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E File Tax Return

E file tax return Publication 538 - Introductory Material Table of Contents IntroductionOrdering forms and publications. E file tax return Tax Questions. E file tax return Reminders Useful Items - You may want to see: Introduction Every taxpayer (individuals, business entities, etc. E file tax return ) must figure taxable income on the basis of an annual accounting period called a tax year. E file tax return The calendar year is the most common tax year. E file tax return Other tax years include a fiscal year and a short tax year. E file tax return Each taxpayer must use a consistent accounting method, which is a set of rules for determining when to report income and expenses. E file tax return The most commonly used accounting methods are the cash method and the accrual method. E file tax return Under the cash method, you generally report income in the tax year you receive it, and deduct expenses in the tax year in which you pay them. E file tax return Under the accrual method, you generally report income in the tax year you earn it, regardless of when payment is received. E file tax return You deduct expenses in the tax year you incur them, regardless of when payment is made. E file tax return This publication explains some of the rules for accounting periods and accounting methods. E file tax return In some cases, you may have to refer to other sources for a more in-depth explanation of the topic. E file tax return Comments and suggestions. E file tax return   We welcome your comments about this publication and your suggestions for future editions. E file tax return   You can write to us at the following address: Internal Revenue Service Business, Exempt Organization and International Forms and Publications Branch SE:W:CAR:MP:T:B 1111 Constitution Ave. E file tax return NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. E file tax return Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. E file tax return   You can email us at taxforms@irs. E file tax return gov. E file tax return Please put “Publications Comment” on the subject line. E file tax return You can also send us comments from www. E file tax return irs. E file tax return gov/formspubs. E file tax return Select “Comment on Tax Forms and Publications” under “More information. E file tax return ”   Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax products. E file tax return Ordering forms and publications. E file tax return   Visit www. E file tax return irs. E file tax return gov/formspubs to download forms and publications, call 1-800–829–3676, or write to the address below and receive a response within 10 days after your request is received. E file tax return Internal Revenue Service 1201 N. E file tax return Mitsubishi Motorway Bloomington, IL 61705-6613 Tax Questions. E file tax return   If you have a tax question, check the information available on IRS. E file tax return gov or call 1-800-829-1040. E file tax return We cannot answer tax questions sent to the above address. E file tax return Reminders Photographs of missing children. E file tax return  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. E file tax return Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. E file tax return You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. E file tax return Useful Items - You may want to see: Publication 537 Installment Sales 541 Partnerships 542 Corporations Form (and Instructions) 1128 Application To Adopt, Change, or Retain a Tax Year 2553 Election by a Small Business Corporation 3115 Application for Change in Accounting Method 8716 Election To Have a Tax Year Other Than a Required Tax Year See Ordering forms and publications, earlier for information about getting these publications and forms. E file tax return Prev  Up  Next   Home   More Online Publications
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ARRA and HIRE Act Bond Guidance

IRS Invites Public to Comment on TEDB Allocation Process and Also Announces a 3-Month Extension to Issue Unexpired TEDB Allocations
The IRS seeks public comment on the reallocation of available amounts of volume cap for Tribal Economic Development Bonds in order to facilitate issuance by Indian tribal governments. Additionally, Indian tribal governments with unexpired volume cap allocations may request a three-month optional extension.

The American Recovery and Reinvestment Act of 2009: Information Center
Update on the new economic stimulus legislation.

IRS Releases Guidance on ARRA Bond Provisions
The latest guidance, forms and information on bond provisions enacted by the American Recovery & Reinvestment Act of 2009.

IRS Announces Tribal Economic Development Bonds Allocations
The IRS has announced the allocation, in two tranches, of $2 billion of volume cap to tribal governments under the new TEDBs program.

IRS Releases Guidance on HIRE Bond Provisions
The Service announced that Notice 2010-35 has been released. The Notice provides guidance for the new Federal refundable tax credit subsidy option (direct pay subsidy option) allowed by the enactment of the Hiring Incentives to Restore Employment Act (HIRE Act) on March 18, 2010. The Notice is also intended to quickly enable issuers to begin issuing these bonds for qualified purposes.

The Service Announces the Release of New and Revised Tax Exempt Bond Forms
The IRS announced that new Form 8038-TC and revised Forms 8038-CP, 8038, and 8038-G have been issued.

Application of the Treasury Offset Program to Payments to Issuers of Direct Pay Bonds
Information on the application of the Treasury Offset Program (TOPS) as it relates to subsidy payments made to issuers of direct pay bonds.

Tax Exempt Bonds Compliance Check Questionnaire on Direct Pay Bonds (February 2010)
The Tax Exempt Bonds office of the Tax Exempt and Government Entities division of the IRS conducted a compliance check questionnaire to evaluate the issuance and record retention policies, procedures and practices of issuers of direct pay build America bonds.

TIGTA Audit Report Finds BABs Payment Processing is Timely and Accurate
TIGTA finds initial build America bond subsidy payments were processed accurately and timely.

TIGTA Finds that Compliance Check Questionnaires by TEB were Appropriate
The compliance check questionnaires issued by the TEB office were appropriate for identifying indications of a high risk of potential noncompliance for BABs and were not examinations.

Page Last Reviewed or Updated: 26-Mar-2014

The E File Tax Return

E file tax return 17. E file tax return   Individual Retirement Arrangements (IRAs) Table of Contents What's New Reminders Introduction Useful Items - You may want to see: Traditional IRAsWho Can Open a Traditional IRA? When and How Can a Traditional IRA Be Opened? How Much Can Be Contributed? When Can Contributions Be Made? How Much Can You Deduct? Nondeductible Contributions Inherited IRAs Can You Move Retirement Plan Assets? When Can You Withdraw or Use IRA Assets? When Must You Withdraw IRA Assets? (Required Minimum Distributions) Are Distributions Taxable? What Acts Result in Penalties or Additional Taxes? Roth IRAsWhat Is a Roth IRA? When Can a Roth IRA Be Opened? Can You Contribute to a Roth IRA? Can You Move Amounts Into a Roth IRA? Are Distributions Taxable? What's New Traditional IRA contribution and deduction limit. E file tax return  The contribution limit to your traditional IRA for 2013 will be increased to the smaller of the following amounts: $5,500, or Your taxable compensation for the year. E file tax return If you were age 50 or older before 2014, the most that can be contributed to your traditional IRA for 2013 will be the smaller of the following amounts: $6,500, or Your taxable compensation for the year. E file tax return For more information, see How Much Can Be Contributed? later. E file tax return Roth IRA contribution limit. E file tax return  If contributions on your behalf are made only to Roth IRAs, your contribution limit for 2013 will generally be the lesser of: $5,500, or Your taxable compensation for the year. E file tax return If you were age 50 or older before 2014 and contributions on your behalf were made only to Roth IRAs, your contribution limit for 2013 will generally be the lesser of: $6,500, or Your taxable compensation for the year. E file tax return However, if your modified adjusted gross income (AGI) is above a certain amount, your contribution limit may be reduced. E file tax return For more information, see How Much Can Be Contributed? under Can You Contribute to a Roth IRA? later. E file tax return Modified AGI limit for traditional IRA contributions increased. E file tax return  For 2013, if you were covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is: More than $95,000 but less than $115,000 for a married couple filing a joint return or a qualifying widow(er), More than $59,000 but less than $69,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. E file tax return If you either lived with your spouse or file a joint return, and your spouse was covered by a retirement plan at work, but you were not, your deduction is phased out if your modified AGI is more than $178,000 but less than $188,000. E file tax return If your modified AGI is $188,000 or more, you cannot take a deduction for contributions to a traditional IRA. E file tax return See How Much Can You Deduct , later. E file tax return Modified AGI limit for Roth IRA contributions increased. E file tax return  For 2013, your Roth IRA contribution limit is reduced (phased out) in the following situations. E file tax return Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $178,000. E file tax return You cannot make a Roth IRA contribution if your modified AGI is $188,000 or more. E file tax return Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2013 and your modified AGI is at least $112,000. E file tax return You cannot make a Roth IRA contribution if your modified AGI is $127,000 or more. E file tax return Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. E