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Free tax software 2011 download 33. Free tax software 2011 download   Credit for the Elderly or the Disabled Table of Contents Introduction Useful Items - You may want to see: Are You Eligible for the Credit?Qualified Individual Income Limits How to Claim the CreditCredit Figured for You Credit Figured by You Introduction If you qualify, you may be able to reduce the tax you owe by taking the credit for the elderly or the disabled which is figured on Schedule R (Form 1040A or 1040). Free tax software 2011 download This chapter explains the following. Free tax software 2011 download Who qualifies for the credit for the elderly or the disabled. Free tax software 2011 download How to claim the credit. Free tax software 2011 download You may be able to take the credit for the elderly or the disabled if: You are age 65 or older at the end of 2013, or You retired on permanent and total disability and have taxable disability income. Free tax software 2011 download Useful Items - You may want to see: Publication 524 Credit for the Elderly or the Disabled 554 Tax Guide for Seniors Form (and Instruction) Schedule R (Form 1040A or 1040) Credit for the Elderly or the Disabled Are You Eligible for the Credit? You can take the credit for the elderly or the disabled if you meet both of the following requirements. Free tax software 2011 download You are a qualified individual. Free tax software 2011 download Your income is not more than certain limits. Free tax software 2011 download You can use Figure 33-A and Table 33-1 as guides to see if you are eligible for the credit. Free tax software 2011 download Use Figure 33-A first to see if you are a qualified individual. Free tax software 2011 download If you are, go to Table 33-1 to make sure your income is not too high to take the credit. Free tax software 2011 download You can take the credit only if you file Form 1040 or Form 1040A. Free tax software 2011 download You cannot take the credit if you file Form 1040EZ. Free tax software 2011 download Qualified Individual You are a qualified individual for this credit if you are a U. Free tax software 2011 download S. Free tax software 2011 download citizen or resident alien, and either of the following applies. Free tax software 2011 download You were age 65 or older at the end of 2013. Free tax software 2011 download You were under age 65 at the end of 2013 and all three of the following statements are true. Free tax software 2011 download You retired on permanent and total disability (explained later). Free tax software 2011 download You received taxable disability income for 2013. Free tax software 2011 download On January 1, 2013, you had not reached mandatory retirement age (defined later under Disability income ). Free tax software 2011 download Age 65. Free tax software 2011 download   You are considered to be age 65 on the day before your 65th birthday. Free tax software 2011 download Therefore, if you were born on January 1, 1949, you are considered to be age 65 at the end of 2013. Free tax software 2011 download U. Free tax software 2011 download S. Free tax software 2011 download Citizen or Resident Alien You must be a U. Free tax software 2011 download S. Free tax software 2011 download citizen or resident alien (or be treated as a resident alien) to take the credit. Free tax software 2011 download Generally, you cannot take the credit if you were a nonresident alien at any time during the tax year. Free tax software 2011 download Exceptions. Free tax software 2011 download   You may be able to take the credit if you are a nonresident alien who is married to a U. Free tax software 2011 download S. Free tax software 2011 download citizen or resident alien at the end of the tax year and you and your spouse choose to treat you as a U. Free tax software 2011 download S. Free tax software 2011 download resident alien. Free tax software 2011 download If you make that choice, both you and your spouse are taxed on your worldwide incomes. Free tax software 2011 download If you were a nonresident alien at the beginning of the year and a resident alien at the end of the year, and you were married to a U. Free tax software 2011 download S. Free tax software 2011 download citizen or resident alien at the end of the year, you may be able to choose to be treated as a U. Free tax software 2011 download S. Free tax software 2011 download resident alien for the entire year. Free tax software 2011 download In that case, you may be allowed to take the credit. Free tax software 2011 download For information on these choices, see chapter 1 of Publication 519, U. Free tax software 2011 download S. Free tax software 2011 download Tax Guide for Aliens. Free tax software 2011 download Married Persons Generally, if you are married at the end of the tax year, you and your spouse must file a joint return to take the credit. Free tax software 2011 download However, if you and your spouse did not live in the same household at any time during the tax year, you can file either a joint return or separate returns and still take the credit. Free tax software 2011 download Head of household. Free tax software 2011 download   You can file as head of household and qualify to take the credit, even if your spouse lived with you during the first 6 months of the year, if you meet certain tests. Free tax software 2011 download See Head of Household in chapter 2 for the tests you must meet. Free tax software 2011 download Under Age 65 If you are under age 65 at the end of 2013, you can qualify for the credit only if you are retired on permanent and total disability (discussed next) and have taxable disability income (discussed later under Disability income ). Free tax software 2011 download You are retired on permanent and total disability if: You were permanently and totally disabled when you retired, and You retired on disability before the close of the tax year. Free tax software 2011 download Even if you do not retire formally, you may be considered retired on disability when you have stopped working because of your disability. Free tax software 2011 download If you retired on disability before 1977, and were not permanently and totally disabled at the time, you can qualify for the credit if you were permanently and totally disabled on January 1, 1976, or January 1, 1977. Free tax software 2011 download Permanent and total disability. Free tax software 2011 download    You are permanently and totally disabled if you cannot engage in any substantial gainful activity because of your physical or mental condition. Free tax software 2011 download A qualified physician must certify that the condition has lasted or can be expected to last continuously for 12 months or more, or that the condition can be expected to result in death. Free tax software 2011 download See Physician's statement , later. Free tax software 2011 download Substantial gainful activity. Free tax software 2011 download   Substantial gainful activity is the performance of significant duties over a reasonable period of time while working for pay or profit, or in work generally done for pay or profit. Free tax software 2011 download Full-time work (or part-time work done at your employer's convenience) in a competitive work situation for at least the minimum wage conclusively shows that you are able to engage in substantial gainful activity. Free tax software 2011 download   Substantial gainful activity is not work you do to take care of yourself or your home. Free tax software 2011 download It is not unpaid work on hobbies, institutional therapy or training, school attendance, clubs, social programs, and similar activities. Free tax software 2011 download However, doing this kind of work may show that you are able to engage in substantial gainful activity. Free tax software 2011 download    The fact that you have not worked for some time is not, of itself, conclusive evidence that you cannot engage in substantial gainful activity. Free tax software 2011 download Sheltered employment. Free tax software 2011 download   Certain work offered at qualified locations to physically or mentally impaired persons is considered sheltered employment. Free tax software 2011 download These qualified locations are in sheltered workshops, hospitals, and similar institutions, homebound programs, and Department of Veterans Affairs (VA) sponsored homes. Free tax software 2011 download   Compared to commercial employment, pay is lower for sheltered employment. Free tax software 2011 download Therefore, one usually does not look for sheltered employment if he or she can get other employment. Free tax software 2011 download The fact that one has accepted sheltered employment is not proof of the person's ability to engage in substantial gainful activity. Free tax software 2011 download Physician's statement. Free tax software 2011 download   If you are under age 65, you must have your physician complete a statement certifying that you were permanently and totally disabled on the date you retired. Free tax software 2011 download You can use the statement in the Instructions for Schedule R. Free tax software 2011 download    Figure 33-A. Free tax software 2011 download Are You a Qualified Individual? This image is too large to be displayed in the current screen. Free tax software 2011 download Please click the link to view the image. Free tax software 2011 download Figure 33-A Are You a Qualified Individual?   You do not have to file this statement with your Form 1040 or Form 1040A, but you must keep it for your records. Free tax software 2011 download Veterans. Free tax software 2011 download   If the Department of Veterans Affairs (VA) certifies that you are permanently and totally disabled, you can substitute VA Form 21-0172, Certification of Permanent and Total Disability, for the physician's statement you are required to keep. Free tax software 2011 download VA Form 21-0172 must be signed by a person authorized by the VA to do so. Free tax software 2011 download You can get this form from your local VA regional office. Free tax software 2011 download Physician's statement obtained in earlier year. Free tax software 2011 download   If you got a physician's statement in an earlier year and, due to your continued disabled condition, you were unable to engage in any substantial gainful activity during 2013, you may not need to get another physician's statement for 2013. Free tax software 2011 download For a detailed explanation of the conditions you must meet, see the instructions for Schedule R, Part II. Free tax software 2011 download If you meet the required conditions, check the box on your Schedule R, Part II, line 2. Free tax software 2011 download   If you checked box 4, 5, or 6 in Part I of Schedule R, enter in the space above the box on line 2 in Part II the first name(s) of the spouse(s) for whom the box is checked. Free tax software 2011 download Table 33-1. Free tax software 2011 download Income Limits IF your filing status is . Free tax software 2011 download . Free tax software 2011 download . Free tax software 2011 download THEN, even if you qualify (see Figure 33-A ), you CANNOT take the credit if. Free tax software 2011 download . Free tax software 2011 download . Free tax software 2011 download   Your adjusted gross income (AGI)* is equal to or more than. Free tax software 2011 download . Free tax software 2011 download . Free tax software 2011 download     OR the total of your nontaxable social security and other nontaxable pension(s), annuities, or disability income is equal to or more than. Free tax software 2011 download . Free tax software 2011 download . Free tax software 2011 download   single, head of household, or qualifying widow(er) with dependent child   $17,500     $5,000   married filing jointly and only one spouse qualifies in Figure 33-A   $20,000     $5,000   married filing jointly and both spouses qualify in Figure 33-A   $25,000     $7,500   married filing separately and you lived apart from your spouse for all of 2013   $12,500     $3,750   * AGI is the amount on Form 1040A, line 22, or Form 1040, line 38. Free tax software 2011 download Disability income. Free tax software 2011 download   If you are under age 65, you must also have taxable disability income to qualify for the credit. Free tax software 2011 download Disability income must meet both of the following requirements. Free