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Free State Tax Usa

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Free State Tax Usa

Free state tax usa Publication 721 - Main Content Table of Contents Part I General InformationRefund of Contributions Tax Withholding and Estimated Tax Filing Requirements Part II Rules for RetireesAnnuity starting date. Free state tax usa Gross monthly rate. Free state tax usa Your cost. Free state tax usa Choosing a survivor annuity after retirement. Free state tax usa Canceling a survivor annuity after retirement. Free state tax usa Annuity starting date after 1986. Free state tax usa Annuity starting date before 1987. Free state tax usa Simplified Method General Rule Three-Year Rule Alternative Annuity Option Federal Gift Tax Retirement During the Past Year Reemployment After Retirement Nonresident Aliens Thrift Savings Plan Rollover Rules Distributions Used To Pay Insurance Premiums for Public Safety Officers How To Report Benefits Part III Rules for Disability Retirement and Credit for the Elderly or the DisabledDisability Annuity Other Benefits Credit for the Elderly or the Disabled Part IV Rules for Survivors of Federal EmployeesFERS Death Benefit CSRS or FERS Survivor Annuity Lump-Sum CSRS or FERS Payment Thrift Savings Plan Federal Estate Tax Part V Rules for Survivors of Federal RetireesCSRS or FERS Survivor Annuity Lump-Sum CSRS or FERS Payment Voluntary Contributions Thrift Savings Plan Federal Estate Tax Income Tax Deduction for Estate Tax Paid How To Get Tax HelpLow Income Taxpayer Clinics Part I General Information This part of the publication contains information that can apply to most recipients of civil service retirement benefits. Free state tax usa Refund of Contributions If you leave federal government service or transfer to a job not under the CSRS or FERS and you are not eligible for an immediate annuity, you can choose to receive a refund of the money in your CSRS or FERS retirement account. Free state tax usa The refund will include both regular and voluntary contributions you made to the fund, plus any interest payable. Free state tax usa If the refund includes only your contributions, none of the refund is taxable. Free state tax usa If it includes any interest, the interest is taxable unless you roll it over directly into another qualified plan or a traditional individual retirement arrangement (IRA). Free state tax usa If you do not have the Office of Personnel Management (OPM) transfer the interest to an IRA or other plan in a direct rollover, tax will be withheld at a 20% rate. Free state tax usa See Rollover Rules in Part II for information on how to make a rollover. Free state tax usa Interest is not paid on contributions to the CSRS for service after 1956 unless your service was for more than 1 year but not more than 5 years. Free state tax usa Therefore, many employees who withdraw their contributions under the CSRS do not get interest and do not owe any tax on their refund. Free state tax usa If you do not roll over interest included in your refund, it may qualify as a lump-sum distribution eligible for capital gain treatment or the 10-year tax option. Free state tax usa If you separate from service before the calendar year in which you reach age 55, it may be subject to an additional 10% tax on early distributions. Free state tax usa For more information, see Lump-Sum Distributions and Tax on Early Distributions in Publication 575. Free state tax usa A lump-sum distribution is eligible for capital gain treatment or the 10-year tax option only if the plan participant was born before January 2, 1936. Free state tax usa Tax Withholding and Estimated Tax The CSRS or FERS annuity you receive is subject to federal income tax withholding, unless you choose not to have tax withheld. Free state tax usa OPM will tell you how to make the choice. Free state tax usa The choice for no withholding remains in effect until you change it. Free state tax usa These withholding rules also apply to a disability annuity, whether received before or after minimum retirement age. Free state tax usa If you choose not to have tax withheld, or if you do not have enough tax withheld, you may have to make estimated tax payments. Free state tax usa You may owe a penalty if the total of your withheld tax and estimated tax does not cover most of the tax shown on your return. Free state tax usa Generally, you will owe the penalty for 2014 if the additional tax you must pay with your return is $1,000 or more and more than 10% of the tax to be shown on your 2014 return. Free state tax usa For more information, including exceptions to the penalty, see chapter 4 of Publication 505, Tax Withholding and Estimated Tax. Free state tax usa Form CSA 1099R. Free state tax usa   Form CSA 1099R is mailed to you by OPM each year. Free state tax usa It will show any tax you had withheld. Free state tax usa File a copy of Form CSA 1099R with your tax return if any federal income tax was withheld. Free state tax usa    You also can view and download your Form CSA 1099R by visiting the OPM website at  www. Free state tax usa servicesonline. Free state tax usa opm. Free state tax usa gov. Free state tax usa To log in, you will need your retirement CSA claim number and your personal identification number. Free state tax usa Choosing no withholding on payments outside the United States. Free state tax usa   The choice for no withholding generally cannot be made for annuity payments to be delivered outside the United States and its possessions. Free state tax usa   To choose no withholding if you are a U. Free state tax usa S. Free state tax usa citizen or resident alien, you must provide OPM with your home address in the United States or its possessions. Free state tax usa Otherwise, OPM has to withhold tax. Free state tax usa For example, OPM must withhold if you provide a U. Free state tax usa S. Free state tax usa address for a nominee, trustee, or agent (such as a bank) to whom the benefits are to be delivered, but you do not provide your own U. Free state tax usa S. Free state tax usa home address. Free state tax usa   If you do not provide a home address in the United States or its possessions, you can choose not to have tax withheld only if you certify to OPM that you are not a U. Free state tax usa S. Free state tax usa citizen, a U. Free state tax usa S. Free state tax usa resident alien, or someone who left the United States to avoid tax. Free state tax usa But if you so certify, you may be subject to the 30% flat rate withholding that applies to nonresident aliens. Free state tax usa For details, see Publication 519, U. Free state tax usa S. Free state tax usa Tax Guide for Aliens. Free state tax usa Withholding certificate. Free state tax usa   If you give OPM a Form W-4P-A, Election of Federal Income Tax Withholding, you can choose not to have tax withheld or you can choose to have tax withheld. Free state tax usa The amount of tax withheld depends on your marital status, the number of withholding allowances, and any additional amount you designate to be withheld. Free state tax usa If you do not make either of these choices, OPM must withhold as if you were married with three withholding allowances. Free state tax usa To change the amount of tax withholding or to stop withholding, call OPM's Retirement Information Office at 1-888-767-6738 (customers within the local Washington, D. Free state tax usa C. Free state tax usa calling area must call 202-606-0500). Free state tax usa No special form is needed. Free state tax usa You will need your retirement CSA or CSF claim number, your social security number, and your personal identification number (PIN) when you call. Free state tax usa If you have TTY/TDD equipment, call 1-855–887–4957. Free state tax usa If you need a PIN, call OPM's Retirement Information Office. Free state tax usa You also can change the amount of withholding or stop withholding online by visiting the OPM website at www. Free state tax usa servicesonline. Free state tax usa opm. Free state tax usa gov. Free state tax usa You will need your retirement CSA or CSF claim number and your PIN. Free state tax usa Withholding from certain lump-sum payments. Free state tax usa   If you leave the federal government before becoming eligible to retire and you apply for a refund of your CSRS or FERS contributions, or you die without leaving a survivor eligible for an annuity, you or your beneficiary will receive a distribution of your contributions to the retirement plan plus any interest payable. Free state tax usa Tax will be withheld at a 20% rate on the interest distributed. Free state tax usa However, tax will not be withheld if you have OPM transfer (roll over) the interest directly to your traditional IRA or other qualified plan. Free state tax usa If you have OPM transfer (roll over) the interest directly to a Roth IRA, the entire amount will be taxed in the current year. Free state tax usa Because no income tax will be withheld at the time of the transfer, you may want to increase your withholding or pay estimated taxes. Free state tax usa See Rollover Rules in Part II. Free state tax usa If you receive only your contributions, no tax will be withheld. Free state tax usa Withholding from Thrift Savings Plan payments. Free state tax usa   Generally, a distribution that you receive from the TSP is subject to federal income tax withholding. Free state tax usa The amount withheld is: 20% if the distribution is an eligible rollover distribution, 10% if it is a nonperiodic distribution other than an eligible rollover distribution, or An amount determined as if you were married with three withholding allowances, unless you submit a withholding certificate (Form W-4P), if it is a periodic distribution. Free state tax usa  However, you usually can choose not to have tax withheld from TSP payments other than eligible rollover distributions. Free state tax usa By January 31 after the end of the year in which you receive a distribution, the TSP will issue Form 1099-R showing the total distributions you received in the prior year and the amount of tax withheld. Free state tax usa   For a detailed discussion of withholding on distributions from the TSP, see Important Tax Information About Payments From Your TSP Account, available from your agency personnel office or from the TSP. Free state tax usa The above document is also available in the “Forms & Publications” section of the TSP website at www. Free state tax usa tsp. Free state tax usa gov. Free state tax usa Estimated tax. Free state tax usa   Generally, you must make estimated tax payments for 2014 if you expect to owe at least $1,000 in tax for 2014 (after subtracting your withholding and credits) and you expect your withholding and your credits to be less than the smaller of: 90% of the tax to be shown on your income tax return for 2014, or 100% of the tax shown on your 2013 income tax return (110% of that amount if the adjusted gross income shown on the return was more than $150,000 ($75,000 if your filing status for 2014 will be married filing separately)). Free state tax usa The return must cover all 12 months. Free state tax usa   You do not have to pay estimated tax for 2014 if you were a U. Free state tax usa S. Free state tax usa citizen or resident alien for all of 2013 and you had no tax liability for the full 12-month 2013 tax year. Free state tax usa   Publication 505 contains information that you can use to help you figure your estimated tax payments. Free state tax usa Filing Requirements If your gross income, including the taxable part of your annuity, is less than a certain amount, you generally do not have to file a federal income tax return for that year. Free state tax usa The gross income filing requirements for the tax year are in the instructions to Form 1040, 1040A, or 1040EZ. Free state tax usa Children. Free state tax usa   If you are the surviving spouse of a federal employee or retiree and your monthly annuity check includes a survivor annuity for one or more children, each child's annuity counts as his or her own income (not yours) for federal income tax purposes. Free state tax usa   If your child can be claimed as a dependent, treat the taxable part of his or her annuity as unearned income when applying the filing requirements for dependents. Free state tax usa Form CSF 1099R. Free state tax usa   Form CSF 1099R will be mailed to you by January 31 after the end of each tax year. Free state tax usa It will show the total amount of the annuity you received in the past year. Free state tax usa It also should show, separately, the survivor annuity for a child or children. Free state tax usa Only the part that is each individual's survivor annuity should be shown on that individual's Form 1040 or 1040A. Free state tax usa   If your Form CSF 1099R does not show separately the amount paid to you for a child or children, attach a statement to your return, along with a copy of Form CSF 1099R, explaining why the amount shown on the tax return differs from the amount shown on Form CSF 1099R. Free state tax usa    You also can view and download your Form CSF 1099R by visiting the OPM website at  www. Free state tax usa servicesonline. Free state tax usa opm. Free state tax usa gov. Free state tax usa To log in you will need your retirement CSF claim number and personal identification number. Free state tax usa    You may request a Summary of Payments, showing the amounts paid to you for your child(ren), from OPM by calling OPM's Retirement Information Office at 1-888-767-6738 (customers within the local Washington, D. Free state tax usa C. Free state tax usa calling area must call 202-606-0500). Free state tax usa You will need your CSF claim number and your social security number when you call. Free state tax usa Taxable part of annuity. Free state tax usa   To find the taxable part of a retiree's annuity when applying the filing requirements, see the discussion in Part II, Rules for Retirees , or Part III, Rules for Disability Retirement and Credit for the Elderly or the Disabled , whichever applies. Free state tax usa To find the taxable part of each survivor annuity when applying the filing requirements, see the discussion in Part IV, Rules for Survivors of Federal Employees , or Part V, Rules for Survivors of Federal Retirees , whichever applies. Free state tax usa Part II Rules for Retirees This part of the publication is for retirees who retired on nondisability retirement. Free state tax usa If you retired on disability before you reached your minimum retirement age, see Part III, Rules for Disability Retirement and Credit for the Elderly or the Disabled. Free state tax usa However, on the day after you reach your minimum retirement age, use the rules in this section to report your disability retirement and begin recovering your cost. Free state tax usa Annuity statement. Free state tax usa   The statement you received from OPM when your CSRS or FERS annuity was approved shows the commencing date (the annuity starting date), the gross monthly rate of your annuity benefit, and your total contributions to the retirement plan (your cost). Free state tax usa You will use this information to figure the tax-free recovery of your cost. Free state tax usa Annuity starting date. Free state tax usa   If you retire from federal government service on a regular annuity, your annuity starting date is the commencing date on your annuity statement from OPM. Free state tax usa If something delays payment of your annuity, such as a late application for retirement, it does not affect the date your annuity begins to accrue or your annuity starting date. Free state tax usa Gross monthly rate. Free state tax usa   This is the amount you were to get after any adjustment for electing a survivor's annuity or for electing the lump-sum payment under the alternative annuity option (if either applied) but before any deduction for income tax withholding, insurance premiums, etc. Free state tax usa Your cost. Free state tax usa   Your monthly annuity payment contains an amount on which you have previously paid income tax. Free state tax usa This amount represents part of your contributions to the retirement plan. Free state tax usa Even though you did not receive the money that was contributed to the plan, it was included in your gross income for federal income tax purposes in the years it was taken out of your pay. Free state tax usa   The cost of your annuity is the total of your contributions to the retirement plan, as shown on your annuity statement from OPM. Free state tax usa If you elected the alternative annuity option, it includes any deemed deposits and any deemed redeposits that were added to your lump-sum credit. Free state tax usa (See Lump-sum credit under Alternative Annuity Option, later. Free state tax usa )   If you repaid contributions that you had withdrawn from the retirement plan earlier, or if you paid into the plan to receive full credit for service not subject to retirement deductions, the entire repayment, including any interest, is a part of your cost. Free state tax usa You cannot claim an interest deduction for any interest payments. Free state tax usa You cannot treat these payments as voluntary contributions; they are considered regular employee contributions. Free state tax usa Recovering your cost tax free. Free state tax usa   How you figure the tax-free recovery of the cost of your CSRS or FERS annuity depends on your annuity starting date. Free state tax usa If your annuity starting date is before July 2, 1986, either the Three-Year Rule or the General Rule (both discussed later) applies to your annuity. Free state tax usa If your annuity starting date is after July 1, 1986, and before November 19, 1996, you could have chosen to use either the General Rule or the Simplified Method (discussed later). Free state tax usa If your annuity starting date is after November 18, 1996, you must use the Simplified Method. Free state tax usa   Under both the General Rule and the Simplified Method, each of your monthly annuity payments is made up of two parts: the tax-free part that is a return of your cost, and the taxable part that is the amount of each payment that is more than the part that represents your cost (unless such payment is used for purposes discussed under Distributions Used To Pay Insurance Premiums for Public Safety Officers , later). Free state tax usa The tax-free part is a fixed dollar amount. Free state tax usa It remains the same, even if your annuity is increased. Free state tax usa Generally, this rule applies as long as you receive your annuity. Free state tax usa However, see Exclusion limit , later. Free state tax usa Choosing a survivor annuity after retirement. Free state tax usa    If you retired without a survivor annuity and report your annuity under the Simplified Method, do not change your tax-free monthly amount even if you later choose a survivor annuity. Free state tax usa   If you retired without a survivor annuity and report your annuity under the General Rule, you must figure the tax-free part of your annuity using a new