, or on Form 1040A, lines 12a and 12b. 2010 1040 form    Disability payments for injuries incurred as a direct result of a terrorist attack directed against the United States (or its allies) are not included in income. 2010 1040 form For more information about payments to survivors of terrorist attacks, see Publication 3920, Tax Relief for Victims of Terrorist Attacks. 2010 1040 form   For more information on how to report disability pensions, including military and certain government disability pensions, see chapter 5. 2010 1040 form Retired public safety officers. 2010 1040 form   An eligible retired public safety officer can elect to exclude from income distributions of up to $3,000 made directly from a government retirement plan to the provider of accident, health, or long-term disability insurance. 2010 1040 form See Insurance Premiums for Retired Public Safety Officers in Publication 575 for more information. 2010 1040 form Railroad retirement benefits. 2010 1040 form   Part of any railroad retirement benefits you receive is treated for tax purposes as social security benefits, and part is treated as an employee pension. 2010 1040 form For information about railroad retirement benefits treated as social security benefits, see Publication 915, Social Security and Equivalent Railroad Retirement Benefits. 2010 1040 form For information about railroad retirement benefits treated as an employee pension, see Railroad Retirement Benefits in Publication 575. 2010 1040 form Withholding and estimated tax. 2010 1040 form   The payer of your pension, profit-sharing, stock bonus, annuity, or deferred compensation plan will withhold income tax on the taxable parts of amounts paid to you. 2010 1040 form You can tell the payer how much to withhold, or not to withhold, by filing Form W-4P. 2010 1040 form If you choose not to have tax withheld, or you do not have enough tax withheld, you may have to pay estimated tax. 2010 1040 form   If you receive an eligible rollover distribution, you cannot choose not to have tax withheld. 2010 1040 form Generally, 20% will be withheld, but no tax will be withheld on a direct rollover of an eligible rollover distribution. 2010 1040 form See Direct rollover option under Rollovers, later. 2010 1040 form   For more information, see Pensions and Annuities under Tax Withholding for 2014 in chapter 4. 2010 1040 form Qualified plans for self-employed individuals. 2010 1040 form   Qualified plans set up by self-employed individuals are sometimes called Keogh or H. 2010 1040 form R. 2010 1040 form 10 plans. 2010 1040 form Qualified plans can be set up by sole proprietors, partnerships (but not a partner), and corporations. 2010 1040 form They can cover self-employed persons, such as the sole proprietor or partners, as well as regular (common-law) employees. 2010 1040 form    Distributions from a qualified plan are usually fully taxable because most recipients have no cost basis. 2010 1040 form If you have an investment (cost) in the plan, however, your pension or annuity payments from a qualified plan are taxed under the Simplified Method. 2010 1040 form For more information about qualified plans, see Publication 560, Retirement Plans for Small Business. 2010 1040 form Purchased annuities. 2010 1040 form   If you receive pension or annuity payments from a privately purchased annuity contract from a commercial organization, such as an insurance company, you generally must use the General Rule to figure the tax-free part of each annuity payment. 2010 1040 form For more information about the General Rule, get Publication 939. 2010 1040 form Also, see Variable Annuities in Publication 575 for the special provisions that apply to these annuity contracts. 2010 1040 form Loans. 2010 1040 form   If you borrow money from your retirement plan, you must treat the loan as a nonperiodic distribution from the plan unless certain exceptions apply. 2010 1040 form This treatment also applies to any loan under a contract purchased under your retirement plan, and to the value of any part of your interest in the plan or contract that you pledge or assign. 2010 1040 form This means that you must include in income all or part of the amount borrowed. 2010 1040 form Even if you do not have to treat the loan as a nonperiodic distribution, you may not be able to deduct the interest on the loan in some situations. 2010 1040 form For details, see Loans Treated as Distributions in Publication 575. 2010 1040 form For information on the deductibility of interest, see chapter 23. 2010 1040 form Tax-free exchange. 2010 1040 form   No gain or loss is recognized on an exchange of an annuity contract for another annuity contract if the insured or annuitant remains the same. 2010 1040 form However, if an annuity contract is exchanged for a life insurance or endowment contract, any gain due to interest accumulated on the contract is ordinary income. 2010 1040 form See Transfers of Annuity Contracts in Publication 575 for more information about exchanges of annuity contracts. 2010 1040 form How To Report If you file Form 1040, report your total annuity on line 16a and the taxable part on line 16b. 2010 1040 form If your pension or annuity is fully taxable, enter it on line 16b; do not make an entry on line 16a. 2010 1040 form If you file Form 1040A, report your total annuity on line 12a and the taxable part on line 12b. 2010 1040 form If your pension or annuity is fully taxable, enter it on line 12b; do not make an entry on line 12a. 2010 1040 form More than one annuity. 2010 1040 form   If you receive more than one annuity and at least one of them is not fully taxable, enter the total amount received from all annuities on Form 1040, line 16a, or Form 1040A, line 12a, and enter the taxable part on Form 1040, line 16b, or Form 1040A, line 12b. 2010 1040 form If all the annuities you receive are fully taxable, enter the total of all of them on Form 1040, line 16b, or Form 1040A, line 12b. 2010 1040 form Joint return. 2010 1040 form   If you file a joint return and you and your spouse each receive one or more pensions or annuities, report the total of the pensions and annuities on Form 1040, line 16a, or Form 1040A, line 12a, and report the taxable part on Form 1040, line 16b, or Form 1040A, line 12b. 2010 1040 form Cost (Investment in the Contract) Before you can figure how much, if any, of a distribution from your pension or annuity plan is taxable, you must determine your cost (your investment in the contract) in the pension or annuity. 2010 1040 form Your total cost in the plan includes the total premiums, contributions, or other amounts you paid. 2010 1040 form This includes the amounts your employer contributed that were taxable to you when paid. 2010 1040 form Cost does not include any amounts you deducted or were excluded from your income. 