tax software 2011 download It must be paid under your employer's accident or health plan or pension plan. Free tax software 2011 download It must be included in your income as wages (or payments instead of wages) for the time you are absent from work because of permanent and total disability. Free tax software 2011 download Payments that are not disability income. Free tax software 2011 download   Any payment you receive from a plan that does not provide for disability retirement is not disability income. Free tax software 2011 download Any lump-sum payment for accrued annual leave that you receive when you retire on disability is a salary payment and is not disability income. Free tax software 2011 download   For purposes of the credit for the elderly or the disabled, disability income does not include amounts you receive after you reach mandatory retirement age. Free tax software 2011 download Mandatory retirement age is the age set by your employer at which you would have had to retire, had you not become disabled. Free tax software 2011 download Income Limits To determine if you can claim the credit, you must consider two income limits. Free tax software 2011 download The first limit is the amount of your adjusted gross income (AGI). Free tax software 2011 download The second limit is the amount of nontaxable social security and other nontaxable pensions, annuities, or disability income you received. Free tax software 2011 download The limits are shown in Table 33-1. Free tax software 2011 download If your AGI and nontaxable pensions, annuities, or disability income are less than the income limits, you may be able to claim the credit. Free tax software 2011 download See How to Claim the Credit , later. Free tax software 2011 download If either your AGI or your nontaxable pensions, annuities, or disability income are equal to or more than the income limits, you cannot take the credit. Free tax software 2011 download How to Claim the Credit You can figure the credit yourself or the Internal Revenue Service will figure it for you. Free tax software 2011 download Credit Figured for You If you choose to have the IRS figure the credit for you, read the following discussion for the form you will file (Form 1040 or 1040A). Free tax software 2011 download If you want the IRS to figure your tax, see chapter 30. Free tax software 2011 download Form 1040. Free tax software 2011 download   If you want the IRS to figure your credit, see Form 1040 Line Entries under Tax Figured by IRS in chapter 30. Free tax software 2011 download Form 1040A. Free tax software 2011 download   If you want the IRS to figure your credit, see Form 1040A Line Entries under Tax Figured by IRS in chapter 30. Free tax software 2011 download Credit Figured by You If you choose to figure the credit yourself, fill out the front of Schedule R. Free tax software 2011 download Next, fill out Schedule R, Part III. Free tax software 2011 download If you file Form 1040A, enter the amount from Schedule R, line 22, on Form 1040A, line 30. Free tax software 2011 download If you file Form 1040, include the amount from Schedule R, line 22, on line 53; check box c, and enter “Sch R” on the line next to that box. Free tax software 2011 download For a step-by-step discussion about filling out Part III of Schedule R, see Figuring the Credit Yourself in Publication 524. Free tax software 2011 download Limit on credit. Free tax software 2011 download   The amount of the credit you can claim is generally limited to the amount of your tax. Free tax software 2011 download Use the Credit Limit Worksheet in the Instructions for Schedule R to determine if your credit is limited. Free tax software 2011 download Prev  Up  Next   Home   More Online Publications
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The Free Tax Software 2011 Download

Free tax software 2011 download 4. Free tax software 2011 download   Qualified Plans Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Kinds of PlansDefined Contribution Plan Defined Benefit Plan Qualification RulesEarly retirement. Free tax software 2011 download Loan secured by benefits. Free tax software 2011 download Waiver of survivor benefits. Free tax software 2011 download Waiver of 30-day waiting period before annuity starting date. Free tax software 2011 download Involuntary cash-out of benefits not more than dollar limit. Free tax software 2011 download Exception for certain loans. Free tax software 2011 download Exception for QDRO. Free tax software 2011 download SIMPLE and safe harbor 401(k) plan exception. Free tax software 2011 download Setting Up a Qualified PlanAdopting a Written Plan Investing Plan Assets Minimum Funding RequirementDue dates. Free tax software 2011 download Installment percentage. Free tax software 2011 download Extended period for making contributions. Free tax software 2011 download ContributionsEmployer Contributions Employee Contributions When Contributions Are Considered Made Employer DeductionDeduction Limits Deduction Limit for Self-Employed Individuals Where To Deduct Contributions Carryover of Excess Contributions Excise Tax for Nondeductible (Excess) Contributions Elective Deferrals (401(k) Plans)Limit on Elective Deferrals Automatic Enrollment Treatment of Excess Deferrals Qualified Roth Contribution ProgramElective Deferrals Qualified Distributions Reporting Requirements DistributionsRequired Distributions Distributions From 401(k) Plans Tax Treatment of Distributions Tax on Early Distributions Tax on Excess Benefits Excise Tax on Reversion of Plan Assets Notification of Significant Benefit Accrual Reduction Prohibited TransactionsTax on Prohibited Transactions Reporting RequirementsOne-participant plan. Free tax software 2011 download Caution: Form 5500-EZ not required. Free tax software 2011 download Form 5500. Free tax software 2011 download Electronic filing of Forms 5500 and 5500-SF. Free tax software 2011 download Topics - This chapter discusses: Kinds of plans Qualification rules Setting up a qualified plan Minimum funding requirement Contributions Employer deduction Elective deferrals (401(k) plans) Qualified Roth contribution program Distributions Prohibited transactions Reporting requirements Useful Items - You may want to see: Publications 575 Pension and Annuity Income 590 Individual Retirement Arrangements (IRAs) 3066 Have you had your Check-up this year? for Retirement Plans 3998 Choosing A Retirement Solution for Your Small Business 4222 401(k) Plans for Small Businesses 4530 Designated Roth Accounts under a 401(k), 403(b), or governmental 457(b) plans 4531 401(k) Plan Checklist 4674 Automatic Enrollment 401(k) Plans for Small Businesses 4806 Profit Sharing Plans for Small Businesses Forms (and Instructions) www. Free tax software 2011 download dol. Free tax software 2011 download gov/ebsa/pdf/2013-5500. Free tax software 2011 download pdf www. Free tax software 2011 download dol. Free tax software 2011 download gov/ebsa/pdf/2013-5500-SF. Free tax software 2011 download pdf W-2 Wage and Tax Statement Schedule K-1 (Form 1065) Partner's Share of Income, Deductions, Credits, etc. Free tax software 2011 download 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Free tax software 2011 download 1040 U. Free tax software 2011 download S. Free tax software 2011 download Individual Income Tax Return Schedule C (Form 1040) Profit or Loss From Business Schedule F (Form 1040) Profit or Loss From Farming 5300 Application for Determination for Employee Benefit Plan 5310 Application for Determination for Terminating Plan 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts 5330 Return of Excise Taxes Related to Employee Benefit Plans 5500 Annual Return/Report of Employee Benefit Plan. Free tax software 2011 download For copies of this form, go to: 5500-EZ Annual Return of One-Participant (Owners and Their Spouses) Retirement Plan 5500-SF Short Form Annual Return/Report of Small Employee Benefit Plan. Free tax software 2011 download For copies of this form, go to: 8717 User Fee for Employee Plan Determination Letter Request 8880 Credit for Qualified Retirement Savings Contributions 8881 Credit for Small Employer Pension Plan Startup Costs 8955-SSA Annual Registration Statement Identifying Separated Participants With Deferred Vested Benefits These qualified retirement plans set up by self-employed individuals are sometimes called Keogh or H. Free tax software 2011 download R. Free tax software 2011 download 10 plans. Free tax software 2011 download A sole proprietor or a partnership can set up one of these plans. Free tax software 2011 download A common-law employee or a partner cannot set up one of these plans. Free tax software 2011 download The plans described here can also be set up and maintained by employers that are corporations. Free tax software 2011 download All the rules discussed here apply to corporations except where specifically limited to the self-employed. Free tax software 2011 download The plan must be for the exclusive benefit of employees or their beneficiaries. Free tax software 2011 download These qualified plans can include coverage for a self-employed individual. Free tax software 2011 download As an employer, you can usually deduct, subject to limits, contributions you make to a qualified plan, including those made for your own retirement. Free tax software 2011 download The contributions (and earnings and gains on them) are generally tax free until distributed by the plan. Free tax software 2011 download Kinds of Plans There are two basic kinds of qualified plans—defined contribution plans and defined benefit plans—and different rules apply to each. Free tax software 2011 download You can have more than one qualified plan, but your contributions to all the plans must not total more than the overall limits discussed under Contributions and Employer Deduction, later. Free tax software 2011 download Defined Contribution Plan A defined contribution plan provides an individual account for each participant in the plan. Free tax software 2011 download It provides benefits to a participant largely based on the amount contributed to that participant's account. Free tax software 2011 download Benefits are also affected by any income, expenses, gains, losses, and forfeitures of other accounts that may be allocated to an account. Free tax software 2011 download A defined contribution plan can be either a profit-sharing plan or a money purchase pension plan. Free tax software 2011 download Profit-sharing plan. Free tax software 2011 download   Although it is called a “profit-sharing plan,” you do not actually have to make a business profit for the year in order to make a contribution (except for yourself if you are self-employed as discussed under Self-employed Individual, later). Free tax software 2011 download A profit-sharing plan can be set up to allow for discretionary employer contributions, meaning the amount contributed each year to the plan is not fixed. Free tax software 2011 download An employer may even make no contribution to the plan for a given year. Free tax software 2011 download   The plan must provide a definite formula for allocating the contribution among the participants and for distributing the accumulated funds to the employees after they reach a certain age, after a fixed number of years, or upon certain other occurrences. Free tax software 2011 download   In general, you can be more flexible in making contributions to a profit-sharing plan than to a money purchase pension plan (discussed next) or a defined benefit plan (discussed later). Free tax software 2011 download Money purchase pension plan. Free tax software 2011 download   Contributions to a money purchase pension plan are fixed and are not based on your business profits. Free tax software 2011 download For example, if the plan requires that contributions be 10% of the participants' compensation without regard to whether you have profits (or the self-employed person has earned income), the plan is a money purchase pension plan. Free tax software 2011 download This applies even though the compensation of a self-employed individual as a participant is based on earned income derived from business profits. Free tax software 2011 download Defined Benefit Plan A defined benefit plan is any plan that is not a defined contribution plan. Free tax software 2011 download Contributions to a defined benefit plan are based on what is