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Freetaxusa com Index A Adjusted gross income (AGI) Income limits for, Income Limits Age Age 65, Age 65. Freetaxusa com Mandatory retirement age, Payments that are not disability income. Freetaxusa com Assistance (see Tax help) C Citizenship requirement, U. Freetaxusa com S. Freetaxusa com Citizen or Resident Alien Credit figured by IRS, Credit Figured for You Credit figured for you, Credit Figured for You D Disability benefits Nontaxable by law, Step 2. Freetaxusa com Total Certain Nontaxable Pensions and Benefits Disability income, Disability income. Freetaxusa com Disability, permanent and total disability, Qualified Individual, Permanent and total disability. Freetaxusa com E Eligibility for credit, Are You Eligible for the Credit? Employer's accident or health plans or pension plans Disability income from, Disability income. Freetaxusa com Excess adjusted gross income, Step 3. Freetaxusa com Determine Excess Adjusted Gross Income F Figuring the credit yourself, Figuring the Credit Yourself Determine excess AGI, Step 3. Freetaxusa com Determine Excess Adjusted Gross Income Determine initial amount, Step 1. Freetaxusa com Determine Initial Amount Determine the credit, Step 5. Freetaxusa com Determine Your Credit Determine the total of steps 2 and 3, Step 4. Freetaxusa com Determine the Total of Steps 2 and 3 Total certain nontaxable pensions and benefits, Step 2. Freetaxusa com Total Certain Nontaxable Pensions and Benefits Foreign military service Pension, annuity, or disability benefit from, Step 2. Freetaxusa com Total Certain Nontaxable Pensions and Benefits Foreign Service Pension, annuity, or disability benefit from, Step 2. Freetaxusa com Total Certain Nontaxable Pensions and Benefits Form RRB-1099 Payments by Railroad Retirement Board, Step 2. Freetaxusa com Total Certain Nontaxable Pensions and Benefits Form SSA-1099 Social security benefit statement, Step 2. Freetaxusa com Total Certain Nontaxable Pensions and Benefits Free tax services, Free help with your tax return. Freetaxusa com H Head of household, Head of household. Freetaxusa com Help (see Tax help) I Income limits, Income Limits Initial amounts for persons under age 65, Initial amounts for persons under age 65. Freetaxusa com J Joint returns, Married Persons L Limit on credit, Limit on credit. Freetaxusa com Lump-sum payments Accrued annual leave, Payments that are not disability income. Freetaxusa com Death benefits paid to surviving spouse or child, Step 2. Freetaxusa com Total Certain Nontaxable Pensions and Benefits M Mandatory retirement age, Payments that are not disability income. Freetaxusa com Married taxpayers, Married Persons Mentally incompetent persons Sheltered employment for, Sheltered employment. Freetaxusa com Missing children Photographs of, Reminders N National Oceanic and Atmospheric Administration Pension, annuity, or disability benefit from, Step 2. Freetaxusa com Total Certain Nontaxable Pensions and Benefits Nonresident aliens, Exceptions. Freetaxusa com Nontaxable payments, Step 2. Freetaxusa com Total Certain Nontaxable Pensions and Benefits O Out of work, Substantial gainful activity. Freetaxusa com P Pension or annuity payments Nontaxable by law, Step 2. Freetaxusa com Total Certain Nontaxable Pensions and Benefits Permanent and total disability, Qualified Individual, Permanent and total disability. Freetaxusa com Physician certification, Permanent and total disability. Freetaxusa com , Physician's statement. Freetaxusa com Public Health Service Pension, annuity, or disability benefit from, Step 2. Freetaxusa com Total Certain Nontaxable Pensions and Benefits Publications (see Tax help) Q Qualified individual, Qualified Individual Age 65 or older, Qualified Individual Under age 65 and retired on permanent and total disability, Qualified Individual, Under Age 65 R Residence requirement, U. Freetaxusa com S. Freetaxusa com Citizen or Resident Alien S Schedule R, Credit Figured for You, Figuring the Credit Yourself, , Examples Sheltered employment, Sheltered employment. Freetaxusa com Social security payments, Step 2. Freetaxusa com Total Certain Nontaxable Pensions and Benefits Substantial gainful activity, Substantial gainful activity. Freetaxusa com T Tables and figures Figure A, Qualified individual determination, Substantial gainful activity. Freetaxusa com Table 1, Income limits, Substantial gainful activity. Freetaxusa com , Table 1. Freetaxusa com Income Limits Table 2, Initial amounts, Table 2. Freetaxusa com Initial Amounts Tax help, How To Get Tax Help TTY/TDD information, How To Get Tax Help U U. Freetaxusa com S. Freetaxusa com citizens and resident aliens, U. Freetaxusa com S. Freetaxusa com Citizen or Resident Alien V VA Form 21-0172 Certification of permanent and total disability, Veterans. Freetaxusa com Veterans Certification by VA of permanent and total disability, Veterans. Freetaxusa com Exclusion of nontaxable pension or annuity payment or disability benefits, Step 2. Freetaxusa com Total Certain Nontaxable Pensions and Benefits Prev  Up     Home   More Online Publications
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Offshore Voluntary Disclosure Initiative: Passive Foreign Income Company Investment Computations

