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2010 1040 Tax Forms

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2010 1040 Tax Forms

2010 1040 tax forms 2. 2010 1040 tax forms   Simplified Employee Pensions (SEPs) Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Setting Up a SEPWhen not to use Form 5305-SEP. 2010 1040 tax forms How Much Can I Contribute?Contribution Limits Deducting ContributionsDeduction Limit for Contributions for Participants Deduction Limit for Self-Employed Individuals Carryover of Excess SEP Contributions When To Deduct Contributions Where To Deduct Contributions Salary Reduction Simplified Employee Pensions (SARSEPs)SARSEP ADP test. 2010 1040 tax forms Deferral percentage. 2010 1040 tax forms Employee compensation. 2010 1040 tax forms Compensation of self-employed individuals. 2010 1040 tax forms Choice not to treat deferrals as compensation. 2010 1040 tax forms Limit on Elective Deferrals Tax Treatment of Deferrals Distributions (Withdrawals) Additional TaxesEffects on employee. 2010 1040 tax forms Reporting and Disclosure Requirements Topics - This chapter discusses: Setting up a SEP How much can I contribute Deducting contributions Salary reduction simplified employee pensions (SARSEPs) Distributions (withdrawals) Additional taxes Reporting and disclosure requirements Useful Items - You may want to see: Publication 590 Individual Retirement Arrangements (IRAs) 3998 Choosing A Retirement Solution for Your Small Business 4285 SEP Checklist 4286 SARSEP Checklist 4333 SEP Retirement Plans for Small Businesses 4336 SARSEP for Small Businesses 4407 SARSEP—Key Issues and Assistance Forms (and Instructions) W-2 Wage and Tax Statement 1040 U. 2010 1040 tax forms S. 2010 1040 tax forms Individual Income Tax Return 5305-SEP Simplified Employee Pension—Individual Retirement Accounts Contribution Agreement 5305A-SEP Salary Reduction Simplified Employee Pension—Individual Retirement Accounts Contribution Agreement 8880 Credit for Qualified Retirement Savings Contributions 8881 Credit for Small Employer Pension Plan Startup Costs A SEP is a written plan that allows you to make contributions toward your own retirement and your employees' retirement without getting involved in a more complex qualified plan. 2010 1040 tax forms Under a SEP, you make contributions to a traditional individual retirement arrangement (called a SEP-IRA) set up by or for each eligible employee. 2010 1040 tax forms A SEP-IRA is owned and controlled by the employee, and you make contributions to the financial institution where the SEP-IRA is maintained. 2010 1040 tax forms SEP-IRAs are set up for, at a minimum, each eligible employee (defined below). 2010 1040 tax forms A SEP-IRA may have to be set up for a leased employee (defined in chapter 1), but does not need to be set up for excludable employees (defined later). 2010 1040 tax forms Eligible employee. 2010 1040 tax forms   An eligible employee is an individual who meets all the following requirements. 2010 1040 tax forms Has reached age 21. 2010 1040 tax forms Has worked for you in at least 3 of the last 5 years. 2010 1040 tax forms Has received at least $550 in compensation from you in 2013. 2010 1040 tax forms This amount remains the same in 2014. 2010 1040 tax forms    You can use less restrictive participation requirements than those listed, but not more restrictive ones. 2010 1040 tax forms Excludable employees. 2010 1040 tax forms   The following employees can be excluded from coverage under a SEP. 2010 1040 tax forms Employees covered by a union agreement and whose retirement benefits were bargained for in good faith by the employees' union and you. 2010 1040 tax forms Nonresident alien employees who have received no U. 2010 1040 tax forms S. 2010 1040 tax forms source wages, salaries, or other personal services compensation from you. 2010 1040 tax forms For more information about nonresident aliens, see Publication 519, U. 2010 1040 tax forms S. 2010 1040 tax forms Tax Guide for Aliens. 2010 1040 tax forms Setting Up a SEP There are three basic steps in setting up a SEP. 2010 1040 tax forms You must execute a formal written agreement to provide benefits to all eligible employees. 2010 1040 tax forms You must give each eligible employee certain information about the SEP. 2010 1040 tax forms A SEP-IRA must be set up by or for each eligible employee. 2010 1040 tax forms Many financial institutions will help you set up a SEP. 2010 1040 tax forms Formal written agreement. 2010 1040 tax forms   You must execute a formal written agreement to provide benefits to all eligible employees under a SEP. 2010 1040 tax forms You can satisfy the written agreement requirement by adopting an IRS model SEP using Form 5305-SEP. 2010 1040 tax forms However, see When not to use Form 5305-SEP, below. 2010 1040 tax forms   If you adopt an IRS model SEP using Form 5305-SEP, no prior IRS approval or determination letter is required. 2010 1040 tax forms Keep the original form. 2010 1040 tax forms Do not file it with the IRS. 2010 1040 tax forms Also, using Form 5305-SEP will usually relieve you from filing annual retirement plan information returns with the IRS and the Department of Labor. 2010 1040 tax forms See the Form 5305-SEP instructions for details. 