exclusion percentage if you later choose a survivor annuity and take reduced annuity payments. Free state tax usa To figure the new exclusion percentage, reduce your cost by the amount you previously recovered tax free. Free state tax usa Figure the expected return as of the date the reduced annuity begins. Free state tax usa For details on the General Rule, see Publication 939. Free state tax usa Canceling a survivor annuity after retirement. Free state tax usa   If you retired with a survivor annuity payable to your spouse upon your death and you notify OPM that your marriage has ended, your annuity might be increased to remove the reduction for a survivor benefit. Free state tax usa The increased annuity does not change the cost recovery you figured at the annuity starting date. Free state tax usa The tax-free part of each annuity payment remains the same. Free state tax usa    For more information about choosing or canceling a survivor annuity after retirement, contact OPM's Retirement Information Office at 1-888-767-6738 (customers within the local Washington, D. Free state tax usa C. Free state tax usa calling area must call 202-606-0500). Free state tax usa Exclusion limit. Free state tax usa   Your annuity starting date determines the total amount of annuity payments that you can exclude from income over the years. Free state tax usa Annuity starting date after 1986. Free state tax usa   If your annuity starting date is after 1986, the total amount of annuity income that you (or the survivor annuitant) can exclude over the years as a return of your cost cannot exceed your total cost. Free state tax usa Annuity payments you or your survivors receive after the total cost in the plan has been recovered are generally fully taxable. Free state tax usa Example. Free state tax usa Your annuity starting date is after 1986 and you exclude $100 a month under the Simplified Method. Free state tax usa If your cost is $12,000, the exclusion ends after 10 years (120 months). Free state tax usa Thereafter, your entire annuity is generally fully taxable. Free state tax usa Annuity starting date before 1987. Free state tax usa   If your annuity starting date is before 1987, you can continue to take your monthly exclusion figured under the General Rule or Simplified Method for as long as you receive your annuity. Free state tax usa If you chose a joint and survivor annuity, your survivor can continue to take that same exclusion. Free state tax usa The total exclusion may be more than your cost. Free state tax usa Deduction of unrecovered cost. Free state tax usa   If your annuity starting date is after July 1, 1986, and the cost of your annuity has not been fully recovered at your (or the survivor annuitant's) death, a deduction is allowed for the unrecovered cost. Free state tax usa The deduction is claimed on your (or your survivor's) final tax return as a miscellaneous itemized deduction (not subject to the 2%-of-adjusted-gross-income limit). Free state tax usa If your annuity starting date is before July 2, 1986, no tax benefit is allowed for any unrecovered cost at death. Free state tax usa Simplified Method If your annuity starting date is after November 18, 1996, you must use the Simplified Method to figure the tax-free part of your CSRS or FERS annuity. Free state tax usa (OPM has figured the taxable amount of your annuity shown on your Form CSA 1099R using the Simplified Method. Free state tax usa ) You could have chosen to use either the Simplified Method or the General Rule if your annuity starting date is after July 1, 1986, but before November 19, 1996. Free state tax usa The Simplified Method does not apply if your annuity starting date is before July 2, 1986. Free state tax usa Under the Simplified Method, you figure the tax-free part of each full monthly payment by dividing your cost by a number of months based on your age. Free state tax usa This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. Free state tax usa If your annuity starting date is after 1997 and your annuity includes a survivor benefit for your spouse, this number is based on your combined ages. Free state tax usa Worksheet A. Free state tax usa   Use Worksheet A. Free state tax usa Simplified Method (near the end of this publication), to figure your taxable annuity. Free state tax usa Be sure to keep the completed worksheet. Free state tax usa It will help you figure your taxable amounts for later years. Free state tax usa Instead of Worksheet A, you generally can use the Simplified Method Worksheet in the instructions for Form 1040, Form 1040A, or Form 1040NR to figure your taxable annuity. Free state tax usa However, you must use Worksheet A and Worksheet B in this publication if you chose the alternative annuity option, discussed later. Free state tax usa Line 2. Free state tax usa   See Your cost , earlier, for an explanation of your cost in the plan. Free state tax usa If your annuity starting date is after November 18, 1996, and you chose the alternative annuity option (explained later), you must reduce your cost by the tax-free part of the lump-sum payment you received. Free state tax usa Line 3. Free state tax usa   The number you enter on line 3 is the appropriate number from Table 1 or 2 representing approximate life expectancies in months. Free state tax usa If your annuity starting date is after 1997, use: Table 1 for an annuity without a survivor benefit, or Table 2 for an annuity with a survivor benefit. Free state tax usa If your annuity starting date is before 1998, use Table 1. Free state tax usa Line 6. Free state tax usa   If you received contributions tax free before 2013, the amount previously recovered tax free that you must enter on line 6 is the total amount from line 10 of last year's worksheet. Free state tax usa If your annuity starting date is before November 19, 1996, and you chose the alternative annuity option, this amount includes the tax-free part of the lump-sum payment you received. Free state tax usa Example. Free state tax usa Bill Smith retired from the Federal Government on March 31, 2013, under an annuity that will provide a survivor benefit for his wife, Kathy. Free state tax usa His annuity starting date is April 1, 2013, the annuity is paid in arrears, and he received his first monthly annuity payment on May 1, 2013. Free state tax usa He must use the Simplified Method to figure the tax-free part of his annuity benefits. Free state tax usa Bill's monthly annuity benefit is $1,000. Free state tax usa He had contributed $31,000 to his retirement plan and had received no distributions before his annuity starting date. Free state tax usa At his annuity starting date, he was 65 and Kathy was 57. Free state tax usa Bill's completed Worksheet A is shown later. Free state tax usa To complete line 3, he used Table 2 at the bottom of the worksheet and found that 310 is the number in the second column opposite the age range that includes 122 (his and Kathy's combined ages). Free state tax usa Bill keeps a copy of the completed worksheet for his records. Free state tax usa It will help him (and Kathy, if she survives him) figure the taxable amount of the annuity in later years. Free state tax usa Bill's tax-free monthly amount is $100. Free state tax usa (See line 4 of the worksheet. Free state tax usa ) If he lives to collect more than 310 monthly payments, he will generally have to include in his gross income the full amount of any annuity payments received after 310 payments have been made. Free state tax usa If Bill does not live to collect 310 monthly payments and his wife begins to receive monthly payments, she also will exclude $100 from each monthly payment until 310 payments (Bill's and hers) have been collected. Free state tax usa If she dies before 310 payments have been made, a miscellaneous itemized deduction (not subject to the 2%-of-adjusted- gross-income limit) will be allowed for the unrecovered cost on her final income tax return. Free state tax usa General Rule If your annuity starting date is after November 18, 1996, you cannot use the General Rule to figure the tax-free part of your CSRS or FERS annuity. Free state tax usa If your annuity starting date is after July 1, 1986, but before November 19, 1996, you could have chosen to use either the General Rule or the Simplified Method. Free state tax usa If your annuity starting date is before July 2, 1986, you could have chosen to use the General Rule only if you could not use the Three-Year Rule. Free state tax usa Under the General Rule, you figure the tax-free part of each full monthly payment by multiplying the initial gross monthly rate of your annuity by an exclusion percentage. Free state tax usa Figuring this percentage is complex and requires the use of actuarial tables. Free state tax usa For these tables and other information about using the General Rule, see Publication 939. Free state tax usa Three-Year Rule If your annuity starting date was before July 2, 1986, you probably had to report your annuity using the Three-Year Rule. Free state tax usa Under this rule, you excluded all the annuity payments from income until you fully recovered your cost. Free state tax usa After your cost was recovered, all payments became fully taxable. Free state tax usa You cannot use another rule to again exclude amounts from income. Free state tax usa The Three-Year Rule was repealed for retirees whose annuity starting date is after July 1, 1986. Free state tax usa Worksheet A. Free state tax usa Simplified Method for Bill Smith See the instructions in Part II of this publication under Simplified Method. Free state tax usa 1. Free state tax usa Enter the total pension or annuity payments received this year. Free state tax usa Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a 1. Free state tax usa $ 8,000 2. Free state tax usa Enter your cost in the plan at the annuity starting date, plus any death benefit exclusion*. Free state tax usa See Your cost in Part II, Rules for Retirees, earlier 2. Free state tax usa 31,000 Note: If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year's worksheet on line 4 below (even if the amount of your pension or annuity has changed). Free state tax usa Otherwise, go to line 3. Free state tax usa   3. Free state tax usa Enter the appropriate number from Table 1 below. Free state tax usa But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, enter the appropriate number from Table 2 below. Free state tax usa 3. Free state tax usa 310 4. Free state tax usa Divide line 2 by the number on line 3 4. Free state tax usa 100 5. Free state tax usa Multiply line 4 by the number of months for which this year's payments were made. Free state tax usa If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. Free state tax usa Otherwise, go to line 6 5. Free state tax usa 800 6. Free state tax usa Enter any amounts previously recovered tax free in years after 1986. Free state tax usa This is the amount shown on line 10 of your worksheet for last year 6. Free state tax usa 0 7. Free state tax usa Subtract line 6 from line 2 7. Free state tax usa 31,000 8. Free state tax usa Enter the smaller of line 5 or line 7 8. Free state tax usa 800 9. Free state tax usa Taxable amount for year. Free state tax usa Subtract line 8 from line 1. Free state tax usa Enter the result, but not less than zero. Free state tax usa Also, add this amount to the total for Form 1040, line 16b, or Form 1040A, line 12b. Free state tax usa If you are a nonresident alien, also enter this amount on line 1 of Worksheet C. Free state tax usa If your Form CSA 1099R or Form CSF 1099R shows a larger amount, use the amount figured on this line instead. Free state tax usa If you are a retired public safety officer, see Distributions Used To Pay Insurance Premiums for Public Safety Officers in Part II before entering an amount on your tax return or Worksheet C, line 1 9. Free state tax usa $7,200 10. Free state tax usa Was your annuity starting date before 1987?   Yes. Free state tax usa Do not complete the rest of this worksheet. Free state tax usa    No. Free state tax usa Add lines 6 and 8. Free state tax usa This is the amount you have recovered tax free through 2013. Free state tax usa You will need this number if you need to fill out this worksheet next year 10. Free state tax usa 800 11. Free state tax usa Balance of cost to be recovered. Free state tax usa Subtract line 10 from line 2. Free state tax usa If zero, you will not have to complete this worksheet next year. Free state tax usa The payments you receive next year will generally be fully taxable 11. Free state tax usa $30,200 Table 1 for Line 3 Above    IF your age on your  annuity starting date was   AND your annuity starting date was—     before November 19, 1996,  THEN enter on line 3 after November 18, 1996,  THEN enter on line 3   55 or under 300 360   56–60 260 310   61–65 240 260   66–70 170 210   71 or over 120 160  Table 2 for Line 3 Above    IF the annuitants' combined ages on your annuity starting date were   THEN enter on line 3         110 or under   410         111–120   360         121–130   310         131–140   260         141 or over   210       * A death benefit exclusion of up to $5,000 applied to certain benefits received by survivors of employees who died before August 21, 1996. Free state tax usa Alternative Annuity Option If you are eligible, you may choose an alternative form of annuity. Free state tax usa If you make this choice, you will receive a lump-sum payment equal to your contributions to the plan and a reduced monthly annuity. Free state tax usa You are eligible to make this choice if you meet all of the following requirements. Free state tax usa You are retiring, but not on disability. Free state tax usa You have a life-threatening illness or other critical medical condition. Free state tax usa You do not have a former spouse entitled to court ordered benefits based on your service. Free state tax usa If you are not eligible or do not choose this alternative annuity, you can skip the following discussion and go to Federal Gift Tax , later. Free state tax usa Lump-Sum Payment The lump-sum payment you receive under the alternative annuity option generally has a tax-free part and a taxable part. Free state tax usa The tax-free part represents part of your cost. Free state tax usa The taxable part represents part of the earnings on your annuity contract. Free state tax usa Your lump-sum credit (discussed later) may include a deemed deposit or redeposit that is treated as being included in your lump-sum payment even though you do not actually receive such amounts. Free state tax usa Deemed deposits and redeposits, which are described later under Lump-sum credit , are taxable to you in the year of retirement. Free state tax usa Your taxable amount may therefore be more than the lump-sum payment you receive. Free state tax usa You must include the taxable part of the lump-sum payment in your income for the year you receive the payment unless you roll it over into another qualified plan or an IRA. Free state tax usa If you do not have OPM transfer the taxable amount to an IRA or other plan in a direct rollover, tax will be withheld at a 20% rate. Free state tax usa See Rollover Rules , later, for information on how to make a rollover. Free state tax usa OPM can make a direct rollover only up to the amount of the lump-sum payment. Free state tax usa Therefore, to defer tax on the full taxable amount if it is more than the payment, you must add funds from another source. Free state tax usa The taxable part of the lump-sum payment does not qualify as a lump-sum distribution eligible for capital gain treatment or the 10-year tax option. Free state tax usa It also may be subject to an additional 10% tax on early distributions if you separate from service before the calendar year in which you reach age 55, even if you reach age 55 in the year you receive the lump-sum payment. Free state tax usa For more information, see Lump-Sum Distributions and Tax on Early Distributions in Publication 575. Free state tax usa Worksheet B. Free state tax usa   Use Worksheet B. Free state tax usa Lump-Sum Payment (near the end of this publication), to figure the taxable part of your lump-sum payment. Free state tax usa Be sure to keep the completed worksheet for your records. Free state tax usa   To complete the worksheet, you will need to know the amount of your lump-sum credit and the present value of your annuity contract. Free state tax usa Lump-sum credit. Free state tax usa   Generally, this is the same amount as the lump-sum payment you receive (the total of your contributions to the retirement system). Free state tax usa However, for purposes of the alternative annuity option, your lump-sum credit also may include deemed deposits and redeposits that OPM advanced to your retirement account so that you are given credit for the service they represent. Free state tax usa Deemed deposits (including interest) are for federal employment during which no retirement contributions were taken out of your pay. Free state tax usa Deemed redeposits (including interest) are for any refunds of retirement contributions that you received and did not repay. Free state tax usa You are treated as if you had received a lump-sum payment equal to the amount of your lump-sum credit and then had made a repayment to OPM of the advanced amounts. Free state tax usa Present value of your annuity contract. Free state tax usa   The present value of your annuity contract is figured using actuarial tables provided by the IRS. Free state tax usa If you are receiving a lump-sum payment under the Alternative Annuity Option, you can write to the address below to find out the present value of your annuity contract. Free state tax usa Internal Revenue Service Attn: Actuarial Group 2 TE/GE SE:T:EP:RA:T:A2 NCA-629 1111 Constitution Ave. Free state tax usa , NW Washington, DC 20224-0002 Example. Free state tax usa David Brown retired from the federal government in 2013, one month after his 55th birthday. Free state tax usa He had contributed $31,000 to his retirement plan and chose to receive a lump-sum payment of that amount under the alternative annuity option. Free state tax usa The present value of his annuity contract was $155,000. Free state tax usa The tax-free part and the taxable part of the lump-sum payment are figured using Worksheet B, as shown below. Free state tax usa The taxable part ($24,800) is also his net cost in the plan, which is used to figure the taxable part of his reduced annuity payments. Free state tax usa See Reduced Annuity , later. Free state tax usa Worksheet B. Free state tax usa Lump-Sum Payment for David Brown See the instructions in Part II of this publication under Alternative Annuity Option . Free state tax usa  1. Free state tax usa Enter your lump-sum credit (your cost in the plan at the annuity starting date) 1. Free state tax usa $ 31,000 2. Free state tax usa Enter the present value of your annuity contract 2. Free state tax usa 155,000 3. Free state tax usa Divide line 1 by line 2 3. Free state tax usa . Free state tax usa 20 4. Free state tax