Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

Free Online Tax

Free Tax FiingFree 2012 State Tax FilingFederal Tax Return FormsWhat Can Students Write Off On TaxesIrs VitaTax Breaks For UnemployedIrsgov ComFiling 2007 Taxes Late OnlineEz 40 Tax FormForm Ez 1040File Past Year TaxesTax Form For MilitaryAmended 1040 Tax ReturnFile 2011 Taxes Late Online Free1040 ExpressIrs Ez Tax Form 2011File Taxes Free10 40 EzFree Tax FilingHow To File An Amended Tax Return For 2012Turbotax Military1040ez Electronic FilingAmend Tax ReturnsFree State File TurbotaxOnline Tax FilingFile 2012 State Taxes1040ez OnlineFederal Ez Tax Form 2012Where To Send 2011 Tax ReturnWww 1040ez Com2009 1040 Tax FormFree Tax FilingHr Block MilitaryH&r Block Tax OnlineHow To Fill Out State Tax FormIrs FileFree File 2011 Tax ReturnCan I File My Back Taxes Online FreeAmended ReturnFile Only State Taxes Online Free

Free Online Tax

Free online tax Publication 550 - Introductory Material Table of Contents Future Developments What's New Reminders IntroductionOrdering forms and publications. Free online tax Tax questions. Free online tax Future Developments For the latest information about developments related to Publication 550, such as legislation enacted after it was published, go to www. Free online tax irs. Free online tax gov/pub550. Free online tax What's New Net investment income tax (NIIT). Free online tax  Beginning in 2013, you may be subject to the NIIT. Free online tax The NIIT applies at a rate of 3. Free online tax 8% to certain net investment income of individuals, estates, and trusts that have income above statutory threshold amounts. Free online tax See Net investment income tax (NIIT) , later. Free online tax Maximum capital gain rates. Free online tax  For 2013, the maximum capital gain rates are 0%, 15%, 20%, 25%, and 28%. Free online tax See Capital Gain Tax Rates , later, for more information. Free online tax Gift tax exclusion amount increased. Free online tax  For calendar year 2013, the first $14,000 of gifts to any person (other than gifts of future interests in property) are not included in the total amount of taxable gifts. Free online tax See Property Received as a Gift , later. Free online tax Reminders Mutual fund distributions. Free online tax  Publication 564, Mutual Fund Distributions, has been incorporated into this publication. Free online tax Foreign source income. Free online tax  If you are a U. Free online tax S. Free online tax citizen with investment income from sources outside the United States (foreign income), you must report that income on your tax return unless it is exempt by U. Free online tax S. Free online tax law. Free online tax This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the foreign payer. Free online tax Employee stock options. Free online tax  If you received an option to buy or sell stock or other property as payment for your services, see Publication 525, Taxable and Nontaxable Income, for the special tax rules that apply. Free online tax Photographs of missing children. Free online tax  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Free online tax Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Free online tax 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. Free online tax Introduction This publication provides information on the tax treatment of investment income and expenses. Free online tax It includes information on the tax treatment of investment income and expenses for individual shareholders of mutual funds or other regulated investment companies, such as money market funds. Free online tax It explains what investment income is taxable and what investment expenses are deductible. Free online tax It explains when and how to show these items on your tax return. Free online tax It also explains how to determine and report gains and losses on the disposition of investment property and provides information on property trades and tax shelters. Free online tax The glossary at the end of this publication defines many of the terms used. Free online tax Investment income. Free online tax   This generally includes interest, dividends, capital gains, and other types of distributions including mutual fund distributions. Free online tax Investment expenses. Free online tax   These include interest paid or incurred to acquire investment property and expenses to manage or collect income from investment property. Free online tax Qualified retirement plans and IRAs. Free online tax   The rules in this publication do not apply to mutual fund shares held in individual retirement arrangements (IRAs), section 401(k) plans, and other qualified retirement plans. Free online tax The value of the mutual fund shares and earnings allocated to you are included in your retirement plan assets and stay tax free generally until the plan distributes them to you. Free online tax The tax rules that apply to retirement plan distributions are explained in the following publications. Free online tax Publication 560, Retirement Plans for Small Business. Free online tax Publication 571, Tax-Sheltered Annuity Plans. Free online tax Publication 575, Pension and Annuity Income. Free online tax Publication 590, Individual Retirement Arrangements (IRAs). Free online tax Publication 721, Tax Guide to U. Free online tax S. Free online tax Civil Service Retirement Benefits. Free online tax    Comments and suggestions. Free online tax   We welcome your comments about this publication and your suggestions for future editions. Free online tax   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Free online tax NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Free online tax Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Free online tax   You can send your comments from www. Free online tax irs. Free online tax gov/formspubs/. Free online tax Click on “More Information” and then on “Comment on Tax Forms and Publications. Free online tax ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Free online tax Ordering forms and publications. Free online tax   Visit www. Free online tax irs. Free online tax gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Free online tax Internal Revenue Service 1201 N. Free online tax Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Free online tax   If you have a tax question, check the information available on IRS. Free online tax gov or call 1-800-829-1040. Free online tax We cannot answer tax questions sent to either of the above addresses. Free online tax Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Online Scams that Impersonate the IRS