2010 1040 tax forms If you choose not to use Form 5305-SEP, you should seek professional advice in adopting a SEP. 2010 1040 tax forms When not to use Form 5305-SEP. 2010 1040 tax forms   You cannot use Form 5305-SEP if any of the following apply. 2010 1040 tax forms You currently maintain any other qualified retirement plan other than another SEP. 2010 1040 tax forms You have any eligible employees for whom IRAs have not been set up. 2010 1040 tax forms You use the services of leased employees, who are not your common-law employees (as described in chapter 1). 2010 1040 tax forms You are a member of any of the following unless all eligible employees of all the members of these groups, trades, or businesses participate under the SEP. 2010 1040 tax forms An affiliated service group described in section 414(m). 2010 1040 tax forms A controlled group of corporations described in section 414(b). 2010 1040 tax forms Trades or businesses under common control described in section 414(c). 2010 1040 tax forms You do not pay the cost of the SEP contributions. 2010 1040 tax forms Information you must give to employees. 2010 1040 tax forms   You must give each eligible employee a copy of Form 5305-SEP, its instructions, and the other information listed in the Form 5305-SEP instructions. 2010 1040 tax forms An IRS model SEP is not considered adopted until you give each employee this information. 2010 1040 tax forms Setting up the employee's SEP-IRA. 2010 1040 tax forms   A SEP-IRA must be set up by or for each eligible employee. 2010 1040 tax forms SEP-IRAs can be set up with banks, insurance companies, or other qualified financial institutions. 2010 1040 tax forms You send SEP contributions to the financial institution where the SEP-IRA is maintained. 2010 1040 tax forms Deadline for setting up a SEP. 2010 1040 tax forms   You can set up a SEP for any year as late as the due date (including extensions) of your income tax return for that year. 2010 1040 tax forms Credit for startup costs. 2010 1040 tax forms   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SEP that first became effective in 2013. 2010 1040 tax forms For more information, see Credit for startup costs under Reminders, earlier. 2010 1040 tax forms How Much Can I Contribute? The SEP rules permit you to contribute a limited amount of money each year to each employee's SEP-IRA. 2010 1040 tax forms If you are self-employed, you can contribute to your own SEP-IRA. 2010 1040 tax forms Contributions must be in the form of money (cash, check, or money order). 2010 1040 tax forms You cannot contribute property. 2010 1040 tax forms However, participants may be able to transfer or roll over certain property from one retirement plan to another. 2010 1040 tax forms See Publication 590 for more information about rollovers. 2010 1040 tax forms You do not have to make contributions every year. 2010 1040 tax forms But if you make contributions, they must be based on a written allocation formula and must not discriminate in favor of highly compensated employees (defined in chapter 1). 2010 1040 tax forms When you contribute, you must contribute to the SEP-IRAs of all participants who actually performed personal services during the year for which the contributions are made, including employees who die or terminate employment before the contributions are made. 2010 1040 tax forms Contributions are deductible within limits, as discussed later, and generally are not taxable to the plan participants. 2010 1040 tax forms A SEP-IRA cannot be a Roth IRA. 2010 1040 tax forms Employer contributions to a SEP-IRA will not affect the amount an individual can contribute to a Roth or traditional IRA. 2010 1040 tax forms Unlike regular contributions to a traditional IRA, contributions under a SEP can be made to participants over age 70½. 2010 1040 tax forms If you are self-employed, you can also make contributions under the SEP for yourself even if you are over 70½. 2010 1040 tax forms Participants age 70½ or over must take required minimum distributions. 2010 1040 tax forms Time limit for making contributions. 2010 1040 tax forms   To deduct contributions for a year, you must make the contributions by the due date (including extensions) of your tax return for the year. 2010 1040 tax forms Contribution Limits Contributions you make for 2013 to a common-law employee's SEP-IRA cannot exceed the lesser of 25% of the employee's compensation or $51,000. 2010 1040 tax forms Compensation generally does not include your contributions to the SEP. 2010 1040 tax forms The SEP plan document will specify how the employer contribution is determined and how it will be allocated to participants. 2010 1040 tax forms Example. 2010 1040 tax forms Your employee, Mary Plant, earned $21,000 for 2013. 2010 1040 tax forms The maximum contribution you can make to her SEP-IRA is $5,250 (25% x $21,000). 2010 1040 tax forms Contributions for yourself. 2010 1040 tax forms   The annual limits on your contributions to a common-law employee's SEP-IRA also apply to contributions you make to your own SEP-IRA. 2010 1040 tax forms However, special rules apply when figuring your maximum deductible contribution. 