usa Tax-free amount. Free state tax usa Multiply line 1 by line 3. Free state tax usa (Caution: Do not include this amount on line 6 of Worksheet A in this publication. Free state tax usa ) 4. Free state tax usa $6,200 5. Free state tax usa Taxable amount (net cost in the plan). Free state tax usa Subtract line 4 from line 1. Free state tax usa Include this amount in the total on Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Free state tax usa Also, enter this amount on line 2 of Worksheet A in this publication. Free state tax usa 5. Free state tax usa $24,800   Lump-sum payment in installments. Free state tax usa   If you choose the alternative annuity option, you usually will receive the lump-sum payment in two equal installments. Free state tax usa You will receive the first installment after you make the choice upon retirement. Free state tax usa The second installment will be paid to you, with interest, in the next calendar year. Free state tax usa (Exceptions to the installment rule are provided for cases of critical medical need. Free state tax usa )   Even though the lump-sum payment is made in installments, the overall tax treatment (explained at the beginning of this discussion) is the same as if the whole payment were paid at once. Free state tax usa If the payment has a tax-free part, you must treat the taxable part as received first. Free state tax usa How to report. Free state tax usa   Add any actual or deemed payment of your lump-sum credit (defined earlier) to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. Free state tax usa Add the taxable part to the total for Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b, unless you roll over the taxable part to your traditional IRA or a qualified retirement plan. Free state tax usa    If you receive the lump-sum payment in two installments, include any interest paid with the second installment on line 8a of either Form 1040 or Form 1040A, or on line 9a of Form 1040NR. Free state tax usa Reduced Annuity If you have chosen to receive a lump-sum payment under the alternative annuity option, you also will receive reduced monthly annuity payments. Free state tax usa These annuity payments each will have a tax-free and a taxable part. Free state tax usa To figure the tax-free part of each annuity payment, you must use the Simplified Method (Worksheet A). Free state tax usa For instructions on how to complete the worksheet, see Worksheet A under Simplified Method, earlier. Free state tax usa To complete Worksheet A, line 2, you must reduce your cost in the plan by the tax-free part of the lump-sum payment you received. Free state tax usa Enter as your net cost on line 2 the amount from Worksheet B, line 5. Free state tax usa Do not include the tax-free part of the lump-sum payment with other amounts recovered tax free (Worksheet A, line 6) when limiting your total exclusion to your total cost. Free state tax usa Example. Free state tax usa The facts are the same as in the example for David Brown in the preceding discussion. Free state tax usa In addition, David received 10 annuity payments in 2013 of $1,200 each. Free state tax usa Using Worksheet A, he figures the taxable part of his annuity payments. Free state tax usa He completes line 2 by reducing his $31,000 cost by the $6,200 tax-free part of his lump-sum payment. Free state tax usa His entry on line 2 is his $24,800 net cost in the plan (the amount from Worksheet B, line 5). Free state tax usa He does not include the tax-free part of his lump-sum payment on Worksheet A, line 6. Free state tax usa David's filled-in Worksheet A is shown on the next page. Free state tax usa Worksheet A. Free state tax usa Simplified Method for David Brown See the instructions in Part II of this publication under Simplified Method . Free state tax usa 1. Free state tax usa Enter the total pension or annuity payments received this year. Free state tax usa Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a 1. Free state tax usa $ 12,000 2. Free state tax usa Enter your cost in the plan at the annuity starting date, plus any death benefit exclusion*. Free state tax usa See Your cost in Part II, Rules for Retirees, earlier 2. Free state tax usa 24,800 Note: If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year's worksheet on line 4 below (even if the amount of your pension or annuity has changed). Free state tax usa Otherwise, go to line 3. Free state tax usa   3. Free state tax usa Enter the appropriate number from Table 1 below. Free state tax usa But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, enter the appropriate number from Table 2 below. Free state tax usa 3. Free state tax usa 360 4. Free state tax usa Divide line 2 by the number on line 3 4. Free state tax usa 68. Free state tax usa 89 5. Free state tax usa Multiply line 4 by the number of months for which this year's payments were made. Free state tax usa If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. Free state tax usa Otherwise, go to line 6 5. Free state tax usa 688. Free state tax usa 90 6. Free state tax usa Enter any amounts previously recovered tax free in years after 1986. Free state tax usa This is the amount shown on line 10 of your worksheet for last year 6. Free state tax usa 0 7. Free state tax usa Subtract line 6 from line 2 7. Free state tax usa 24,800 8. Free state tax usa Enter the smaller of line 5 or line 7 8. Free state tax usa 688. Free state tax usa 90 9. Free state tax usa Taxable amount for year. Free state tax usa Subtract line 8 from line 1. Free state tax usa Enter the result, but not less than zero. Free state tax usa Also, add this amount to the total for Form 1040, line 16b, or Form 1040A, line 12b. Free state tax usa If you are a nonresident alien, also enter this amount on line 1 of Worksheet C. Free state tax usa If your Form CSA 1099R or Form CSF 1099R shows a larger amount, use the amount figured on this line instead. Free state tax usa If you are a retired public safety officer, see Distributions Used To Pay Insurance Premiums for Public Safety Officers in Part II before entering an amount on your tax return or Worksheet C, line 1 9. Free state tax usa $11,311. Free state tax usa 10 10. Free state tax usa Was your annuity starting date before 1987?   Yes. Free state tax usa Do not complete the rest of this worksheet. Free state tax usa    No. Free state tax usa Add lines 6 and 8. Free state tax usa This is the amount you have recovered tax free through 2013. Free state tax usa You will need this number if you need to fill out this worksheet next year 10. Free state tax usa 688. Free state tax usa 90 11. Free state tax usa Balance of cost to be recovered. Free state tax usa Subtract line 10 from line 2. Free state tax usa If zero, you will not have to complete this worksheet next year. Free state tax usa The payments you receive next year will generally be fully taxable 11. Free state tax usa $24,111. Free state tax usa 10 Table 1 for Line 3 Above    IF your age on your annuity starting date was   AND your annuity starting date was—     before November 19, 1996,  THEN enter on line 3 after November 18, 1996,  THEN enter on line 3   55 or under 300 360   56–60 260 310   61–65 240 260   66–70 170 210   71 or over 120 160  Table 2 for Line 3 Above    IF the annuitants' combined ages on your annuity starting date were   THEN enter on line 3         110 or under   410         111–120   360         121–130   310         131–140   260         141 or over   210       * A death benefit exclusion of up to $5,000 applied to certain benefits received by survivors of employees who died before August 21, 1996. Free state tax usa Reemployment after choosing the alternative annuity option. Free state tax usa If you chose this option when you retired and then you were reemployed by the Federal Government before retiring again, your Form CSA 1099R may show only the amount of your contributions to your retirement plan during your reemployment. Free state tax usa If the amount on the form does not include all your contributions, disregard it and use your total contributions to figure the taxable part of your annuity payments. Free state tax usa Annuity starting date before November 19, 1996. Free state tax usa   If your annuity starting date is before November 19, 1996, and you chose the alternative annuity option, the taxable and tax-free parts of your lump-sum payment and your annuity payments are figured using different rules. Free state tax usa Under those rules, you do not reduce your cost in the plan (Worksheet A, line 2) by the tax-free part of the lump-sum payment. Free state tax usa However, you must include that tax-free amount with other amounts previously recovered tax free (Worksheet A, line 6) when limiting your total exclusion to your total cost. Free state tax usa Federal Gift Tax If, through the exercise or nonexercise of an election or option, you provide an annuity for your beneficiary at or after your death, you have made a gift. Free state tax usa The gift may be taxable for gift tax purposes. Free state tax usa The value of the gift is equal to the value of the annuity. Free state tax usa Joint and survivor annuity. Free state tax usa   If the gift is an interest in a joint and survivor annuity where only you and your spouse can receive payments before the death of the last spouse to die, the gift generally will qualify for the unlimited marital deduction. Free state tax usa This will eliminate any gift tax liability with regard to that gift. Free state tax usa   If you provide survivor annuity benefits for someone other than your current spouse, such as your former spouse, the unlimited marital deduction will not apply. Free state tax usa This may result in a taxable gift. Free state tax usa More information. Free state tax usa   For information about the gift tax, see Publication 950, Introduction to Estate and Gift Taxes, and Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, and its instructions. Free state tax usa Retirement During the Past Year If you have recently retired, the following discussions covering annual leave, voluntary contributions, and community property may apply to you. Free state tax usa Annual leave. Free state tax usa   A payment for accrued annual leave received on retirement is a salary payment. Free state tax usa It is taxable as wages in the tax year you receive it. Free state tax usa Voluntary contributions. Free state tax usa   Voluntary contributions to the retirement fund are those made in addition to the regular contributions that were deducted from your salary. Free state tax usa They also include the regular contributions withheld from your salary after you have the years of service necessary for the maximum annuity allowed by law. Free state tax usa Voluntary contributions are not the same as employee contributions to the Thrift Savings Plan. Free state tax usa See Thrift Savings Plan , later. Free state tax usa Additional annuity benefit. Free state tax usa   If you choose to receive an additional annuity benefit from your voluntary contributions, it is treated separately from the annuity benefit that comes from the regular contributions deducted from your salary. Free state tax usa This separate treatment applies for figuring the amounts to be excluded from, and included in, gross income. Free state tax usa It does not matter that you receive only one monthly check covering both benefits. Free state tax usa Each year you will receive a Form CSA 1099R that will show how much of your total annuity received in the past year was from each type of benefit. Free state tax usa   Figure the taxable and tax-free parts of your additional monthly benefits from voluntary contributions using the rules that apply to regular CSRS and FERS annuities, as explained earlier. Free state tax usa Refund of voluntary contributions. Free state tax usa   If you choose to receive a refund of your voluntary contributions plus accrued interest, the interest is taxable to you in the tax year it is distributed unless you roll it over to a traditional IRA or another qualified retirement plan. Free state tax usa If you do not have OPM transfer the interest to a traditional IRA or other qualified retirement plan in a direct rollover, tax will be withheld at a 20% rate. Free state tax usa See Rollover Rules , later. Free state tax usa The interest does not qualify as a lump-sum distribution eligible for capital gain treatment or the 10-year tax option. Free state tax usa It also may be subject to an additional 10% tax on early distributions if you separate from service before the calendar year in which you reach age 55. Free state tax usa For more information, see Lump-Sum Distributions and Tax on Early Distributions in Publication 575. Free state tax usa Community property laws. Free state tax usa   State community property laws apply to your annuity. Free state tax usa These laws will affect your income tax only if you file a return separately from your spouse. Free state tax usa   Generally, the determination of whether your annuity is separate income (taxable to you) or community income (taxable to both you and your spouse) is based on your marital status and domicile when you were working. Free state tax usa Regardless of whether you are now living in a community property state or a noncommunity property state, your current annuity may be community income if it is based on services you performed while married and domiciled in a community property state. Free state tax usa   At any time, you have only one domicile even though you may have more than one home. Free state tax usa Your domicile is your fixed and permanent legal home that you intend to use for an indefinite or unlimited period, and to which, when absent, you intend to return. Free state tax usa The question of your domicile is mainly a matter of your intentions as indicated by your actions. Free state tax usa   If your annuity is a mixture of community income and separate income, you must divide it between the two kinds of income. Free state tax usa The division is based on your periods of service and domicile in community and noncommunity property states while you were married. Free state tax usa   For more information, see Publication 555, Community Property. Free state tax usa Reemployment After Retirement If you retired from federal service and are later rehired by the Federal Government as an employee, you can continue to receive your annuity during reemployment. Free state tax usa The employing agency usually will pay you the difference between your salary for your period of reemployment and your annuity. Free state tax usa This amount is taxable as wages. Free state tax usa Your annuity will continue to be taxed just as it was before. Free state tax usa If you are still recovering your cost, you continue to do so. Free state tax usa If you have recovered your cost, the annuity you receive while you are reemployed generally is fully taxable. Free state tax usa Nonresident Aliens The following special rules apply to nonresident alien federal employees performing services outside the United States and to nonresident alien retirees and beneficiaries. Free state tax usa A nonresident alien is an individual who is not a citizen or a resident alien of the United States. Free state tax usa Special rule for figuring your total contributions. Free state tax usa   Your contributions to the retirement plan (your cost) also include the government's contributions to the plan to a certain extent. Free state tax usa You include government contributions that would not have been taxable to you at the time they were contributed if they had been paid directly to you. Free state tax usa For example, government contributions would not have been taxable to you if, at the time made, your services were performed outside the United States. Free state tax usa Thus, your cost is increased by these government contributions and the benefits that you, or your beneficiary, must include in income are reduced. Free state tax usa   This method of figuring your total contributions does not apply to any contributions the government made on your behalf after you became a citizen or a resident alien of the United States. Free state tax usa Limit on taxable amount. Free state tax usa   There is a limit on the taxable amount of payments received from the CSRS, the FERS, or the TSP by a nonresident alien retiree or nonresident alien beneficiary. Free state tax usa Figure this limited taxable amount by multiplying the otherwise taxable amount by a fraction. Free state tax usa The numerator of the fraction is the retiree's total U. Free state tax usa S. Free state tax usa Government basic pay, other than tax-exempt pay for services performed outside the United States. Free state tax usa The denominator is the retiree's total U. Free state tax usa S. Free state tax usa Government basic pay for all services. Free state tax usa    Basic pay includes regular pay plus any standby differential. Free state tax usa It does not include bonuses, overtime pay, certain retroactive pay, uniform or other allowances, or lump-sum leave payments. Free state tax usa   To figure the limited taxable amount of your CSRS or FERS annuity or your TSP distributions, use Worksheet C. Free state tax usa (For an annuity, first complete Worksheet A in this publication. Free state tax usa ) Worksheet C. Free state tax usa Limited Taxable Amount for Nonresident Alien 1. Free state tax usa Enter the otherwise taxable amount of the CSRS or FERS annuity (from line 9 of Worksheet A or from Forms CSA 1099R or CSF 1099R) or TSP distributions (from Form 1099R) 1. Free state tax usa   2. Free state tax usa Enter the total U. Free state tax usa S. Free state tax usa Government basic pay other than tax-exempt pay for services performed outside the United States 2. Free state tax usa   3. Free state tax usa Enter the total U. Free state tax usa S. Free state tax usa Government basic pay for all services 3. Free state tax usa   4. Free state tax usa Divide line 2 by line 3 4. Free state tax usa   5. Free state tax usa Limited taxable amount. Free state tax usa Multiply line 1 by line 4. Free state tax usa Enter this amount on Form 1040NR, line 17b 5. Free state tax usa   Example 1. Free state tax usa You are a nonresident alien who performed all services for the U. Free state tax usa S. Free state tax usa Government abroad as a nonresident alien. Free state tax usa You retired and began to receive a monthly annuity of $200. Free state tax usa Your total basic pay for all services for the U. Free state tax usa S. Free state tax usa Government was $100,000. Free state tax usa All of your basic pay was tax exempt because it was not U. Free state tax usa S. Free state tax usa source income. Free state tax usa The taxable amount of your annuity using Worksheet A in this publication is $720. Free state tax usa You are a nonresident alien, so you figure the limited taxable amount of your annuity using Worksheet C as follows. Free state tax usa Worksheet C. Free state tax usa Limited Taxable Amount for Nonresident Alien — Example 1 1. Free state tax usa Enter