2010 1040 form From this total cost, subtract any refunds of premiums, rebates, dividends, unrepaid loans that were not included in your income, or other tax-free amounts that you received by the later of the annuity starting date or the date on which you received your first payment. 2010 1040 form Your annuity starting date is the later of the first day of the first period for which you received a payment or the date the plan's obligations became fixed. 2010 1040 form Designated Roth accounts. 2010 1040 form   Your cost in these accounts is your designated Roth contributions that were included in your income as wages subject to applicable withholding requirements. 2010 1040 form Your cost will also include any in-plan Roth rollovers you included in income. 2010 1040 form Foreign employment contributions. 2010 1040 form   If you worked in a foreign country and contributions were made to your retirement plan, special rules apply in determining your cost. 2010 1040 form See Foreign employment contributions under Cost (Investment in the Contract) in Publication 575. 2010 1040 form Taxation of Periodic Payments Fully taxable payments. 2010 1040 form   Generally, if you did not pay any part of the cost of your employee pension or annuity and your employer did not withhold part of the cost from your pay while you worked, the amounts you receive each year are fully taxable. 2010 1040 form You must report them on your income tax return. 2010 1040 form Partly taxable payments. 2010 1040 form   If you paid part of the cost of your pension or annuity, you are not taxed on the part of the pension or annuity you receive that represents a return of your cost. 2010 1040 form The rest of the amount you receive is generally taxable. 2010 1040 form You figure the tax-free part of the payment using either the Simplified Method or the General Rule. 2010 1040 form Your annuity starting date and whether or not your plan is qualified determine which method you must or may use. 2010 1040 form   If your annuity starting date is after November 18, 1996, and your payments are from a qualified plan, you must use the Simplified Method. 2010 1040 form Generally, you must use the General Rule if your annuity is paid under a nonqualified plan, and you cannot use this method if your annuity is paid under a qualified plan. 2010 1040 form   If you had more than one partly taxable pension or annuity, figure the tax-free part and the taxable part of each separately. 2010 1040 form   If your annuity is paid under a qualified plan and your annuity starting date is after July 1, 1986, and before November 19, 1996, you could have chosen to use either the General Rule or the Simplified Method. 2010 1040 form Exclusion limit. 2010 1040 form   Your annuity starting date determines the total amount of annuity payments that you can exclude from your taxable income over the years. 2010 1040 form Once your annuity starting date is determined, it does not change. 2010 1040 form If you calculate the taxable portion of your annuity payments using the simplified method worksheet, the annuity starting date determines the recovery period for your cost. 2010 1040 form That recovery period begins on your annuity starting date and is not affected by the date you first complete the worksheet. 2010 1040 form Exclusion limited to cost. 2010 1040 form   If your annuity starting date is after 1986, the total amount of annuity income that you can exclude over the years as a recovery of the cost cannot exceed your total cost. 2010 1040 form Any unrecovered cost at your (or the last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. 2010 1040 form This deduction is not subject to the 2%-of-adjusted-gross-income limit. 2010 1040 form Exclusion not limited to cost. 2010 1040 form   If your annuity starting date is before 1987, you can continue to take your monthly exclusion for as long as you receive your annuity. 2010 1040 form If you chose a joint and survivor annuity, your survivor can continue to take the survivor's exclusion figured as of the annuity starting date. 2010 1040 form The total exclusion may be more than your cost. 2010 1040 form Simplified Method Under the Simplified Method, you figure the tax-free part of each annuity payment by dividing your cost by the total number of anticipated monthly payments. 2010 1040 form For an annuity that is payable for the lives of the annuitants, this number is based on the annuitants' ages on the annuity starting date and is determined from a table. 2010 1040 form For any other annuity, this number is the number of monthly annuity payments under the contract. 2010 1040 form Who must use the Simplified Method. 2010 1040 form   You must use the Simplified Method if your annuity starting date is after November 18, 1996, and you both: Receive pension or annuity payments from a qualified employee plan, qualified employee annuity, or a tax-sheltered annuity (403(b)) plan, and On your annuity starting date, you were either under age 75, or entitled to less than 5 years of guaranteed payments. 2010 1040 form Guaranteed payments. 2010 1040 form   Your annuity contract provides guaranteed payments if a minimum number of payments or a minimum amount (for example, the amount of your investment) is payable even if you and any survivor annuitant do not live to receive the minimum. 2010 1040 form If the minimum amount is less than the total amount of the payments you are to receive, barring death, during the first 5 years after payments begin (figured by ignoring any payment increases), you are entitled to less than 5 years of guaranteed payments. 2010 1040 form How to use the Simplified Method. 2010 1040 form    Complete the Simplified Method Worksheet in Publication 575 to figure your taxable annuity for 2013. 2010 1040 form Single-life annuity. 2010 1040 form    If your annuity is payable for your life alone, use Table 1 at the bottom of the worksheet to determine the total number of expected monthly payments. 2010 1040 form Enter on line 3 the number shown for your age at the annuity starting date. 2010 1040 form Multiple-lives annuity. 2010 1040 form   If your annuity is payable for the lives of more than one annuitant, use Table 2 at the bottom of the worksheet to determine the total number of expected monthly payments. 2010 1040 form Enter on line 3 the number shown for the combined ages of you and the youngest survivor annuitant at the annuity starting date. 2010 1040 form   However, if your annuity starting date is before 1998, do not use Table 2 and do not combine the annuitants' ages. 2010 1040 form Instead you must use Table 1 and enter on line 3 the number shown for the primary annuitant's age on the annuity starting date. 2010 1040 form    Be sure to keep a copy of the completed worksheet; it will help you figure your taxable annuity next year. 2010 1040 form Example. 2010 1040 form Bill Smith, age 65, began receiving retirement benefits in 2013, under a joint and survivor annuity. 2010 1040 form Bill's annuity starting date is January 1, 2013. 