file tax return You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more. E file tax return See Can You Contribute to a Roth IRA , later. E file tax return Net Investment Income Tax. E file tax return   For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan including IRAs (for example; 401(a), 403(a), 403(b), 408, 408A, or 457(b) plans). E file tax return However, these distributions are taken into account when determining the modified adjusted gross income threshold. E file tax return Distributions from a nonqualified retirement plan are included in net investment income. E file tax return See Form 8960, Net Investment Income Tax - Individuals, Estates, and Trusts, and its instructions for more information. E file tax return Name change. E file tax return  All spousal IRAs have been renamed Kay Bailey Hutchison Spousal IRAs. E file tax return There are no changes to the rules regarding these IRAs. E file tax return See Kay Bailey Hutchison Spousal IRA Limit , later, for more information. E file tax return Reminders 2014 limits. E file tax return   You can find information about the 2014 contribution and AGI limits in Publication 590. E file tax return Contributions to both traditional and Roth IRAs. E file tax return   For information on your combined contribution limit if you contribute to both traditional and Roth IRAs, see Roth IRAs and traditional IRAs under How Much Can Be Contributed? in Roth IRAs, later. E file tax return Statement of required minimum distribution. E file tax return  If a minimum distribution from your IRA is required, the trustee, custodian, or issuer that held the IRA at the end of the preceding year must either report the amount of the required minimum distribution to you, or offer to calculate it for you. E file tax return The report or offer must include the date by which the amount must be distributed. E file tax return The report is due January 31 of the year in which the minimum distribution is required. E file tax return It can be provided with the year-end fair market value statement that you normally get each year. E file tax return No report is required for IRAs of owners who have died. E file tax return IRA interest. E file tax return  Although interest earned from your IRA is generally not taxed in the year earned, it is not tax-exempt interest. E file tax return Tax on your traditional IRA is generally deferred until you take a distribution. E file tax return Do not report this interest on your tax return as tax-exempt interest. E file tax return Form 8606. E file tax return   To designate contributions as nondeductible, you must file Form 8606, Nondeductible IRAs. E file tax return The term “50 or older” is used several times in this chapter. E file tax return It refers to an IRA owner who is age 50 or older by the end of the tax year. E file tax return Introduction An individual retirement arrangement (IRA) is a personal savings plan that gives you tax advantages for setting aside money for your retirement. E file tax return This chapter discusses the following topics. E file tax return The rules for a traditional IRA (any IRA that is not a Roth or SIMPLE IRA). E file tax return The Roth IRA, which features nondeductible contributions and tax-free distributions. E file tax return Simplified Employee Pensions (SEPs) and Savings Incentive Match Plans for Employees (SIMPLEs) are not discussed in this chapter. E file tax return For more information on these plans and employees' SEP IRAs and SIMPLE IRAs that are part of these plans, see Publications 560 and 590. E file tax return For information about contributions, deductions, withdrawals, transfers, rollovers, and other transactions, see Publication 590. E file tax return Useful Items - You may want to see: Publication 560 Retirement Plans for Small Business 590 Individual Retirement Arrangements (IRAs) Form (and Instructions) 5329 Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts 8606 Nondeductible IRAs Traditional IRAs In this chapter, the original IRA (sometimes called an ordinary or regular IRA) is referred to as a “traditional IRA. E file tax return ” A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA. E file tax return Two advantages of a traditional IRA are: You may be able to deduct some or all of your contributions to it, depending on your circumstances, and Generally, amounts in your IRA, including earnings and gains, are not taxed until they are distributed. E file tax return Who Can Open a Traditional IRA? You can open and make contributions to a traditional IRA if: You (or, if you file a joint return, your spouse) received taxable compensation during the year, and You were not age 70½ by the end of the year. E file tax return What is compensation?   Generally, compensation is what you earn from working. E file tax return Compensation includes wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services. E file tax return The IRS treats as compensation any amount properly shown in box 1 (Wages, tips, other compensation) of Form W-2, Wage and Tax Statement, provided that amount is reduced by any amount properly shown in box 11 (Nonqualified plans). E file tax return   Scholarship and fellowship payments are compensation for this purpose only if shown in box 1 of Form W-2. E file tax return   Compensation also includes commissions and taxable alimony and separate maintenance payments. E file tax return Self-employment income. E file tax return   If you are self-employed (a sole proprietor or a partner), compensation is the net earnings from your trade or business (provided your personal services are a material income-producing factor) reduced by the total of: The deduction for contributions made on your behalf to retirement plans, and The deductible part of your self-employment tax. E file tax return   Compensation includes earnings from self-employment even if they are not subject to self-employment tax because of your religious beliefs. E file tax return Nontaxable combat pay. E file tax return   For IRA purposes, if you were a member of the U. E file tax return S. E file tax return Armed Forces, your compensation includes any nontaxable combat pay you receive. E file tax return What is not compensation?   Compensation does not include any of the following items. E file tax return Earnings and profits from property, such as rental income, interest income, and dividend income. E file tax return Pension or annuity income. E file tax return Deferred compensation received (compensation payments postponed from a past year). E file tax return Income from a partnership for which you do not provide services that are a material income-producing factor. E file tax return Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b. E file tax return Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs. E file tax return When and How Can a Traditional IRA Be Opened? You can open a traditional IRA at any time. E file tax return However, the time for making contributions for any year is limited. E file tax return See When Can Contributions Be Made , later. E file tax return You can open different kinds of IRAs with a variety of organizations. E file tax return You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. E file tax return You can also open an IRA through your stockbroker. E file tax return Any IRA must meet Internal Revenue Code requirements. E file tax return Kinds of traditional IRAs. E file tax return   Your traditional IRA can be an individual retirement account or annuity. E file tax return It can be part of either a simplified employee pension (SEP) or an employer or employee association trust account. E file tax return How Much Can Be Contributed? There are limits and other rules that affect the amount that can be contributed to a traditional IRA. E file tax return These limits and other rules are explained below. E file tax return Community property laws. E file tax return   Except as discussed later under Kay Bailey Hutchison Spousal IRA limit , each spouse figures his or her limit separately, using his or her own compensation. E file tax return This is the rule even in states with community property laws. E file tax return Brokers' commissions. E file tax return   Brokers' commissions paid in connection with your traditional IRA are subject to the contribution limit. E file tax return Trustees' fees. E file tax return   Trustees' administrative fees are not subject to the contribution limit. E file tax return Qualified reservist repayments. E file tax return   If you are (or were) a member of a reserve component and you were ordered or called to active duty after September 11, 2001, you may be able to contribute (repay) to an IRA amounts equal to any qualified reservist distributions you received. E file tax return You can make these repayment contributions even if they would cause your total contributions to the IRA to be more than the general limit on contributions. E file tax return To be eligible to make these repayment contributions, you must have received a qualified reservist distribution from an IRA or from a section 401(k) or 403(b) plan or similar arrangement. E file tax return   For more information, see Qualified reservist repayments under How Much Can Be Contributed? in chapter 1 of Publication 590. E file tax return Contributions on your behalf to a traditional IRA reduce your limit for contributions to a Roth IRA. E file tax return (See Roth IRAs, later. E file tax return ) General limit. E file tax return   For 2013, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts. E file tax return $5,500 ($6,500 if you are 50 or older). E file tax return Your taxable compensation (defined earlier) for the year. E file tax return This is the most that can be contributed regardless of whether the contributions are to one or more traditional IRAs or whether all or part of the contributions are nondeductible. E file tax return (See Nondeductible Contributions , later. E file tax return ) Qualified reservist repayments do not affect this limit. E file tax return Example 1. E file tax return Betty, who is 34 