needed to provide definitely determinable benefits to plan participants. Free tax software 2011 download Actuarial assumptions and computations are required to figure these contributions. Free tax software 2011 download Generally, you will need continuing professional help to have a defined benefit plan. Free tax software 2011 download Qualification Rules To qualify for the tax benefits available to qualified plans, a plan must meet certain requirements (qualification rules) of the tax law. Free tax software 2011 download Generally, unless you write your own plan, the financial institution that provided your plan will take the continuing responsibility for meeting qualification rules that are later changed. Free tax software 2011 download The following is a brief overview of important qualification rules that generally have not yet been discussed. Free tax software 2011 download It is not intended to be all-inclusive. Free tax software 2011 download See Setting Up a Qualified Plan , later. Free tax software 2011 download Generally, the following qualification rules also apply to a SIMPLE 401(k) retirement plan. Free tax software 2011 download A SIMPLE 401(k) plan is, however, not subject to the top-heavy plan rules and nondiscrimination rules if the plan satisfies the provisions discussed in chapter 3 under SIMPLE 401(k) Plan. Free tax software 2011 download Plan assets must not be diverted. Free tax software 2011 download   Your plan must make it impossible for its assets to be used for, or diverted to, purposes other than the benefit of employees and their beneficiaries. Free tax software 2011 download As a general rule, the assets cannot be diverted to the employer. Free tax software 2011 download Minimum coverage requirement must be met. Free tax software 2011 download   To be a qualified plan, a defined benefit plan must benefit at least the lesser of the following. Free tax software 2011 download 50 employees, or The greater of: 40% of all employees, or Two employees. Free tax software 2011 download If there is only one employee, the plan must benefit that employee. Free tax software 2011 download Contributions or benefits must not discriminate. Free tax software 2011 download   Under the plan, contributions or benefits to be provided must not discriminate in favor of highly compensated employees. Free tax software 2011 download Contributions and benefits must not be more than certain limits. Free tax software 2011 download   Your plan must not provide for contributions or benefits that are more than certain limits. Free tax software 2011 download The limits apply to the annual contributions and other additions to the account of a participant in a defined contribution plan and to the annual benefit payable to a participant in a defined benefit plan. Free tax software 2011 download These limits are discussed later in this chapter under Contributions. Free tax software 2011 download Minimum vesting standard must be met. Free tax software 2011 download   Your plan must satisfy certain requirements regarding when benefits vest. Free tax software 2011 download A benefit is vested (you have a fixed right to it) when it becomes nonforfeitable. Free tax software 2011 download A benefit is nonforfeitable if it cannot be lost upon the happening, or failure to happen, of any event. Free tax software 2011 download Special rules apply to forfeited benefit amounts. Free tax software 2011 download In defined contribution plans, forfeitures can be allocated to the accounts of remaining participants in a nondiscriminatory way, or they can be used to reduce your contributions. Free tax software 2011 download   Forfeitures under a defined benefit plan cannot be used to increase the benefits any employee would otherwise receive under the plan. Free tax software 2011 download Forfeitures must be used instead to reduce employer contributions. Free tax software 2011 download Participation. Free tax software 2011 download   In general, an employee must be allowed to participate in your plan if he or she meets both the following requirements. Free tax software 2011 download Has reached age 21. Free tax software 2011 download Has at least 1 year of service (2 years if the plan is not a 401(k) plan and provides that after not more than 2 years of service the employee has a nonforfeitable right to all his or her accrued benefit). Free tax software 2011 download A plan cannot exclude an employee because he or she has reached a specified age. Free tax software 2011 download Leased employee. Free tax software 2011 download   A leased employee, defined in chapter 1, who performs services for you (recipient of the services) is treated as your employee for certain plan qualification rules. Free tax software 2011 download These rules include those in all the following areas. Free tax software 2011 download Nondiscrimination in coverage, contributions, and benefits. Free tax software 2011 download Minimum age and service requirements. Free tax software 2011 download Vesting. Free tax software 2011 download Limits on contributions and benefits. Free tax software 2011 download Top-heavy plan requirements. Free tax software 2011 download Contributions or benefits provided by the leasing organization for services performed for you are treated as provided by you. Free tax software 2011 download Benefit payment must begin when required. Free tax software 2011 download   Your plan must provide that, unless the participant chooses otherwise, the payment of benefits to the participant must begin within 60 days after the close of the latest of the following periods. Free tax software 2011 download The plan year in which the participant reaches the earlier of age 65 or the normal retirement age specified in the plan. Free tax software 2011 download The plan year in which the 10th anniversary of the year in which the participant began participating in the plan occurs. Free tax software 2011 download The plan year in which the participant separates from service. Free tax software 2011 download Early retirement. Free tax software 2011 download   Your plan can provide for payment of retirement benefits before the normal retirement age. Free tax software 2011 download If your plan offers an early retirement benefit, a participant who separates from service before satisfying the early retirement age requirement is entitled to that benefit if he or she meets both the following requirements. Free tax software 2011 download Satisfies the service requirement for the early retirement benefit. Free tax software 2011 download Separates from service with a nonforfeitable right to an accrued benefit. Free tax software 2011 download The benefit, which may be actuarially reduced, is payable when the early retirement age requirement is met. Free tax software 2011 download Required minimum distributions. Free tax software 2011 download   Special rules require minimum annual distributions from qualified plans, generally beginning after age  70½. Free tax software 2011 download See Required Distributions , under Distributions, later. Free tax software 2011 download Survivor benefits. Free tax software 2011 download   Defined benefit and money purchase pension plans must provide automatic survivor benefits in both the following forms. Free tax software 2011 download A qualified joint and survivor annuity for a vested participant who does not die before the annuity starting date. Free tax software 2011 download A qualified pre-retirement survivor annuity for a vested participant who dies before the annuity starting date and who has a surviving spouse. Free tax software 2011 download   The automatic survivor benefit also applies to any participant under a profit-sharing plan unless all the following conditions are met. Free tax software 2011 download The participant does not choose benefits in the form of a life annuity. Free tax software 2011 download The plan pays the full vested account balance to the participant's surviving spouse (or other beneficiary if the surviving spouse consents or if there is no surviving spouse) if the participant dies. Free tax software 2011 download The plan is not a direct or indirect transferee of a plan that must provide automatic survivor benefits. Free tax software 2011 download Loan secured by benefits. Free tax software 2011 download   If automatic survivor benefits are required for a spouse under a plan, he or she must consent to a loan that uses as security the accrued benefits in the plan. Free tax software 2011 download Waiver of survivor benefits. Free tax software 2011 download   Each plan participant may be permitted to waive the joint and survivor annuity or the pre-retirement survivor annuity (or both), but only if the participant has the written consent of the spouse. Free tax software 2011 download The plan also must allow the participant to withdraw the waiver. Free tax software 2011 download The spouse's consent must be witnessed by a plan representative or notary public. Free tax software 2011 download Waiver of 30-day waiting period before annuity starting date. Free tax software 2011 download    A plan may permit a participant to waive (with spousal consent) the 30-day minimum waiting period after a written explanation of the terms and conditions of a joint and survivor annuity is provided to each participant. Free tax software 2011 download   The waiver is allowed only if the distribution begins more than 7 days after the written explanation is provided. Free tax software 2011 download Involuntary cash-out of benefits not more than dollar limit. Free tax software 2011 download   A plan may provide for the immediate distribution of the participant's benefit under the plan if the present value of the benefit is not greater than $5,000. Free tax software 2011 download   However, the distribution cannot be made after the annuity starting date unless the participant and the spouse or surviving spouse of a participant who died (if automatic survivor benefits are required for a spouse under the plan) consents in writing to the distribution. Free tax software 2011 download If the present value is greater than $5,000, the plan must have the written consent of the participant and the spouse or surviving spouse (if automatic survivor benefits are required for a spouse under the plan) for any immediate distribution of the benefit. Free tax software 2011 download   Benefits attributable to rollover contributions and earnings on them can be ignored in determining the present value of these benefits. Free tax software 2011 download   A plan must provide for the automatic rollover of any cash-out distribution of more than $1,000 to an individual retirement account or annuity, unless the participant chooses otherwise. Free tax software 2011 download A section 402(f) notice must be sent prior to an involuntary cash-out of an eligible rollover distribution. Free tax software 2011 download See Section 402(f) Notice under Distributions, later, for more details. Free tax software 2011 download Consolidation, merger, or transfer of assets or liabilities. Free tax software 2011 download   Your plan must provide that, in the case of any merger or consolidation with, or transfer of assets or liabilities to, any other plan, each participant would (if the plan then terminated) receive a benefit equal to or more than the benefit he or she would have been entitled to just before the merger, etc. Free tax software 2011 download (if the plan had then terminated). Free tax software 2011 download Benefits must not be assigned or alienated. Free tax software 2011 download   Your plan must provide that a participant's or beneficiary's benefits under the plan cannot be taken away by any legal or equitable proceeding except as provided below or pursuant to certain judgements or settlements against the participant for violations of plan rules. Free tax software 2011 download Exception for certain loans. Free tax software 2011 download   A loan from the plan (not from a third party) to a participant or beneficiary is not treated as an assignment or alienation if the loan is secured by the participant's accrued nonforfeitable benefit and is exempt from the tax on prohibited transactions under section 4975(d)(1) or would be exempt if the participant were a disqualified person. Free tax software 2011 download A disqualified person is defined later in this chapter under Prohibited Transactions. Free tax software 