September 2010

A significant number of Offshore Voluntary Disclosure Practice (VDP) cases involve Passive Foreign Investment Company (PFIC) investments.  A lack of historical information on the cost basis and holding period of many PFIC investments makes it difficult for taxpayers to prepare statutory PFIC computations and for the Service to verify them.  As a result, resolution of many VDP cases is being unduly delayed.  Therefore, for purposes of this initiative, the Service is offering taxpayers an alternative to the statutory PFIC computation that will resolve PFIC issues on a basis that is consistent with the Mark to Market (MTM) methodology authorized in Internal Revenue Code section 1296 but will not require complete reconstruction of historical data.

The terms of this alternative resolution are as follows:

  • If elected, the alternative resolution will apply to all PFIC investments in cases that have been accepted into the VDP and that qualify for the special civil penalty framework announced by the IRS on March 23, 2009.  The initial MTM computation of gain or loss under this methodology will be for the first year of the VDP application but could be made after 2003 depending on when the first PFIC investment was made.  Generally, under the terms of the March 23, 2009 framework, the first year of the VDP application will be for the calendar year ending December 31, 2003.   This will require a determination of the basis for every PFIC investment, which should be agreed between the taxpayer and the Service based on the best available evidence. 


  • A tax rate of 20% will be applied to the MTM gain(s), MTM net gain(s) and gains from all PFIC dispositions during the VDP period, in lieu of the rate contained in section 1291(a)(1)(B) for the amount allocable to the current year and section 1291(c)(2) for the deferred tax amount(s) allocable to any other taxable year.

  • A rate of 7% of the tax computed for PFIC investments marked to market in the first year of the VDP application will be added to the tax for that year, in lieu of the interest charge mechanism described in sections 1291(c) and 1296(j).

  • MTM losses will be limited to unreversed inclusions (generally, previously reported MTM gains less allowed MTM losses) on an investment-by-investment basis in the same manner as section 1296. During the VDP period, these MTM losses will be treated as  ordinary losses (IRC 1296[c][1][B]) and the tax benefit is limited to the tax rate applicable to the MTM gains derived during the VDP period (20%).  This limitation is accomplished by multiplying the MTM loss by 20% and applying the result as a credit against the tax liability for the year.
     
  • Regular and Alternative Minimum Tax are both to be computed without the PFIC dispositions or MTM gains and losses.  The tax from the PFIC transactions (20% plus the 7% for 2003, if applicable) is added to (or subtracted from) the applicable total tax (either regular or AMT, whichever is higher).  The tax and interest (i.e., the 7% for the first year of the VDP) computed under the VDP alternative MTM can be added to the applicable total tax (either regular or AMT, whichever is higher) and placed on the amended return in the margin, with a supporting schedule.

  • Underpayment interest and penalties on the deficiency are computed in accordance with the Internal Revenue Code and the terms of the VDP.

  • For any PFIC investment retained beyond 12/31/2008, the taxpayer must continue using the MTM method, but will apply the normal statutory rules of section 1296 as well as the provisions of sections 1291-1298, as applicable.

Taxpayers should direct questions regarding PFICs and how the alternative resolution will affect their cases to the examiners assigned to their cases.  Before electing the alternative PFIC resolution, taxpayers with PFIC investments should consult their tax advisors to ensure that the issue is material in their cases and that the alternative is in fact preferable to the statutory computation in their situation.  If the taxpayer does not elect to use the alternative PFIC computation, then the PFIC provisions of section 1291-1298 apply. 

