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H and r block free military 4. H and r block free military   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. H and r block free military Loan secured by benefits. H and r block free military Waiver of survivor benefits. H and r block free military Waiver of 30-day waiting period before annuity starting date. H and r block free military Involuntary cash-out of benefits not more than dollar limit. H and r block free military Exception for certain loans. H and r block free military Exception for QDRO. H and r block free military SIMPLE and safe harbor 401(k) plan exception. H and r block free military Setting Up a Qualified PlanAdopting a Written Plan Investing Plan Assets Minimum Funding RequirementDue dates. H and r block free military Installment percentage. H and r block free military Extended period for making contributions. H and r block free military 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. H and r block free military Caution: Form 5500-EZ not required. H and r block free military Form 5500. H and r block free military Electronic filing of Forms 5500 and 5500-SF. H and r block free military 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. H and r block free military dol. H and r block free military gov/ebsa/pdf/2013-5500. H and r block free military pdf www. H and r block free military dol. H and r block free military gov/ebsa/pdf/2013-5500-SF. H and r block free military pdf W-2 Wage and Tax Statement Schedule K-1 (Form 1065) Partner's Share of Income, Deductions, Credits, etc. H and r block free military 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. H and r block free military 1040 U. H and r block free military S. H and r block free military 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. H and r block free military 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. H and r block free military 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. H and r block free military R. H and r block free military 10 plans. H and r block free military A sole proprietor or a partnership can set up one of these plans. H and r block free military A common-law employee or a partner cannot set up one of these plans. H and r block free military The plans described here can also be set up and maintained by employers that are corporations. H and r block free military All the rules discussed here apply to corporations except where specifically limited to the self-employed. H and r block free military The plan must be for the exclusive benefit of employees or their beneficiaries. H and r block free military These qualified plans can include coverage for a self-employed individual. H and r block free military As an employer, you can usually deduct, subject to limits, contributions you make to a qualified plan, including those made for your own retirement. H and r block free military The contributions (and earnings and gains on them) are generally tax free until distributed by the plan. H and r block free military Kinds of Plans There are two basic kinds of qualified plans—defined contribution plans and defined benefit plans—and different rules apply to each. H and r block free military 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. H and r block free military Defined Contribution Plan A defined contribution plan provides an individual account for each participant in the plan. H and r block free military It provides benefits to a participant largely based on the amount contributed to that participant's account. H and r block free military Benefits are also affected by any income, expenses, gains, losses, and forfeitures of other accounts that may be allocated to an account. H and r block free military A defined contribution plan can be either a profit-sharing plan or a money purchase pension plan. H and r block free military Profit-sharing plan. H and r block free military   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). H and r block free military 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. H and r block free military An employer may even make no contribution to the plan for a given year. H and r block free military   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. H and r block free military   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). H and r block free military Money purchase pension plan. H and r block free military   Contributions to a money purchase pension plan are fixed and are not based on your business profits. H and r block free military 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. H and r block free military This applies even though the compensation of a self-employed individual as a participant is based on earned income derived from business profits. H and r block free military Defined Benefit Plan A defined benefit plan is any plan that is not a defined contribution plan. H and r block free military Contributions to a defined benefit plan are based on what is needed to provide definitely determinable benefits to plan participants. H and r block free military Actuarial assumptions and computations are required to figure these contributions. H and r block free military Generally, you will need continuing professional help to have a defined benefit plan. H and r block free military Qualification Rules To qualify for the tax benefits available to qualified plans, a plan must meet certain requirements (qualification rules) of the tax law. H and r block free military 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. H and r block free military The following is a brief overview of important qualification rules that generally have not yet been discussed. H and r block free military It is not intended to be all-inclusive. H and r block free military See Setting Up a Qualified Plan , later. H and r block free military Generally, the following qualification rules also apply to a SIMPLE 401(k) retirement plan. H and r block free military 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. H and r block free military Plan assets must not be diverted. H and r block free military   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. H and r block free military As a general rule, the assets cannot be diverted to the employer. H and r block free military Minimum coverage requirement must be met. H and r block free military   To be a qualified plan, a defined benefit plan must benefit at least the lesser of the following. H and r block free military 50 employees, or The greater of: 40% of all employees, or Two employees. H and r block free military If there is only one employee, the plan must benefit that employee. H and r block free military Contributions or benefits must not discriminate. H and r block free military   Under the plan, contributions or benefits to be provided must not discriminate in favor of highly compensated employees. H and r block free military Contributions and benefits must not be more than certain limits. H and r block free military   Your plan must not provide for contributions or benefits that are more than certain limits. H and r block free military 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. H and r block free military These limits are discussed later in this chapter under Contributions. H and r block free military Minimum vesting standard must be met. H and r block free military   Your plan must satisfy certain requirements regarding when benefits vest. H and r block free military A benefit is vested (you have a fixed right to it) when it becomes nonforfeitable. H and r block free military A benefit is nonforfeitable if it cannot be lost upon the happening, or failure to happen, of any event. H and r block free military Special rules apply to forfeited benefit amounts. H and r block free military 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. H and r block free military   Forfeitures under a defined benefit plan cannot be used to increase the benefits any employee would otherwise receive under the plan. H and r block free military Forfeitures must be used instead to reduce employer contributions. H and r block free military Participation. H and r block free military   In general, an employee must be