2011 download Exception for QDRO. Free tax software 2011 download   Compliance with a QDRO (qualified domestic relations order) does not result in a prohibited assignment or alienation of benefits. Free tax software 2011 download   Payments to an alternate payee under a QDRO before the participant attains age 59½ are not subject to the 10% additional tax that would otherwise apply under certain circumstances. Free tax software 2011 download Benefits distributed to an alternate payee under a QDRO can be rolled over tax free to an individual retirement account or to an individual retirement annuity. Free tax software 2011 download No benefit reduction for social security increases. Free tax software 2011 download   Your plan must not permit a benefit reduction for a post-separation increase in the social security benefit level or wage base for any participant or beneficiary who is receiving benefits under your plan, or who is separated from service and has nonforfeitable rights to benefits. Free tax software 2011 download This rule also applies to plans supplementing the benefits provided by other federal or state laws. Free tax software 2011 download Elective deferrals must be limited. Free tax software 2011 download   If your plan provides for elective deferrals, it must limit those deferrals to the amount in effect for that particular year. Free tax software 2011 download See Limit on Elective Deferrals later in this chapter. Free tax software 2011 download Top-heavy plan requirements. Free tax software 2011 download   A top-heavy plan is one that mainly favors partners, sole proprietors, and other key employees. Free tax software 2011 download   A plan is top-heavy for a plan year if, for the preceding plan year, the total value of accrued benefits or account balances of key employees is more than 60% of the total value of accrued benefits or account balances of all employees. Free tax software 2011 download Additional requirements apply to a top-heavy plan primarily to provide minimum benefits or contributions for non-key employees covered by the plan. Free tax software 2011 download   Most qualified plans, whether or not top-heavy, must contain provisions that meet the top-heavy requirements and will take effect in plan years in which the plans are top-heavy. Free tax software 2011 download These qualification requirements for top-heavy plans are explained in section 416 and its regulations. Free tax software 2011 download SIMPLE and safe harbor 401(k) plan exception. Free tax software 2011 download   The top-heavy plan requirements do not apply to SIMPLE 401(k) plans, discussed earlier in chapter 3, or to safe harbor 401(k) plans that consist solely of safe harbor contributions, discussed later in this chapter. Free tax software 2011 download QACAs (discussed later) also are not subject to top-heavy requirements. Free tax software 2011 download Setting Up a Qualified Plan There are two basic steps in setting up a qualified plan. Free tax software 2011 download First you adopt a written plan. Free tax software 2011 download Then you invest the plan assets. Free tax software 2011 download You, the employer, are responsible for setting up and maintaining the plan. Free tax software 2011 download If you are self-employed, it is not necessary to have employees besides yourself to sponsor and set up a qualified plan. Free tax software 2011 download If you have employees, see Participation, under Qualification Rules, earlier. Free tax software 2011 download Set-up deadline. Free tax software 2011 download   To take a deduction for contributions for a tax year, your plan must be set up (adopted) by the last day of that year (December 31 for calendar-year employers). Free tax software 2011 download Credit for startup costs. Free tax software 2011 download   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a qualified plan that first became effective in 2013. Free tax software 2011 download For more information, see Credit for startup costs under Reminders, earlier. Free tax software 2011 download Adopting a Written Plan You must adopt a written plan. Free tax software 2011 download The plan can be an IRS-approved master or prototype plan offered by a sponsoring organization. Free tax software 2011 download Or it can be an individually designed plan. Free tax software 2011 download Written plan requirement. Free tax software 2011 download   To qualify, the plan you set up must be in writing and must be communicated to your employees. Free tax software 2011 download The plan's provisions must be stated in the plan. Free tax software 2011 download It is not sufficient for the plan to merely refer to a requirement of the Internal Revenue Code. Free tax software 2011 download Master or prototype plans. Free tax software 2011 download   Most qualified plans follow a standard form of plan (a master or prototype plan) approved by the IRS. Free tax software 2011 download Master and prototype plans are plans made available by plan providers for adoption by employers (including self-employed individuals). Free tax software 2011 download Under a master plan, a single trust or custodial account is established, as part of the plan, for the joint use of all adopting employers. Free tax software 2011 download Under a prototype plan, a separate trust or custodial account is established for each employer. Free tax software 2011 download Plan providers. Free tax software 2011 download   The following organizations generally can provide IRS-approved master or prototype plans. Free tax software 2011 download Banks (including some savings and loan associations and federally insured credit unions). Free tax software 2011 download Trade or professional organizations. Free tax software 2011 download Insurance companies. Free tax software 2011 download Mutual funds. Free tax software 2011 download Individually designed plan. Free tax software 2011 download   If you prefer, you can set up an individually designed plan to meet specific needs. Free tax software 2011 download Although advance IRS approval is not required, you can apply for approval by paying a fee and requesting a determination letter. Free tax software 2011 download You may need professional help for this. Free tax software 2011 download See Rev. Free tax software 2011 download Proc. Free tax software 2011 download 2014-6, 2014-1 I. Free tax software 2011 download R. Free tax software 2011 download B. Free tax software 2011 download 198, available at www. Free tax software 2011 download irs. Free tax software 2011 download gov/irb/2014-1_IRB/ar10. Free tax software 2011 download html, as annually updated, that may help you decide whether to apply for approval. Free tax software 2011 download Internal Revenue Bulletins are available on the IRS website at IRS. Free tax software 2011 download gov They are also available at most IRS offices and at certain libraries. Free tax software 2011 download User fee. Free tax software 2011 download   The fee mentioned earlier for requesting a determination letter does not apply to employers who have 100 or fewer employees who received at least $5,000 of compensation from the employer for the preceding year. Free tax software 2011 download At least one of them must be a non-highly compensated employee participating in the plan. Free tax software 2011 download The fee does not apply to requests made by the later of the following dates. Free tax software 2011 download The end of the 5th plan year the plan is in effect. Free tax software 2011 download The end of any remedial amendment period for the plan that begins within the first 5 plan years. Free tax software 2011 download The request cannot be made by the sponsor of a prototype or similar plan the sponsor intends to market to participating employers. Free tax software 2011 download   For more information about whether the user fee applies, see Rev. Free tax software 2011 download Proc. Free tax software 2011 download 2014-8, 2014-1 I. Free tax software 2011 download R. Free tax software 2011 download B. Free tax software 2011 download 242, available at www. Free tax software 2011 download irs. Free tax software 2011 download gov/irb/2014-1_IRB/ar12. Free tax software 2011 download html, as may be annually updated; Notice 2003-49, 2003-32 I. Free tax software 2011 download R. Free tax software 2011 download B. Free tax software 2011 download 294, available at www. Free tax software 2011 download irs. Free tax software 2011 download gov/irb/2003-32_IRB/ar13. Free tax software 2011 download html; and Notice 2011-86, 2011-45 I. Free tax software 2011 download R. Free tax software 2011 download B. Free tax software 2011 download 698, available at www. Free tax software 2011 download irs. Free tax software 2011 download gov/irb/2011-45_IRB/ar11. Free tax software 2011 download html. Free tax software 2011 download Investing Plan Assets In setting up a qualified plan, you arrange how the plan's funds will be used to build its assets. Free tax software 2011 download You can establish a trust or custodial account to invest the funds. Free tax software 2011 download You, the trust, or the custodial account can buy an annuity contract from an insurance company. Free tax software 2011 download Life insurance can be included only if it is incidental to the retirement benefits. Free tax software 2011 download You set up a trust by a legal instrument (written document). Free tax software 2011 download You may need professional help to do this. Free tax software 2011 download You can set up a custodial account with a bank, savings and loan association, credit union, or other person who can act as the plan trustee. Free tax software 2011 download You do not need a trust or custodial account, although you can have one, to invest the plan's funds in annuity contracts or face-amount certificates. Free tax software 2011 download If anyone other than a trustee holds them, however, the contracts or certificates must state they are not transferable. Free tax software 2011 download Other plan requirements. Free tax software 2011 download   For information on other important plan requirements, see Qualification Rules , earlier in this chapter. Free tax software 2011 download Minimum Funding Requirement In general, if your plan is a money purchase pension plan or a defined benefit plan, you must actually pay enough into the plan to satisfy the minimum funding standard for each year. Free tax software 2011 download Determining the amount needed to satisfy the minimum funding standard for a defined benefit plan is complicated, and you should seek professional help in order to meet these contribution requirements. Free tax software 2011 download For information on this funding requirement, see section 412 and its regulations. Free tax software 2011 download Quarterly installments of required contributions. Free tax software 2011 download   If your plan is a defined benefit plan subject to the minimum funding requirements, you generally must make quarterly installment payments of the required contributions. Free tax software 2011 download If you do not pay the full installments timely, you may have to pay interest on any underpayment for the period of the underpayment. Free tax software 2011 download Due dates. Free tax software 2011 download   The due dates for the installments are 15 days after the end of each quarter. Free tax software 2011 download For a calendar-year plan, the installments are due April 15, July 15, October 15, and January 15 (of the following year). Free tax software 2011 download Installment percentage. Free tax software 2011 download   Each quarterly installment must be 25% of the required annual payment. Free tax software 2011 download Extended period for making contributions. Free tax software 2011 download   Additional contributions required to satisfy the minimum funding requirement for a plan year will be considered timely if made by 8½ months after the end of that year. Free tax software 2011 download Contributions A qualified plan is generally funded by your contributions. Free tax software 2011 download However, employees participating in the plan may be permitted to make contributions, and you may be permitted to make contributions on your own behalf. Free tax software 2011 download See Employee Contributions and Elective Deferrals later. Free tax software 2011 download Contributions deadline. Free tax software 2011 download   