Page Last Reviewed or Updated: 09-Jan-2014

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Freetaxusa com 3. Freetaxusa com   Adjustments to Income Table of Contents Individual Retirement Arrangement (IRA) Contributions and DeductionsContributions to Kay Bailey Hutchison Spousal IRAs. Freetaxusa com Deductible contribution. Freetaxusa com Nondeductible contribution. Freetaxusa com You may be able to subtract amounts from your total income (Form 1040, line 22 or Form 1040A, line 15) or total effectively connected income (Form 1040NR, line 23) to get your adjusted gross income (Form 1040, line 37; Form 1040A, line 21; or Form 1040NR, line 36). Freetaxusa com Some adjustments to income follow. Freetaxusa com Contributions to your individual retirement arrangement (IRA) (Form 1040, line 32; Form 1040A, line 17; or Form 1040NR, line 32), explained later in this publication. Freetaxusa com Certain moving expenses (Form 1040, line 26; or Form 1040NR, line 26) if you changed job locations or started a new job in 2013. Freetaxusa com See Publication 521, Moving Expenses, or see Form 3903, Moving Expenses, and its instructions. Freetaxusa com Some health insurance costs (Form 1040, line 29 or Form 1040NR, line 29) if you were self-employed and had a net profit for the year, or if you received wages in 2013 from an S corporation in which you were a more-than-2% shareholder. Freetaxusa com For more details, see Publication 535, Business Expenses. Freetaxusa com Payments to your self-employed SEP, SIMPLE, or qualified plan (Form 1040, line 28 or Form 1040NR, line 28). Freetaxusa com For more information, including limits on how much you can deduct, see Publication 560, Retirement Plans for Small Business. Freetaxusa com Penalties paid on early withdrawal of savings (Form 1040, line 30 or Form 1040NR, line 30). Freetaxusa com Form 1099-INT, Interest Income, or Form 1099-OID, Original Issue Discount, will show the amount of any penalty you were charged. Freetaxusa com Alimony payments (Form 1040, line 31a). Freetaxusa com For more information, see Publication 504, Divorced or Separated Individuals. Freetaxusa com There are other items you can claim as adjustments to income. Freetaxusa com These adjustments are discussed in your tax return instructions. Freetaxusa com Individual Retirement Arrangement (IRA) Contributions and Deductions This section explains the tax treatment of amounts you pay into traditional IRAs. Freetaxusa com A traditional IRA is any IRA that is not a Roth or SIMPLE IRA. Freetaxusa com Roth and SIMPLE IRAs are defined earlier in the IRA discussion under Retirement Plan Distributions . Freetaxusa com For more detailed information, see Publication 590. Freetaxusa com Contributions. Freetaxusa com   An IRA is a personal savings plan that offers you tax advantages to set aside money for your retirement. Freetaxusa com Two advantages of a traditional IRA are: You may be able to deduct some or all of your contributions to it, depending on your circumstances, and Generally, amounts in your IRA, including earnings and gains, are not taxed until distributed. Freetaxusa com    Although interest earned from your traditional IRA generally is not taxed in the year earned, it is not tax-exempt interest. Freetaxusa com Do not report this interest on your tax return as tax-exempt interest. Freetaxusa com General limit. Freetaxusa com   The most that can be contributed for 2013 to your traditional IRA is the smaller of the following amounts. Freetaxusa com Your taxable compensation for the year, or $5,500 ($6,500 if you were age 50 or older by the end of 2013). Freetaxusa com Contributions to Kay Bailey Hutchison Spousal IRAs. Freetaxusa com   In the case of a married couple filing a joint return for 2013, up to $5,500 ($6,500 for each spouse age 50 or older by the end of 2013) can be contributed to IRAs on behalf of each spouse, even if one spouse has little or no compensation. Freetaxusa com For more information on the general limit and the Kay Bailey Hutchison Spousal IRA limit, see How Much Can Be Contributed? in Publication 590. Freetaxusa com Deductible contribution. Freetaxusa com   Generally, you can deduct the lesser of the contributions to your traditional IRA for the year or the general limit (or Kay Bailey Hutchison Spousal IRA limit, if applicable) just explained. Freetaxusa com However, if you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, you may not be able to deduct all of the contributions. Freetaxusa com Your deduction may be reduced or eliminated, depending on your filing status and the amount of your income. Freetaxusa com For more information, see Limit if Covered by Employer Plan in Publication 590. Freetaxusa com Nondeductible contribution. Freetaxusa com   The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. Freetaxusa com You must file Form 8606, Nondeductible IRAs, to report nondeductible contributions even if you do not have to file a tax return for the year. Freetaxusa com    For 2014, the most that can be contributed to your traditional IRA is $5,500 ($6,500 if you are age 50 or older at the end of 2014). Freetaxusa com Prev  Up  Next   Home   More Online Publications