Video: Phishing-Malware:  English

FS-2010-9, January 2010

WASHINGTON — Consumers should protect themselves against online identity theft and other scams that increase during and linger after the filing season. Such scams may appropriate the name, logo or other appurtenances of the IRS or U.S. Department of the Treasury to mislead taxpayers into believing that the scam is legitimate.
    
Scams involving the impersonation of the IRS usually take the form of e-mails, tweets or other online messages to consumers. Scammers may also use phones and faxes to reach intended victims. Some scammers set up phony Web sites.

The IRS and E-mail

Generally, the IRS does not send unsolicited e-mails to taxpayers. Further, the IRS does not discuss tax account information with taxpayers via e-mail or use e-mail to solicit sensitive financial and personal information from taxpayers. The IRS does not request financial account security information, such as PIN numbers, from taxpayers.     

Object of Scams

Most scams impersonating the IRS are identity theft schemes. In this type of scam, the scammer poses as a legitimate institution to trick consumers into revealing personal and financial information — such as passwords and Social Security, PIN, bank account and credit card numbers — that can be used to gain access to and steal their bank, credit card or other financial accounts. Attempted identity theft scams that take place via e-mail are known as phishing. Other scams may try to persuade a victim to advance sums of money in the hope of realizing a larger gain. These are known as advance fee scams. 

Who Is Targeted

Anyone with a computer, phone or fax machine could receive a scam message or unknowingly visit a phony or misleading Web site. Individuals, businesses, educators, charities and others have been targeted by e-mails that claim to come from the IRS or Treasury Department. Scam e-mails are generally sent out in bulk, based on e-mail addresses (urls), similar to spam.

How an Identity Theft Scam Works

Most of the scams that impersonate the IRS are identity theft scams. Typically, a consumer will receive an e-mail that claims to come from the IRS or Treasury Department. The message will contain an enticing or intimidating subject line, such as tax refund, inherited funds or IRS notice. Usually, the message will state that the recipient needs to provide the IRS with information to obtain the refund or avoid some penalty. The message will instruct the consumer to open an attachment or click on a link in the e-mail. This may lead to an official-looking form to be filled out online or send the taxpayer to a seemingly genuine but bogus IRS Web site. The look-alike site will then contain a phony but genuine-looking online form or interactive application that requires the personal and financial information the scammer can use to commit identity theft. 

Alternatively, the clicked link may secretly download malware to the consumer’s computer. Malware is malicious code that can take over the computer’s hard drive, giving the scammer remote access to the computer, or it could look for passwords and other information and send them to the scammer.

Phony Web or Commercial Sites

In many IRS-impersonation scams, the scammer sends the consumer to a phony Web site that mimics the appearance of the genuine IRS Web site, IRS.gov. This allows the scammer to steer victims to phony interactive forms or applications that appear genuine but require the targeted victim to enter personal and financial information that will be used to commit identity theft.  

The official Web site for the Internal Revenue Service is IRS.gov, and all IRS.gov Web page addresses begin with http://www.irs.gov/

In addition to Web sites established by scammers, there are commercial Internet sites that often resemble the authentic IRS site or contain some form of the IRS name in the address but end with a .com, .net, .org or other designation instead of .gov. These sites have no connection to the IRS. Consumers may unknowingly visit these sites when searching the Internet to retrieve tax forms, publications and other information from the IRS.

Frequent or Recent Scams

There are a number of scams that impersonate the IRS. Some of them appear with great frequency, particularly during and right after filing season, and recur annually. Others are new.   