You can make deductible contributions for a tax year up to the due date of your return (plus extensions) for that year. Free tax software 2011 download Self-employed individual. Free tax software 2011 download   You can make contributions on behalf of yourself only if you have net earnings (compensation) from self-employment in the trade or business for which the plan was set up. Free tax software 2011 download Your net earnings must be from your personal services, not from your investments. Free tax software 2011 download If you have a net loss from self-employment, you cannot make contributions for yourself for the year, even if you can contribute for common-law employees based on their compensation. Free tax software 2011 download Employer Contributions There are certain limits on the contributions and other annual additions you can make each year for plan participants. Free tax software 2011 download There are also limits on the amount you can deduct. Free tax software 2011 download See Deduction Limits , later. Free tax software 2011 download Limits on Contributions and Benefits Your plan must provide that contributions or benefits cannot exceed certain limits. Free tax software 2011 download The limits differ depending on whether your plan is a defined contribution plan or a defined benefit plan. Free tax software 2011 download Defined benefit plan. Free tax software 2011 download   For 2013, the annual benefit for a participant under a defined benefit plan cannot exceed the lesser of the following amounts. Free tax software 2011 download 100% of the participant's average compensation for his or her highest 3 consecutive calendar years. Free tax software 2011 download $205,000 ($210,000 for 2014). Free tax software 2011 download Defined contribution plan. Free tax software 2011 download   For 2013, a defined contribution plan's annual contributions and other additions (excluding earnings) to the account of a participant cannot exceed the lesser of the following amounts. Free tax software 2011 download 100% of the participant's compensation. Free tax software 2011 download $51,000 ($52,000 for 2014). Free tax software 2011 download   Catch-up contributions (discussed later under Limit on Elective Deferrals) are not subject to the above limit. Free tax software 2011 download Employee Contributions Participants may be permitted to make nondeductible contributions to a plan in addition to your contributions. Free tax software 2011 download Even though these employee contributions are not deductible, the earnings on them are tax free until distributed in later years. Free tax software 2011 download Also, these contributions must satisfy the actual contribution percentage (ACP) test of section 401(m)(2), a nondiscrimination test that applies to employee contributions and matching contributions. Free tax software 2011 download See Regulations sections 1. Free tax software 2011 download 401(k)-2 and 1. Free tax software 2011 download 401(m)-2 for further guidance relating to the nondiscrimination rules under sections 401(k) and 401(m). Free tax software 2011 download When Contributions Are Considered Made You generally apply your plan contributions to the year in which you make them. Free tax software 2011 download But you can apply them to the previous year if all the following requirements are met. Free tax software 2011 download You make them by the due date of your tax return for the previous year (plus extensions). Free tax software 2011 download The plan was established by the end of the previous year. Free tax software 2011 download The plan treats the contributions as though it had received them on the last day of the previous year. Free tax software 2011 download You do either of the following. Free tax software 2011 download You specify in writing to the plan administrator or trustee that the contributions apply to the previous year. Free tax software 2011 download You deduct the contributions on your tax return for the previous year. Free tax software 2011 download A partnership shows contributions for partners on Form 1065. Free tax software 2011 download Employer's promissory note. Free tax software 2011 download   Your promissory note made out to the plan is not a payment that qualifies for the deduction. Free tax software 2011 download Also, issuing this note is a prohibited transaction subject to tax. Free tax software 2011 download See Prohibited Transactions , later. Free tax software 2011 download Employer Deduction You can usually deduct, subject to limits, contributions you make to a qualified plan, including those made for your own retirement. Free tax software 2011 download The contributions (and earnings and gains on them) are generally tax free until distributed by the plan. Free tax software 2011 download Deduction Limits The deduction limit for your contributions to a qualified plan depends on the kind of plan you have. Free tax software 2011 download Defined contribution plans. Free tax software 2011 download   The deduction for contributions to a defined contribution plan (profit-sharing plan or money purchase pension plan) cannot be more than 25% of the compensation paid (or accrued) during the year to your eligible employees participating in the plan. Free tax software 2011 download If you are self-employed, you must reduce this limit in figuring the deduction for contributions you make for your own account. Free tax software 2011 download See Deduction Limit for Self-Employed Individuals , later. Free tax software 2011 download   When figuring the deduction limit, the following rules apply. Free tax software 2011 download Elective deferrals (discussed later) are not subject to the limit. Free tax software 2011 download Compensation includes elective deferrals. Free tax software 2011 download The maximum compensation that can be taken into account for each employee in 2013 is $255,000 ($260,000 for 2014). Free tax software 2011 download Defined benefit plans. Free tax software 2011 download   The deduction for contributions to a defined benefit plan is based on actuarial assumptions and computations. Free tax software 2011 download Consequently, an actuary must figure your deduction limit. Free tax software 2011 download    In figuring the deduction for contributions, you cannot take into account any contributions or benefits that are more than the limits discussed earlier under Limits on Contributions and Benefits, earlier. Free tax software 2011 download Table 4–1. Free tax software 2011 download Carryover of Excess Contributions Illustrated—Profit-Sharing Plan (000's omitted) Year Participants' compensation Participants' share of required contribution (10% of annual profit) Deductible  limit for current year (25% of compensation) Contribution Excess contribution carryover used1 Total  deduction including carryovers Excess contribution carryover available at end of year 2010 $1,000 $100 $250 $100 $ 0 $100 $ 0 2011 400 165 100 165 0 100 65 2012 500 100 125 100 25 125 40 2013 600 100 150 100 40 140 0  1There were no carryovers from years before 2010. Free tax software 2011 download Deduction Limit for Self-Employed Individuals If you make contributions for yourself, you need to make a special computation to figure your maximum deduction for these contributions. Free tax software 2011 download Compensation is your net earnings from self-employment, defined in chapter 1. Free tax software 2011 download This definition takes into account both the following items. Free tax software 2011 download The deduction for the deductible part of your self-employment tax. Free tax software 2011 download The deduction for contributions on your behalf to the plan. Free tax software 2011 download The deduction for your own contributions and your net earnings depend on each other. Free tax software 2011 download For this reason, you determine the deduction for your own contributions indirectly by reducing the contribution rate called for in your plan. Free tax software 2011 download To do this, use either the Rate Table for Self-Employed or the Rate Worksheet for Self-Employed in chapter 5. Free tax software 2011 download Then figure your maximum deduction by using the Deduction Worksheet for Self-Employed in chapter 5. Free tax software 2011 download Where To Deduct Contributions Deduct the contributions you make for your common-law employees on your tax return. Free tax software 2011 download For example, sole proprietors deduct them on Schedule C (Form 1040) or Schedule F (Form 1040); partnerships deduct them on Form 1065; and corporations deduct them on Form 1120, or Form 1120S. Free tax software 2011 download Sole proprietors and partners deduct contributions for themselves on line 28 of Form 1040. Free tax software 2011 download (If you are a partner, contributions for yourself are shown on the Schedule K-1 (Form 1065) you get from the partnership. Free tax software 2011 download ) Carryover of Excess Contributions If you contribute more to the plans than you can deduct for the year, you can carry over and deduct the difference in later years, combined with your contributions for those years. Free tax software 2011 download Your combined deduction in a later year is limited to 25% of the participating employees' compensation for that year. Free tax software 2011 download For purposes of this limit, a SEP is treated as a profit-sharing (defined contribution) plan. Free tax software 2011 download However, this percentage limit must be reduced to figure your maximum deduction for contributions you make for yourself. Free tax software 2011 download See Deduction Limit for Self-Employed Individuals, earlier. Free tax software 2011 download The amount you carry over and deduct may be subject to the excise tax discussed next. Free tax software 2011 download Table 4-1, earlier, illustrates the carryover of excess contributions to a profit-sharing plan. Free tax software 2011 download Excise Tax for Nondeductible (Excess) Contributions If you contribute more than your deduction limit to a retirement plan, you have made nondeductible contributions and you may be liable for an excise tax. Free tax software 2011 download In general, a 10% excise tax applies to nondeductible contributions made to qualified pension and profit-sharing plans and to SEPs. Free tax software 2011 download Special rule for self-employed individuals. Free tax software 2011 download   The 10% excise tax does not apply to any contribution made to meet the minimum funding requirements in a money purchase pension plan or a defined benefit plan. Free tax software 2011 download Even if that contribution is more than your earned income from the trade or business for which the plan is set up, the difference is not subject to this excise tax. Free tax software 2011 download See Minimum Funding Requirement , earlier. Free tax software 2011 download Reporting the tax. Free tax software 2011 download   You must report the tax on your nondeductible contributions on Form 5330. Free tax software 2011 download Form 5330 includes a computation of the tax. Free tax software 2011 download See the separate instructions for completing the form. Free tax software 2011 download Elective Deferrals (401(k) Plans) Your qualified plan can include a cash or deferred arrangement under which participants can choose to have you contribute part of their before-tax compensation to the plan rather than receive the compensation in cash. Free tax software 2011 download A plan with this type of arrangement is popularly known as a “401(k) plan. Free tax software 2011 download ” (As a self-employed individual participating in the plan, you can contribute part of your before-tax net earnings from the business. Free tax software 2011 download ) This contribution is called an “elective deferral” because participants choose (elect) to defer receipt of the money. Free tax software 2011 download In general, a qualified plan can include a cash or deferred arrangement only if the qualified plan is one of the following plans. Free tax software 2011 download A profit-sharing plan. Free tax software 2011 download A money purchase pension plan in existence on June 27, 1974, that included a salary reduction arrangement on that date. Free tax software 2011 download Partnership. Free tax software 2011 download   A partnership can have a 401(k) plan. Free tax software 2011 download Restriction on conditions of participation. Free tax