years old and single, earned $24,000 in 2013. E file tax return Her IRA contributions for 2013 are limited to $5,500. E file tax return Example 2. E file tax return John, an unmarried college student working part time, earned $3,500 in 2013. E file tax return His IRA contributions for 2013 are limited to $3,500, the amount of his compensation. E file tax return Kay Bailey Hutchison Spousal IRA limit. E file tax return   For 2013, if you file a joint return and your taxable compensation is less than that of your spouse, the most that can be contributed for the year to your IRA is the smaller of the following amounts. E file tax return $5,500 ($6,500 if you are 50 or older). E file tax return The total compensation includible in the gross income of both you and your spouse for the year, reduced by the following two amounts. E file tax return Your spouse's IRA contribution for the year to a traditional IRA. E file tax return Any contribution for the year to a Roth IRA on behalf of your spouse. E file tax return This means that the total combined contributions that can be made for the year to your IRA and your spouse's IRA can be as much as $11,000 ($12,000 if only one of you is 50 or older, or $13,000 if both of you are 50 or older). E file tax return When Can Contributions Be Made? As soon as you open your traditional IRA, contributions can be made to it through your chosen sponsor (trustee or other administrator). E file tax return Contributions must be in the form of money (cash, check, or money order). E file tax return Property cannot be contributed. E file tax return Contributions must be made by due date. E file tax return   Contributions can be made to your traditional IRA for a year at any time during the year or by the due date for filing your return for that year, not including extensions. E file tax return Age 70½ rule. E file tax return   Contributions cannot be made to your traditional IRA for the year in which you reach age 70½ or for any later year. E file tax return   You attain age 70½ on the date that is 6 calendar months after the 70th anniversary of your birth. E file tax return If you were born on or before June 30, 1943, you cannot contribute for 2013 or any later year. E file tax return Designating year for which contribution is made. E file tax return   If an amount is contributed to your traditional IRA between January 1 and April 15, you should tell the sponsor which year (the current year or the previous year) the contribution is for. E file tax return If you do not tell the sponsor which year it is for, the sponsor can assume, and report to the IRS, that the contribution is for the current year (the year the sponsor received it). E file tax return Filing before a contribution is made. E file tax return   You can file your return claiming a traditional IRA contribution before the contribution is actually made. E file tax return Generally, the contribution must be made by the due date of your return, not including extensions. E file tax return Contributions not required. E file tax return   You do not have to contribute to your traditional IRA for every tax year, even if you can. E file tax return How Much Can You Deduct? Generally, you can deduct the lesser of: The contributions to your traditional IRA for the year, or The general limit (or the Kay Bailey Hutchison Spousal IRA limit, if it applies). E file tax return However, if you or your spouse was covered by an employer retirement plan, you may not be able to deduct this amount. E file tax return See Limit If Covered by Employer Plan , later. E file tax return You may be able to claim a credit for contributions to your traditional IRA. E file tax return For more information, see chapter 37. E file tax return Trustees' fees. E file tax return   Trustees' administrative fees that are billed separately and paid in connection with your traditional IRA are not deductible as IRA contributions. E file tax return However, they may be deductible as a miscellaneous itemized deduction on Schedule A (Form 1040). E file tax return See chapter 28. E file tax return Brokers' commissions. E file tax return   Brokers' commissions are part of your IRA contribution and, as such, are deductible subject to the limits. E file tax return Full deduction. E file tax return   If neither you nor your spouse was covered for any part of the year by an employer retirement plan, you can take a deduction for total contributions to one or more traditional IRAs of up to the lesser of: $5,500 ($6,500 if you are age 50 or older in 2013). E file tax return 100% of your compensation. E file tax return This limit is reduced by any contributions made to a 501(c)(18) plan on your behalf. E file tax return Kay Bailey Hutchison Spousal IRA. E file tax return   In the case of a married couple with unequal compensation who file a joint return, the deduction for contributions to the traditional IRA of the spouse with less compensation is limited to the lesser of the following amounts. E file tax return $5,500 ($6,500 if the spouse with the lower compensation is age 50 or older in 2013). E file tax return The total compensation includible in the gross income of both spouses for the year reduced by the following three amounts. E file tax return The IRA deduction for the year of the spouse with the greater compensation. E file tax return Any designated nondeductible contribution for the year made on behalf of the spouse with the greater compensation. E file tax return Any contributions for the year to a Roth IRA on behalf of the spouse with the greater compensation. E file tax return This limit is reduced by any contributions to a 501(c)(18) plan on behalf of the spouse with the lesser compensation. E file tax return Note. E file tax return If you were divorced or legally separated (and did not remarry) before the end of the year, you cannot deduct any contributions to your spouse's IRA. E file tax return After a divorce or legal separation, you can deduct only contributions to your own IRA. E file tax return Your deductions are subject to the rules for single individuals. E file tax return Covered by an employer retirement plan. E file tax return   If you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, your deduction may be further limited. E file tax return This is discussed later under Limit If Covered by Employer Plan . E file tax return Limits on the amount you can deduct do not affect the amount that can be contributed. E file tax return See Nondeductible Contributions , later. E file tax return Are You Covered by an Employer Plan? The Form W-2 you receive from your employer has a box used to indicate whether you were covered for the year. E file tax return The “Retirement plan” box should be checked if you were covered. E file tax return Reservists and volunteer firefighters should also see Situations in Which You Are Not Covered by an Employer Plan , later. E file tax return If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer. E file tax return Federal judges. E file tax return   For purposes of the IRA deduction, federal judges are covered by an employer retirement plan. E file tax return For Which Year(s) Are You Covered by an Employer Plan? Special rules apply to determine the tax years for which you are covered by an employer plan. E file tax return These rules differ depending on whether the plan is a defined contribution plan or a defined benefit plan. E file tax return Tax year. E file tax return   Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. E file tax return For almost all people, the tax year is the calendar year. E file tax return Defined contribution plan. E file tax return   Generally, you are covered by a defined contribution plan for a tax year if amounts are contributed or allocated to your account for the plan year that ends with or within that tax year. E file tax return   A defined contribution plan is a plan that provides for a separate account for each person covered by the plan. E file tax return Types of defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans. E file tax return Defined benefit plan. E file tax return   If you are eligible to participate in your employer's defined benefit plan for the plan year that ends within your tax year, you are covered by the plan. E file tax return This rule applies even if you: Declined to participate in the plan, Did not make a required contribution, or Did not perform the minimum service required to accrue a benefit for the year. E file tax return   A defined benefit plan is any plan that is not a defined contribution plan. E file tax return Defined benefit plans include pension plans and annuity plans. E file tax return No vested interest. E file tax return   If you accrue a benefit for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the accrual. E file tax return Situations in Which You Are Not Covered by an Employer Plan Unless you are covered under another employer plan, you are not covered by an employer plan if you are in one of the situations described below. E file tax return Social security or railroad retirement. E file tax return   Coverage under social security or railroad retirement is not coverage under an employer retirement plan. E file tax return Benefits from a previous employer's plan. E file tax return   If you receive retirement benefits from a previous employer's plan, you are not covered by that plan. E file tax return Reservists. E file tax return   If the only reason you participate in a plan is because you are a member of a reserve unit of the armed forces, you may not be covered by the plan. E file tax return You are not covered by the plan if both of the following conditions are met. E file tax return The plan you participate in is established for its employees by: The United States, A state or political subdivision of a state, or An instrumentality of either (a) or (b) above. E file tax return You did not serve more than 90 days on active duty during the year (not counting duty for training). E file tax return Volunteer firefighters. E file tax return   If the only reason you