the otherwise taxable amount of the CSRS or FERS annuity (from line 9 of Worksheet A or from Forms CSA 1099R or CSF 1099R) or TSP distributions (from Form 1099R) 1. Free state tax usa $ 720 2. Free state tax usa Enter the total U. Free state tax usa S. Free state tax usa Government basic pay other than tax-exempt pay for services performed outside the United States 2. Free state tax usa 0 3. Free state tax usa Enter the total U. Free state tax usa S. Free state tax usa Government basic pay for all services 3. Free state tax usa 100,000 4. Free state tax usa Divide line 2 by line 3 4. Free state tax usa 0 5. Free state tax usa Limited taxable amount. Free state tax usa Multiply line 1 by line 4. Free state tax usa Enter this amount on Form 1040NR, line 17b 5. Free state tax usa 0 Example 2. Free state tax usa You are a nonresident alien who performed services for the U. Free state tax usa S. Free state tax usa Government as a nonresident alien both within the United States and abroad. Free state tax usa You retired and began to receive a monthly annuity of $240. Free state tax usa Your total basic pay for your services for the U. Free state tax usa S. Free state tax usa Government was $120,000; $40,000 was for work done in the United States and $80,000 was for your work done in a foreign country. Free state tax usa The part of your total basic pay for your work done in a foreign country was tax exempt because it was not U. Free state tax usa S. Free state tax usa source income. Free state tax usa The taxable amount of your annuity figured using Worksheet A in this publication is $1,980. Free state tax usa You are a nonresident alien, so you figure the limited taxable amount of your annuity using Worksheet C as follows. Free state tax usa Worksheet C. Free state tax usa Limited Taxable Amount for Nonresident Alien — Example 2 1. Free state tax usa Enter the otherwise taxable amount of the CSRS or FERS annuity (from line 9 of Worksheet A or from Forms CSA 1099R or CSF 1099R) or TSP distributions (from Form 1099R) 1. Free state tax usa $ 1,980 2. Free state tax usa Enter the total U. Free state tax usa S. Free state tax usa Government basic pay other than tax-exempt pay for services performed outside the United States 2. Free state tax usa 40,000 3. Free state tax usa Enter the total U. Free state tax usa S. Free state tax usa Government basic pay for all services 3. Free state tax usa 120,000 4. Free state tax usa Divide line 2 by line 3 4. Free state tax usa . Free state tax usa 333 5. Free state tax usa Limited taxable amount. Free state tax usa Multiply line 1 by line 4. Free state tax usa Enter this amount on Form 1040NR, line 17b 5. Free state tax usa 659 Thrift Savings Plan Generally, all of the money in your TSP account is taxed as ordinary income when you receive it. Free state tax usa (However, see Roth TSP balance and Uniformed services TSP accounts, next. Free state tax usa ) This is because neither the contributions to your traditional TSP balance nor its earnings have been included previously in your taxable income. Free state tax usa The way that you withdraw your account balance determines when you must pay the tax. Free state tax usa Roth TSP balance. Free state tax usa   The TSP also offers a Roth TSP option, which allows you to make after-tax contributions into your TSP account. Free state tax usa This means Roth TSP contributions are included in your income. Free state tax usa The contribution limits are the same as the traditional TSP. Free state tax usa You can elect to have part or all of your TSP contributions designated as a Roth TSP. Free state tax usa Agency contributions will be part of your traditional TSP balance. Free state tax usa Also, you cannot roll over any portion of your traditional TSP into your Roth TSP. Free state tax usa   Qualified distributions from your Roth TSP are not included in income. Free state tax usa This applies to both your cost in the account and income earned on that account. Free state tax usa A qualified distribution is generally a distribution that is: Made after a 5-tax-year period of participation, and Made on or after the date you reach age 59½, made to a beneficiary or your estate on or after your death, or attributable to your being disabled. Free state tax usa   For more information, go to the TSP website, www. Free state tax usa tsp. Free state tax usa gov, or the TSP Service Office. Free state tax usa See Publication 575, Pension and Annuity Income, for more information about designated Roth accounts. Free state tax usa Uniformed services TSP accounts. Free state tax usa   If you have a uniformed services TSP account that includes contributions from combat zone pay, the distributions attributable to those contributions are tax exempt. Free state tax usa However, any earnings on those contributions to a traditional TSP balance are subject to tax when they are distributed. Free state tax usa See Roth TSP balance discussed previously to get more information about Roth contributions. Free state tax usa The statement you receive from the TSP will separately state the total amount of your distribution and the amount of your taxable distribution for the year. Free state tax usa You can get more information from the TSP website, www. Free state tax usa tsp. Free state tax usa gov, or the TSP Service Office. Free state tax usa Direct rollover by the TSP. Free state tax usa   If you ask the TSP to transfer any part of the money in your account, from traditional contributions and its earnings, to a traditional IRA or other qualified retirement plan, the tax on that part is deferred until you receive payments from the traditional IRA or other plan. Free state tax usa However, see the following Note for a discussion on direct rollovers by the TSP of Roth contributions and its earnings. Free state tax usa Also, see Rollover Rules , later. Free state tax usa Direct rollover by the TSP to a Roth IRA. Free state tax usa   If you ask the TSP to transfer any part of the money in your account, from traditional contributions and its earnings, to a Roth IRA, the amount transferred will be taxed in the current year. Free state tax usa However, see the following Note for a discussion on direct rollovers by the TSP of Roth contributions and its earnings. Free state tax usa Also, see Rollovers to Roth IRAs for more information, later. Free state tax usa Note. Free state tax usa A direct rollover of your Roth contributions and its earnings (if certain conditions are met, see Roth TSP balance , earlier) in your TSP account to a Roth 401(k), Roth 403(b), Roth 457(b), or Roth IRA are not subject to tax when they are transferred or when you receive payments from those accounts at a later date. Free state tax usa This is because you already paid tax on those contributions. Free state tax usa You cannot rollover Roth contributions and its earnings in your TSP account to a traditional IRA. Free state tax usa TSP annuity. Free state tax usa   If you ask the TSP to buy an annuity with the money in your account, from traditional contributions and its earnings, the annuity payments are taxed when you receive them. Free state tax usa The payments are not subject to the additional 10% tax on early distributions, even if you are under age 55 when they begin. Free state tax usa However, there is no tax on the annuity payments if the annuity is purchased using the money in your account from Roth contributions and its earnings if certain conditions are met. Free state tax usa See Roth TSP balance , earlier. Free state tax usa This is because you already paid tax on those contributions. Free state tax usa Cash withdrawals. Free state tax usa   If you withdraw any of the money in your TSP account, from traditional contributions and its earnings, it is generally taxed as ordinary income when you receive it unless you roll it over into a traditional IRA or other qualified plan. Free state tax usa (See Rollover Rules , later. Free state tax usa ) If you receive your entire TSP account balance in a single tax year, you may be able to use the 10-year tax option to figure your tax. Free state tax usa See Lump-Sum Distributions in Publication 575 for details. Free state tax usa However, there is no tax if you withdraw money in your TSP account from Roth contributions and its earnings if certain conditions are met. Free state tax usa See Roth TSP balance , earlier. Free state tax usa    To qualify for the 10-year tax option, the plan participant must have been born before January 2, 1936. Free state tax usa   If you receive a single payment or you choose to receive your account balance in monthly payments over a period of less than 10 years, the TSP generally must withhold 20% for federal income tax. Free state tax usa If you choose to receive your account balance in monthly payments over a period of 10 or more years or a period based on your life expectancy, the payments are subject to withholding as if you are married with three withholding allowances, unless you submit a withholding certificate. Free state tax usa See also Withholding from Thrift Savings Plan payments earlier under Tax Withholding and Estimated Tax in Part I. Free state tax usa However, there is no withholding requirement for amounts withdrawn from your TSP account that is from Roth contributions and its earnings, if certain conditions are met. Free state tax usa See Roth TSP balance , earlier, for a discussion of those conditions. Free state tax usa Tax on early distributions. Free state tax usa   Any money paid to you from your TSP account before you reach age 59½ may be subject to an additional 10% tax on early distributions. Free state tax usa However, this additional tax does not apply in certain situations, including any of the following. Free state tax usa You receive the distribution and separate from government service during or after the calendar year in which you reach age 55. Free state tax usa You choose to receive your account balance in monthly payments based on your life expectancy. Free state tax usa You are totally and permanently disabled. Free state tax usa You receive amounts from your Roth contributions since that represents a return of your cost (after-tax money). Free state tax usa The earnings may be subject to the 10% tax depending on whether you met certain conditions. Free state tax usa See Roth TSP balance , earlier. Free state tax usa   For more information, see Tax on Early Distributions in Publication 575. Free state tax usa Outstanding loan. Free state tax usa   If the TSP declares a distribution from your account because money you borrowed has not been repaid when you separate from government service, your account is reduced and the amount of the distribution (your unpaid loan balance and any unpaid interest), from traditional contributions and its earnings, is taxed in the year declared. Free state tax usa The distribution also may be subject to the additional 10% tax on early distributions. Free state tax usa However, the tax will be deferred if you make a rollover contribution to a traditional IRA or other qualified plan equal to the declared distribution amount. Free state tax usa See Rollover Rules , later. Free state tax usa   If you withdraw any money from your TSP account in that same year, the TSP must withhold income tax of 20% of the total of the declared distribution and the amount withdrawn. Free state tax usa However, no withholding is required for portions of the distribution that is from Roth contributions and its earnings, if certain conditions are met. Free state tax usa See Roth TSP balance , earlier. Free state tax usa More information. Free state tax usa   For more information about the TSP, see Summary of the Thrift Savings Plan, distributed to all federal employees. Free state tax usa Also, see Important Tax Information About Payments From Your TSP Account and Special Tax Withholding Rules for Thrift Savings Plan Payments to Nonresident Aliens, which are available from your agency personnel office or from the TSP by calling 1-TSP-YOU-FIRST (1-877-968-3778) and for participants who are deaf, hard of hearing, or have a speech disability, call 1-TSP-THRIFT5 (1-877-847-4385). Free state tax usa    The above documents are also available on the TSP website at www. Free state tax usa tsp. Free state tax usa gov. Free state tax usa Select “Forms & Publications. Free state tax usa ” Rollover Rules Generally, a rollover is a tax-free withdrawal of cash or other assets from one qualified retirement plan or traditional IRA and its reinvestment in another qualified retirement plan or traditional IRA. Free state tax usa You do not include the amount rolled over in your income, and you cannot take a deduction for it. Free state tax usa The amount rolled over is taxed later as the new program pays that amount to you. Free state tax usa If you roll over amounts into a traditional IRA, later distributions of these amounts from the traditional IRA do not qualify for the capital gain or the 10-year tax option. Free state tax usa However, capital gain treatment or the 10-year tax option will be restored if the traditional IRA contains only amounts rolled over from a qualified plan and these amounts are rolled over from the traditional IRA into a qualified retirement plan. Free state tax usa To qualify for the capital gain treatment or 10-year tax option, the plan participant must have been born before January 2, 1936. Free state tax usa You can also roll over a distribution from a qualified retirement plan into a Roth IRA. Free state tax usa Although the transfer of a distribution into a Roth IRA is considered a rollover for Roth IRA purposes, it is not a tax-free transfer unless you are rolling over amounts from Roth contributions and its earnings. Free state tax usa See Rollovers to Roth IRAs , later, for more information. Free state tax usa Qualified retirement plan. Free state tax usa   For this purpose, a qualified retirement plan generally is: A qualified employee plan, A qualified employee annuity, A tax-sheltered annuity plan (403(b) plan), or An eligible state or local government section 457 deferred compensation plan. Free state tax usa The CSRS, FERS, and TSP are considered qualified retirement plans. Free state tax usa Distributions eligible for rollover treatment. Free state tax usa   If you receive a refund of your CSRS or FERS contributions when you leave government service, you can roll over any interest you receive on the contributions. Free state tax usa You cannot roll over any part of your CSRS or FERS annuity payments. Free state tax usa   You can roll over a distribution of any part of your TSP account balance except: A distribution of your account balance that you choose to receive in monthly payments over: Your life expectancy, The joint life expectancies of you and your beneficiary, or A period of 10 years or more, A required minimum distribution generally beginning at age 70½, A declared distribution because of an unrepaid loan, if you have not separated from government service (see Outstanding loan under Thrift Savings Plan, earlier), or A hardship distribution. Free state tax usa   In addition, a distribution to your beneficiary generally is not treated as an eligible rollover distribution. Free state tax usa However, see Qualified domestic relations order (QDRO) and Rollovers by surviving spouse , and Rollovers by nonspouse beneficiary , later. Free state tax usa Direct rollover option. Free state tax usa   You can choose to have the OPM or TSP transfer any part of an eligible rollover distribution directly to another qualified retirement plan that accepts rollover distributions or to a traditional IRA or Roth IRA. Free state tax usa   There is an automatic rollover requirement for mandatory distributions. Free state tax usa A mandatory distribution is a distribution made without your consent and before you reach age 62 or normal retirement age, whichever is later. Free state tax usa The automatic rollover requirement applies if the distribution is more than $1,000 and is an eligible rollover distribution. Free state tax usa You can choose to have the distribution paid directly to you or rolled over directly to your traditional or Roth IRA or another qualified retirement plan. Free state tax usa If you do not make this choice, OPM will automatically roll over the distribution into an IRA of a designated trustee or issuer. Free state tax usa No tax withheld. Free state tax usa   If you choose the direct rollover option or have an automatic rollover, no tax will be withheld from any part of the distribution that is directly paid to the trustee of the other plan. Free state tax usa However, if the rollover is to a Roth IRA, you may want to choose to have tax withheld since any amount rolled over is generally included in income. Free state tax usa Any part of the eligible rollover distribution paid to you is subject to withholding at a 20% rate. Free state tax usa Direct roll over amounts from Roth contributions and its earnings do not have tax withheld because you already paid tax on those amounts. Free state tax usa Payment to you option. Free state tax usa   If an eligible rollover distribution is paid to you, the OPM or TSP must withhold 20% for income tax even if you plan to roll over the distribution to another qualified retirement plan, traditional or Roth IRA. Free state tax usa However, the full amount is treated as distributed to you even though you actually receive only 80%. Free state tax usa You generally must include in income any part (including the part withheld) that you do not roll over within 60 days to another qualified retirement plan or to a traditional IRA. Free state tax usa Rollovers to Roth IRAs are generally included in income. Free state tax usa Eligible rollover distributions that are from Roth contributions do not have tax withheld because you already paid tax on those amounts. Free state tax usa If you leave government service before the calendar year in which you reach age 55 and are under age 59½ when a distribution is paid to you, you may have to pay an additional 10% tax on any part, including any tax withheld, that you do not roll over. Free state tax usa However, distributions from Roth contributions will not be subject to the 10% additional tax because it is a return of your cost (after-tax money). Free state tax usa Earnings from those contributions may be subject to the 10% additional tax if certain conditions are not met. Free state tax usa See Roth TSP balance , earlier. Free state tax usa Also, see Tax on Early Distributions in Publication 575. Free state tax usa Exception to withholding. Free state tax usa   Withholding from an eligible rollover distribution paid to you is not required if the distributions for your tax year total less than $200. Free state tax usa Partial rollovers. Free state tax usa   A lump-sum distribution may qualify for capital gain treatment or the 10-year tax option if the plan participant was born before January 2, 1936. Free state tax usa See Lump-Sum Distributions in Publication 575. Free state tax usa However, if you roll over any part of the distribution, the part you keep does not qualify for this special tax treatment. Free state tax usa Rolling over more than amount received. Free state tax usa   If you want to roll over more of an eligible rollover distribution than the amount you received after income tax was withheld, you will have to add funds from some other source (such as your savings or borrowed amounts). Free state tax usa Example. Free state tax usa You left government service at age 53. Free state tax usa On February 1, 2013, you receive an eligible rollover distribution of $10,000 from you