2010 1040 form The benefits are to be paid for the joint lives of Bill and his wife Kathy, age 65. 2010 1040 form Bill had contributed $31,000 to a qualified plan and had received no distributions before the annuity starting date. 2010 1040 form Bill is to receive a retirement benefit of $1,200 a month, and Kathy is to receive a monthly survivor benefit of $600 upon Bill's death. 2010 1040 form Bill must use the Simplified Method to figure his taxable annuity because his payments are from a qualified plan and he is under age 75. 2010 1040 form Because his annuity is payable over the lives of more than one annuitant, he uses his and Kathy's combined ages and Table 2 at the bottom of the worksheet in completing line 3 of the worksheet. 2010 1040 form His completed worksheet is shown in Worksheet 10-A. 2010 1040 form Bill's tax-free monthly amount is $100 ($31,000 ÷ 310) as shown on line 4 of the worksheet. 2010 1040 form Upon Bill's death, if Bill has not recovered the full $31,000 investment, Kathy will also exclude $100 from her $600 monthly payment. 2010 1040 form The full amount of any annuity payments received after 310 payments are paid must be included in gross income. 2010 1040 form If Bill and Kathy die before 310 payments are made, a miscellaneous itemized deduction will be allowed for the unrecovered cost on the final income tax return of the last to die. 2010 1040 form This deduction is not subject to the 2%-of-adjusted- gross-income limit. 2010 1040 form Worksheet 10-A. 2010 1040 form Simplified Method Worksheet for Bill Smith 1. 2010 1040 form Enter the total pension or annuity payments received this year. 2010 1040 form Also, add this amount to the total for Form 1040, line 16a, or Form 1040A, line 12a 1. 2010 1040 form 14,400 2. 2010 1040 form Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion*. 2010 1040 form See Cost (Investment in the Contract) , earlier 2. 2010 1040 form 31,000       Note: If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year's worksheet on line 4 below (even if the amount of your pension or annuity has changed). 2010 1040 form Otherwise, go to line 3. 2010 1040 form         3. 2010 1040 form Enter the appropriate number from Table 1 below. 2010 1040 form But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, enter the appropriate number from Table 2 below 3. 2010 1040 form 310     4. 2010 1040 form Divide line 2 by the number on line 3 4. 2010 1040 form 100     5. 2010 1040 form Multiply line 4 by the number of months for which this year's payments were made. 2010 1040 form If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. 2010 1040 form Otherwise, go to line 6 5. 2010 1040 form 1,200     6. 2010 1040 form Enter any amounts previously recovered tax free in years after 1986. 2010 1040 form This is the amount shown on line 10 of your worksheet for last year 6. 2010 1040 form -0-     7. 2010 1040 form Subtract line 6 from line 2 7. 2010 1040 form 31,000     8. 2010 1040 form Enter the smaller of line 5 or line 7 8. 2010 1040 form 1,200 9. 2010 1040 form Taxable amount for year. 2010 1040 form Subtract line 8 from line 1. 2010 1040 form Enter the result, but not less than zero. 2010 1040 form Also, add this amount to the total for Form 1040, line 16b, or Form 1040A, line 12b 9. 2010 1040 form 13,200   Note: If your Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. 2010 1040 form If you are a retired public safety officer, see Insurance Premiums for Retired Public Safety Officers in Publication 575 before entering an amount on your tax return. 2010 1040 form     10. 2010 1040 form Was your annuity starting date before 1987? □ Yes. 2010 1040 form STOP. 2010 1040 form Do not complete the rest of this worksheet. 2010 1040 form  ☑ No. 2010 1040 form Add lines 6 and 8. 2010 1040 form This is the amount you have recovered tax free through 2013. 2010 1040 form You will need this number if you need to fill out this worksheet next year 10. 2010 1040 form 1,200 11. 2010 1040 form Balance of cost to be recovered. 2010 1040 form Subtract line 10 from line 2. 2010 1040 form If zero, you will not have to complete this worksheet next year. 2010 1040 form The payments you receive next year will generally be fully taxable 11. 2010 1040 form 29,800 TABLE 1 FOR LINE 3 ABOVE   AND your annuity starting date was— IF the age at annuity starting date was. 2010 1040 form . 2010 1040 form . 2010 1040 form before November 19, 1996, enter on line 3. 2010 1040 form . 2010 1040 form . 2010 1040 form after November 18, 1996, enter on line 3. 2010 1040 form . 2010 1040 form . 2010 1040 form 55 or under 300 360 56–60 260 310 61–65 240 260 66–70 170 210 71 or older 120 160 TABLE 2 FOR LINE 3 ABOVE IF the combined ages at annuity starting date were. 2010 1040 form . 2010 1040 form . 2010 1040 form   THEN enter on line 3. 2010 1040 form . 2010 1040 form . 2010 1040 form 110 or under   410 111–120   360 121–130   310 131–140   260 141 or older   210 * A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996. 2010 1040 form Who must use the General Rule. 2010 1040 form   You must use the General Rule if you receive pension or annuity payments from: A nonqualified plan (such as a private annuity, a purchased commercial annuity, or a nonqualified employee plan), or A qualified plan if you are age 75 or older on your annuity starting date and your annuity payments are guaranteed for at least 5 years. 2010 1040 form Annuity starting before November 19, 1996. 2010 1040 form   If your annuity starting date is after July 1, 1986, and before November 19, 1996, you had to use the General Rule for either circumstance just described. 2010 1040 form You also had to use it for any fixed-period annuity. 2010 1040 form If you did not have to use the General Rule, you could have chosen to use it. 2010 1040 form If your annuity starting date is before July 2, 1986, you had to use the General Rule unless you could use the Three-Year Rule. 2010 1040 form   If you had to use the General Rule (or chose to use it), you must continue to use it each year that you recover your cost. 2010 1040 form Who cannot use the General Rule. 2010 1040 form   You cannot use the General Rule if you receive your pension or annuity from a qualified plan and none of the circumstances described in the preceding discussions apply to you. 2010 1040 form See Who must use the Simplified Method , earlier. 2010 1040 form More information. 2010 1040 form   For complete information on using the General Rule, including the actuarial tables you need, see Publication 939. 2010 1040 form Taxation of Nonperiodic Payments Nonperiodic distributions are also known as amounts not received as an annuity. 2010 1040 form They include all payments other than periodic payments and corrective distributions. 2010 1040 form Examples of nonperiodic payments are cash withdrawals, distributions of current earnings, certain loans, and the value of annuity contracts transferred without full and adequate consideration. 