participate in a plan is because you are a volunteer firefighter, you may not be covered by the plan. E file tax return You are not covered by the plan if both of the following conditions are met. E file tax return The plan you participate in is established for its employees by: The United States, A state or political subdivision of a state, or An instrumentality of either (a) or (b) above. E file tax return Your accrued retirement benefits at the beginning of the year will not provide more than $1,800 per year at retirement. E file tax return Limit If Covered by Employer Plan If either you or your spouse was covered by an employer retirement plan, you may be entitled to only a partial (reduced) deduction or no deduction at all, depending on your income and your filing status. E file tax return Your deduction begins to decrease (phase out) when your income rises above a certain amount and is eliminated altogether when it reaches a higher amount. E file tax return These amounts vary depending on your filing status. E file tax return To determine if your deduction is subject to phaseout, you must determine your modified adjusted gross income (AGI) and your filing status. E file tax return See Filing status and Modified adjusted gross income (AGI) , later. E file tax return Then use Table 17-1 or 17-2 to determine if the phaseout applies. E file tax return Social security recipients. E file tax return   Instead of using Table 17-1 or Table 17-2, use the worksheets in Appendix B of Publication 590 if, for the year, all of the following apply. E file tax return You received social security benefits. E file tax return You received taxable compensation. E file tax return Contributions were made to your traditional IRA. E file tax return You or your spouse was covered by an employer retirement plan. E file tax return Use those worksheets to figure your IRA deduction, your nondeductible contribution, and the taxable portion, if any, of your social security benefits. E file tax return Deduction phaseout. E file tax return   If you were covered by an employer retirement plan and you did not receive any social security retirement benefits, your IRA deduction may be reduced or eliminated depending on your filing status and modified AGI as shown in Table 17-1. E file tax return Table 17-1. E file tax return Effect of Modified AGI1 on Deduction if You Are Covered by Retirement Plan at Work If you are covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. E file tax return IF your filing status is. E file tax return . E file tax return . E file tax return   AND your modified AGI is. E file tax return . E file tax return . E file tax return   THEN you can take. E file tax return . E file tax return . E file tax return single   or  head of household   $59,000 or less   a full deduction. E file tax return   more than $59,000 but less than $69,000   a partial deduction. E file tax return   $69,000 or more   no deduction. E file tax return married filing jointly   or  qualifying widow(er)   $95,000 or less   a full deduction. E file tax return   more than $95,000 but less than $115,000   a partial deduction. E file tax return   $115,000 or more   no deduction. E file tax return married filing separately2   less than $10,000   a partial deduction. E file tax return   $10,000 or more   no deduction. E file tax return 1Modified AGI (adjusted gross income). E file tax return See Modified adjusted gross income (AGI) . E file tax return 2If you did not live with your spouse at any time during the year, your filing status is considered Single for this purpose (therefore, your IRA deduction is determined under the “Single” column). E file tax return If your spouse is covered. E file tax return   If you are not covered by an employer retirement plan, but your spouse is, and you did not receive any social security benefits, your IRA deduction may be reduced or eliminated entirely depending on your filing status and modified AGI as shown in Table 17-2. E file tax return Filing status. E file tax return   Your filing status depends primarily on your marital status. E file tax return For this purpose, you need to know if your filing status is single or head of household, married filing jointly or qualifying widow(er), or married filing separately. E file tax return If you need more information on filing status, see chapter 2. E file tax return Lived apart from spouse. E file tax return   If you did not live with your spouse at any time during the year and you file a separate return, your filing status, for this purpose, is single. E file tax return Table 17-2. E file tax return Effect of Modified AGI1 on Deduction if You Are NOT Covered by Retirement Plan at Work If you are not covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. E file tax return IF your filing status is. E file tax return . E file tax return . E file tax return   AND your modified AGI is. E file tax return . E file tax return . E file tax return   THEN you can take. E file tax return . E file tax return . E file tax return single, head of household, or qualifying widow(er)   any amount   a full deduction. E file tax return married filing jointly or separately with a spouse who is not covered by a plan at work   any amount   a full deduction. E file tax return married filing jointly with a spouse who is covered by a plan at work   $178,000 or less   a full deduction. E file tax return   more than $178,000 but less than $188,000   a partial deduction. E file tax return   $188,000 or more   no deduction. E file tax return married filing separately with a spouse who is covered by a plan at work2   less than $10,000   a partial deduction. E file tax return   $10,000 or more   no deduction. E file tax return 1Modified AGI (adjusted gross income). E file tax return See Modified adjusted gross income (AGI) . E file tax return 2You are entitled to the full deduction if you did not live with your spouse at any time during the year. E file tax return Modified adjusted gross income (AGI). E file tax return   How you figure your modified AGI depends on whether you are filing Form 1040 or Form 1040A. E file tax return If you made contributions to your IRA for 2013 and received a distribution from your IRA in 2013, see Publication 590. E file tax return You may be able to use Worksheet 17-1 to figure your modified AGI. E file tax return    Do not assume that your modified AGI is the same as your compensation. E file tax return Your modified AGI may include income in addition to your compensation (discussed earlier), such as interest, dividends, and income from IRA distributions. E file tax return Form 1040. E file tax return   If you file Form 1040, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following eight amounts. E file tax return IRA deduction. E file tax return Student loan interest deduction. E file tax return Tuition and fees deduction. E file tax return Domestic production activities deduction. E file tax return Foreign earned income exclusion. E file tax return Foreign housing exclusion or deduction. E file tax return Exclusion of qualified savings bond interest shown on Form 8815, Exclusion of Interest From Series EE and I U. E file tax return S. E file tax return Savings Bonds Issued After 1989. E file tax return Exclusion of employer-provided adoption benefits shown on Form 8839, Qualified Adoption Expenses. E file tax return This is your modified AGI. E file tax return Form 1040A. E file tax return   If you file Form 1040A, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. E file tax return IRA deduction. E file tax return Student loan interest deduction. E file tax return Tuition and fees deduction. E file tax return Exclusion of qualified savings bond interest shown on Form 8815. E file tax return This is your modified AGI. E file tax return Both contributions for 2013 and distributions in 2013. E file tax return   If all three of the following apply, any IRA distributions you received in 2013 may be partly tax free and partly taxable. E file tax return You received distributions in 2013 from one or more traditional IRAs. E file tax return You made contributions to a traditional IRA for 2013. E file tax return Some of those contributions may be nondeductible contributions. E file tax return If this is your situation, you must figure the taxable part of the traditional IRA distribution before you can figure your modified AGI. E file tax return To do this, you can use Worksheet 1-5, Figuring the Taxable Part of Your IRA Distribution, in Publication 590. E file tax return   If at least one of the above does not apply, figure your modified AGI using Worksheet 17-1, later. E file tax return    How to figure your reduced IRA deduction. E file tax return   You can figure your reduced IRA deduction for either Form 1040 or Form 1040A by using the worksheets in chapter 1 of Publication 590. E file tax return Also, the instructions for Form 1040 and Form 1040A include similar worksheets that you may be able to use instead. E file tax return Worksheet 17-1. E file tax return Figuring Your Modified AGI Use this worksheet to figure your modified adjusted gross income for traditional IRA purposes. E file tax return 1. E file tax return Enter your adjusted gross income (AGI) from Form 1040, line 38, or Form 1040A, line 22, figured without taking into account the amount from Form 1040, line 32, or Form 1040A, line 17 1. E file tax return   2. E file tax return Enter any student loan interest deduction from Form 1040, line 33, or Form 1040A, line 18 2. E file tax return   3. E file tax return Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 3. E file tax return   4. E file tax return Enter any domestic production activities deduction from Form 1040, line 35 4. E file tax return   5. E file tax return Enter any foreign earned income and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 5. E file tax return   6. E file tax return Enter any foreign housing deduction from Form 2555, line 50 6. E file tax return   7. E file tax return Enter any excludable savings bond interest from Form 8815, line 14 7. E