2010 1040 tax forms See Deduction Limit for Self-Employed Individuals , later. 2010 1040 tax forms Annual compensation limit. 2010 1040 tax forms   You cannot consider the part of an employee's compensation over $255,000 when figuring your contribution limit for that employee. 2010 1040 tax forms However, $51,000 is the maximum contribution for an eligible employee. 2010 1040 tax forms These limits are $260,000 and $52,000, respectively, in 2014. 2010 1040 tax forms Example. 2010 1040 tax forms Your employee, Susan Green, earned $210,000 for 2013. 2010 1040 tax forms Because of the maximum contribution limit for 2013, you can only contribute $51,000 to her SEP-IRA. 2010 1040 tax forms More than one plan. 2010 1040 tax forms   If you contribute to a defined contribution plan (defined in chapter 4), annual additions to an account are limited to the lesser of $51,000 or 100% of the participant's compensation. 2010 1040 tax forms When you figure this limit, you must add your contributions to all defined contribution plans maintained by you. 2010 1040 tax forms Because a SEP is considered a defined contribution plan for this limit, your contributions to a SEP must be added to your contributions to other defined contribution plans you maintain. 2010 1040 tax forms Tax treatment of excess contributions. 2010 1040 tax forms   Excess contributions are your contributions to an employee's SEP-IRA (or to your own SEP-IRA) for 2013 that exceed the lesser of the following amounts. 2010 1040 tax forms 25% of the employee's compensation (or, for you, 20% of your net earnings from self-employment). 2010 1040 tax forms $51,000. 2010 1040 tax forms Excess contributions are included in the employee's income for the year and are treated as contributions by the employee to his or her SEP-IRA. 2010 1040 tax forms For more information on employee tax treatment of excess contributions, see chapter 1 in Publication 590. 2010 1040 tax forms Reporting on Form W-2. 2010 1040 tax forms   Do not include SEP contributions on your employee's Form W-2 unless contributions were made under a salary reduction arrangement (discussed later). 2010 1040 tax forms Deducting Contributions Generally, you can deduct the contributions you make each year to each employee's SEP-IRA. 2010 1040 tax forms If you are self-employed, you can deduct the contributions you make each year to your own SEP-IRA. 2010 1040 tax forms Deduction Limit for Contributions for Participants The most you can deduct for your contributions to you or your employee's SEP-IRA is the lesser of the following amounts. 2010 1040 tax forms Your contributions (including any excess contributions carryover). 2010 1040 tax forms 25% of the compensation (limited to $255,000 per participant) paid to the participants during 2013 from the business that has the plan, not to exceed $51,000 per participant. 2010 1040 tax forms In 2014, the amounts in (2) above are $260,000 and $52,000, respectively. 2010 1040 tax forms Deduction Limit for Self-Employed Individuals If you contribute to your own SEP-IRA, you must make a special computation to figure your maximum deduction for these contributions. 2010 1040 tax forms When figuring the deduction for contributions made to your own SEP-IRA, compensation is your net earnings from self-employment (defined in chapter 1), which takes into account both the following deductions. 2010 1040 tax forms The deduction for the deductible part of your self-employment tax. 2010 1040 tax forms The deduction for contributions to your own SEP-IRA. 2010 1040 tax forms The deduction for contributions to your own SEP-IRA and your net earnings depend on each other. 2010 1040 tax forms For this reason, you determine the deduction for contributions to your own SEP-IRA indirectly by reducing the contribution rate called for in your plan. 2010 1040 tax forms To do this, use the Rate Table for Self-Employed or the Rate Worksheet for Self-Employed, whichever is appropriate for your plan's contribution rate, in chapter 5. 2010 1040 tax forms Then figure your maximum deduction by using the Deduction Worksheet for Self-Employed in chapter 5. 2010 1040 tax forms Carryover of Excess SEP Contributions If you made SEP contributions that are more than the deduction limit (nondeductible contributions), you can carry over and deduct the difference in later years. 2010 1040 tax forms However, the carryover, when combined with the contribution for the later year, is subject to the deduction limit for that year. 2010 1040 tax forms If you also contributed to a defined benefit plan or defined contribution plan, see Carryover of Excess Contributions under Employer Deduction in chapter 4 for the carryover limit. 2010 1040 tax forms Excise tax. 2010 1040 tax forms   If you made nondeductible (excess) contributions to a SEP, you may be subject to a 10% excise tax. 2010 1040 tax forms For information about the excise tax, see Excise Tax for Nondeductible (Excess) Contributions under Employer Deduction in chapter 4. 2010 1040 tax forms When To Deduct Contributions When you can deduct contributions made for a year depends on the tax year on which the SEP is maintained. 