2010 1040 form Corrective distributions of excess plan contributions. 2010 1040 form   Generally, if the contributions made for you during the year to certain retirement plans exceed certain limits, the excess is taxable to you. 2010 1040 form To correct an excess, your plan may distribute it to you (along with any income earned on the excess). 2010 1040 form For information on plan contribution limits and how to report corrective distributions of excess contributions, see Retirement Plan Contributions under Employee Compensation in Publication 525. 2010 1040 form Figuring the taxable amount of nonperiodic payments. 2010 1040 form   How you figure the taxable amount of a nonperiodic distribution depends on whether it is made before the annuity starting date, or on or after the annuity starting date. 2010 1040 form If it is made before the annuity starting date, its tax treatment also depends on whether it is made under a qualified or nonqualified plan. 2010 1040 form If it is made under a nonqualified plan, its tax treatment depends on whether it fully discharges the contract, is received under certain life insurance or endowment contracts, or is allocable to an investment you made before August 14, 1982. 2010 1040 form Annuity starting date. 2010 1040 form   The annuity starting date is either the first day of the first period for which you receive an annuity payment under the contract or the date on which the obligation under the contract becomes fixed, whichever is later. 2010 1040 form Distribution on or after annuity starting date. 2010 1040 form   If you receive a nonperiodic payment from your annuity contract on or after the annuity starting date, you generally must include all of the payment in gross income. 2010 1040 form Distribution before annuity starting date. 2010 1040 form   If you receive a nonperiodic distribution before the annuity starting date from a qualified retirement plan, you generally can allocate only part of it to the cost of the contract. 2010 1040 form You exclude from your gross income the part that you allocate to the cost. 2010 1040 form You include the remainder in your gross income. 2010 1040 form   If you receive a nonperiodic distribution before the annuity starting date from a plan other than a qualified retirement plan (nonqualified plan), it is allocated first to earnings (the taxable part) and then to the cost of the contract (the tax-free part). 2010 1040 form This allocation rule applies, for example, to a commercial annuity contract you bought directly from the issuer. 2010 1040 form    Distributions from nonqualified plans are subject to the net investment income tax. 2010 1040 form See the Instructions for Form 8960. 2010 1040 form   For more information, see Figuring the Taxable Amount under Taxation of Nonperiodic Payments in Publication 575. 2010 1040 form Lump-Sum Distributions This section on lump-sum distributions only applies if the plan participant was born before January 2, 1936. 2010 1040 form If the plan participant was born after January 1, 1936, the taxable amount of this nonperiodic payment is reported as discussed earlier. 2010 1040 form A lump-sum distribution is the distribution or payment in one tax year of a plan participant's entire balance from all of the employer's qualified plans of one kind (for example, pension, profit-sharing, or stock bonus plans). 2010 1040 form A distribution from a nonqualified plan (such as a privately purchased commercial annuity or a section 457 deferred compensation plan of a state or local government or tax-exempt organization) cannot qualify as a lump-sum distribution. 2010 1040 form The participant's entire balance from a plan does not include certain forfeited amounts. 2010 1040 form It also does not include any deductible voluntary employee contributions allowed by the plan after 1981 and before 1987. 2010 1040 form For more information about distributions that do not qualify as lump-sum distributions, see Distributions that do not qualify under Lump-Sum Distributions in Publication 575. 2010 1040 form If you receive a lump-sum distribution from a qualified employee plan or qualified employee annuity and the plan participant was born before January 2, 1936, you may be able to elect optional methods of figuring the tax on the distribution. 2010 1040 form The part from active participation in the plan before 1974 may qualify as capital gain subject to a 20% tax rate. 2010 1040 form The part from participation after 1973 (and any part from participation before 1974 that you do not report as capital gain) is ordinary income. 2010 1040 form You may be able to use the 10-year tax option, discussed later, to figure tax on the ordinary income part. 2010 1040 form Use Form 4972 to figure the separate tax on a lump-sum distribution using the optional methods. 2010 1040 form The tax figured on Form 4972 is added to the regular tax figured on your other income. 2010 1040 form This may result in a smaller tax than you would pay by including the taxable amount of the distribution as ordinary income in figuring your regular tax. 2010 1040 form How to treat the distribution. 2010 1040 form   If you receive a lump-sum distribution, you may have the following options for how you treat the taxable part. 2010 1040 form Report the part of the distribution from participation before 1974 as a capital gain (if you qualify) and the part from participation after 1973 as ordinary income. 2010 1040 form Report the part of the distribution from participation before 1974 as a capital gain (if you qualify) and use the 10-year tax option to figure the tax on the part from participation after 1973 (if you qualify). 2010 1040 form Use the 10-year tax option to figure the tax on the total taxable amount (if you qualify). 2010 1040 form Roll over all or part of the distribution. 2010 1040 form See Rollovers , later. 2010 1040 form No tax is currently due on the part rolled over. 2010 1040 form Report any part not rolled over as ordinary income. 2010 1040 form Report the entire taxable part of the distribution as ordinary income on your tax return. 2010 1040 form   The first three options are explained in the following discussions. 2010 1040 form Electing optional lump-sum treatment. 2010 1040 form   You can choose to use the 10-year tax option or capital gain treatment only once after 1986 for any plan participant. 2010 1040 form If you make this choice, you cannot use either of these optional treatments for any future distributions for the participant. 2010 1040 form Taxable and tax-free parts of the distribution. 2010 1040 form    The taxable part of a lump-sum distribution is the employer's contributions and income earned on your account. 