file tax return   8. E file tax return Enter any excluded employer-provided adoption benefits from Form 8839, line 28 8. E file tax return   9. E file tax return Add lines 1 through 8. E file tax return This is your Modified AGI for traditional IRA purposes 9. E file tax return   Reporting Deductible Contributions If you file Form 1040, enter your IRA deduction on line 32 of that form. E file tax return If you file Form 1040A, enter your IRA deduction on line 17. E file tax return You cannot deduct IRA contributions on Form 1040EZ. E file tax return Nondeductible Contributions Although your deduction for IRA contributions may be reduced or eliminated, contributions can be made to your IRA up to the general limit or, if it applies, the Kay Bailey Hutchison Spousal IRA limit. E file tax return The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. E file tax return Example. E file tax return Mike is 28 years old and single. E file tax return In 2013, he was covered by a retirement plan at work. E file tax return His salary was $57,312. E file tax return His modified AGI was $70,000. E file tax return Mike made a $5,500 IRA contribution for 2013. E file tax return Because he was covered by a retirement plan and his modified AGI was over $69,000, he cannot deduct his $5,500 IRA contribution. E file tax return He must designate this contribution as a nondeductible contribution by reporting it on Form 8606, as explained next. E file tax return Form 8606. E file tax return   To designate contributions as nondeductible, you must file Form 8606. E file tax return   You do not have to designate a contribution as nondeductible until you file your tax return. E file tax return When you file, you can even designate otherwise deductible contributions as nondeductible. E file tax return   You must file Form 8606 to report nondeductible contributions even if you do not have to file a tax return for the year. E file tax return A Form 8606 is not used for the year that you make a rollover from a qualified retirement plan to a traditional IRA and the rollover includes nontaxable amounts. E file tax return In those situations, a Form 8606 is completed for the year you take a distribution from that IRA. E file tax return See Form 8606 under Distributions Fully or Partly Taxable, later. E file tax return Failure to report nondeductible contributions. E file tax return   If you do not report nondeductible contributions, all of the contributions to your traditional IRA will be treated as deductible contributions when withdrawn. E file tax return All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. E file tax return Penalty for overstatement. E file tax return   If you overstate the amount of nondeductible contributions on your Form 8606 for any tax year, you must pay a penalty of $100 for each overstatement, unless it was due to reasonable cause. E file tax return Penalty for failure to file Form 8606. E file tax return   You will have to pay a $50 penalty if you do not file a required Form 8606, unless you can prove that the failure was due to reasonable cause. E file tax return    Tax on earnings on nondeductible contributions. E file tax return   As long as contributions are within the contribution limits, none of the earnings or gains on contributions (deductible or nondeductible) will be taxed until they are distributed. E file tax return See When Can You Withdraw or Use IRA Assets , later. E file tax return Cost basis. E file tax return   You will have a cost basis in your traditional IRA if you made any nondeductible contributions. E file tax return Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions. E file tax return Inherited IRAs If you inherit a traditional IRA, you are called a beneficiary. E file tax return A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. E file tax return Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive. E file tax return Inherited from spouse. E file tax return   If you inherit a traditional IRA from your spouse, you generally have the following three choices. E file tax return You can: Treat it as your own IRA by designating yourself as the account owner. E file tax return Treat it as your own by rolling it over into your IRA, or to the extent it is taxable, into a: Qualified employer plan, Qualified employee annuity plan (section 403(a) plan), Tax-sheltered annuity plan (section 403(b) plan), or Deferred compensation plan of a state or local government (section 457 plan). E file tax return Treat yourself as the beneficiary rather than treating the IRA as your own. E file tax return Treating it as your own. E file tax return   You will be considered to have chosen to treat the IRA as your own if: Contributions (including rollover contributions) are made to the inherited IRA, or You do not take the required minimum distribution for a year as a beneficiary of the IRA. E file tax return You will only be considered to have chosen to treat the IRA as your own if: You are the sole beneficiary of the IRA, and You have an unlimited right to withdraw amounts from it. E file tax return   However, if you receive a distribution from your deceased spouse's IRA, you can roll that distribution over into your own IRA within the 60-day time limit, as long as the distribution is not a required distribution, even if you are not the sole beneficiary of your deceased spouse's IRA. E file tax return Inherited from someone other than spouse. E file tax return   If you inherit a traditional IRA from anyone other than your deceased spouse, you cannot treat the inherited IRA as your own. E file tax return This means that you cannot make any contributions to the IRA. E file tax return It also means you cannot roll over any amounts into or out of the inherited IRA. E file tax return However, you can make a trustee-to-trustee transfer as long as the IRA into which amounts are being moved is set up and maintained in the name of the deceased IRA owner for the benefit of you as beneficiary. E file tax return For more information, see the discussion of inherited IRAs under Rollover From One IRA Into Another, later. E file tax return Can You Move Retirement Plan Assets? You can transfer, tax free, assets (money or property) from other retirement plans (including traditional IRAs) to a traditional IRA. E file tax return You can make the following kinds of transfers. E file tax return Transfers from one trustee to another. E file tax return Rollovers. E file tax return Transfers incident to a divorce. E file tax return Transfers to Roth IRAs. E file tax return   Under certain conditions, you can move assets from a traditional IRA or from a designated Roth account to a Roth IRA. E file tax return You can also move assets from a qualified retirement plan to a Roth IRA. E file tax return See Can You Move Amounts Into a Roth IRA? under Roth IRAs, later. E file tax return Trustee-to-Trustee Transfer A transfer of funds in your traditional IRA from one trustee directly to another, either at your request or at the trustee's request, is not a rollover. E file tax return Because there is no distribution to you, the transfer is tax free. E file tax return Because it is not a rollover, it is not affected by the 1-year waiting period required between rollovers, discussed later under Rollover From One IRA Into Another . E file tax return For information about direct transfers to IRAs from retirement plans other than IRAs, see Can You Move Retirement Plan Assets? in chapter 1 and Can You Move Amounts Into a Roth IRA? in chapter 2 of Publication 590. E file tax return Rollovers Generally, a rollover is a tax-free distribution to you of cash or other assets from one retirement plan that you contribute (roll over) to another retirement plan. E file tax return The contribution to the second retirement plan is called a “rollover contribution. E file tax return ” Note. E file tax return An amount rolled over tax free from one retirement plan to another is generally includible in income when it is distributed from the second plan. E file tax return Kinds of rollovers to a traditional IRA. E file tax return   You can roll over amounts from the following plans into a traditional IRA: A traditional IRA, An employer's qualified retirement plan for its employees, A deferred compensation plan of a state or local government (section 457 plan), or A tax-sheltered annuity plan (section 403(b) plan). E file tax return Treatment of rollovers. E file tax return   You cannot deduct a rollover contribution, but you must report the rollover distribution on your tax return as discussed later under Reporting rollovers from IRAs and under Reporting rollovers from employer plans . E file tax return Kinds of rollovers from a traditional IRA. E file tax return   You may be able to roll over, tax free, a distribution from your traditional IRA into a qualified plan. E file tax return These plans include the federal Thrift Savings Fund (for federal employees), deferred compensation plans of state or local governments (section 457 plans), and tax-sheltered annuity plans (section 403(b) plans). E file tax return The part of the distribution that you can roll over is the part that would otherwise be taxable (includible in your income). E file tax return Qualified plans may, but are not required to, accept such rollovers. E file tax return Time limit for making a rollover contribution. E file tax return   You generally must make the rollover contribution by the 60th day after the day you receive the distribution from your traditional IRA or your employer's plan. E file tax return 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. E file tax return For more information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. E file tax return Extension of rollover period. E file tax return   If an amount distributed to you from a traditional IRA or a qualified employer retirement plan is a frozen deposit at any time during the 60-day period allowed for a rollover, special rules extend the rollover period. E file tax return For more information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. E