  • Refund Scam — This is the most frequent IRS-impersonation scam seen by the IRS. In this phishing scam, a bogus e-mail claiming to come from the IRS tells the consumer that he or she is eligible to receive a tax refund for a specified amount. It may use the phrase “last annual calculations of your fiscal activity.” To claim the tax refund, the consumer must open an attachment or click on a link contained in the e-mail to access and complete a claim form. The form requires the entry of personal and financial information. Several variations on the refund scam have claimed to come from the Exempt Organizations area of the IRS or the name and signature of a genuine or made-up IRS executive. In reality, taxpayers do not complete a special form to obtain their federal tax refund — refunds are triggered by the tax return they submitted to the IRS.
  • Lottery winnings or cash consignment — These advance fee scam e-mails claim to come from the Treasury Department to notify recipients that they’ll receive millions of dollars in recovered funds or lottery winnings or cash consignment if they provide certain personal information, including phone numbers, via return e-mail. The e-mail may be just the first step in a multi-step scheme, in which the victim is later contacted by telephone or further e-mail and instructed to deposit taxes on the funds or winnings before they can receive any of it. Alternatively, they may be sent a phony check of the funds or winnings and told to deposit it but pay 10 percent in taxes or fees. Thinking that the check must have cleared the bank and is genuine, some people comply. However, the scammers, not the Treasury Department, will get the taxes or fees. In reality, the Treasury Department does not become involved in notification of inheritances or lottery or other winnings.
  • Beneficial Owner Form — This fax-based phishing scam, which generally targets foreign nationals, recurs periodically. It’s based on a genuine IRS form, the W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding. The scammer, though, invents his or her own number and name for the form. The scammer modifies the form to request passport numbers, information that is often used for account security purposes (such as mother’s maiden name) and similar detailed personal and financial information, and states that the recipient may have to pay additional tax if he or she fails to immediately fax back the completed form. In reality, the real W-8BEN is completed by banks, not individuals.

Other Known Scams

The contents of other IRS-impersonation scams vary but may claim that the recipient will be paid for participating in an online survey or is under investigation or audit. Some scam e-mails have referenced Recovery-related tax provisions, such as Making Work Pay, or solicited for charitable donations to victims of natural disasters. Taxpayers should beware of an e-mail scam that references underreported income and the recipient’s “tax statement,” since clicking on a link or opening an attachment is known to download malware onto the recipient’s computer.

How to Spot a Scam

Many e-mail scams are fairly sophisticated and hard to detect. However, there are signs to watch for, such as an e-mail that:

  •  Requests detailed or an unusual amount of personal and/or financial information, such as name, SSN, bank or credit card account numbers or security-related information, such as mother’s maiden name, either in the e-mail itself or on another site to which a link in the e-mail sends the recipient.
  • Dangles bait to get the recipient to respond to the e-mail, such as mentioning a tax refund or offering to pay the recipient to participate in an IRS survey.
  • Threatens a consequence for not responding to the e-mail, such as additional taxes or blocking access to the recipient’s funds.
  • Gets the Internal Revenue Service or other federal agency names wrong.
  • Uses incorrect grammar or odd phrasing (many of the e-mail scams originate overseas and are written by non-native English speakers).
  • Uses a really long address in any link contained in the e-mail message or one that does not start with the actual IRS Web site address (http://www.irs.gov). The actual link’s address, or url, is revealed by moving the mouse over the link included in the text of the e-mail.

What to Do

Taxpayers who receive a suspicious e-mail claiming to come from the IRS should take the following steps:

  • Avoid opening any attachments to the e-mail, in case they contain malicious code that will infect your computer.
  • Avoid clicking on any links, for the same reason. Alternatively, the links may connect to a phony IRS Web site that appears authentic and then prompts for personal identifiers, bank or credit card account numbers or PINs.
  • Visit the IRS Web site, www.irs.gov, to use the “Where’s My Refund?” interactive tool to determine if they are really getting a refund, rather than responding to the e-mail message.
  • Forward the suspicious e-mail or url address to the IRS mailbox phishing@irs.gov, then delete the e-mail from their inbox.

Consumers who believe they are or may be victims of identity theft or other scams may visit the U.S. Federal Trade Commission’s Web site for identity theft, www.OnGuardOnline.gov, for guidance in what to do. The IRS is one of the sponsors of this site.

More information on IRS-impersonation scams, identity theft and suspicious e-mail is available on IRS.gov.

 

Page Last Reviewed or Updated: 08-Jan-2014

The Free Online Tax

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