2010 1040 form You may recover your cost in the lump sum and any net unrealized appreciation (NUA) in employer securities tax free. 2010 1040 form Cost. 2010 1040 form   In general, your cost is the total of: The plan participant's nondeductible contributions to the plan, The plan participant's taxable costs of any life insurance contract distributed, Any employer contributions that were taxable to the plan participant, and Repayments of any loans that were taxable to the plan participant. 2010 1040 form You must reduce this cost by amounts previously distributed tax free. 2010 1040 form Net unrealized appreciation (NUA). 2010 1040 form   The NUA in employer securities (box 6 of Form 1099-R) received as part of a lump-sum distribution is generally tax free until you sell or exchange the securities. 2010 1040 form (For more information, see Distributions of employer securities under Taxation of Nonperiodic Payments in Publication 575. 2010 1040 form ) Capital Gain Treatment Capital gain treatment applies only to the taxable part of a lump-sum distribution resulting from participation in the plan before 1974. 2010 1040 form The amount treated as capital gain is taxed at a 20% rate. 2010 1040 form You can elect this treatment only once for any plan participant, and only if the plan participant was born before January 2, 1936. 2010 1040 form Complete Part II of Form 4972 to choose the 20% capital gain election. 2010 1040 form For more information, see Capital Gain Treatment under Lump-Sum Distributions in Publication 575. 2010 1040 form 10-Year Tax Option The 10-year tax option is a special formula used to figure a separate tax on the ordinary income part of a lump-sum distribution. 2010 1040 form You pay the tax only once, for the year in which you receive the distribution, not over the next 10 years. 2010 1040 form You can elect this treatment only once for any plan participant, and only if the plan participant was born before January 2, 1936. 2010 1040 form The ordinary income part of the distribution is the amount shown in box 2a of the Form 1099-R given to you by the payer, minus the amount, if any, shown in box 3. 2010 1040 form You also can treat the capital gain part of the distribution (box 3 of Form 1099-R) as ordinary income for the 10-year tax option if you do not choose capital gain treatment for that part. 2010 1040 form Complete Part III of Form 4972 to choose the 10-year tax option. 2010 1040 form You must use the special Tax Rate Schedule shown in the instructions for Part III to figure the tax. 2010 1040 form Publication 575 illustrates how to complete Form 4972 to figure the separate tax. 2010 1040 form Rollovers If you withdraw cash or other assets from a qualified retirement plan in an eligible rollover distribution, you can defer tax on the distribution by rolling it over to another qualified retirement plan or a traditional IRA. 2010 1040 form For this purpose, the following plans are qualified retirement plans. 2010 1040 form A qualified employee plan. 2010 1040 form A qualified employee annuity. 2010 1040 form A tax-sheltered annuity plan (403(b) plan). 2010 1040 form An eligible state or local government section 457 deferred compensation plan. 2010 1040 form Eligible rollover distributions. 2010 1040 form   Generally, an eligible rollover distribution is any distribution of all or any part of the balance to your credit in a qualified retirement plan. 2010 1040 form For information about exceptions to eligible rollover distributions, see Publication 575. 2010 1040 form Rollover of nontaxable amounts. 2010 1040 form   You may be able to roll over the nontaxable part of a distribution (such as your after-tax contributions) made to another qualified retirement plan that is a qualified employee plan or a 403(b) plan, or to a traditional or Roth IRA. 2010 1040 form The transfer must be made either through a direct rollover to a qualified plan or 403(b) plan that separately accounts for the taxable and nontaxable parts of the rollover or through a rollover to a traditional or Roth IRA. 2010 1040 form   If you roll over only part of a distribution that includes both taxable and nontaxable amounts, the amount you roll over is treated as coming first from the taxable part of the distribution. 2010 1040 form   Any after-tax contributions that you roll over into your traditional IRA become part of your basis (cost) in your IRAs. 2010 1040 form To recover your basis when you take distributions from your IRA, you must complete Form 8606 for the year of the distribution. 2010 1040 form For more information, see the Form 8606 instructions. 2010 1040 form Direct rollover option. 2010 1040 form   You can choose to have any part or all of an eligible rollover distribution paid directly to another qualified retirement plan that accepts rollover distributions or to a traditional or Roth IRA. 2010 1040 form If you choose the direct rollover option, or have an automatic rollover, no tax will be withheld from any part of the distribution that is directly paid to the trustee of the other plan. 2010 1040 form Payment to you option. 2010 1040 form   If an eligible rollover distribution is paid to you, 20% generally will be withheld for income tax. 2010 1040 form However, the full amount is treated as distributed to you even though you actually receive only 80%. 2010 1040 form You generally must include in income any part (including the part withheld) that you do not roll over within 60 days to another qualified retirement plan or to a traditional or Roth IRA. 2010 1040 form (See Pensions and Annuities under Tax Withholding for 2014 in chapter 4. 2010 1040 form )    If you decide to roll over an amount equal to the distribution before withholding, your contribution to the new plan or IRA must include other money (for example, from savings or amounts borrowed) to replace the amount withheld. 2010 1040 form Time for making rollover. 2010 1040 form   You generally must complete the rollover of an eligible rollover distribution paid to you by the 60th day following the day on which you receive the distribution from your employer's plan. 2010 1040 form (If an amount distributed to you becomes a frozen deposit in a financial institution during the 60-day period after you receive it, the rollover period is extended for the period during which the distribution is in a frozen deposit in a financial institution. 2010 1040 form )   The IRS may waive the 60-day requirement where the failure to do so would be against equity or good conscience, such as in the event of a casualty, disaster, or other event beyond your reasonable control. 2010 1040 form   The administrator of a qualified plan must give you a written explanation of your distribution options within a reasonable period of time before making an eligible rollover distribution. 2010 1040 form Qualified domestic relations order (QDRO). 2010 1040 form   You may be able to roll over tax free all or part of a distribution from a qualified retirement plan that you receive under a QDRO. 2010 1040 form If you receive the distribution as an employee's spouse or former spouse (not as a nonspousal beneficiary), the rollover rules apply to you as if you were the employee. 