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Page Last Reviewed or Updated: 15-Nov-2013

The Free State Tax Usa

Free state tax usa Publication 596 - Main Content Table of Contents Chapter 1—Rules for EveryoneRule 1—Adjusted Gross Income (AGI) Limits Rule 2—You Must Have a Valid Social Security Number (SSN) Rule 3—Your Filing Status Cannot Be Married Filing Separately Rule 4—You Must Be a U. Free state tax usa S. Free state tax usa Citizen or Resident Alien All Year Rule 5—You Cannot File Form 2555 or Form 2555-EZ Rule 6—Your Investment Income Must Be $3,300 or Less Rule 7—You Must Have Earned Income Chapter 2—Rules If You Have a Qualifying ChildRule 8—Your Child Must Meet the Relationship, Age, Residency, and Joint Return Tests Rule 9—Your Qualifying Child Cannot Be Used by More Than One Person To Claim the EIC Rule 10—You Cannot Be a Qualifying Child of Another Taxpayer Chapter 3—Rules If You Do Not Have a Qualifying ChildRule 11—You Must Be at Least Age 25 but Under Age 65 Rule 12—You Cannot Be the Dependent of Another Person Rule 13—You Cannot Be a Qualifying Child of Another Taxpayer Rule 14—You Must Have Lived in the United States More Than Half of the Year Chapter 4—Figuring and Claiming the EICRule 15—Earned Income Limits IRS Will Figure the EIC for You How To Figure the EIC Yourself Schedule EIC Chapter 5—Disallowance of the EICForm 8862 Are You Prohibited From Claiming the EIC for a Period of Years? Chapter 6—Detailed ExamplesExample 1—Sharon Rose Example 2—Cynthia and Jerry Grey Chapter 1—Rules for Everyone This chapter discusses Rules 1 through 7. Free state tax usa You must meet all seven rules to qualify for the earned income credit. Free state tax usa If you do not meet all seven rules, you cannot get the credit and you do not need to read the rest of the publication. Free state tax usa If you meet all seven rules in this chapter, then read either chapter 2 or chapter 3 (whichever applies) for more rules you must meet. Free state tax usa Rule 1—Adjusted Gross Income (AGI) Limits Your adjusted gross income (AGI) must be less than: $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children, $43,038 ($48,378 for married filing jointly) if you have two qualifying children, $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. Free state tax usa Adjusted gross income (AGI). Free state tax usa   AGI is the amount on line 4 of Form 1040EZ, line 22 of Form 1040A, or line 38 of Form 1040. Free state tax usa   If your AGI is equal to or more than the applicable limit listed above, you cannot claim the EIC. Free state tax usa You do not need to read the rest of this publication. Free state tax usa Example—AGI is more than limit. Free state tax usa Your AGI is $38,550, you are single, and you have one qualifying child. Free state tax usa You cannot claim the EIC because your AGI is not less than $37,870. Free state tax usa However, if your filing status was married filing jointly, you might be able to claim the EIC because your AGI is less than $43,210. Free state tax usa Community property. Free state tax usa   If you are married, but qualify to file as head of household under special rules for married taxpayers living apart (see Rule 3), and live in a state that has community property laws, your AGI includes that portion of both your and your spouse's wages that you are required to include in gross income. Free state tax usa This is different from the community property rules that apply under Rule 7. Free state tax usa Rule 2—You Must Have a Valid Social Security Number (SSN) To claim the EIC, you (and your spouse, if filing a joint return) must have a valid SSN issued by the Social Security Administration (SSA). Free state tax usa Any qualifying child listed on Schedule EIC also must have a valid SSN. Free state tax usa (See Rule 8 if you have a qualifying child. Free state tax usa ) If your social security card (or your spouse's, if filing a joint return) says “Not valid for employment” and your SSN was issued so that you (or your spouse) could get a federally funded benefit, you cannot get the EIC. Free state tax usa An example of a federally funded benefit is Medicaid. Free state tax usa If you have a card with the legend “Not valid for employment” and your immigration status has changed so that you are now a U. Free state tax usa S. Free state tax usa citizen or permanent resident, ask the SSA for a new social security card without the legend. Free state tax usa If you get the new card after you have already filed your return, you can file an amended return on Form 1040X, Amended U. Free state tax usa S. Free state tax usa Individual Income Tax Return, to claim the EIC. Free state tax usa U. Free state tax usa S. Free state tax usa citizen. Free state tax usa   If you were a U. Free state tax usa S. Free state tax usa citizen when you received your SSN, you have a valid SSN. Free state tax usa Valid for work only with INS authorization or DHS authorization. Free state tax usa   If your social security card reads “Valid for work only with INS authorization” or “Valid for work only with DHS authorization,” you have a valid SSN, but only if that authorization is still valid. Free state tax usa SSN missing or incorrect. Free state tax usa   If an SSN for you or your spouse is missing from your tax return or is incorrect, you may not get the EIC. Free state tax usa Other taxpayer identification number. Free state tax usa   You cannot get the EIC if, instead of an SSN, you (or your spouse, if filing a joint return) have an individual taxpayer identification number (ITIN). Free state tax usa ITINs are issued by the Internal Revenue Service to noncitizens who cannot get an SSN. Free state tax usa No SSN. Free state tax usa   If you do not have a valid SSN, put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). Free state tax usa You cannot claim the EIC. Free state tax usa Getting an SSN. Free state tax usa   If you (or your spouse, if filing a joint return) do not have an SSN, you can apply for one by filing Form SS-5 with the SSA. Free state tax usa You can get Form SS-5 online at www. Free state tax usa socialsecurity. Free state tax usa gov, from your local SSA office, or by calling the SSA at 1-800-772-1213. Free state tax usa Filing deadline approaching and still no SSN. Free state tax usa   If the filing deadline is approaching and you still do not have an SSN, you have two choices. Free state tax usa Request an automatic 6-month extension of time to file your return. Free state tax usa You can get this extension by filing Form 4868, Application for Automatic Extension of Time to File U. Free state tax usa S. Free state tax usa Individual Income Tax Return. Free state tax usa For more information, see the instructions for Form 4868. Free state tax usa File the return on time without claiming the EIC. Free state tax usa After receiving the SSN, file an amended return, Form 1040X, claiming the EIC. Free state tax usa Attach a filled-in Schedule EIC, Earned Income Credit, if you have a qualifying child. Free state tax usa Rule 3—Your Filing Status Cannot Be “Married Filing Separately” If you are married, you usually must file a joint return to claim the EIC. Free state tax usa Your filing status cannot be “Married filing separately. Free state tax usa ” Spouse did not live with you. Free state tax usa   If you are married and your spouse did not live in your home at any time during the last 6 months of the year, you may be able to file as head of household, instead of married filing separately. Free state tax usa In that case, you may be able to claim the EIC. Free state tax usa For detailed information about filing as head of household, see Publication 501, Exemptions, Standard Deduction, and Filing Information. Free state tax usa Rule 4—You Must Be a U. Free state tax usa S. Free state tax usa Citizen or Resident Alien All Year If you (or your spouse, if married) were a nonresident alien for any part of the year, you cannot claim the earned income credit unless your filing status is married filing jointly. Free state tax usa You can use that filing status only if one spouse is a U. Free state tax usa S. Free state tax usa citizen or resident alien and you choose to treat the nonresident spouse as a U. Free state tax usa S. Free state tax usa resident. Free state tax usa If you make this choice, you and your spouse are taxed on your worldwide income. Free state tax usa If you need more information on making this choice, get Publication 519, U. Free state tax usa S. Free state tax usa Tax Guide for Aliens. Free state tax usa If you (or your spouse, if married) were a nonresident alien for any part of the year and your filing status is not married filing jointly, enter “No” on the dotted line next to line 64a (Form 1040) or in the space to the left of line 38a (Form 1040A). Free state tax usa Rule 5—You Cannot File Form 2555 or Form 2555-EZ You cannot claim the earned income credit if you file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. Free state tax usa You file these forms to exclude income earned in foreign countries from your gross income, or to deduct or exclude a foreign housing amount. Free state tax usa U. Free state tax usa S. Free state tax usa possessions are not foreign countries. Free state tax usa See Publication 54, Tax Guide for U. Free state tax usa S. Free state tax usa Citizens and Resident Aliens Abroad, for more detailed information. Free state tax usa Rule 6—Your Investment Income Must Be $3,300 or Less You cannot claim the earned income credit unless your investment income is $3,300 or less. Free state tax usa If your investment income is more than $3,300, you cannot claim the credit. Free state tax usa Form 1040EZ. Free state tax usa   If you file Form 1040EZ, your investment income is the total of the amount on line 2 and the amount of any tax-exempt interest you wrote to the right of the words “Form 1040EZ” on line 2. Free state tax usa Form 1040A. Free state tax usa   If you file Form 1040A, your investment income is the total of the amounts on lines 8a (taxable interest), 8b (tax-exempt interest), 9a (ordinary dividends), and 10 (capital gain distributions) on that form. Free state tax usa Form 1040. Free state tax usa   If you file Form 1040, use Worksheet 1 in this chapter to figure your investment income. Free state tax usa    Worksheet 1. Free state tax usa Investment Income If You Are Filing Form 1040 Use this worksheet to figure investment income for the earned income credit when you file Form 1040. Free state tax usa Interest and Dividends         1. Free state tax usa Enter any amount from Form 1040, line 8a 1. Free state tax usa   2. Free state tax usa Enter any amount from Form 1040, line 8b, plus any amount on Form 8814, line 1b 2. Free state tax usa   3. Free state tax usa Enter any amount from Form 1040, line 9a 3. Free state tax usa   4. Free state tax usa Enter the amount from Form 1040, line 21, that is from Form 8814 if you are filing that form to report your child's interest and dividend income on your return. Free state tax usa (If your child received an Alaska Permanent Fund dividend, use Worksheet 2 in this chapter to figure the amount to enter on this line. Free state tax usa ) 4. Free state tax usa   Capital Gain Net Income         5. Free state tax usa Enter the amount from Form 1040, line 13. Free state tax usa If the amount on that line is a loss, enter -0- 5. Free state tax usa       6. Free state tax usa Enter any gain from Form 4797, Sales of Business Property, line 7. Free state tax usa If the amount on that line is a loss, enter -0-. Free state tax usa (But, if you completed lines 8 and 9 of Form 4797, enter the amount from line 9 instead. Free state tax usa ) 6. Free state tax usa       7. Free state tax usa Substract line 6 of this worksheet from line 5 of this worksheet. Free state tax usa (If the result is less than zero, enter -0-. Free state tax usa ) 7. Free state tax usa   Royalties and Rental Income From Personal Property         8. Free state tax usa Enter any royalty income from Schedule E, line 23b, plus any income from the rental of personal property shown on Form 1040, line 21 8. Free state tax usa       9. Free state tax usa Enter any expenses from Schedule E, line 20, related to royalty income, plus any expenses from the rental of personal property deducted on Form 1040, line 36 9. Free state tax usa       10. Free state tax usa Subtract the amount on line 9 of this worksheet from the amount on line 8. Free state tax usa (If the result is less than zero, enter -0-. Free state tax usa ) 10. Free state tax usa   Passive Activities         11. Free state tax usa Enter the total of any net income from passive activities (such as income included on Schedule E, line 26, 29a (col. Free state tax usa (g)), 34a (col. Free state tax usa (d)), or 40). Free state tax usa (See instructions below for lines 11 and 12. Free state tax usa ) 11. Free state tax usa       12. Free state tax usa Enter the total of any losses from passive activities (such as losses included on Schedule E, line 26, 29b (col. Free state tax usa (f)), 34b (col. Free state tax usa (c)), or 40). Free state tax usa (See instructions below for lines 11 and 12. Free state tax usa ) 12. Free state tax usa       13. Free state tax usa Combine the amounts on lines 11 and 12 of this worksheet. Free state tax usa (If the result is less than zero, enter -0-. Free state tax usa ) 13. Free state tax usa   14. Free state tax usa Add the amounts on lines 1, 2, 3, 4, 7, 10, and 13. Free state tax usa Enter the total. Free state tax usa This is your investment income 14. Free state tax usa   15. Free state tax usa Is the amount on line 14 more than $3,300? ❑ Yes. Free state tax usa You cannot take the credit. Free state tax usa  ❑ No. Free state tax usa Go to Step 3 of the Form 1040 instructions for lines 64a and 64b to find out if you can take the credit (unless you are using this publication to find out if you can take the credit; in that case, go to Rule 7, next). Free state tax usa       Instructions for lines 11 and 12. Free state tax usa In figuring the amount to enter on lines 11 and 12, do not take into account any royalty income (or loss) included on line 26 of Schedule E or any amount included in your earned income. Free state tax usa To find out if the income on line 26 or line 40 of Schedule E is from a passive activity, see the Schedule E instructions. Free state tax usa If any of the rental real estate income (or loss) included on Schedule E, line 26, is not from a passive activity, print “NPA” and the amount of that income (or loss) on the dotted line next to line 26. Free state tax usa Worksheet 2. Free state tax usa Worksheet for Line 4 of Worksheet 1 Complete this worksheet only if Form 8814 includes an Alaska Permanent Fund dividend. Free state tax usa Note. Free state tax usa Fill out a separate Worksheet 2 for each Form 8814. Free state tax usa     1. Free state tax usa Enter the amount from Form 8814, line 2a 1. Free state tax usa   2. Free state tax usa Enter the amount from Form 8814, line 2b 2. Free state tax usa   3. Free state tax usa Subtract line 2 from line 1 3. Free state tax usa   4. Free state tax usa Enter the amount from Form 8814, line 1a 4. Free state tax usa   5. Free state tax usa Add lines 3 and 4 5. Free state tax usa   6. Free state tax usa Enter the amount of the child's Alaska Permanent Fund dividend 6. Free state tax usa   7. Free state tax usa Divide line 6 by line 5. Free state tax usa Enter the result as a decimal (rounded to at least three places) 7. Free state tax usa   8. Free state tax usa Enter the amount from Form 8814, line 12 8. Free state tax usa   9. Free state tax usa Multiply line 7 by line 8 9. Free state tax usa   10. Free state tax usa Subtract line 9 from line 8. Free state tax usa Enter the result on line 4 of Worksheet 1 10. Free state tax usa     (If filing more than one Form 8814, enter on line 4 of Worksheet 1 the total of the amounts on line 10 of all Worksheets 2. Free state tax usa )     Example—completing Worksheet 2. Free state tax usa Your 10-year-old child has taxable interest income of $400, an Alaska Permanent Fund dividend of $1,000, and ordinary dividends of $1,100, of which $500 are qualified dividends. Free state tax usa You choose to report this income on your return. Free state tax usa You enter $400 on line 1a of Form 8814, $2,100 ($1,000 + $1,100) on line 2a, and $500 on line 2b. Free state tax usa After completing lines 4 through 11, you enter $400 on line 12 of Form 8814 and line 21 of Form 1040. Free state tax usa On Worksheet 2, you enter $2,100 on line 1, $500 on line 2, $1,600 on line 3, $400 on line 4, $2,000 on line 5, $1,000 on line 6, 0. Free state tax usa 500 on line 7, $400 on line 8, $200 on line 9, and $200 on line 10. Free state tax usa You then enter $200 on line 4 of Worksheet 1. Free state tax usa Rule 7—You Must Have Earned Income This credit is called the “earned income” credit because, to qualify, you must work and have earned income. Free state tax usa If you are married and file a joint return, you meet this rule if at least one spouse works and has earned income. Free state tax usa If you are an employee, earned income includes all the taxable income you get from your employer. Free state tax usa Rule 15 has information that will help you figure the amount of your earned income. Free state tax usa If you are self-employed or a statutory employee, you will figure your earned income on EIC Worksheet B in the Form 1040 instructions. Free state tax usa Earned Income Earned income includes all of the following types of income. Free state tax usa Wages, salaries, tips, and other taxable employee pay. Free state tax usa Employee pay is earned income only if it is taxable. Free state tax usa Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. Free state tax usa But there is an exception for nontaxable combat pay, which you can choose to include in earned income, as explained later in this chapter. Free state tax usa Net earnings from self-employment. Free state tax usa Gross income received as a statutory employee. Free state tax usa Wages, salaries, and tips. Free state tax usa    Wages, salaries, and tips you receive for working are reported to you on Form W-2, in box 1. Free state tax usa You should report these on line 1 (Form 1040EZ) or line 7 (Forms 1040A and 1040). Free state tax usa Nontaxable combat pay election. Free state tax usa   You can elect to include your nontaxable combat pay in earned income for the earned income credit. Free state tax usa The amount of your