software 2011 download   The plan cannot require, as a condition of participation, that an employee complete more than 1 year of service. Free tax software 2011 download Matching contributions. Free tax software 2011 download   If your plan permits, you can make matching contributions for an employee who makes an elective deferral to your 401(k) plan. Free tax software 2011 download For example, the plan might provide that you will contribute 50 cents for each dollar your participating employees choose to defer under your 401(k) plan. Free tax software 2011 download Matching contributions are generally subject to the ACP test discussed earlier under Employee Contributions. Free tax software 2011 download Nonelective contributions. Free tax software 2011 download   You can also make contributions (other than matching contributions) for your participating employees without giving them the choice to take cash instead. Free tax software 2011 download These are called nonelective contributions. Free tax software 2011 download Employee compensation limit. Free tax software 2011 download   No more than $255,000 of the employee's compensation can be taken into account when figuring contributions other than elective deferrals in 2013. Free tax software 2011 download This limit is $260,000 in 2014. Free tax software 2011 download SIMPLE 401(k) plan. Free tax software 2011 download   If you had 100 or fewer employees who earned $5,000 or more in compensation during the preceding year, you may be able to set up a SIMPLE 401(k) plan. Free tax software 2011 download A SIMPLE 401(k) plan is not subject to the nondiscrimination and top-heavy plan requirements discussed earlier under Qualification Rules. Free tax software 2011 download For details about SIMPLE 401(k) plans, see SIMPLE 401(k) Plan in chapter 3. Free tax software 2011 download Distributions. Free tax software 2011 download   Certain rules apply to distributions from 401(k) plans. Free tax software 2011 download See Distributions From 401(k) Plans , later. Free tax software 2011 download Limit on Elective Deferrals There is a limit on the amount an employee can defer each year under these plans. Free tax software 2011 download This limit applies without regard to community property laws. Free tax software 2011 download Your plan must provide that your employees cannot defer more than the limit that applies for a particular year. Free tax software 2011 download For 2013 and 2014, the basic limit on elective deferrals is $17,500. Free tax software 2011 download This limit applies to all salary reduction contributions and elective deferrals. Free tax software 2011 download If, in conjunction with other plans, the deferral limit is exceeded, the difference is included in the employee's gross income. Free tax software 2011 download Catch-up contributions. Free tax software 2011 download   A 401(k) plan can permit participants who are age 50 or over at the end of the calendar year to also make catch-up contributions. Free tax software 2011 download The catch-up contribution limit for 2013 and 2014 is $5,500. Free tax software 2011 download Elective deferrals are not treated as catch-up contributions for 2013 until they exceed the $17,500 limit, the actual deferral percentage (ADP) test limit of section 401(k)(3), or the plan limit (if any). Free tax software 2011 download However, the catch-up contribution a participant can make for a year cannot exceed the lesser of the following amounts. Free tax software 2011 download The catch-up contribution limit. Free tax software 2011 download The excess of the participant's compensation over the elective deferrals that are not catch-up contributions. Free tax software 2011 download Treatment of contributions. Free tax software 2011 download   Your contributions to your own 401(k) plan are generally deductible by you for the year they are contributed to the plan. Free tax software 2011 download Matching or nonelective contributions made to the plan are also deductible by you in the year of contribution. Free tax software 2011 download Your employees' elective deferrals other than designated Roth contributions are tax free until distributed from the plan. Free tax software 2011 download Elective deferrals are included in wages for social security, Medicare, and federal unemployment (FUTA) tax. Free tax software 2011 download Forfeiture. Free tax software 2011 download   Employees have a nonforfeitable right at all times to their accrued benefit attributable to elective deferrals. Free tax software 2011 download Reporting on Form W-2. Free tax software 2011 download   Do not include elective deferrals in the “Wages, tips, other compensation” box of Form W-2. Free tax software 2011 download You must, however, include them in the “Social security wages” and “Medicare wages and tips” boxes. Free tax software 2011 download You must also include them in box 12. Free tax software 2011 download Mark the “Retirement plan” checkbox in box 13. Free tax software 2011 download For more information, see the Form W-2 instructions. Free tax software 2011 download Automatic Enrollment Your 401(k) plan can have an automatic enrollment feature. Free tax software 2011 download Under this feature, you can automatically reduce an employee's pay by a fixed percentage and contribute that amount to the 401(k) plan on his or her behalf unless the employee affirmatively chooses not to have his or her pay reduced or chooses to have it reduced by a different percentage. Free tax software 2011 download These contributions are elective deferrals. Free tax software 2011 download An automatic enrollment feature will encourage employees' saving for retirement and will help your plan pass nondiscrimination testing (if applicable). Free tax software 2011 download For more information, see Publication 4674, Automatic Enrollment 401(k) Plans for Small Businesses. Free tax software 2011 download Eligible automatic contribution arrangement. Free tax software 2011 download   Under an eligible automatic contribution arrangement (EACA), a participant is treated as having elected to have the employer make contributions in an amount equal to a uniform percentage of compensation. Free tax software 2011 download This automatic election will remain in place until the participant specifically elects not to have such deferral percentage made (or elects a different percentage). Free tax software 2011 download There is no required deferral percentage. Free tax software 2011 download Withdrawals. Free tax software 2011 download   Under an EACA, you may allow participants to withdraw their automatic contributions to the plan if certain conditions are met. Free tax software 2011 download The participant must elect the withdrawal no later than 90 days after the date of the first elective contributions under the EACA. Free tax software 2011 download The participant must withdraw the entire amount of EACA default contributions, including any earnings thereon. Free tax software 2011 download   If the plan allows withdrawals under the EACA, the amount of the withdrawal other than the amount of any designated Roth contributions must be included in the employee's gross income for the tax year in which the distribution is made. Free tax software 2011 download The additional 10% tax on early distributions will not apply to the distribution. Free tax software 2011 download Notice requirement. Free tax software 2011 download   Under an EACA, employees must be given written notice of the terms of the EACA within a reasonable period of time before each plan year. 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Free tax software 2011 download If an employee does not make an affirmative election, the default deferral percentage must meet the following conditions. Free tax software 2011 download It must be applied uniformly. Free tax software 2011 download It must not exceed 10%. Free tax software 2011 download It must be at least 3% in the first plan year it applies to an employee and through the end of the following year. Free tax software 2011 download It must increase to at least 4% in the following plan year. Free tax software 2011 download It must increase to at least 5% in the following plan year. Free tax software 2011 download It must increase to at least 6% in subsequent plan years. Free tax software 2011 download Matching or nonelective contributions. Free tax software 2011 download   Under the terms of the QACA, you must make either matching or nonelective contributions according to the following terms. Free tax software 2011 download Matching contributions. Free tax software 2011 download You must make matching contributions on behalf of each non-highly compensated employee in the following amounts. Free tax software 2011 download An amount equal to 100% of elective deferrals, up to 1% of compensation. Free tax software 2011 download An amount equal to 50% of elective deferrals, from 1% up to 6% of compensation. Free tax software 2011 download Other formulas may be used as long as they are at least as favorable to non-highly compensated employees. Free tax software 2011 download The rate of matching contributions for highly compensated employees, including yourself, must not exceed the rates for non-highly compensated employees. Free tax software 2011 download Nonelective contributions. Free tax software 2011 download You must make nonelective contributions on behalf of every non-highly compensated employee eligible to participate in the plan, regardless of whether they elected to participate, in an amount equal to at least 3% of their compensation. Free tax software 2011 download Vesting requirements. Free tax software 2011 download   All accrued benefits attributed to matching or nonelective contributions under the QACA must be 100% vested for all employees who complete 2 years of service. Free tax software 2011 download These contributions are subject to special withdrawal restrictions, discussed later. Free tax software 2011 download Notice requirements. Free tax software 2011 download   Each employee eligible to participate in the QACA must receive written notice of their rights and obligations under the QACA, within a reasonable period before each plan year. Free tax software 2011 download The notice must be written in a manner calculated to be understood by the average employee, and it must be accurate and comprehensive. Free tax software 2011 download The notice must explain their right to elect not to have elective contributions made on their behalf, or to have contributions made at a different percentage than the default percentage. Free tax software 2011 download Additionally, the notice must explain how contributions will be invested in the absence of any investment election by the employee. Free tax software 2011 download The employee must have a reasonable period of time after receiving the notice to make such contribution and investment elections prior to the first contributions under the QACA. Free tax software 2011 download Treatment of Excess Deferrals If the total of an employee's deferrals is more than the limit for 2013, the employee can have the difference (called an excess deferral) paid out of any of the plans that permit these distributions. Free tax software 2011 download He or she must notify the plan by April 15, 2014 (or an earlier date specified in the plan), of the amount to be paid from each plan. Free tax software 2011 download The plan must then pay the employee that amount, plus earnings on the amount through the end of 2013, by April 15, 2014. Free tax software 2011 download Excess withdrawn by April 15. Free tax software 2011 download   If the employee takes out the excess deferral by April 15, 2014, it is not reported again by including it in the employee's gross income for 2014. Free tax software 2011 download However, any income earned in 2013 on the excess deferral taken out is taxable in the tax year in which it is taken out. Free tax software 2011 download The distribution is not subject to the additional 10% tax on early distributions. Free tax software 2011 download   If the employee takes out part of the excess deferral and the income on it, the distribution is treated as made proportionately from the excess deferral and the income. Free tax software 2011 download   Even if the employee takes out the excess deferral by April 15, the amount will be considered for purposes of nondiscrimination