2010 1040 form You can roll over the distribution from the plan into a traditional IRA or to another eligible retirement plan. 2010 1040 form See Rollovers in Publication 575 for more information on benefits received under a QDRO. 2010 1040 form Rollover by surviving spouse. 2010 1040 form   You may be able to roll over tax free all or part of a distribution from a qualified retirement plan you receive as the surviving spouse of a deceased employee. 2010 1040 form The rollover rules apply to you as if you were the employee. 2010 1040 form You can roll over a distribution into a qualified retirement plan or a traditional or Roth IRA. 2010 1040 form For a rollover to a Roth IRA, see Rollovers to Roth IRAs , later. 2010 1040 form    A distribution paid to a beneficiary other than the employee's surviving spouse is generally not an eligible rollover distribution. 2010 1040 form However, see Rollovers by nonspouse beneficiary next. 2010 1040 form Rollovers by nonspouse beneficiary. 2010 1040 form   If you are a designated beneficiary (other than a surviving spouse) of a deceased employee, you may be able to roll over tax free all or a portion of a distribution you receive from an eligible retirement plan of the employee. 2010 1040 form The distribution must be a direct trustee-to-trustee transfer to your traditional or Roth IRA that was set up to receive the distribution. 2010 1040 form The transfer will be treated as an eligible rollover distribution and the receiving plan will be treated as an inherited IRA. 2010 1040 form For information on inherited IRAs, see What if You Inherit an IRA? in chapter 1 of Publication 590, Individual Retirement Arrangements (IRAs). 2010 1040 form Retirement bonds. 2010 1040 form   If you redeem retirement bonds purchased under a qualified bond purchase plan, you can roll over the proceeds that exceed your basis tax free into an IRA (as discussed in Publication 590) or a qualified employer plan. 2010 1040 form Designated Roth accounts. 2010 1040 form   You can roll over an eligible rollover distribution from a designated Roth account into another designated Roth account or a Roth IRA. 2010 1040 form If you want to roll over the part of the distribution that is not included in income, you must make a direct rollover of the entire distribution or you can roll over the entire amount (or any portion) to a Roth IRA. 2010 1040 form For more information on rollovers from designated Roth accounts, see Rollovers in Publication 575. 2010 1040 form In-plan rollovers to designated Roth accounts. 2010 1040 form   If you are a plan participant in a 401(k), 403(b), or 457(b) plan, your plan may permit you to roll over amounts in those plans to a designated Roth account within the same plan. 2010 1040 form The rollover of any untaxed amounts must be included in income. 2010 1040 form See Designated Roth accounts under Rollovers in Publication 575 for more information. 2010 1040 form Rollovers to Roth IRAs. 2010 1040 form   You can roll over distributions directly from a qualified retirement plan (other than a designated Roth account) to a Roth IRA. 2010 1040 form   You must include in your gross income distributions from a qualified retirement plan (other than a designated Roth account) that you would have had to include in income if you had not rolled them over into a Roth IRA. 2010 1040 form You do not include in gross income any part of a distribution from a qualified retirement plan that is a return of contributions to the plan that were taxable to you when paid. 2010 1040 form In addition, the 10% tax on early distributions does not apply. 2010 1040 form More information. 2010 1040 form   For more information on the rules for rolling over distributions, see Rollovers in Publication 575. 2010 1040 form Special Additional Taxes To discourage the use of pension funds for purposes other than normal retirement, the law imposes additional taxes on early distributions of those funds and on failures to withdraw the funds timely. 2010 1040 form Ordinarily, you will not be subject to these taxes if you roll over all early distributions you receive, as explained earlier, and begin drawing out the funds at a normal retirement age, in reasonable amounts over your life expectancy. 2010 1040 form These special additional taxes are the taxes on: Early distributions, and Excess accumulation (not receiving minimum distributions). 2010 1040 form These taxes are discussed in the following sections. 2010 1040 form If you must pay either of these taxes, report them on Form 5329. 2010 1040 form However, you do not have to file Form 5329 if you owe only the tax on early distributions and your Form 1099-R correctly shows a “1” in box 7. 2010 1040 form Instead, enter 10% of the taxable part of the distribution on Form 1040, line 58 and write “No” under the heading “Other Taxes” to the left of line 58. 2010 1040 form Even if you do not owe any of these taxes, you may have to complete Form 5329 and attach it to your Form 1040. 2010 1040 form This applies if you meet an exception to the tax on early distributions but box 7 of your Form 1099-R does not indicate an exception. 2010 1040 form Tax on Early Distributions Most distributions (both periodic and nonperiodic) from qualified retirement plans and nonqualified annuity contracts made to you before you reach age 59½ are subject to an additional tax of 10%. 2010 1040 form This tax applies to the part of the distribution that you must include in gross income. 2010 1040 form For this purpose, a qualified retirement plan is: A qualified employee plan, A qualified employee annuity plan, A tax-sheltered annuity plan, or An eligible state or local government section 457 deferred compensation plan (to the extent that any distribution is attributable to amounts the plan received in a direct transfer or rollover from one of the other plans listed here or an IRA). 2010 1040 form 5% rate on certain early distributions from deferred annuity contracts. 2010 1040 form   If an early withdrawal from a deferred annuity is otherwise subject to the 10% additional tax, a 5% rate may apply instead. 2010 1040 form A 5% rate applies to distributions under a written election providing a specific schedule for the distribution of your interest in the contract if, as of March 1, 1986, you had begun receiving payments under the election. 2010 1040 form On line 4 of Form 5329, multiply the line 3 amount by 5% instead of 10%. 2010 1040 form Attach an explanation to your return. 2010 1040 form Distributions from Roth IRAs allocable to a rollover from an eligible retirement plan within the 5-year period. 2010 1040 form   If, within the 5-year period starting with the first day of your tax year in which you rolled over an amount from an eligible retirement plan to a Roth IRA, you take a distribution from the Roth IRA, you may have to pay the additional 10% tax on early distributions. 