nontaxable combat pay should be shown on your Form W-2, in box 12, with code Q. Free state tax usa Electing to include nontaxable combat pay in earned income may increase or decrease your EIC. Free state tax usa For details, see Nontaxable combat pay in chapter 4. Free state tax usa Net earnings from self-employment. Free state tax usa   You may have net earnings from self-employment if: You own your own business, or You are a minister or member of a religious order. Free state tax usa Minister's housing. Free state tax usa   The rental value of a home or a housing allowance provided to a minister as part of the minister's pay generally is not subject to income tax but is included in net earnings from self-employment. Free state tax usa For that reason, it is included in earned income for the EIC (except in the cases described in Approved Form 4361 or Form 4029 , below). Free state tax usa Statutory employee. Free state tax usa   You are a statutory employee if you receive a Form W-2 on which the “Statutory employee” box (box 13) is checked. Free state tax usa You report your income and expenses as a statutory employee on Schedule C or C-EZ (Form 1040). Free state tax usa Strike benefits. Free state tax usa   Strike benefits paid by a union to its members are earned income. Free state tax usa Approved Form 4361 or Form 4029 This section is for persons who have an approved: Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners, or Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits. Free state tax usa Each approved form exempts certain income from social security taxes. Free state tax usa Each form is discussed here in terms of what is or is not earned income for the EIC. Free state tax usa Form 4361. Free state tax usa   Whether or not you have an approved Form 4361, amounts you received for performing ministerial duties as an employee count as earned income. Free state tax usa This includes wages, salaries, tips, and other taxable employee compensation. Free state tax usa A nontaxable housing allowance or the nontaxable rental value of a home is not earned income. Free state tax usa Also, amounts you received for performing ministerial duties, but not as an employee, do not count as earned income. Free state tax usa Examples include fees for performing marriages and honoraria for delivering speeches. Free state tax usa Form 4029. Free state tax usa   Whether or not you have an approved Form 4029, all wages, salaries, tips, and other taxable employee compensation count as earned income. Free state tax usa However, amounts you received as a self-employed individual do not count as earned income. Free state tax usa Also, in figuring earned income, do not subtract losses on Schedule C, C-EZ, or F from wages on line 7 of Form 1040. Free state tax usa Disability Benefits If you retired on disability, taxable benefits you receive under your employer's disability retirement plan are considered earned income until you reach minimum retirement age. Free state tax usa Minimum retirement age generally is the earliest age at which you could have received a pension or annuity if you were not disabled. Free state tax usa You must report your taxable disability payments on line 7 of either Form 1040 or Form 1040A until you reach minimum retirement age. Free state tax usa Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension and are not considered earned income. Free state tax usa Report taxable pension payments on Form 1040, lines 16a and 16b, or Form 1040A, lines 12a and 12b. Free state tax usa Disability insurance payments. Free state tax usa   Payments you received from a disability insurance policy that you paid the premiums for are not earned income. Free state tax usa It does not matter whether you have reached minimum retirement age. Free state tax usa If this policy is through your employer, the amount may be shown in box 12 of your Form W-2 with code “J. Free state tax usa ” Income That Is Not Earned Income Examples of items that are not earned income include interest and dividends, pensions and annuities, social security and railroad retirement benefits (including disability benefits), alimony and child support, welfare benefits, workers' compensation benefits, unemployment compensation (insurance), nontaxable foster care payments, and veterans' benefits, including VA rehabilitation payments. Free state tax usa Do not include any of these items in your earned income. Free state tax usa Earnings while an inmate. Free state tax usa   Amounts received for work performed while an inmate in a penal institution are not earned income when figuring the earned income credit. Free state tax usa This includes amounts for work performed while in a work release program or while in a halfway house. Free state tax usa Workfare payments. Free state tax usa   Nontaxable workfare payments are not earned income for the EIC. Free state tax usa These are cash payments certain people receive from a state or local agency that administers public assistance programs funded under the federal Temporary Assistance for Needy Families (TANF) program in return for certain work activities such as (1) work experience activities (including remodeling or repairing public housing) if sufficient private sector employment is not available, or (2) community service program activities. Free state tax usa Community property. Free state tax usa   If you are married, but qualify to file as head of household under special rules for married taxpayers living apart (see Rule 3), and live in a state that has community property laws, your earned income for the EIC does not include any amount earned by your spouse that is treated as belonging to you under those laws. Free state tax usa That amount is not earned income for the EIC, even though you must include it in your gross income on your income tax return. Free state tax usa Your earned income includes the entire amount you earned, even if part of it is treated as belonging to your spouse under your state's community property laws. Free state tax usa Nevada, Washington, and California domestic partners. Free state tax usa   If you are a registered domestic partner in Nevada, Washington, or California, the same rules apply. Free state tax usa Your earned income for the EIC does not include any amount earned by your partner. Free state tax usa Your earned income includes the entire amount you earned. Free state tax usa For details, see Publication 555. Free state tax usa Conservation Reserve Program (CRP) payments. Free state tax usa   If you were receiving social security retirement benefits or social security disability benefits at the time you received any CRP payments, your CRP payments are not earned income for the EIC. Free state tax usa Nontaxable military pay. Free state tax usa   Nontaxable pay for members of the Armed Forces is not considered earned income for the EIC. Free state tax usa Examples of nontaxable military pay are combat pay, the Basic Allowance for Housing (BAH), and the Basic Allowance for Subsistence (BAS). Free state tax usa See Publication 3, Armed Forces' Tax Guide, for more information. Free state tax usa    Combat pay. Free state tax usa You can elect to include your nontaxable combat pay in earned income for the EIC. Free state tax usa See Nontaxable combat pay in chapter 4. Free state tax usa Chapter 2—Rules If You Have a Qualifying Child If you have met all the rules in chapter 1, use this chapter to see if you have a qualifying child. Free state tax usa This chapter discusses Rules 8 through 10. Free state tax usa You must meet all three of those rules, in addition to the rules in chapters 1 and 4, to qualify for the earned income credit with a qualifying child. Free state tax usa You must file Form 1040 or Form 1040A to claim the EIC with a qualifying child. Free state tax usa (You cannot file Form 1040EZ. Free state tax usa ) You also must complete Schedule EIC and attach it to your return. Free state tax usa If you meet all the rules in chapter 1 and this chapter, read chapter 4 to find out what to do next. Free state tax usa No qualifying child. Free state tax usa   If you do not meet Rule 8, you do not have a qualifying child. Free state tax usa Read chapter 3 to find out if you can get the earned income credit without a qualifying child. Free state tax usa Rule 8—Your Child Must Meet the Relationship, Age, Residency, and Joint Return Tests Your child is a qualifying child if your child meets four tests. Free state tax usa The fours tests are: Relationship, Age, Residency, and Joint return. Free state tax usa The four tests are illustrated in Figure 1. Free state tax usa The paragraphs that follow contain more information about each test. Free state tax usa Relationship Test To be your qualifying child, a child must be your: Son, daughter, stepchild, foster child, or a descendant of any of them (for example, your grandchild), or Brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them (for example, your niece or nephew). Free state tax usa The following definitions clarify the relationship test. Free state tax usa Adopted child. Free state tax usa   An adopted child is always treated as your own child. Free state tax usa The term “adopted child” includes a child who was lawfully placed with you for legal adoption. Free state tax usa Foster child. Free state tax usa   For the EIC, a person is your foster child if the child is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction. Free state tax usa (An authorized placement agency includes a state or local government agency. Free state tax usa It also includes a tax-exempt organization licensed by a state. Free state tax usa In addition, it includes an Indian tribal government or an organization authorized by an Indian tribal government to place Indian children. Free state tax usa ) Example. Free state tax usa Debbie, who is 12 years old, was placed in your care 2 years ago by an authorized agency responsible for placing children in foster homes. Free state tax usa Debbie is your foster child. Free state tax usa Figure 1. Free state tax usa Tests for Qualifying Child Please click here for the text description of the image. Free state tax usa Conditions for Qualifying Child Age Test Your child must be: Under age 19 at the end of 2013 and younger than you (or your spouse, if filing jointly), Under age 24 at the end of 2013, a student, and younger than you (or your spouse, if filing jointly, or Permanently and totally disabled at any time during 2013, regardless of age. Free state tax usa The following examples and definitions clarify the age test. Free state tax usa Example 1—child not under age 19. Free state tax usa Your son turned 19 on December 10. Free state tax usa Unless he was permanently and totally disabled or a student, he is not a qualifying child because, at the end of the year, he was not under age 19. Free state tax usa Example 2—child not younger than you or your spouse. Free state tax usa Your 23-year-old brother, who is a full-time student and unmarried, lives with you and your spouse. Free state tax usa He is not disabled. Free state tax usa Both you and your spouse are 21 years old, and you file a joint return. Free state tax usa Your brother is not your qualifying child because he is not younger than you or your spouse. Free state tax usa Example 3—child younger than your spouse but not younger than you. Free state tax usa The facts are the same as in Example 2 except that your spouse is 25 years old. Free state tax usa Because your brother is younger than your spouse, he is your qualifying child, even though he is not younger than you. Free state tax usa Student defined. Free state tax usa   To qualify as a student, your child must be, during some part of each of any 5 calendar months during the calendar year: A full-time student at a school that has a regular teaching staff, course of study, and regular student body at the school, or A student taking a full-time, on-farm training course given by a school described in (1), or a state, county, or local government. Free state tax usa   The 5 calendar months need not be consecutive. Free state tax usa   A full-time student is a student who is enrolled for the number of hours or courses the school considers to be full-time attendance. Free state tax usa School defined. Free state tax usa   A school can be an elementary school, junior or senior high school, college, university, or technical, trade, or mechanical school. Free state tax usa However, on-the-job training courses, correspondence schools, and schools offering courses only through the Internet do not count as schools for the EIC. Free state tax usa Vocational high school students. Free state tax usa   Students who work in co-op jobs in private industry as a part of a school's regular course of classroom and practical training are considered full-time students. Free state tax usa Permanently and totally disabled. Free state tax usa   Your child is permanently and totally disabled if both of the following apply. Free state tax usa He or she cannot engage in any substantial gainful activity because of a physical or mental condition. Free state tax usa A doctor determines the condition has lasted or can be expected to last continuously for at least a year or can lead to death. Free state tax usa Residency Test Your child must have lived with you in the United States for more than half of 2013. Free state tax usa The following definitions clarify the residency test. Free state tax usa United States. Free state tax usa   This means the 50 states and the District of Columbia. Free state tax usa It does not include Puerto Rico or U. Free state tax usa S. Free state tax usa possessions such as Guam. Free state tax usa Homeless shelter. Free state tax usa   Your home can be any location where you regularly live. Free state tax usa You do not need a traditional home. Free state tax usa For example, if your child lived with you for more than half the year in one or more homeless shelters, your child meets the residency test. Free state tax usa Military personnel stationed outside the United States. Free state tax usa   U. Free state tax usa S. Free state tax usa military personnel stationed outside the United States on extended active duty are considered to live in the United States during that duty period for purposes of the EIC. Free state tax usa Extended active duty. Free state tax usa   Extended active duty means you are called or ordered to duty for an indefinite period or for a period of more than 90 days. Free state tax usa Once you begin serving your extended active duty, you are still considered to have been on extended active duty even if you do not serve more than 90 days. Free state tax usa Birth or death of child. Free state tax usa    child who was born or died in 2013 is treated as having lived with you for more than half of 2013 if your home was the child's home for more than half the time he or she was alive in 2013. Free state tax usa Temporary absences. Free state tax usa   Count time that you or your child is away from home on a temporary absence due to a special circumstance as time the child lived with you. Free state tax usa Examples of a special circumstance include illness, school attendance, business, vacation, military service, and detention in a juvenile facility. Free state tax usa Kidnapped child. Free state tax usa   A kidnapped child is treated as living with you for more than half of the year if the child lived with you for more than half the part of the year before the date of the kidnapping. Free state tax usa The child must be presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or the child's family. Free state tax usa This treatment applies for all years until the child is returned. Free state tax usa However, the last year this treatment can apply is the earlier of: The year there is a determination that the child is dead, or The year the child would have reached age 18. Free state tax usa   If your qualifying child has been kidnapped and meets these requirements, enter “KC,” instead of a number, on line 6 of Schedule EIC. Free state tax usa Joint Return Test To meet this test, the child cannot file a joint return for the year. Free state tax usa Exception. Free state tax usa   An exception to the joint return test applies if your child and his or her spouse file a joint return only to claim a refund of income tax withheld or estimated tax paid. Free state tax usa Example 1—child files joint return. Free state tax usa You supported your 18-year-old daughter, and she lived with you all year while her husband was in the Armed Forces. Free state tax usa He earned $25,000 for the year. Free state tax usa The couple files a joint return. Free state tax usa Because your daughter and her husband file a joint return, she is not your qualifying child. Free state tax usa Example 2—child files joint return to get refund of tax withheld. Free state tax usa Your 18-year-old son and his 17-year-old wife had $800 of wages from part-time jobs and no other income. Free state tax usa They do not have a child. Free state tax usa Neither is required to file a tax return. Free state tax usa Taxes were taken out of their pay, so they file a joint return only to get a refund of the withheld taxes. Free state tax usa The exception to the joint return test applies, so your son may be your qualifying child if all the other tests are met. Free state tax usa Example 3—child files joint return to claim American opportunity credit. Free state tax usa The facts are the same as in Example 2 except no taxes were taken out of your son's pay. Free state tax usa He and his wife are not required to file a tax return, but they file a joint return to claim an American opportunity credit of $124 and get a refund of that amount. Free state tax usa Because claiming the American opportunity credit is their reason for filing the return, they are not filing it only to claim a refund of income tax withheld or estimated tax paid. Free state tax usa The exception to the joint return test does not apply, so your son is not your qualifying child. Free state tax usa Married child. Free state tax usa   Even if your child does not file a joint return, if your child was married at the end of the year, he or she cannot be your qualifying child unless: You can claim an exemption for the child, or The reason you cannot claim an exemption for the child is that you let the child's other parent claim the exemption under the Special rule for divorced or separated parents (or parents who live apart) described later. Free state tax usa    Social security number. Free state tax usa Your qualifying child must have a valid social security number (SSN), unless the child was born and died in 2013 and you attach to your return a copy of the child's birth certificate, death certificate, or hospital records showing a live birth. Free state tax usa You cannot claim the EIC on the basis of a qualifying child if: The qualifying child's SSN is missing from your tax return or is incorrect, The qualifying child's social security card says “Not valid for employment” and was issued for use in getting