2010 1040 tax forms If the SEP is maintained on a calendar year basis, you deduct the yearly contributions on your tax return for the year within which the calendar year ends. 2010 1040 tax forms If you file your tax return and maintain the SEP using a fiscal year or short tax year, you deduct contributions made for a year on your tax return for that year. 2010 1040 tax forms Example. 2010 1040 tax forms You are a fiscal year taxpayer whose tax year ends June 30. 2010 1040 tax forms You maintain a SEP on a calendar year basis. 2010 1040 tax forms You deduct SEP contributions made for calendar year 2013 on your tax return for your tax year ending June 30, 2014. 2010 1040 tax forms Where To Deduct Contributions Deduct the contributions you make for your common-law employees on your tax return. 2010 1040 tax forms For example, sole proprietors deduct them on Schedule C (Form 1040) or Schedule F (Form 1040), Profit or Loss From Farming; partnerships deduct them on Form 1065, U. 2010 1040 tax forms S. 2010 1040 tax forms Return of Partnership Income; and corporations deduct them on Form 1120, U. 2010 1040 tax forms S. 2010 1040 tax forms Corporation Income Tax Return, or Form 1120S, U. 2010 1040 tax forms S. 2010 1040 tax forms Income Tax Return for an S Corporation. 2010 1040 tax forms Sole proprietors and partners deduct contributions for themselves on line 28 of Form 1040. 2010 1040 tax forms (If you are a partner, contributions for yourself are shown on the Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. 2010 1040 tax forms , you receive from the partnership. 2010 1040 tax forms ) Remember that sole proprietors and partners can't deduct as a business expense contributions made to a SEP for themselves, only those made for their common-law employees. 2010 1040 tax forms Salary Reduction Simplified Employee Pensions (SARSEPs) A SARSEP is a SEP set up before 1997 that includes a salary reduction arrangement. 2010 1040 tax forms (See the Caution, next. 2010 1040 tax forms ) Under a SARSEP, your employees can choose to have you contribute part of their pay to their SEP-IRAs rather than receive it in cash. 2010 1040 tax forms This contribution is called an “elective deferral” because employees choose (elect) to set aside the money, and they defer the tax on the money until it is distributed to them. 2010 1040 tax forms You are not allowed to set up a SARSEP after 1996. 2010 1040 tax forms However, participants (including employees hired after 1996) in a SARSEP set up before 1997 can continue to have you contribute part of their pay to the plan. 2010 1040 tax forms If you are interested in setting up a retirement plan that includes a salary reduction arrangement, see chapter 3. 2010 1040 tax forms Who can have a SARSEP?   A SARSEP set up before 1997 is available to you and your eligible employees only if all the following requirements are met. 2010 1040 tax forms At least 50% of your employees eligible to participate choose to make elective deferrals. 2010 1040 tax forms You have 25 or fewer employees who were eligible to participate in the SEP at any time during the preceding year. 2010 1040 tax forms The elective deferrals of your highly compensated employees meet the SARSEP ADP test. 2010 1040 tax forms SARSEP ADP test. 2010 1040 tax forms   Under the SARSEP ADP test, the amount deferred each year by each eligible highly compensated employee as a percentage of pay (the deferral percentage) cannot be more than 125% of the average deferral percentage (ADP) of all non-highly compensated employees eligible to participate. 2010 1040 tax forms A highly compensated employee is defined in chapter 1. 2010 1040 tax forms Deferral percentage. 2010 1040 tax forms   The deferral percentage for an employee for a year is figured as follows. 2010 1040 tax forms   The elective employer contributions (excluding certain catch-up contributions)  paid to the SEP for the employee for the year     The employee's compensation (limited to $255,000 in 2013)   The instructions for Form 5305A-SEP have a worksheet you can use to determine whether the elective deferrals of your highly compensated employees meet the SARSEP ADP test. 2010 1040 tax forms Employee compensation. 2010 1040 tax forms   For figuring the deferral percentage, compensation is generally the amount you pay to the employee for the year. 2010 1040 tax forms Compensation includes the elective deferral and other amounts deferred in certain employee benefit plans. 2010 1040 tax forms See Compensation in chapter 1. 2010 1040 tax forms Elective deferrals under the SARSEP are included in figuring your employees' deferral percentage even though they are not included in the income of your employees for income tax purposes. 2010 1040 tax forms Compensation of self-employed individuals. 2010 1040 tax forms   If you are self-employed, compensation is your net earnings from self-employment as defined in chapter 1. 2010 1040 tax forms   Compensation does not include tax-free items (or deductions related to them) other than foreign earned income and housing cost amounts. 2010 1040 tax forms Choice not to treat deferrals as compensation. 2010 1040 tax forms   You can choose not to treat elective deferrals (and other amounts deferred in certain employee benefit plans) for a year as compensation under your SARSEP. 