2010 1040 form You generally must pay the 10% additional tax on any amount attributable to the part of the rollover that you had to include in income. 2010 1040 form The additional tax is figured on Form 5329. 2010 1040 form For more information, see Form 5329 and its instructions. 2010 1040 form For information on qualified distributions from Roth IRAs, see Additional Tax on Early Distributions in chapter 2 of Publication 590. 2010 1040 form Distributions from designated Roth accounts allocable to in-plan Roth rollovers within the 5-year period. 2010 1040 form   If, within the 5-year period starting with the first day of your tax year in which you rolled over an amount from a 401(k), 403(b), or 457(b) plan to a designated Roth account, you take a distribution from the designated Roth account, you may have to pay the additional 10% tax on early distributions. 2010 1040 form You generally must pay the 10% additional tax on any amount attributable to the part of the in-plan rollover that you had to include in income. 2010 1040 form The additional tax is figured on Form 5329. 2010 1040 form For more information, see Form 5329 and its instructions. 2010 1040 form For information on qualified distributions from designated Roth accounts, see Designated Roth accounts under Taxation of Periodic Payments in Publication 575. 2010 1040 form Exceptions to tax. 2010 1040 form    Certain early distributions are excepted from the early distribution tax. 2010 1040 form If the payer knows that an exception applies to your early distribution, distribution code “2,” “3,” or “4” should be shown in box 7 of your Form 1099-R and you do not have to report the distribution on Form 5329. 2010 1040 form If an exception applies but distribution code “1” (early distribution, no known exception) is shown in box 7, you must file Form 5329. 2010 1040 form Enter the taxable amount of the distribution shown in box 2a of your Form 1099-R on line 1 of Form 5329. 2010 1040 form On line 2, enter the amount that can be excluded and the exception number shown in the Form 5329 instructions. 2010 1040 form    If distribution code “1” is incorrectly shown on your Form 1099-R for a distribution received when you were age 59½ or older, include that distribution on Form 5329. 2010 1040 form Enter exception number “12” on line 2. 2010 1040 form General exceptions. 2010 1040 form   The tax does not apply to distributions that are: Made as part of a series of substantially equal periodic payments (made at least annually) for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary (if from a qualified retirement plan, the payments must begin after your separation from service), Made because you are totally and permanently disabled, or Made on or after the death of the plan participant or contract holder. 2010 1040 form Additional exceptions for qualified retirement plans. 2010 1040 form   The tax does not apply to distributions that are: From a qualified retirement plan (other than an IRA) after your separation from service in or after the year you reached age 55 (age 50 for qualified public safety employees), From a qualified retirement plan (other than an IRA) to an alternate payee under a qualified domestic relations order, From a qualified retirement plan to the extent you have deductible medical expenses that exceed 10% (or 7. 2010 1040 form 5% if you or your spouse are age 65 or older) of your adjusted gross income, whether or not you itemize your deductions for the year, From an employer plan under a written election that provides a specific schedule for distribution of your entire interest if, as of March 1, 1986, you had separated from service and had begun receiving payments under the election, From an employee stock ownership plan for dividends on employer securities held by the plan, From a qualified retirement plan due to an IRS levy of the plan, From elective deferral accounts under 401(k) or 403(b) plans or similar arrangements that are qualified reservist distributions, or Phased retirement annuity payments made to federal employees. 2010 1040 form See Pub. 2010 1040 form 721 for more information on the phased retirement program. 2010 1040 form Qualified public safety employees. 2010 1040 form   If you are a qualified public safety employee, distributions made from a governmental defined benefit pension plan are not subject to the additional tax on early distributions. 2010 1040 form You are a qualified public safety employee if you provide police protection, firefighting services, or emergency medical services for a state or municipality, and you separated from service in or after the year you attained age 50. 2010 1040 form Qualified reservist distributions. 2010 1040 form   A qualified reservist distribution is not subject to the additional tax on early distributions. 2010 1040 form A qualified reservist distribution is a distribution (a) from elective deferrals under a section 401(k) or 403(b) plan, or a similar arrangement, (b) to an individual ordered or called to active duty (because he or she is a member of a reserve component) for a period of more than 179 days or for an indefinite period, and (c) made during the period beginning on the date of the order or call and ending at the close of the active duty period. 2010 1040 form You must have been ordered or called to active duty after September 11, 2001. 2010 1040 form For more information, see Qualified reservist distributions under Special Additional Taxes in Publication 575. 2010 1040 form Additional exceptions for nonqualified annuity contracts. 2010 1040 form   The tax does not apply to distributions from: A deferred annuity contract to the extent allocable to investment in the contract before August 14, 1982, A deferred annuity contract under a qualified personal injury settlement, A deferred annuity contract purchased by your employer upon termination of a qualified employee plan or qualified employee annuity plan and held by your employer until your separation from service, or An immediate annuity contract (a single premium contract providing substantially equal annuity payments that start within 1 year from the date of purchase and are paid at least annually). 2010 1040 form Tax on Excess Accumulation To make sure that most of your retirement benefits are paid to you during your lifetime, rather than to your beneficiaries after your death, the payments that you receive from qualified retirement plans must begin no later than your required beginning date (defined later). 2010 1040 form The payments each year cannot be less than the required minimum distribution. 2010 1040 form Required distributions not made. 2010 1040 form   If the actual distributions to you in any year are less than the minimum required distribution for that year, you are subject to an additional tax. 2010 1040 form The tax equals 50% of the part of the required minimum distribution that was not distributed. 