file tax return More information. E file tax return   For more information on rollovers, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. E file tax return Rollover From One IRA Into Another You can withdraw, tax free, all or part of the assets from one traditional IRA if you reinvest them within 60 days in the same or another traditional IRA. E file tax return Because this is a rollover, you cannot deduct the amount that you reinvest in an IRA. E file tax return Waiting period between rollovers. E file tax return   Generally, if you make a tax-free rollover of any part of a distribution from a traditional IRA, you cannot, within a 1-year period, make a tax-free rollover of any later distribution from that same IRA. E file tax return You also cannot make a tax-free rollover of any amount distributed, within the same 1-year period, from the IRA into which you made the tax-free rollover. E file tax return   The 1-year period begins on the date you receive the IRA distribution, not on the date you roll it over into an IRA. E file tax return Example. E file tax return You have two traditional IRAs, IRA-1 and IRA-2. E file tax return You make a tax-free rollover of a distribution from IRA-1 into a new traditional IRA (IRA-3). E file tax return You cannot, within 1 year of the distribution from IRA-1, make a tax-free rollover of any distribution from either IRA-1 or IRA-3 into another traditional IRA. E file tax return However, the rollover from IRA-1 into IRA-3 does not prevent you from making a tax-free rollover from IRA-2 into any other traditional IRA. E file tax return This is because you have not, within the last year, rolled over, tax free, any distribution from IRA-2 or made a tax-free rollover into IRA-2. E file tax return Exception. E file tax return   For an exception for distributions from failed financial institutions, see Rollover From One IRA Into Another under Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. E file tax return Partial rollovers. E file tax return   If you withdraw assets from a traditional IRA, you can roll over part of the withdrawal tax free and keep the rest of it. E file tax return The amount you keep will generally be taxable (except for the part that is a return of nondeductible contributions). E file tax return The amount you keep may be subject to the 10% additional tax on early distributions, discussed later under What Acts Result in Penalties or Additional Taxes? . E file tax return Required distributions. E file tax return   Amounts that must be distributed during a particular year under the required distribution rules (discussed later) are not eligible for rollover treatment. E file tax return Inherited IRAs. E file tax return   If you inherit a traditional IRA from your spouse, you generally can roll it over, or you can choose to make the inherited IRA your own. E file tax return See Treating it as your own , earlier. E file tax return Not inherited from spouse. E file tax return   If you inherit a traditional IRA from someone other than your spouse, you cannot roll it over or allow it to receive a rollover contribution. E file tax return You must withdraw the IRA assets within a certain period. E file tax return For more information, see When Must You Withdraw Assets? in chapter 1 of Publication 590. E file tax return Reporting rollovers from IRAs. E file tax return   Report any rollover from one traditional IRA to the same or another traditional IRA on lines 15a and 15b, Form 1040, or lines 11a and 11b, Form 1040A, as follows. E file tax return   Enter the total amount of the distribution on Form 1040, line 15a, or Form 1040A, line 11a. E file tax return If the total amount on Form 1040, line 15a, or Form 1040A, line 11a, was rolled over, enter zero on Form 1040, line 15b, or Form 1040A, line 11b. E file tax return If the total distribution was not rolled over, enter the taxable portion of the part that was not rolled over on Form 1040, line 15b, or Form 1040A, line 11b. E file tax return Put “Rollover” next to Form 1040, line 15b, or Form 1040A, line 11b. E file tax return See your tax return instructions. E file tax return   If you rolled over the distribution into a qualified plan (other than an IRA) or you make the rollover in 2014, attach a statement explaining what you did. E file tax return Rollover From Employer's Plan Into an IRA You can roll over into a traditional IRA all or part of an eligible rollover distribution you receive from your (or your deceased spouse's): Employer's qualified pension, profit-sharing, or stock bonus plan; Annuity plan; Tax-sheltered annuity plan (section 403(b) plan); or Governmental deferred compensation plan (section 457 plan). E file tax return A qualified plan is one that meets the requirements of the Internal Revenue Code. E file tax return Eligible rollover distribution. E file tax return   Generally, an eligible rollover distribution is any distribution of all or part of the balance to your credit in a qualified retirement plan except the following. E file tax return A required minimum distribution (explained later under When Must You Withdraw IRA Assets? (Required Minimum Distributions) ). E file tax return A hardship distribution. E file tax return Any of a series of substantially equal periodic distributions paid at least once a year over: Your lifetime or life expectancy, The lifetimes or life expectancies of you and your beneficiary, or A period of 10 years or more. E file tax return Corrective distributions of excess contributions or excess deferrals, and any income allocable to the excess, or of excess annual additions and any allocable gains. E file tax return A loan treated as a distribution because it does not satisfy certain requirements either when made or later (such as upon default), unless the participant's accrued benefits are reduced (offset) to repay the loan. E file tax return Dividends on employer securities. E file tax return The cost of life insurance coverage. E file tax return Any nontaxable amounts that you roll over into your traditional IRA become part of your basis (cost) in your IRAs. E file tax return To recover your basis when you take distributions from your IRA, you must complete Form 8606 for the year of the distribution. E file tax return See Form 8606 under Distributions Fully or Partly Taxable, later. E file tax return Rollover by nonspouse beneficiary. E file tax return   A direct transfer from a deceased employee's qualified pension, profit-sharing, or stock bonus plan; annuity plan; tax-sheltered annuity (section 403(b)) plan; or governmental deferred compensation (section 457) plan to an IRA set up to receive the distribution on your behalf can be treated as an eligible rollover distribution if you are the designated beneficiary of the plan and not the employee's spouse. E file tax return The IRA is treated as an inherited IRA. E file tax return For more information about inherited IRAs, see Inherited IRAs , earlier. E file tax return Reporting rollovers from employer plans. E file tax return    Enter the total distribution (before income tax or other deductions were withheld) on Form 1040, line 16a, or Form 1040A, line 12a. E file tax return This amount should be shown in box 1 of Form 1099-R. E file tax return From this amount, subtract any contributions (usually shown in box 5 of Form 1099-R) that were taxable to you when made. E file tax return From that result, subtract the amount that was rolled over either directly or within 60 days of receiving the distribution. E file tax return Enter the remaining amount, even if zero, on Form 1040, line 16b, or Form 1040A, line 12b. E file tax return Also, enter "Rollover" next to Form 1040, line 16b, or Form 1040A, line 12b. E file tax return Transfers Incident to Divorce If an interest in a traditional IRA is transferred from your spouse or former spouse to you by a divorce or separate maintenance decree or a written document related to such a decree, the interest in the IRA, starting from the date of the transfer, is treated as your IRA. E file tax return The transfer is tax free. E file tax return For detailed information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. E file tax return Converting From Any Traditional IRA to a Roth IRA Allowable conversions. E file tax return   You can withdraw all or part of the assets from a traditional IRA and reinvest them (within 60 days) in a Roth IRA. E file tax return The amount that you withdraw and timely contribute (convert) to the Roth IRA is called a conversion contribution. E file tax return If properly (and timely) rolled over, the 10% additional tax on early distributions will not apply. E file tax return However, a part or all of the conversion contribution from your traditional IRA is included in your gross income. E file tax return Required distributions. E file tax return   You cannot convert amounts that must be distributed from your traditional IRA for a particular year (including the calendar year in which you reach age 70½) under the required distribution rules (discussed later). E file tax return Income. E file tax return   You must include in your gross income distributions from a traditional IRA that you would have had to include in income if you had not converted them into a Roth IRA. E file tax return These amounts are normally included in income on your return for the year that you converted them from a traditional IRA to a Roth IRA. E file tax return   You do not include in gross income any part of a distribution from a traditional IRA that is a return of your basis, as discussed later. E file tax return   You must file Form 8606 to report 2013 conversions from traditional, SEP, or SIMPLE IRAs to a Roth IRA in 2013 (unless you recharacterized the entire amount) and to figure the amount to include in income. E file tax return   If you must include any amount in your gross income, you may have to increase your withholding or make estimated tax payments. E file tax return See chapter 4. E file tax return Recharacterizations You may be able to treat a contribution made to one