2010 1040 tax forms Limit on Elective Deferrals The most a participant can choose to defer for calendar year 2013 is the lesser of the following amounts. 2010 1040 tax forms 25% of the participant's compensation (limited to $255,000 of the participant's compensation). 2010 1040 tax forms $17,500. 2010 1040 tax forms The $17,500 limit applies to the total elective deferrals the employee makes for the year to a SEP and any of the following. 2010 1040 tax forms Cash or deferred arrangement (section 401(k) plan). 2010 1040 tax forms Salary reduction arrangement under a tax-sheltered annuity plan (section 403(b) plan). 2010 1040 tax forms SIMPLE IRA plan. 2010 1040 tax forms In 2014, the $255,000 limit increases to $260,000 and the $17,500 limit remains at $17,500. 2010 1040 tax forms Catch-up contributions. 2010 1040 tax forms   A SARSEP can permit participants who are age 50 or over at the end of the calendar year to also make catch-up contributions. 2010 1040 tax forms The catch-up contribution limit for 2013 is $5,500 and remains at $5,500 for 2014. 2010 1040 tax forms Elective deferrals are not treated as catch-up contributions for 2013 until they exceed the elective deferral limit (the lesser of 25% of compensation or $17,500), the SARSEP ADP test limit discussed earlier, or the plan limit (if any). 2010 1040 tax forms However, the catch-up contribution a participant can make for a year cannot exceed the lesser of the following amounts. 2010 1040 tax forms The catch-up contribution limit. 2010 1040 tax forms The excess of the participant's compensation over the elective deferrals that are not catch-up contributions. 2010 1040 tax forms   Catch-up contributions are not subject to the elective deferral limit (the lesser of 25% of compensation or $17,500 in 2013 and in 2014). 2010 1040 tax forms Overall limit on SEP contributions. 2010 1040 tax forms   If you also make nonelective contributions to a SEP-IRA, the total of the nonelective and elective contributions to that SEP-IRA cannot exceed the lesser of 25% of the employee's compensation or $51,000 for 2013 ($52,000 for 2014). 2010 1040 tax forms The same rule applies to contributions you make to your own SEP-IRA. 2010 1040 tax forms See Contribution Limits , earlier. 2010 1040 tax forms Figuring the elective deferral. 2010 1040 tax forms   For figuring the 25% limit on elective deferrals, compensation does not include SEP contributions, including elective deferrals or other amounts deferred in certain employee benefit plans. 2010 1040 tax forms Tax Treatment of Deferrals Elective deferrals that are not more than the limits discussed earlier under Limit on Elective Deferrals are excluded from your employees' wages subject to federal income tax in the year of deferral. 2010 1040 tax forms However, these deferrals are included in wages for social security, Medicare, and federal unemployment (FUTA) tax. 2010 1040 tax forms Excess deferrals. 2010 1040 tax forms   For 2013, excess deferrals are the elective deferrals for the year that are more than the $17,500 limit discussed earlier. 2010 1040 tax forms For a participant who is eligible to make catch-up contributions, excess deferrals are the elective deferrals that are more than $23,000. 2010 1040 tax forms The treatment of excess deferrals made under a SARSEP is similar to the treatment of excess deferrals made under a qualified plan. 2010 1040 tax forms See Treatment of Excess Deferrals under Elective Deferrals (401(k) Plans) in chapter 4. 2010 1040 tax forms Excess SEP contributions. 2010 1040 tax forms   Excess SEP contributions are elective deferrals of highly compensated employees that are more than the amount permitted under the SARSEP ADP test. 2010 1040 tax forms You must notify your highly compensated employees within 2½ months after the end of the plan year of their excess SEP contributions. 2010 1040 tax forms If you do not notify them within this time period, you must pay a 10% tax on the excess. 2010 1040 tax forms For an explanation of the notification requirements, see Rev. 2010 1040 tax forms Proc. 2010 1040 tax forms 91-44, 1991-2 C. 2010 1040 tax forms B. 2010 1040 tax forms 733. 2010 1040 tax forms If you adopted a SARSEP using Form 5305A-SEP, the notification requirements are explained in the instructions for that form. 2010 1040 tax forms Reporting on Form W-2. 2010 1040 tax forms   Do not include elective deferrals in the “Wages, tips, other compensation” box of Form W-2. 2010 1040 tax forms You must, however, include them in the “Social security wages” and “Medicare wages and tips” boxes. 2010 1040 tax forms You must also include them in box 12. 2010 1040 tax forms Mark the “Retirement plan” checkbox in box 13. 2010 1040 tax forms For more information, see the Form W-2 instructions. 2010 1040 tax forms Distributions (Withdrawals) As an employer, you cannot prohibit distributions from a SEP-IRA. 2010 1040 tax forms Also, you cannot make your contributions on the condition that any part of them must be kept in the account after you have made your contributions to the employee's accounts. 2010 1040 tax forms Distributions are subject to IRA rules. 