2010 1040 form   For this purpose, a qualified retirement plan includes: A qualified employee plan, A qualified employee annuity plan, An eligible section 457 deferred compensation plan, or A tax-sheltered annuity plan (403(b) plan)(for benefits accruing after 1986). 2010 1040 form Waiver. 2010 1040 form   The tax may be waived if you establish that the shortfall in distributions was due to reasonable error and that reasonable steps are being taken to remedy the shortfall. 2010 1040 form See the Instructions for Form 5329 for the procedure to follow if you believe you qualify for a waiver of this tax. 2010 1040 form State insurer delinquency proceedings. 2010 1040 form   You might not receive the minimum distribution because assets are invested in a contract issued by an insurance company in state insurer delinquency proceedings. 2010 1040 form If your payments are reduced below the minimum due to these proceedings, you should contact your plan administrator. 2010 1040 form Under certain conditions, you will not have to pay the 50% excise tax. 2010 1040 form Required beginning date. 2010 1040 form   Unless the rule for 5% owners applies, you generally must begin to receive distributions from your qualified retirement plan by April 1 of the year that follows the later of: The calendar year in which you reach age 70½, or The calendar year in which you retire from employment with the employer maintaining the plan. 2010 1040 form However, your plan may require you to begin to receive distributions by April 1 of the year that follows the year in which you reach age 70½, even if you have not retired. 2010 1040 form   If you reached age 70½ in 2013, you may be required to receive your first distribution by April 1, 2014. 2010 1040 form Your required distribution then must be made for 2014 by December 31, 2014. 2010 1040 form 5% owners. 2010 1040 form   If you are a 5% owner, you must begin to receive distributions by April 1 of the year that follows the calendar year in which you reach age 70½. 2010 1040 form   You are a 5% owner if, for the plan year ending in the calendar year in which you reach age 70½, you own (or are considered to own under section 318 of the Internal Revenue Code) more than 5% of the outstanding stock (or more than 5% of the total voting power of all stock) of the employer, or more than 5% of the capital or profits interest in the employer. 2010 1040 form Age 70½. 2010 1040 form   You reach age 70½ on the date that is 6 calendar months after the date of your 70th birthday. 2010 1040 form   For example, if you are retired and your 70th birthday was on June 30, 2013, you were age 70½ on December 30, 2013. 2010 1040 form If your 70th birthday was on July 1, 2013, you reached age 70½ on January 1, 2014. 2010 1040 form Required distributions. 2010 1040 form   By the required beginning date, as explained earlier, you must either: Receive your entire interest in the plan (for a tax-sheltered annuity, your entire benefit accruing after 1986), or Begin receiving periodic distributions in annual amounts calculated to distribute your entire interest (for a tax-sheltered annuity, your entire benefit accruing after 1986) over your life or life expectancy or over the joint lives or joint life expectancies of you and a designated beneficiary (or over a shorter period). 2010 1040 form Additional information. 2010 1040 form   For more information on this rule, see Tax on Excess Accumulation in Publication 575. 2010 1040 form Form 5329. 2010 1040 form   You must file Form 5329 if you owe tax because you did not receive a minimum required distribution from your qualified retirement plan. 2010 1040 form Survivors and Beneficiaries Generally, a survivor or beneficiary reports pension or annuity income in the same way the plan participant would have. 2010 1040 form However, some special rules apply. 2010 1040 form See Publication 575 for more information. 2010 1040 form Survivors of employees. 2010 1040 form   If you are entitled to receive a survivor annuity on the death of an employee who died, you can exclude part of each annuity payment as a tax-free recovery of the employee's investment in the contract. 2010 1040 form You must figure the taxable and tax-free parts of your annuity payments using the method that applies as if you were the employee. 2010 1040 form Survivors of retirees. 2010 1040 form   If you receive benefits as a survivor under a joint and survivor annuity, include those benefits in income in the same way the retiree would have included them in income. 2010 1040 form If you receive a survivor annuity because of the death of a retiree who had reported the annuity under the Three-Year Rule and recovered all of the cost tax free, your survivor payments are fully taxable. 2010 1040 form    If the retiree was reporting the annuity payments under the General Rule, you must apply the same exclusion percentage to your initial survivor annuity payment called for in the contract. 2010 1040 form The resulting tax-free amount will then remain fixed. 2010 1040 form Any increases in the survivor annuity are fully taxable. 2010 1040 form    If the retiree was reporting the annuity payments under the Simplified Method, the part of each payment that is tax free is the same as the tax-free amount figured by the retiree at the annuity starting date. 2010 1040 form This amount remains fixed even if the annuity payments are increased or decreased. 2010 1040 form See Simplified Method , earlier. 2010 1040 form   In any case, if the annuity starting date is after 1986, the total exclusion over the years cannot be more than the cost. 2010 1040 form Estate tax deduction. 2010 1040 form   If your annuity was a joint and survivor annuity that was included in the decedent's estate, an estate tax may have been paid on it. 2010 1040 form You can deduct the part of the total estate tax that was based on the annuity. 2010 1040 form The deceased annuitant must have died after the annuity starting date. 2010 1040 form (For details, see section 1. 2010 1040 form 691(d)-1 of the regulations. 2010 1040 form ) Deduct it in equal amounts over your remaining life expectancy. 2010 1040 form   If the decedent died before the annuity starting date of a deferred annuity contract and you receive a death benefit under that contract, the amount you receive (either in a lump sum or as periodic payments) in excess of the decedent's cost is included in your gross income as income in respect of a decedent for which you may be able to claim an estate tax deduction. 2010 1040 form   You can take the estate tax deduction as an itemized deduction on Schedule A, Form 1040. 2010 1040 form This deduction is not subject to the 2%-of-adjusted-gross-income limit on miscellaneous deductions. 2010 1040 form See Publication 559, Survivors, Executors, and Administrators, for more information on the estate tax deduction. 2010 1040 form Prev  Up  Next   Home   More Online Publications