type of IRA as having been made to a different type of IRA. E file tax return This is called recharacterizing the contribution. E file tax return See Can You Move Retirement Plan Assets? in chapter 1 of Publication 590 for more detailed information. E file tax return How to recharacterize a contribution. E file tax return   To recharacterize a contribution, you generally must have the contribution transferred from the first IRA (the one to which it was made) to the second IRA in a trustee-to-trustee transfer. E file tax return If the transfer is made by the due date (including extensions) for your tax return for the year during which the contribution was made, you can elect to treat the contribution as having been originally made to the second IRA instead of to the first IRA. E file tax return If you recharacterize your contribution, you must do all three of the following. E file tax return Include in the transfer any net income allocable to the contribution. E file tax return If there was a loss, the net income you must transfer may be a negative amount. E file tax return Report the recharacterization on your tax return for the year during which the contribution was made. E file tax return Treat the contribution as having been made to the second IRA on the date that it was actually made to the first IRA. E file tax return No deduction allowed. E file tax return   You cannot deduct the contribution to the first IRA. E file tax return Any net income you transfer with the recharacterized contribution is treated as earned in the second IRA. E file tax return Required notifications. E file tax return   To recharacterize a contribution, you must notify both the trustee of the first IRA (the one to which the contribution was actually made) and the trustee of the second IRA (the one to which the contribution is being moved) that you have elected to treat the contribution as having been made to the second IRA rather than the first. E file tax return You must make the notifications by the date of the transfer. E file tax return Only one notification is required if both IRAs are maintained by the same trustee. E file tax return The notification(s) must include all of the following information. E file tax return The type and amount of the contribution to the first IRA that is to be recharacterized. E file tax return The date on which the contribution was made to the first IRA and the year for which it was made. E file tax return A direction to the trustee of the first IRA to transfer in a trustee-to-trustee transfer the amount of the contribution and any net income (or loss) allocable to the contribution to the trustee of the second IRA. E file tax return The name of the trustee of the first IRA and the name of the trustee of the second IRA. E file tax return Any additional information needed to make the transfer. E file tax return Reporting a recharacterization. E file tax return   If you elect to recharacterize a contribution to one IRA as a contribution to another IRA, you must report the recharacterization on your tax return as directed by Form 8606 and its instructions. E file tax return You must treat the contribution as having been made to the second IRA. E file tax return When Can You Withdraw or Use IRA Assets? There are rules limiting use of your IRA assets and distributions from it. E file tax return Violation of the rules generally results in additional taxes in the year of violation. E file tax return See What Acts Result in Penalties or Additional Taxes , later. E file tax return Contributions returned before the due date of return. E file tax return   If you made IRA contributions in 2013, you can withdraw them tax free by the due date of your return. E file tax return If you have an extension of time to file your return, you can withdraw them tax free by the extended due date. E file tax return You can do this if, for each contribution you withdraw, both of the following conditions apply. E file tax return You did not take a deduction for the contribution. E file tax return You withdraw any interest or other income earned on the contribution. E file tax return You can take into account any loss on the contribution while it was in the IRA when calculating the amount that must be withdrawn. E file tax return If there was a loss, the net income earned on the contribution may be a negative amount. E file tax return Note. E file tax return To calculate the amount you must withdraw, see Worksheet 1-4 under When Can You Withdraw or Use Assets? in chapter 1 of Publication 590. E file tax return Earnings includible in income. E file tax return   You must include in income any earnings on the contributions you withdraw. E file tax return Include the earnings in income for the year in which you made the contributions, not in the year in which you withdraw them. E file tax return Generally, except for any part of a withdrawal that is a return of nondeductible contributions (basis), any withdrawal of your contributions after the due date (or extended due date) of your return will be treated as a taxable distribution. E file tax return Excess contributions can also be recovered tax free as discussed under What Acts Result in Penalties or Additional Taxes?, later. E file tax return    Early distributions tax. E file tax return   The 10% additional tax on distributions made before you reach age 59½ does not apply to these tax-free withdrawals of your contributions. E file tax return However, the distribution of interest or other income must be reported on Form 5329 and, unless the distribution qualifies as an exception to the age 59½ rule, it will be subject to this tax. E file tax return When Must You Withdraw IRA Assets? (Required Minimum Distributions) You cannot keep funds in a traditional IRA indefinitely. E file tax return Eventually they must be distributed. E file tax return If there are no distributions, or if the distributions are not large enough, you may have to pay a 50% excise tax on the amount not distributed as required. E file tax return See Excess Accumulations (Insufficient Distributions) , later. E file tax return The requirements for distributing IRA funds differ depending on whether you are the IRA owner or the beneficiary of a decedent's IRA. E file tax return Required minimum distribution. E file tax return   The amount that must be distributed each year is referred to as the required minimum distribution. E file tax return Required distributions not eligible for rollover. E file tax return   Amounts that must be distributed (required minimum distributions) during a particular year are not eligible for rollover treatment. E file tax return IRA owners. E file tax return   If you are the owner of a traditional IRA, you must generally start receiving distributions from your IRA by April 1 of the year following the year in which you reach age 70½. E file tax return April 1 of the year following the year in which you reach age 70½ is referred to as the required beginning date. E file tax return Distributions by the required beginning date. E file tax return   You must receive at least a minimum amount for each year starting with the year you reach age 70½ (your 70½ year). E file tax return If you do not (or did not) receive that minimum amount in your 70½ year, then you must receive distributions for your 70½ year by April 1 of the next year. E file tax return   If an IRA owner dies after reaching age 70½, but before April 1 of the next year, no minimum distribution is required because death occurred before the required beginning date. E file tax return Even if you begin receiving distributions before you attain age 70½, you must begin calculating and receiving required minimum distributions by your required beginning date. E file tax return Distributions after the required beginning date. E file tax return   The required minimum distribution for any year after the year you turn 70½ must be made by December 31 of that later year. E file tax return    Beneficiaries. E file tax return   If you are the beneficiary of a decedent's traditional IRA, the requirements for distributions from that IRA generally depend on whether the IRA owner died before or after the required beginning date for distributions. E file tax return More information. E file tax return   For more information, including how to figure your minimum required distribution each year and how to figure your required distribution if you are a beneficiary of a decedent's IRA, see When Must You Withdraw Assets? in chapter 1 of Publication 590. E file tax return Are Distributions Taxable? In general, distributions from a traditional IRA are taxable in the year you receive them. E file tax return Exceptions. E file tax return   Exceptions to distributions from traditional IRAs being taxable in the year you receive them are: Rollovers, Qualified charitable distributions (QCD), discussed later, Tax-free withdrawals of contributions, discussed earlier, and The return of nondeductible contributions, discussed later under Distributions Fully or Partly Taxable . E file tax return    Although a conversion of a traditional IRA is considered a rollover for Roth IRA purposes, it is not an exception to the rule that distributions from a traditional IRA are taxable in the year you receive them. E file tax return Conversion distributions are includible in your gross income subject to this rule and the special rules for conversions explained in Converting From Any Traditional IRA Into a Roth IRA under Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. E file tax return Qualified charitable distributions (QCD). E file tax return   A QCD is generally a nontaxable distribution made directly by the trustee of your IRA to an organization eligible to receive tax-deductible contributions. E file tax return Special rules apply if you made a qualified charitable distribution in January 2013 that you elected to treat as made in 2012. E file tax return See Qualified Charitable Distributions in Publication 590 for more information. E file tax return Ordinary income. E file tax return   Distributions