testing requirements of the plan, unless the distributed amount is for a non-highly compensated employee who participates in only one employer's 401(k) plan or plans. Free tax software 2011 download Excess not withdrawn by April 15. Free tax software 2011 download   If the employee does not take out the excess deferral by April 15, 2014, the excess, though taxable in 2013, is not included in the employee's cost basis in figuring the taxable amount of any eventual distributions under the plan. Free tax software 2011 download In effect, an excess deferral left in the plan is taxed twice, once when contributed and again when distributed. Free tax software 2011 download Also, if the employee's excess deferral is allowed to stay in the plan and the employee participates in no other employer's plan, the plan can be disqualified. Free tax software 2011 download Reporting corrective distributions on Form 1099-R. Free tax software 2011 download   Report corrective distributions of excess deferrals (including any earnings) on Form 1099-R. Free tax software 2011 download For specific information about reporting corrective distributions, see the Instructions for Forms 1099-R and 5498. Free tax software 2011 download Tax on excess contributions of highly compensated employees. Free tax software 2011 download   The law provides tests to detect discrimination in a plan. Free tax software 2011 download If tests, such as the actual deferral percentage test (ADP test) (see section 401(k)(3)) and the actual contribution percentage test (ACP test) (see section 401(m)(2)), show that contributions for highly compensated employees are more than the test limits for these contributions, the employer may have to pay a 10% excise tax. Free tax software 2011 download Report the tax on Form 5330. Free tax software 2011 download The ADP test does not apply to a safe harbor 401(k) plan (discussed next) nor to a QACA. Free tax software 2011 download Also, the ACP test does not apply to these plans if certain additional requirements are met. Free tax software 2011 download   The tax for the year is 10% of the excess contributions for the plan year ending in your tax year. Free tax software 2011 download Excess contributions are elective deferrals, employee contributions, or employer matching or nonelective contributions that are more than the amount permitted under the ADP test or the ACP test. Free tax software 2011 download   See Regulations sections 1. Free tax software 2011 download 401(k)-2 and 1. Free tax software 2011 download 401(m)-2 for further guidance relating to the nondiscrimination rules under sections 401(k) and 401(m). Free tax software 2011 download    If the plan fails the ADP or ACP testing, and the failure is not corrected by the end of the next plan year, the plan can be disqualified. Free tax software 2011 download Safe harbor 401(k) plan. Free tax software 2011 download If you meet the requirements for a safe harbor 401(k) plan, you do not have to satisfy the ADP test, nor the ACP test, if certain additional requirements are met. Free tax software 2011 download For your plan to be a safe harbor plan, you must meet the following conditions. Free tax software 2011 download Matching or nonelective contributions. Free tax software 2011 download You must make matching or nonelective contributions according to one of the following formulas. Free tax software 2011 download Matching contributions. Free tax software 2011 download You must make matching contributions according to the following rules. Free tax software 2011 download You must contribute an amount equal to 100% of each non-highly compensated employee's elective deferrals, up to 3% of compensation. Free tax software 2011 download You must contribute an amount equal to 50% of each non-highly compensated employee's elective deferrals, from 3% up to 5% of compensation. Free tax software 2011 download The rate of matching contributions for highly compensated employees, including yourself, must not exceed the rates for non-highly compensated employees. Free tax software 2011 download Nonelective contributions. Free tax software 2011 download You must make nonelective contributions, without regard to whether the employee made elective deferrals, on behalf of all non-highly compensated employees eligible to participate in the plan, equal to at least 3% of the employee's compensation. Free tax software 2011 download These mandatory matching and nonelective contributions must be immediately 100% vested and are subject to special withdrawal restrictions. Free tax software 2011 download Notice requirement. Free tax software 2011 download You must give eligible employees written notice of their rights and obligations with regard to contributions under the plan, within a reasonable period before the plan year. Free tax software 2011 download The other requirements for a 401(k) plan, including withdrawal and vesting rules, must also be met for your plan to qualify as a safe harbor 401(k) plan. Free tax software 2011 download Qualified Roth Contribution Program Under this program an eligible employee can designate all or a portion of his or her elective deferrals as after-tax Roth contributions. Free tax software 2011 download Elective deferrals designated as Roth contributions must be maintained in a separate Roth account. Free tax software 2011 download However, unlike other elective deferrals, designated Roth contributions are not excluded from employees' gross income, but qualified distributions from a Roth account are excluded from employees' gross income. Free tax software 2011 download Elective Deferrals Under a qualified Roth contribution program, the amount of elective deferrals that an employee may designate as a Roth contribution is limited to the maximum amount of elective deferrals excludable from gross income for the year (for 2013 and 2014, $17,500 if under age 50 and $23,000 if age 50 or over) less the total amount of the employee's elective deferrals not designated as Roth contributions. Free tax software 2011 download Designated Roth deferrals are treated the same as pre-tax elective deferrals for most purposes, including: The annual individual elective deferral limit (total of all designated Roth contributions and traditional, pre-tax elective deferrals) of $17,500 for 2013 and 2014, with an additional $5,500 if age 50 or over for 2013 and 2014, Determining the maximum employee and employer annual contributions of the lesser of 100% of compensation or $51,000 for 2013 ($52,000 for 2014), Nondiscrimination testing, Required distributions, and Elective deferrals not taken into account for purposes of deduction limits. Free tax software 2011 download Qualified Distributions A qualified distribution is a distribution that is made after the employee's nonexclusion period and: On or after the employee attains age   59½, On account of the employee's being disabled, or On or after the employee's death. Free tax software 2011 download An employee's nonexclusion period for a plan is the 5-tax-year period beginning with the earlier of the following tax years. Free tax software 2011 download The first tax year in which the employee made a contribution to his or her Roth account in the plan, or If a rollover contribution was made to the employee's designated Roth account from a designated Roth account previously established for the employee under another plan, then the first tax year the employee made a designated Roth contribution to the previously established account. Free tax software 2011 download Rollover. Free tax software 2011 download   Beginning September 28, 2010, a rollover from another account can be made to a designated Roth account in the same plan. Free tax software 2011 download For additional information on these in-plan Roth rollovers, see Notice 2010-84, 2010-51 I. Free tax software 2011 download R. Free tax software 2011 download B. Free tax software 2011 download 872, available at www. Free tax software 2011 download irs. Free tax software 2011 download gov/irb/2010-51_IRB/ar11. Free tax software 2011 download html, and Notice 2013-74. Free tax software 2011 download A distribution from a designated Roth account can only be rolled over to another designated Roth account or a Roth IRA. Free tax software 2011 download Rollover amounts do not apply toward the annual deferral limit. Free tax software 2011 download Reporting Requirements You must report a contribution to a Roth account on Form W-2 and a distribution from a Roth account on Form 1099-R. Free tax software 2011 download See the Form W-2 and 1099-R instructions for detailed information. Free tax software 2011 download Distributions Amounts paid to plan participants from a qualified plan are called distributions. Free tax software 2011 download Distributions may be nonperiodic, such as lump-sum distributions, or periodic, such as annuity payments. Free tax software 2011 download Also, certain loans may be treated as distributions. Free tax software 2011 download See Loans Treated as Distributions in Publication 575. Free tax software 2011 download Required Distributions A qualified plan must provide that each participant will either: Receive his or her entire interest (benefits) in the plan by the required beginning date (defined later), or Begin receiving regular periodic distributions by the required beginning date in annual amounts calculated to distribute the participant's entire interest (benefits) over his or her life expectancy or over the joint life expectancy of the participant and the designated beneficiary (or over a shorter period). Free tax software 2011 download These distribution rules apply individually to each qualified plan. Free tax software 2011 download You cannot satisfy the requirement for one plan by taking a distribution from another. Free tax software 2011 download The plan must provide that these rules override any inconsistent distribution options previously offered. Free tax software 2011 download Minimum distribution. Free tax software 2011 download   If the account balance of a qualified plan participant is to be distributed (other than as an annuity), the plan administrator must figure the minimum amount required to be distributed each distribution calendar year. Free tax software 2011 download This minimum is figured by dividing the account balance by the applicable life expectancy. Free tax software 2011 download The plan administrator can use the life expectancy tables in Appendix C of Publication 590 for this purpose. Free tax software 2011 download For more information on figuring the minimum distribution, see Tax on Excess Accumulation in Publication 575. Free tax software 2011 download Required beginning date. Free tax software 2011 download   Generally, each participant must receive his or her entire benefits in the plan or begin to receive periodic distributions of benefits from the plan by the required beginning date. Free tax software 2011 download   A participant must begin to receive distributions from his or her qualified retirement plan by April 1 of the first year after the later of the following years. Free tax software 2011 download Calendar year in which he or she reaches age 70½. Free tax software 2011 download Calendar year in which he or she retires from employment with the employer maintaining the plan. Free tax software 2011 download However, the plan may require the participant to begin receiving distributions by April 1 of the year after the participant reaches age 70½ even if the participant has not retired. Free tax software 2011 download   If the participant is a 5% owner of the employer maintaining the plan, the participant must begin receiving distributions by April 1 of the first year after the calendar year in which the participant reached age 70½. Free tax software 2011 download For more information, see Tax on Excess Accumulation in Publication 575. Free tax software 2011 download Distributions after the starting year. Free tax software 2011 download   The distribution required to be made by April 1 is treated as a distribution for the starting year. Free tax software 2011 download (The starting year is the year in which the participant meets (1) or (2) above, whichever applies. Free tax software 2011 download ) After the starting year, the participant must receive the required distribution for each year by December 31 of that year. Free tax software 2011 download If no