2010 1040 tax forms Generally, you or your employee must begin to receive distributions from a SEP-IRA by April 1 of the first year after the calendar year in which you or your employee reaches age 70½. 2010 1040 tax forms For more information about IRA rules, including the tax treatment of distributions, rollovers, required distributions, and income tax withholding, see Publication 590. 2010 1040 tax forms Additional Taxes The tax advantages of using SEP-IRAs for retirement savings can be offset by additional taxes that may be imposed for all the following actions. 2010 1040 tax forms Making excess contributions. 2010 1040 tax forms Making early withdrawals. 2010 1040 tax forms Not making required withdrawals. 2010 1040 tax forms For information about these taxes, see chapter 1 in Publication 590. 2010 1040 tax forms Also, a SEP-IRA may be disqualified, or an excise tax may apply, if the account is involved in a prohibited transaction, discussed next. 2010 1040 tax forms Prohibited transaction. 2010 1040 tax forms   If an employee improperly uses his or her SEP-IRA, such as by borrowing money from it, the employee has engaged in a prohibited transaction. 2010 1040 tax forms In that case, the SEP-IRA will no longer qualify as an IRA. 2010 1040 tax forms For a list of prohibited transactions, see Prohibited Transactions in chapter 4. 2010 1040 tax forms Effects on employee. 2010 1040 tax forms   If a SEP-IRA is disqualified because of a prohibited transaction, the assets in the account will be treated as having been distributed to the employee on the first day of the year in which the transaction occurred. 2010 1040 tax forms The employee must include in income the fair market value of the assets (on the first day of the year) that is more than any cost basis in the account. 2010 1040 tax forms Also, the employee may have to pay the additional tax for making early withdrawals. 2010 1040 tax forms Reporting and Disclosure Requirements If you set up a SEP using Form 5305-SEP, you must give your eligible employees certain information about the SEP when you set it up. 2010 1040 tax forms See Setting Up a SEP , earlier. 2010 1040 tax forms Also, you must give your eligible employees a statement each year showing any contributions to their SEP-IRAs. 2010 1040 tax forms You must also give them notice of any excess contributions. 2010 1040 tax forms For details about other information you must give them, see the instructions for Form 5305-SEP or Form 5305A-SEP (for a salary reduction SEP). 2010 1040 tax forms Even if you did not use Form 5305-SEP or Form 5305A-SEP to set up your SEP, you must give your employees information similar to that described above. 2010 1040 tax forms For more information, see the instructions for either Form 5305-SEP or Form 5305A-SEP. 2010 1040 tax forms Prev  Up  Next   Home   More Online Publications
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The 2010 1040 Tax Forms

2010 1040 tax forms Tax Changes for Businesses Table of Contents 2001 ChangesNew 5-Year Carryback Rule for Net Operating Losses (NOLs) Electronic Form 1099 Tax Incentives for New York Liberty Zone Other 2001 Changes 2002 ChangesNonaccrual-Experience Method Issuance of Qualified Zone Academy Bonds Depletion Work Opportunity Credit Expanded in New York Liberty Zone Credit For Pension Plan Startup Costs Welfare-to-Work Credit Extended Work Opportunity Credit Extended Electric and Clean-Fuel Vehicles Renewable Electricity Production Credit Later ChangesSpecial Depreciation Allowance Extension of Placed in Service Date Special Liberty Zone Depreciation Allowance for New and Used Property Depreciation of Property Used on Indian Reservations Indian Employment Credit Extended 2001 Changes New 5-Year Carryback Rule for Net Operating Losses (NOLs) If you have an NOL from a tax year ending during 2001 or 2002, you must generally carry back the entire amount of the NOL to the 5 tax years before the NOL year (the carryback period). 2010 1040 tax forms However, you can still choose to use the previous carryback period. 2010 1040 tax forms You also can choose not to carry back an NOL and only carry it forward. 2010 1040 tax forms Individuals, estates, and trusts can file Form 1045, Application for Tentative Refund. 2010 1040 tax forms Corporations can file Form 1139, Corporation Application for Tentative Refund. 2010 1040 tax forms The instructions for these forms will be revised to reflect the new law. 2010 1040 tax forms Electronic Form 1099 For tax years ending after March 9, 2002, most Forms 1099 can be furnished electronically if the recipient consents, according to IRS regulations, to receive it that way. 2010 1040 tax forms Tax Incentives for New York Liberty Zone New tax benefits are provided for the parts of New York City damaged in the terrorist attacks on September 11, 2001. 2010 1040 tax forms These benefits apply to the newly created New York Liberty Zone, which is the area located on or south of Canal Street, East Broadway (east of its intersection with Canal Street), or Grand Street (east of its intersection with East Broadway), in the Borough of Manhattan. 2010 1040 tax forms Tax benefits for the New York Liberty Zone include the following. 2010 1040 tax forms A special depreciation allowance equal to 30% of the adjusted basis of qualified Liberty Zone property. 2010 1040 tax forms It is allowed for the year the property is placed in service. 