a federally funded benefit, or Instead of an SSN, the qualifying child has: An individual taxpayer identification number (ITIN), which is issued to a noncitizen who cannot get an SSN, or An adoption taxpayer identification number (ATIN), issued to adopting parents who cannot get an SSN for the child being adopted until the adoption is final. Free state tax usa   If you have more than one qualifying child and only one has a valid SSN, you can use only that child to claim the EIC. Free state tax usa For more information about SSNs, see Rule 2. Free state tax usa Rule 9—Your Qualifying Child Cannot Be Used by More Than One Person To Claim the EIC Sometimes a child meets the tests to be a qualifying child of more than one person. Free state tax usa However, only one of these persons can actually treat the child as a qualifying child. Free state tax usa Only that person can use the child as a qualifying child to take all of the following tax benefits (provided the person is eligible for each benefit). Free state tax usa The exemption for the child. Free state tax usa The child tax credit. Free state tax usa Head of household filing status. Free state tax usa The credit for child and dependent care expenses. Free state tax usa The exclusion for dependent care benefits. Free state tax usa The EIC. Free state tax usa The other person cannot take any of these benefits based on this qualifying child. Free state tax usa In other words, you and the other person cannot agree to divide these tax benefits between you. Free state tax usa The other person cannot take any of these tax benefits unless he or she has a different qualifying child. Free state tax usa The tiebreaker rules, which follow, explain who, if anyone, can claim the EIC when more than one person has the same qualifying child. Free state tax usa However, the tiebreaker rules do not apply if the other person is your spouse and you file a joint return. Free state tax usa Tiebreaker rules. Free state tax usa   To determine which person can treat the child as a qualifying child to claim the six tax benefits just listed, the following tiebreaker rules apply. Free state tax usa If only one of the persons is the child's parent, the child is treated as the qualifying child of the parent. Free state tax usa If the parents file a joint return together and can claim the child as a qualifying child, the child is treated as the qualifying child of the parents. Free state tax usa If the parents do not file a joint return together but both parents claim the child as a qualifying child, the IRS will treat the child as the qualifying child of the parent with whom the child lived for the longer period of time during the year. Free state tax usa If the child lived with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who had the higher adjusted gross income (AGI) for the year. Free state tax usa If no parent can claim the child as a qualifying child, the child is treated as the qualifying child of the person who had the highest AGI for the year. Free state tax usa If a parent can claim the child as a qualifying child but no parent does so claim the child, the child is treated as the qualifying child of the person who had the highest AGI for the year, but only if that person's AGI is higher than the highest AGI of any of the child's parents who can claim the child. Free state tax usa If the child's parents file a joint return with each other, this rule can be applied by treating the parents' total AGI as divided evenly between them. Free state tax usa See Example 8. Free state tax usa   Subject to these tiebreaker rules, you and the other person may be able to choose which of you claims the child as a qualifying child. Free state tax usa See Examples 1 through 13. Free state tax usa   If you cannot claim the EIC because your qualifying child is treated under the tiebreaker rules as the qualifying child of another person for 2013, you may be able to take the EIC using a different qualifying child, but you cannot take the EIC using the rules in chapter 3 for people who do not have a qualifying child. Free state tax usa If the other person cannot claim the EIC. Free state tax usa   If you and someone else have the same qualifying child but the other person cannot claim the EIC because he or she is not eligible or his or her earned income or AGI is too high, you may be able to treat the child as a qualifying child. Free state tax usa See Examples 6 and 7. Free state tax usa But you cannot treat the child as a qualifying child to claim the EIC if the other person uses the child to claim any of the other six tax benefits listed earlier in this chapter. Free state tax usa Examples. Free state tax usa    The following examples may help you in determining whether you can claim the EIC when you and someone else have the same qualifying child. Free state tax usa Example 1—child lived with parent and grandparent. Free state tax usa You and your 2-year-old son Jimmy lived with your mother all year. Free state tax usa You are 25 years old, unmarried, and your AGI is $9,000. Free state tax usa Your only income was $9,000 from a part-time job. Free state tax usa Your mother's only income was $20,000 from her job, and her AGI is $20,000. Free state tax usa Jimmy's father did not live with you or Jimmy. Free state tax usa The special rule explained later for divorced or separated parents (or parents who live apart) does not apply. Free state tax usa Jimmy is a qualifying child of both you and your mother because he meets the relationship, age, residency, and joint return tests for both you and your mother. Free state tax usa However, only one of you can treat him as a qualifying child to claim the EIC (and the other tax benefits listed earlier in this chapter for which that person qualifies). Free state tax usa He is not a qualifying child of anyone else, including his father. Free state tax usa If you do not claim Jimmy as a qualifying child for the EIC or any of the other tax benefits listed earlier, your mother can treat him as a qualifying child to claim the EIC (and any of the other tax benefits listed earlier for which she qualifies). Free state tax usa Example 2—parent has higher AGI than grandparent. Free state tax usa The facts are the same as in Example 1 except your AGI is $25,000. Free state tax usa Because your mother's AGI is not higher than yours, she cannot claim Jimmy as a qualifying child. Free state tax usa Only you can claim him. Free state tax usa Example 3—two persons claim same child. Free state tax usa The facts are the same as in Example 1 except that you and your mother both claim Jimmy as a qualifying child. Free state tax usa In this case, you as the child's parent will be the only one allowed to claim Jimmy as a qualifying child for the EIC and the other tax benefits listed earlier for which you qualify. Free state tax usa The IRS will disallow your mother's claim to the EIC and any of the other tax benefits listed earlier unless she has another qualifying child. Free state tax usa Example 4—qualifying children split between two persons. Free state tax usa The facts are the same as in Example 1 except that you also have two other young children who are qualifying children of both you and your mother. Free state tax usa Only one of you can claim each child. Free state tax usa However, if your mother's AGI is higher than yours, you can allow your mother to claim one or more of the children. Free state tax usa For example, if you claim one child, your mother can claim the other two. Free state tax usa Example 5—taxpayer who is a qualifying child. Free state tax usa The facts are the same as in Example 1 except that you are only 18 years old. Free state tax usa This means you are a qualifying child of your mother. Free state tax usa Because of Rule 10, discussed next, you cannot claim the EIC and cannot claim your son as a qualifying child. Free state tax usa Only your mother may be able to treat Jimmy as a qualifying child to claim the EIC. Free state tax usa If your mother meets all the other requirements for claiming the EIC and you do not claim Jimmy as a qualifying child for any of the other tax benefits listed earlier, your mother can claim both you and Jimmy as qualifying children for the EIC. Free state tax usa Example 6—grandparent with too much earned income to claim EIC. Free state tax usa The facts are the same as in Example 1 except that your mother earned $50,000 from her job. Free state tax usa Because your mother's earned income is too high for her to claim the EIC, only you can claim the EIC using your son. Free state tax usa Example 7—parent with too much earned income to claim EIC. Free state tax usa The facts are the same as in Example 1 except that you earned $50,000 from your job and your AGI is $50,500. Free state tax usa Your earned income is too high for you to claim the EIC. Free state tax usa But your mother cannot claim the EIC either, because her AGI is not higher than yours. Free state tax usa Example 8—child lived with both parents and grandparent. Free state tax usa The facts are the same as in Example 1 except that you and Jimmy's father are married to each other, live with Jimmy and your mother, and have AGI of $30,000 on a joint return. Free state tax usa If you and your husband do not claim Jimmy as a qualifying child for the EIC or any of the other tax benefits listed earlier, your mother can claim him instead. Free state tax usa Even though the AGI on your joint return, $30,000, is more than your mother's AGI of $20,000, for this purpose half of the joint AGI can be treated as yours and half as your husband's. Free state tax usa In other words, each parent's AGI can be treated as $15,000. Free state tax usa Example 9—separated parents. Free state tax usa You, your husband, and your 10-year-old son Joey lived together until August 1, 2013, when your husband moved out of the household. Free state tax usa In August and September, Joey lived with you. Free state tax usa For the rest of the year, Joey lived with your husband, who is Joey's father. Free state tax usa Joey is a qualifying child of both you and your husband because he lived with each of you for more than half the year and because he met the relationship, age, and joint return tests for both of you. Free state tax usa At the end of the year, you and your husband still were not divorced, legally separated, or separated under a written separation agreement, so the Special rule for divorced or separated parents (or parents who live apart) does not apply. Free state tax usa You and your husband will file separate returns. Free state tax usa Your husband agrees to let you treat Joey as a qualifying child. Free state tax usa This means, if your husband does not claim Joey as a qualifying child for any of the tax benefits listed earlier, you can claim him as a qualifying child for any tax benefit listed earlier for which you qualify. Free state tax usa However, your filing status is married filing separately, so you cannot claim the EIC or the credit for child and dependent care expenses. Free state tax usa See Rule 3. Free state tax usa Example 10—separated parents claim same child. Free state tax usa The facts are the same as in Example 9 except that you and your husband both claim Joey as a qualifying child. Free state tax usa In this case, only your husband will be allowed to treat Joey as a qualifying child. Free state tax usa This is because, during 2013, the boy lived with him longer than with you. Free state tax usa You cannot claim the EIC (either with or without a qualifying child). Free state tax usa However, your husband's filing status is married filing separately, so he cannot claim the EIC or the credit for child and dependent care expenses. Free state tax usa See Rule 3. Free state tax usa Example 11—unmarried parents. Free state tax usa You, your 5-year-old son, and your son's father lived together all year. Free state tax usa You and your son's father are not married. Free state tax usa Your son is a qualifying child of both you and his father because he meets the relationship, age, residency, and joint return tests for both you and his father. Free state tax usa Your earned income and AGI are $12,000, and your son's father's earned income and AGI are $14,000. Free state tax usa Neither of you had any other income. Free state tax usa Your son's father agrees to let you treat the child as a qualifying child. Free state tax usa This means, if your son's father does not claim your son as a qualifying child for the EIC or any of the other tax benefits listed earlier, you can claim him as a qualifying child for the EIC and any of the other tax benefits listed earlier for which you qualify. Free state tax usa Example 12—unmarried parents claim same child. Free state tax usa The facts are the same as in Example 11 except that you and your son's father both claim your son as a qualifying child. Free state tax usa In this case, only your son's father will be allowed to treat your son as a qualifying child. Free state tax usa This is because his AGI, $14,000, is more than your AGI, $12,000. Free state tax usa You cannot claim the EIC (either with or without a qualifying child). Free state tax usa Example 13—child did not live with a parent. Free state tax usa You and your 7-year-old niece, your sister's child, lived with your mother all year. Free state tax usa You are 25 years old, and your AGI is $9,300. Free state tax usa Your only income was from a part-time job. Free state tax usa Your mother's AGI is $15,000. Free state tax usa Her only income was from her job. Free state tax usa Your niece's parents file jointly, have an AGI of less than $9,000, and do not live with you or their child. Free state tax usa Your niece is a qualifying child of both you and your mother because she meets the relationship, age, residency, and joint return tests for both you and your mother. Free state tax usa However, only your mother can treat her as a qualifying child. Free state tax usa This is because your mother's AGI, $15,000, is more than your AGI, $9,300. Free state tax usa Special rule for divorced or separated parents (or parents who live apart). Free state tax usa   A child will be treated as the qualifying child of his or her noncustodial parent (for purposes of claiming an exemption and the child tax credit, but not for the EIC) if all of the following statements are true. Free state tax usa The parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Lived apart at all time during the last 6 months of 2013, whether or not they are or were married. Free state tax usa The child received over half of his or her support for the year from the parents. Free state tax usa The child is in the custody of one or both parents for more than half of 2013. Free state tax usa Either of the following statements is true. Free state tax usa The custodial parent signs Form 8332 or a substantially similar statement that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches the form or statement to his or her return. Free state tax usa If the divorce decree or separation agreement went into effect after 1984 and before 2009, the noncustodial parent may be able to attach certain pages from the decree or agreement instead of Form 8332. Free state tax usa A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2013 provides that the noncustodial parent can claim the child as a dependent, and the noncustodial parent provides at least $600 for support of the child during 2013. Free state tax usa For details, see Publication 501. Free state tax usa Also see Applying Rule 9 to divorced or separated parents (or parents who live apart), next. Free state tax usa Applying Rule 9 to divorced or separated parents (or parents who live apart). Free state tax usa   If a child is treated as the qualifying child of the noncustodial parent under the special rule just described for children of divorced or separated parents (or parents who live apart), only the noncustodial parent can claim an exemption and the child tax credit for the child. Free state tax usa However, the custodial parent, if eligible, or another eligible taxpayer can claim the child as a qualifying child for the EIC and other tax benefits listed earlier in this chapter. Free state tax usa If the child is the qualifying child of more than one person for these benefits, then the tiebreaker rules determine which person can treat the child as a qualifying child. Free state tax usa Example 1. Free state tax usa You and your 5-year-old son lived all year with your mother, who paid the entire cost of keeping up the home. Free state tax usa Your AGI is $10,000. Free state tax usa Your mother’s AGI is $25,000. Free state tax usa Your son's father did not live with you or your son. Free state tax usa Under the Special rule for divorced or separated parents (or parents who live apart), your son is treated as the qualifying child of his father, who can claim an exemption and the child tax credit for the child. Free state tax usa However, your son's father cannot claim your son as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, or the EIC. Free state tax usa You and your mother did not have any child care expenses or dependent care benefits. Free state tax usa If you do not claim your son as a qualifying child, your mother can claim him as a qualifying child for the EIC and head of household filing status, if she qualifies for these tax benefits. Free state tax usa Example 2. Free state tax usa The facts are the same as in Example 1 except that your AGI is $25,000 and your mother's AGI is $21,000. Free state tax usa Your mother cannot claim your son as a qualifying child for any purpose because her AGI is not higher than yours. Free state tax usa Example 3. Free state tax usa The facts are the same as in Example 1 except that you and your mother both claim your son as a qualifying child for the EIC. Free state tax usa Your mother also claims him as a qualifying child for head of household filing status. Free state tax usa You as the child's parent will be the only one allowed to claim your son as a qualifying child for the EIC. Free state tax usa The IRS will disallow your mother's claim to the EIC and head of household filing status unless she has another qualifying child. Free state tax usa Rule 10—You Cannot Be a Qualifying Child of Another Taxpayer You are a qualifying child of another taxpayer (your parent, guardian, foster parent, etc. Free state tax usa ) if all of the following statements are true. Free state tax usa You are that person's son, daughter, stepchild, foster child, or a descendant of any of them. Free state tax usa Or, you are that person's brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them. Free state tax usa You were: Under age 19 at the end of the year and younger than that person (or that person's spouse, if the person files jointly), Under age 24 at the end of the year, a student, and younger than that person (or that person's spouse, if the person files jointly), or Permanently and totally disabled, regardless of age. Free state tax usa You lived with that person in the United States