distribution is made in the starting year, required distributions for 2 years must be made in the next year (one by April 1 and one by December 31). Free tax software 2011 download Distributions after participant's death. Free tax software 2011 download   See Publication 575 for the special rules covering distributions made after the death of a participant. Free tax software 2011 download Distributions From 401(k) Plans Generally, distributions cannot be made until one of the following occurs. Free tax software 2011 download The employee retires, dies, becomes disabled, or otherwise severs employment. Free tax software 2011 download The plan ends and no other defined contribution plan is established or continued. Free tax software 2011 download In the case of a 401(k) plan that is part of a profit-sharing plan, the employee reaches age 59½ or suffers financial hardship. Free tax software 2011 download For the rules on hardship distributions, including the limits on them, see Regulations section 1. Free tax software 2011 download 401(k)-1(d). Free tax software 2011 download The employee becomes eligible for a qualified reservist distribution (defined next). Free tax software 2011 download Certain distributions listed above may be subject to the tax on early distributions discussed later. Free tax software 2011 download Qualified reservist distributions. Free tax software 2011 download   A qualified reservist distribution is a distribution from an IRA or an elective deferral account made after September 11, 2001, to a military reservist or a member of the National Guard who has been called to active duty for at least 180 days or for an indefinite period. Free tax software 2011 download All or part of a qualified reservist distribution can be recontributed to an IRA. Free tax software 2011 download The additional 10% tax on early distributions does not apply to a qualified reservist distribution. Free tax software 2011 download Tax Treatment of Distributions Distributions from a qualified plan minus a prorated part of any cost basis are subject to income tax in the year they are distributed. Free tax software 2011 download Since most recipients have no cost basis, a distribution is generally fully taxable. Free tax software 2011 download An exception is a distribution that is properly rolled over as discussed under Rollover, next. Free tax software 2011 download The tax treatment of distributions depends on whether they are made periodically over several years or life (periodic distributions) or are nonperiodic distributions. Free tax software 2011 download See Taxation of Periodic Payments and Taxation of Nonperiodic Payments in Publication 575 for a detailed description of how distributions are taxed, including the 10-year tax option or capital gain treatment of a lump-sum distribution. Free tax software 2011 download Note. Free tax software 2011 download A recipient of a distribution from a designated Roth account will have a cost basis since designated Roth contributions are made on an after-tax basis. Free tax software 2011 download Also, a distribution from a designated Roth account is entirely tax-free if certain conditions are met. Free tax software 2011 download See Qualified distributions under Qualified Roth Contribution Program, earlier. Free tax software 2011 download Rollover. Free tax software 2011 download   The recipient of an eligible rollover distribution from a qualified plan can defer the tax on it by rolling it over into a traditional IRA or another eligible retirement plan. Free tax software 2011 download However, it may be subject to withholding as discussed under Withholding requirement, later. Free tax software 2011 download A rollover can also be made to a Roth IRA, in which case, any previously untaxed amounts are includible in gross income unless the rollover is from a designated Roth account. Free tax software 2011 download Eligible rollover distribution. Free tax software 2011 download   This is a distribution of all or any part of an employee's balance in a qualified retirement plan that is not any of the following. Free tax software 2011 download A required minimum distribution. Free tax software 2011 download See Required Distributions , earlier. Free tax software 2011 download Any of a series of substantially equal payments made at least once a year over any of the following periods. Free tax software 2011 download The employee's life or life expectancy. Free tax software 2011 download The joint lives or life expectancies of the employee and beneficiary. Free tax software 2011 download A period of 10 years or longer. Free tax software 2011 download A hardship distribution. Free tax software 2011 download The portion of a distribution that represents the return of an employee's nondeductible contributions to the plan. Free tax software 2011 download See Employee Contributions , earlier, and Rollover of nontaxable amounts, next. Free tax software 2011 download Loans treated as distributions. Free tax software 2011 download Dividends on employer securities. Free tax software 2011 download The cost of any life insurance coverage provided under a qualified retirement plan. Free tax software 2011 download Similar items designated by the IRS in published guidance. Free tax software 2011 download See, for example, the Instructions for Forms 1099-R and 5498. Free tax software 2011 download Rollover of nontaxable amounts. Free tax software 2011 download   You may be able to roll over the nontaxable part of a distribution to another qualified retirement plan or a section 403(b) plan, or to an IRA. Free tax software 2011 download If the rollover is to a qualified retirement plan or a section 403(b) plan that separately accounts for the taxable and nontaxable parts of the rollover, the transfer must be made through a direct (trustee-to-trustee) rollover. Free tax software 2011 download If the rollover is to an IRA, the transfer can be made by any rollover method. Free tax software 2011 download Note. Free tax software 2011 download A distribution from a designated Roth account can be rolled over to another designated Roth account or to a Roth IRA. Free tax software 2011 download If the rollover is to a Roth IRA, it can be rolled over by any rollover method, but if the rollover is to another designated Roth account, it must be rolled over directly (trustee-to-trustee). Free tax software 2011 download More information. Free tax software 2011 download   For more information about rollovers, see Rollovers in Pubs. Free tax software 2011 download 575 and 590. Free tax software 2011 download Withholding requirement. Free tax software 2011 download   If, during a year, a qualified plan pays to a participant one or more eligible rollover distributions (defined earlier) that are reasonably expected to total $200 or more, the payor must withhold 20% of the taxable portion of each distribution for federal income tax. Free tax software 2011 download Exceptions. Free tax software 2011 download   If, instead of having the distribution paid to him or her, the participant chooses to have the plan pay it directly to an IRA or another eligible retirement plan (a direct rollover), no withholding is required. Free tax software 2011 download   If the distribution is not an eligible rollover distribution, defined earlier, the 20% withholding requirement does not apply. Free tax software 2011 download Other withholding rules apply to distributions that are not eligible rollover distributions, such as long-term periodic distributions and required distributions (periodic or nonperiodic). Free tax software 2011 download However, the participant can choose not to have tax withheld from these distributions. Free tax software 2011 download If the participant does not make this choice, the following withholding rules apply. Free tax software 2011 download For periodic distributions, withholding is based on their treatment as wages. Free tax software 2011 download For nonperiodic distributions, 10% of the taxable part is withheld. Free tax software 2011 download Estimated tax payments. Free tax software 2011 download   If no income tax is withheld or not enough tax is withheld, the recipient of a distribution may have to make estimated tax payments. Free tax software 2011 download For more information, see Withholding Tax and Estimated Tax in Publication 575. Free tax software 2011 download Section 402(f) Notice. Free tax software 2011 download   If a distribution is an eligible rollover distribution, as defined earlier, you must provide a written notice to the recipient that explains the following rules regarding such distributions. Free tax software 2011 download That the distribution may be directly transferred to an eligible retirement plan and information about which distributions are eligible for this direct transfer. Free tax software 2011 download That tax will be withheld from the distribution if it is not directly transferred to an eligible retirement plan. Free tax software 2011 download That the distribution will not be subject to tax if transferred to an eligible retirement plan within 60 days after the date the recipient receives the distribution. Free tax software 2011 download Certain other rules that may be applicable. Free tax software 2011 download   Notice 2009-68, 2009-39 I. Free tax software 2011 download R. Free tax software 2011 download B. Free tax software 2011 download 423, available at www. Free tax software 2011 download irs. Free tax software 2011 download gov/irb/2009-39_IRB/ar14. Free tax software 2011 download html, contains two updated safe harbor section 402(f) notices that plan administrators may provide recipients of eligible rollover distributions. Free tax software 2011 download If the plan allows in-plan Roth rollovers, the 402(f) notice must be amended to reflect this. Free tax software 2011 download Notice 2010-84 contains guidance on how to modify a 402(f) notice for in-plan Roth rollovers. Free tax software 2011 download Timing of notice. Free tax software 2011 download   The notice generally must be provided no less than 30 days and no more than 180 days before the date of a distribution. Free tax software 2011 download Method of notice. Free tax software 2011 download   The written notice must be provided individually to each distributee of an eligible rollover distribution. Free tax software 2011 download Posting of the notice is not sufficient. Free tax software 2011 download However, the written requirement may be satisfied through the use of electronic media if certain additional conditions are met. Free tax software 2011 download See Regulations section 1. Free tax software 2011 download 401(a)-21. Free tax software 2011 download Tax on failure to give notice. Free tax software 2011 download   Failure to give a 402(f) notice will result in a tax of $100 for each failure, with a total not exceeding $50,000 per calendar year. Free tax software 2011 download The tax will not be imposed if it is shown that such failure is due to reasonable cause and not to willful neglect. Free tax software 2011 download Tax on Early Distributions If a distribution is made to an employee under the plan before he or she reaches age 59½, the employee may have to pay a 10% additional tax on the distribution. Free tax software 2011 download This tax applies to the amount received that the employee must include in income. Free tax software 2011 download Exceptions. Free tax software 2011 download   The 10% tax will not apply if distributions before age 59½ are made in any of the following circumstances. Free tax software 2011 download Made to a beneficiary (or to the estate of the employee) on or after the death of the employee. Free tax software 2011 download Made due to the employee having a qualifying disability. Free tax software 2011 download Made as part of a series of substantially equal periodic payments beginning after separation from service and made at least annually for the life or life expectancy of the employee or the joint lives or life expectancies of the employee and his or her designated beneficiary. Free tax software 2011 download (The payments under this exception, except in the case of death or disability, must continue for at least 5 years or until the employee reaches age 59½, whichever is the longer period. Free tax software 2011 download ) Made to an employee after separation from service if the separation occurred during o