2010 1040 tax forms No alternative minimum tax depreciation adjustment for qualified Liberty Zone property. 2010 1040 tax forms Classification of Liberty Zone leasehold improvement property as 5-year property. 2010 1040 tax forms Authorization of the issuance of tax-exempt New York Liberty bonds to finance the acquisition, construction, reconstruction, and renovation of nonresidential real property, residential rental property, and public utility property in the Liberty Zone. 2010 1040 tax forms An increased section 179 deduction for certain Liberty Zone property. 2010 1040 tax forms Extension of the replacement period from 2 years to 5 years for certain property involuntarily converted as a result of the terrorist attacks on September 11, 2001, but only if substantially all of the use of the replacement property is in New York City. 2010 1040 tax forms For more information about involuntary conversions, see Postponement of Gain in Publication 547, Casualties, Disasters, and Thefts. 2010 1040 tax forms In addition, for 2002 and 2003, the work opportunity credit is expanded by creating a new targeted group, consisting generally of employees who work in the Liberty Zone or, in certain cases, in New York City outside the Liberty Zone. 2010 1040 tax forms For more information, see Work Opportunity Credit Expanded in New York Liberty Zone under 2002 Changes, later. 2010 1040 tax forms For more information about the 30% special depreciation allowance, Liberty Zone leasehold improvement property, or increased section 179 deduction, see New York Liberty Zone Benefits, in chapter 5. 2010 1040 tax forms In addition, the tax benefits for the Liberty Zone will be covered in a new edition of Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities, available later in 2002. 2010 1040 tax forms Other 2001 Changes Other changes are discussed in the following chapters. 2010 1040 tax forms Chapter 4 Car Expenses Chapter 5 Depreciation 2002 Changes Nonaccrual-Experience Method Under current law, if you perform services and use an accrual method of accounting, you do not accrue income which, based on experience, you expect to be uncollectible. 2010 1040 tax forms Beginning in 2002, this rule only applies if you perform services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, and consulting, or your average annual gross receipts for the 3 prior tax years does not exceed $5,000,000. 2010 1040 tax forms As under current law, the nonaccrual-experience method will not apply to amounts on which you charge interest or a late payment penalty. 2010 1040 tax forms For more information, see Nonaccrual-Experience Method in chapter 11 of Publication 535, Business Expenses. 2010 1040 tax forms Issuance of Qualified Zone Academy Bonds State and local governments issue qualified zone academy bonds to raise funds for the use of qualified zone academies. 2010 1040 tax forms The amount of bonds that may be issued was limited to $400 million each year for 1998, 1999, 2000, and 2001. 2010 1040 tax forms This provision has been extended to provide for an additional $400 million of bonds to be issued each year for 2002 and 2003. 2010 1040 tax forms For more information about qualified zone academy bonds, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. 2010 1040 tax forms Depletion The suspension of the taxable income limit on percentage depletion from the marginal production of oil and natural gas that was scheduled to expire for tax years beginning after 2001 has been extended to tax years beginning before 2004. 2010 1040 tax forms For more information on marginal production, see section 613A(c) of the Internal Revenue Code. 2010 1040 tax forms Work Opportunity Credit Expanded in New York Liberty Zone The work opportunity credit is expanded to include a new targeted group consisting generally of employees who perform substantially all their services: In the New York Liberty Zone (defined earlier under Tax Incentives for New York Liberty Zone, under 2001 Changes), or Elsewhere in New York City for a business that relocated from the Liberty Zone due to the destruction or damage of its place of business by the September 11, 2001, terrorist attack. 2010 1040 tax forms The credit is available to employers for wages paid to new employees and existing employees for work performed during 2002 or 2003. 2010 1040 tax forms Certain limits apply. 2010 1040 tax forms For more information about the work opportunity credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. 2010 1040 tax forms Credit For Pension Plan Startup Costs The credit for pension plan startup costs is now allowed for plans that become effective after December 31, 2001. 2010 1040 tax forms Previously, the credit was only allowed for plans established after December 31, 2001. 2010 1040 tax forms For more information on the credit, see Important Changes for 2002 in Publication 560, Retirement Plans for Small Business. 2010 1040 tax forms Welfare-to-Work Credit Extended The welfare-to-work credit that was scheduled to expire for wages paid to individuals who began working for you after 2001 has been extended to include wages paid to qualified individuals who begin work for you in 2002 or 2003. 