for more than half of the year. Free state tax usa You are not filing a joint return for the year (or are filing a joint return only to claim a refund of withheld income tax or estimated tax paid). Free state tax usa For more details about the tests to be a qualifying child, see Rule 8. Free state tax usa If you are a qualifying child of another taxpayer, you cannot claim the EIC. Free state tax usa This is true even if the person for whom you are a qualifying child does not claim the EIC or meet all of the rules to claim the EIC. Free state tax usa Put “No” beside line 64a (Form 1040) or line 38a (Form 1040A). Free state tax usa Example. Free state tax usa You and your daughter lived with your mother all year. Free state tax usa You are 22 years old, unmarried, and attended a trade school full time. Free state tax usa You had a part-time job and earned $5,700. Free state tax usa You had no other income. Free state tax usa Because you meet the relationship, age, residency, and joint return tests, you are a qualifying child of your mother. Free state tax usa She can claim the EIC if she meets all the other requirements. Free state tax usa Because you are your mother's qualifying child, you cannot claim the EIC. Free state tax usa This is so even if your mother cannot or does not claim the EIC. Free state tax usa Child of person not required to file a return. Free state tax usa   You are not the qualifying child of another taxpayer (and so may qualify to claim the EIC) if the person for whom you met the relationship, age, residency, and joint return tests is not required to file an income tax return and either: Does not file an income tax return, or Files a return only to get a refund of income tax withheld or estimated tax paid. Free state tax usa Example 1—return not required. Free state tax usa The facts are the same as in the last example except your mother had no gross income, is not required to file a 2013 tax return, and does not file a 2013 tax return. Free state tax usa As a result, you are not your mother's qualifying child. Free state tax usa You can claim the EIC if you meet all the other requirements to do so. Free state tax usa Example 2—return filed to get refund of tax withheld. Free state tax usa The facts are the same as in Example 1 except your mother had wages of $1,500 and had income tax withheld from her wages. Free state tax usa She files a return only to get a refund of the income tax withheld and does not claim the EIC or any other tax credits or deductions. Free state tax usa As a result, you are not your mother's qualifying child. Free state tax usa You can claim the EIC if you meet all the other requirements to do so. Free state tax usa Example 3—return filed to get EIC. Free state tax usa The facts are the same as in Example 2 except your mother claimed the EIC on her return. Free state tax usa Since she filed the return to get the EIC, she is not filing it only to get a refund of income tax withheld. Free state tax usa As a result, you are your mother's qualifying child. Free state tax usa You cannot claim the EIC. Free state tax usa Chapter 3—Rules If You Do Not Have a Qualifying Child Use this chapter if you do not have a qualifying child and have met all the rules in chapter 1. Free state tax usa This chapter discusses Rules 11 through 14. Free state tax usa You must meet all four of those rules, in addition to the rules in chapters 1 and 4, to qualify for the earned income credit without a qualifying child. Free state tax usa You can file Form 1040, Form 1040A, or Form 1040EZ to claim the EIC without a qualifying child. Free state tax usa If you meet all the rules in chapter 1 and this chapter, read chapter 4 to find out what to do next. Free state tax usa If you have a qualifying child. Free state tax usa   If you meet Rule 8, you have a qualifying child. Free state tax usa If you meet Rule 8 and do not claim the EIC with a qualifying child, you cannot claim the EIC without a qualifying child. Free state tax usa Rule 11—You Must Be at Least Age 25 but Under Age 65 You must be at least age 25 but under age 65 at the end of 2013. Free state tax usa If you are married filing a joint return, either you or your spouse must be at least age 25 but under age 65 at the end of 2013. Free state tax usa It does not matter which spouse meets the age test, as long as one of the spouses does. Free state tax usa You meet the age test if you were born after December 31, 1948, and before January 2, 1989. Free state tax usa If you are married filing a joint return, you meet the age test if either you or your spouse was born after December 31, 1948, and before January 2, 1989. Free state tax usa If neither you nor your spouse meets the age test, you cannot claim the EIC. Free state tax usa Put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). Free state tax usa Death of spouse. Free state tax usa   If you are filing a joint return with your spouse who died in 2013, you meet the age test if your spouse was at least age 25 but under age 65 at the time of death. Free state tax usa Example 1. Free state tax usa You are age 28 and unmarried. Free state tax usa You meet the age test. Free state tax usa Example 2—spouse meets age test. Free state tax usa You are married and filing a joint return. Free state tax usa You are age 23 and your spouse is age 27. Free state tax usa You meet the age test because your spouse is at least age 25 but under age 65. Free state tax usa Example 3—spouse dies in 2013. Free state tax usa You are married and filing a joint return with your spouse who died in August 2013. Free state tax usa You are age 67. Free state tax usa Your spouse would have become age 65 in November 2013. Free state tax usa Because your spouse was under age 65 when she died, you meet the age test. Free state tax usa Rule 12—You Cannot Be the Dependent of Another Person If you are not filing a joint return, you meet this rule if: You checked box 6a on Form 1040 or 1040A, or You did not check the “You” box on line 5 of Form 1040EZ, and you entered $10,000 on that line. Free state tax usa If you are filing a joint return, you meet this rule if: You checked both box 6a and box 6b on Form 1040 or 1040A, or You and your spouse did not check either the “You” box or the “Spouse” box on line 5 of Form 1040EZ, and you entered $20,000 on that line. Free state tax usa If you are not sure whether someone else can claim you as a dependent, get Publication 501 and read the rules for claiming a dependent. Free state tax usa If someone else can claim you as a dependent on his or her return, but does not, you still cannot claim the credit. Free state tax usa Example 1. Free state tax usa In 2013, you were age 25, single, and living at home with your parents. Free state tax usa You worked and were not a student. Free state tax usa You earned $7,500. Free state tax usa Your parents cannot claim you as a dependent. Free state tax usa When you file your return, you claim an exemption for yourself by not checking the You box on line 5 of your Form 1040EZ and by entering $10,000 on that line. Free state tax usa You meet this rule. Free state tax usa You can claim the EIC if you meet all the other requirements. Free state tax usa Example 2. Free state tax usa The facts are the same as in Example 1, except that you earned $2,000. Free state tax usa Your parents can claim you as a dependent but decide not to. Free state tax usa You do not meet this rule. Free state tax usa You cannot claim the credit because your parents could have claimed you as a dependent. Free state tax usa Joint returns. Free state tax usa   You generally cannot be claimed as a dependent by another person if you are married and file a joint return. Free state tax usa   However, another person may be able to claim you as a dependent if you and your spouse file a joint return merely to claim a refund of income tax withheld or estimated tax paid. Free state tax usa But neither you nor your spouse can be claimed as a dependent by another person if you claim the EIC on your joint return. Free state tax usa Example 1—return filed to get refund of tax withheld. Free state tax usa You are 26 years old. Free state tax usa You and your wife live with your parents and had $800 of wages from part-time jobs and no other income. Free state tax usa Neither you nor your wife is required to file a tax return. Free state tax usa You do not have a child. Free state tax usa Taxes were taken out of your pay so you file a joint return only to get a refund of the withheld taxes. Free state tax usa Your parents are not disqualified from claiming an exemption for you just because you filed a joint return. Free state tax usa They can claim exemptions for you and your wife if all the other tests to do so are met. Free state tax usa Example 2—return filed to get EIC. Free state tax usa The facts are the same as in Example 1except no taxes were taken out of your pay. Free state tax usa Also, you and your wife are not required to file a tax return, but you file a joint return to claim an EIC of $63 and get a refund of that amount. Free state tax usa Because claiming the EIC is your reason for filing the return, you are not filing it only to claim a refund of income tax withheld or estimated tax paid. Free state tax usa Your parents cannot claim an exemption for either you or your wife. Free state tax usa Rule 13—You Cannot Be a Qualifying Child of Another Taxpayer You are a qualifying child of another taxpayer (your parent, guardian, foster parent, etc. Free state tax usa ) if all of the following statements are true. Free state tax usa You are that person's son, daughter, stepchild, foster child, or a descendant of any of them. Free state tax usa Or, you are that person's brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them. Free state tax usa You were: Under age 19 at the end of the year and younger than that person (or that person's spouse, if the person files jointly), Under age 24 at the end of the year, a student, and younger than that person (or that person's spouse, if the person files jointly), or Permanently and totally disabled, regardless of age. Free state tax usa You lived with that person in the United States for more than half of the year. Free state tax usa You are not filing a joint return for the year (or are filing a joint return only to claim a refund of withheld income tax or estimated tax paid). Free state tax usa For more details about the tests to be a qualifying child, see Rule 8. Free state tax usa If you are a qualifying child of another taxpayer, you cannot claim the EIC. Free state tax usa This is true even if the person for whom you are a qualifying child does not claim the EIC or meet all of the rules to claim the EIC. Free state tax usa Put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). Free state tax usa Example. Free state tax usa You lived with your mother all year. Free state tax usa You are age 26, unmarried, and permanently and totally disabled. Free state tax usa Your only income was from a community center where you went three days a week to answer telephones. Free state tax usa You earned $5,000 for the year and provided more than half of your own support. Free state tax usa Because you meet the relationship, age, residency, and joint return tests, you are a qualifying child of your mother for the EIC. Free state tax usa She can claim the EIC if she meets all the other requirements. Free state tax usa Because you are a qualifying child of your mother, you cannot claim the EIC. Free state tax usa This is so even if your mother cannot or does not claim the EIC. Free state tax usa Joint returns. Free state tax usa   You generally cannot be a qualifying child of another taxpayer if you are married and file a joint return. Free state tax usa   However, you may be a qualifying child of another taxpayer if you and your spouse file a joint return merely to claim a refund of income tax withheld or estimated tax paid. Free state tax usa But neither you nor your spouse can be a qualifying child of another taxpayer if you claim the EIC on your joint return. Free state tax usa Child of person not required to file a return. Free state tax usa   You are not the qualifying child of another taxpayer (and so may qualify to claim the EIC) if the person for whom you meet the relationship, age, residency, and joint return tests is not required to file an income tax return and either: Does not file an income tax return, or Files a return only to get a refund of income tax withheld or estimated tax paid. Free state tax usa Example 1—return not required. Free state tax usa You lived all year with your father. Free state tax usa You are 27 years old, unmarried, permanently and totally disabled, and earned $13,000. Free state tax usa You have no other income, no children, and provided more than half of your own support. Free state tax usa Your father had no gross income, is not required to file a 2013 tax return, and does not file a 2013 tax return. Free state tax usa As a result, you are not your father's qualifying child. Free state tax usa You can claim the EIC if you meet all the other requirements to do so. Free state tax usa Example 2—return filed to get refund of tax withheld. Free state tax usa The facts are the same as in Example 1 except your father had wages of $1,500 and had income tax withheld from his wages. Free state tax usa He files a return only to get a refund of the income tax withheld and does not claim the EIC or any other tax credits or deductions. Free state tax usa As a result, you are not your father's qualifying child. Free state tax usa You can claim the EIC if you meet all the other requirements to do so. Free state tax usa Example 3—return filed to get EIC. Free state tax usa The facts are the same as in Example 2 except your father claimed the EIC on his return. Free state tax usa Since he filed the return to get the EIC, he is not filing it only to get a refund of income tax withheld. Free state tax usa As a result, you are your father's qualifying child. Free state tax usa You cannot claim the EIC. Free state tax usa Rule 14—You Must Have Lived in the United States More Than Half of the Year Your home (and your spouse's, if filing a joint return) must have been in the United States for more than half the year. Free state tax usa If it was not, put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). Free state tax usa United States. Free state tax usa   This means the 50 states and the District of Columbia. Free state tax usa It does not include Puerto Rico or U. Free state tax usa S. Free state tax usa possessions such as Guam. Free state tax usa Homeless shelter. Free state tax usa   Your home can be any location where you regularly live. Free state tax usa You do not need a traditional home. Free state tax usa If you lived in one or more homeless shelters in the United States for more than half the year, you meet this rule. Free state tax usa Military personnel stationed outside the United States. Free state tax usa   U. Free state tax usa S. Free state tax usa military personnel stationed outside the United States on extended active duty (defined in chapter 2) are considered to live in the United States during that duty period for purposes of the EIC. Free state tax usa Chapter 4—Figuring and Claiming the EIC You must meet one more rule to claim the EIC. Free state tax usa You need to know the amount of your earned income to see if you meet the rule in this chapter. Free state tax usa You also need to know that amount to figure your EIC. Free state tax usa Rule 15—Earned Income Limits Your earned income must be less than: $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children, $43,038 ($48,378 for married filing jointly) if you have two qualifying children, $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. Free state tax usa Earned Income Earned income generally means wages, salaries, tips, other taxable employee pay, and net earnings from self-employment. Free state tax usa Employee pay is earned income only if it is taxable. Free state tax usa Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. Free state tax usa But there is an exception for nontaxable combat pay, which you can choose to include in earned income. Free state tax usa Earned income is explained in detail in Rule 7 in chapter 1. Free state tax usa Figuring earned income. Free state tax usa   If you are self-employed, a statutory employee, or a member of the clergy or a church employee who files Schedule SE (Form 1040), you will figure your earned income when you fill out Part 4 of EIC Worksheet B in the Form 1040 instructions. Free state tax usa   Otherwise, figure your earned income by using the worksheet in Step 5 of the Form 1040 instructions for lines 64a and 64b or the Form 1040A instructions for lines 38a and 38b, or the worksheet in Step 2 of the Form 1040EZ instructions for lines 8a and 8b. Free state tax usa   When using one of those worksheets to figure your earned income, you will start with the amount on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ). Free state tax usa You will then reduce that amount by any amount included on that line and described in the following list. Free state tax usa Scholarship or fellowship grants not reported on a Form W-2. Free state tax usa A scholarship or fellowship grant that was not reported to you on a Form W-2 is not considered earned income for the earned income credit. Free state tax usa Inmate's income. Free state tax usa Amounts received for work performed while an inmate in a penal institution are not earned income for the earned income credit. Free state tax usa This includes amounts received for work performed while in a work release program or while in a halfway house. Free state tax usa If you received any amount for work done while an inmate in a penal institution and that amount is included in the total on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ), put “PRI” and the amount on the dotted line next to line 7 (Form 1040), in the space to the left of the entry space for line 7 (Form 1040A), or in the space to the left of line 1 (Form 1040EZ). Free state tax usa Pension or annuity from deferred compensation plans. Free state tax usa A pension or annuity from a nonqualified deferred compensation plan or a nongovernmental section 457 plan is not considered earned income for the earned income credit. Free state tax usa If you received such an amount and it was included in the total on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ), put “DFC” and the amount on the dotted line next to line 7 (Form 1040), in the space to the left of the entry space for line 7 (Form 1040A), or in the space to the left of line 1 (Form 1040EZ). Free state tax usa This amount may be reported in box 11 of your Form W-2. Free state tax usa If you received such an amount but box 11 is blank, contact your employer for the amount received as a pension or an annuity. Free state tax usa Clergy. Free state tax usa   If you are a member of the clergy who files Schedule SE and the amount on line 2 of that schedule includes an amount that was also re