from traditional IRAs that you include in income are taxed as ordinary income. E file tax return No special treatment. E file tax return   In figuring your tax, you cannot use the 10-year tax option or capital gain treatment that applies to lump-sum distributions from qualified retirement plans. E file tax return Distributions Fully or Partly Taxable Distributions from your traditional IRA may be fully or partly taxable, depending on whether your IRA includes any nondeductible contributions. E file tax return Fully taxable. E file tax return   If only deductible contributions were made to your traditional IRA (or IRAs, if you have more than one), you have no basis in your IRA. E file tax return Because you have no basis in your IRA, any distributions are fully taxable when received. E file tax return See Reporting taxable distributions on your return , later. E file tax return Partly taxable. E file tax return    If you made nondeductible contributions or rolled over any after-tax amounts to any of your traditional IRAs, you have a cost basis (investment in the contract) equal to the amount of those contributions. E file tax return These nondeductible contributions are not taxed when they are distributed to you. E file tax return They are a return of your investment in your IRA. E file tax return   Only the part of the distribution that represents nondeductible contributions and rolled over after-tax amounts (your cost basis) is tax free. E file tax return If nondeductible contributions have been made or after-tax amounts have been rolled over to your IRA, distributions consist partly of nondeductible contributions (basis) and partly of deductible contributions, earnings, and gains (if there are any). E file tax return Until all of your basis has been distributed, each distribution is partly nontaxable and partly taxable. E file tax return Form 8606. E file tax return   You must complete Form 8606 and attach it to your return if you receive a distribution from a traditional IRA and have ever made nondeductible contributions or rolled over after-tax amounts to any of your traditional IRAs. E file tax return Using the form, you will figure the nontaxable distributions for 2013 and your total IRA basis for 2013 and earlier years. E file tax return Note. E file tax return If you are required to file Form 8606, but you are not required to file an income tax return, you still must file Form 8606. E file tax return Send it to the IRS at the time and place you would otherwise file an income tax return. E file tax return Distributions reported on Form 1099-R. E file tax return   If you receive a distribution from your traditional IRA, you will receive Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. E file tax return , or a similar statement. E file tax return IRA distributions are shown in boxes 1 and 2a of Form 1099-R. E file tax return A number or letter code in box 7 tells you what type of distribution you received from your IRA. E file tax return Withholding. E file tax return   Federal income tax is withheld from distributions from traditional IRAs unless you choose not to have tax withheld. E file tax return See chapter 4. E file tax return IRA distributions delivered outside the United States. E file tax return   In general, if you are a U. E file tax return S. E file tax return citizen or resident alien and your home address is outside the United States or its possessions, you cannot choose exemption from withholding on distributions from your traditional IRA. E file tax return Reporting taxable distributions on your return. E file tax return    Report fully taxable distributions, including early distributions on Form 1040, line 15b, or Form 1040A, line 11b (no entry is required on Form 1040, line 15a, or Form 1040A, line 11a). E file tax return If only part of the distribution is taxable, enter the total amount on Form 1040, line 15a, or Form 1040A, line 11a, and the taxable part on Form 1040, line 15b, or Form 1040A, line 11b. E file tax return You cannot report distributions on Form 1040EZ. E file tax return What Acts Result in Penalties or Additional Taxes? The tax advantages of using traditional IRAs for retirement savings can be offset by additional taxes and penalties if you do not follow the rules. E file tax return There are additions to the regular tax for using your IRA funds in prohibited transactions. E file tax return There are also additional taxes for the following activities. E file tax return Investing in collectibles. E file tax return Making excess contributions. E file tax return Taking early distributions. E file tax return Allowing excess amounts to accumulate (failing to take required distributions). E file tax return There are penalties for overstating the amount of nondeductible contributions and for failure to file a Form 8606, if required. E file tax return Prohibited Transactions Generally, a prohibited transaction is any improper use of your traditional IRA by you, your beneficiary, or any disqualified person. E file tax return Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendent, and any spouse of a lineal descendent). E file tax return The following are examples of prohibited transactions with a traditional IRA. E file tax return Borrowing money from it. E file tax return Selling property to it. E file tax return Receiving unreasonable compensation for managing it. E file tax return Using it as security for a loan. E file tax return Buying property for personal use (present or future) with IRA funds. E file tax return Effect on an IRA account. E file tax return   Generally, if you or your beneficiary engages in a prohibited transaction in connection with your traditional IRA account at any time during the year, the account stops being an IRA as of the first day of that year. E file tax return Effect on you or your beneficiary. E file tax return   If your account stops being an IRA because you or your beneficiary engaged in a prohibited transaction, the account is treated as distributing all its assets to you at their fair market values on the first day of the year. E file tax return If the total of those values is more than your basis in the IRA, you will have a taxable gain that is includible in your income. E file tax return For information on figuring your gain and reporting it in income, see Are Distributions Taxable , earlier. E file tax return The distribution may be subject to additional taxes or penalties. E file tax return Taxes on prohibited transactions. E file tax return   If someone other than the owner or beneficiary of a traditional IRA engages in a prohibited transaction, that person may be liable for certain taxes. E file tax return In general, there is a 15% tax on the amount of the prohibited transaction and a 100% additional tax if the transaction is not corrected. E file tax return More information. E file tax return   For more information on prohibited transactions, see What Acts Result in Penalties or Additional Taxes? in chapter 1 of Publication 590. E file tax return Investment in Collectibles If your traditional IRA invests in collectibles, the amount invested is considered distributed to you in the year invested. E file tax return You may have to pay the 10% additional tax on early distributions, discussed later. E file tax return Collectibles. E file tax return   These include: Artworks, Rugs, Antiques, Metals, Gems, Stamps, Coins, Alcoholic beverages, and Certain other tangible personal property. E file tax return Exception. E file tax return    Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U. E file tax return S. E file tax return gold coins, or one-ounce silver coins minted by the Treasury Department. E file tax return It can also invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion. E file tax return Excess Contributions Generally, an excess contribution is the amount contributed to your traditional IRA(s) for the year that is more than the smaller of: The maximum deductible amount for the year. E file tax return For 2013, this is $5,500 ($6,500 if you are 50 or older), or Your taxable compensation for the year. E file tax return Tax on excess contributions. E file tax return   In general, if the excess contributions for a year are not withdrawn by the date your return for the year is due (including extensions), you are subject to a 6% tax. E file tax return You must pay the 6% tax each year on excess amounts that remain in your traditional IRA at the end of your tax year. E file tax return The tax cannot be more than 6% of the combined value of all your IRAs as of the end of your tax year. E file tax return Excess contributions withdrawn by due date of return. E file tax return   You will not have to pay the 6% tax if you withdraw an excess contribution made during a tax year and you also withdraw interest or other income earned on the excess contribution. E file tax return You must complete your withdrawal by the date your tax return for that year is due, including extensions. E file tax return How to treat withdrawn contributions. E file tax return   Do not include in your gross income an excess contribution that you withdraw from your traditional IRA before your tax return is due if both the following conditions are met. E file tax return No deduction was allowed for the excess contribution. E file tax return You withdraw the interest or other income earned on the excess contribution. E file tax return You can take into account any loss on the contribution while it was in the IRA when calculating the amount that must be withdrawn. E file tax return If there was a loss, the net income you must withdraw may be a negative amount. E file tax return How to treat withdrawn interest or other income. E file tax return   You must include in your gross income the interest or other income that was earned on the excess contribution. E file tax return Report it on your return for the year in which the excess contribution was made. E file tax return Your withdrawal of interest or other income may be subject to an additional 10% tax on early distributions, discus