2010 1040 tax forms For more information on the welfare-to-work credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. 2010 1040 tax forms Work Opportunity Credit Extended The work opportunity credit that was scheduled to expire for wages paid to individuals who began working for you after 2001 has been extended to include wages paid to qualified individuals who begin work for you in 2002 or 2003. 2010 1040 tax forms For more information about the work opportunity credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. 2010 1040 tax forms Electric and Clean-Fuel Vehicles The maximum clean-fuel vehicle deduction and qualified electric vehicle credit were scheduled to be 25% lower for 2002 and both were scheduled to be phased out completely by 2005. 2010 1040 tax forms The full deduction and credit are now allowed for qualified property placed in service in 2002 and 2003. 2010 1040 tax forms The phaseout of the deduction and the credit will begin in 2004, and no deduction or credit will be allowed for property placed in service after 2006. 2010 1040 tax forms For more information about electric and clean-fuel vehicles, see chapter 12 in Publication 535, Business Expenses. 2010 1040 tax forms Renewable Electricity Production Credit The renewable electricity production credit is extended to include electricity produced by facilities placed in service after 2001 and before 2004. 2010 1040 tax forms Later Changes Special Depreciation Allowance You can claim the special depreciation allowance (an additional 30% depreciation deduction) for new property that you acquire before September 11, 2004, and place in service for your business generally before January 1, 2005, if you meet the other requirements for qualified property covered in chapter 5. 2010 1040 tax forms Accordingly, you will generally no longer be able to claim the special depreciation allowance for the qualified property if you acquire it after September 10, 2004, or place it in service for your business after December 31, 2004. 2010 1040 tax forms However, you will be able to claim the special Liberty Zone depreciation allowance (an additional 30% depreciation deduction) for most qualified property if you place it in service in the Liberty Zone after December 31, 2004, and generally before January 1, 2007, provided you meet the other requirements for qualified Liberty Zone property covered in chapter 5. 2010 1040 tax forms Extension of Placed in Service Date To qualify for the special depreciation allowance, your property must meet certain tests, including the placed in service date test, as well as the other requirements covered in chapter 5 of this publication. 2010 1040 tax forms To meet the placed in service date test, your property must generally be placed in service for use in your trade or business or for the production of income after September 10, 2001, and before January 1, 2005. 2010 1040 tax forms However, certain property placed in service before January 1, 2006, may meet this test. 2010 1040 tax forms Transportation property and property with a recovery period of 10 years or longer meet the test if one of the following applies. 2010 1040 tax forms The property has an estimated production period of more than 2 years. 2010 1040 tax forms The property has an estimated production period of more than 1 year and it costs more than $1 million. 2010 1040 tax forms Transportation property is any tangible personal property used in the trade or business of transporting persons or property. 2010 1040 tax forms For property that qualifies for the special depreciation allowance solely because of the one-year extension of the placed in service date, only the part of the basis attributable to manufacture, construction, or production before September 11, 2004, is eligible for the special depreciation allowance. 2010 1040 tax forms Special Liberty Zone Depreciation Allowance for New and Used Property You can claim the special Liberty Zone depreciation allowance (an additional 30% depreciation deduction) for used property that you acquire after September 10, 2001, if the property meets the requirements listed under Qualified Liberty Zone Property in chapter 5 of this publication. 2010 1040 tax forms You will be able to claim the allowance for both new and used property that you acquire after September 10, 2004, provided the property meets the other requirements for qualified Liberty Zone property. 2010 1040 tax forms Depreciation of Property Used on Indian Reservations The special depreciation rules that apply to qualified property used on an Indian reservation were scheduled to expire for property placed in service after 2003. 2010 1040 tax forms These special rules have been extended to include property placed in service in 2004. 2010 1040 tax forms For more information about these rules, see Publication 946, How To Depreciate Property. 2010 1040 tax forms Indian Employment Credit Extended The Indian employment credit that was scheduled to expire for tax years beginning after 2003 has been extended to include a tax year beginning in 2004. 2010 1040 tax forms For more information about this credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. 2010 1040 tax forms Prev  Up  Next   Home   More Online Publications