allowed to participate in your plan if he or she meets both the following requirements. H and r block free military Has reached age 21. H and r block free military 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). H and r block free military A plan cannot exclude an employee because he or she has reached a specified age. H and r block free military Leased employee. H and r block free military   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. H and r block free military These rules include those in all the following areas. H and r block free military Nondiscrimination in coverage, contributions, and benefits. H and r block free military Minimum age and service requirements. H and r block free military Vesting. H and r block free military Limits on contributions and benefits. H and r block free military Top-heavy plan requirements. H and r block free military Contributions or benefits provided by the leasing organization for services performed for you are treated as provided by you. H and r block free military Benefit payment must begin when required. H and r block free military   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. H and r block free military The plan year in which the participant reaches the earlier of age 65 or the normal retirement age specified in the plan. H and r block free military The plan year in which the 10th anniversary of the year in which the participant began participating in the plan occurs. H and r block free military The plan year in which the participant separates from service. H and r block free military Early retirement. H and r block free military   Your plan can provide for payment of retirement benefits before the normal retirement age. H and r block free military 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. H and r block free military Satisfies the service requirement for the early retirement benefit. H and r block free military Separates from service with a nonforfeitable right to an accrued benefit. H and r block free military The benefit, which may be actuarially reduced, is payable when the early retirement age requirement is met. H and r block free military Required minimum distributions. H and r block free military   Special rules require minimum annual distributions from qualified plans, generally beginning after age  70½. H and r block free military See Required Distributions , under Distributions, later. H and r block free military Survivor benefits. H and r block free military   Defined benefit and money purchase pension plans must provide automatic survivor benefits in both the following forms. H and r block free military A qualified joint and survivor annuity for a vested participant who does not die before the annuity starting date. H and r block free military A qualified pre-retirement survivor annuity for a vested participant who dies before the annuity starting date and who has a surviving spouse. H and r block free military   The automatic survivor benefit also applies to any participant under a profit-sharing plan unless all the following conditions are met. H and r block free military The participant does not choose benefits in the form of a life annuity. H and r block free military 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. H and r block free military The plan is not a direct or indirect transferee of a plan that must provide automatic survivor benefits. H and r block free military Loan secured by benefits. H and r block free military   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. H and r block free military Waiver of survivor benefits. H and r block free military   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. H and r block free military The plan also must allow the participant to withdraw the waiver. H and r block free military The spouse's consent must be witnessed by a plan representative or notary public. H and r block free military Waiver of 30-day waiting period before annuity starting date. H and r block free military    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. H and r block free military   The waiver is allowed only if the distribution begins more than 7 days after the written explanation is provided. H and r block free military Involuntary cash-out of benefits not more than dollar limit. H and r block free military   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. H and r block free military   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. H and r block free military 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. H and r block free military   Benefits attributable to rollover contributions and earnings on them can be ignored in determining the present value of these benefits. H and r block free military   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. H and r block free military A section 402(f) notice must be sent prior to an involuntary cash-out of an eligible rollover distribution. H and r block free military See Section 402(f) Notice under Distributions, later, for more details. H and r block free military Consolidation, merger, or transfer of assets or liabilities. H and r block free military   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. H and r block free military (if the plan had then terminated). H and r block free military Benefits must not be assigned or alienated. H and r block free military   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. H and r block free military Exception for certain loans. H and r block free military   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. H and r block free military A disqualified person is defined later in this chapter under Prohibited Transactions. H and r block free military Exception for QDRO. H and r block free military   Compliance with a QDRO (qualified domestic relations order) does not result in a prohibited assignment or alienation of benefits. H and r block free military   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. H and r block free military 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. H and r block free military No benefit reduction for social security increases. H and r block free military   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. H and r block free military This rule also applies to plans supplementing the benefits provided by other federal or state laws. H and r block free military Elective deferrals must be limited. H and r block free military   If your plan provides for elective deferrals, it must limit those deferrals to the amount in effect for that particular year. H and r block free military See Limit on Elective Deferrals later in this chapter. H and r block free military Top-heavy plan requirements. H and r block free military   A top-heavy plan is one that mainly favors partners, sole proprietors, and other key employees. H and r block free military   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. H and r block free military Additional requirements apply to a top-heavy plan primarily to provide minimum benefits or contributions for non-key employees covered by the plan. H and r block free military   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. H and r block free military These qualification requirements for top-heavy plans are explained in section 416 and its regulations. H and r block free military SIMPLE and safe harbor 401(k) plan exception. H and r block free military   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. H and r block free military QACAs (discussed later) also are not subject to top-heavy requirements. H and r block free military Setting Up a Qualified Plan There are two basic steps in setting up a qualified plan. H and r block free military First you adopt a written plan. H and r block free military Then you invest the plan assets. H and r block free military You, the employer, are responsible for setting up and maintaining the plan. H and r block free military If you are self-employed, it is not necessary to have employees besides yourself to sponsor and set up a qualified plan. H and r block free military If you have employees, see Participation, under Qualification Rules, earlier. H and r block free military Set-up deadline. H and r block free military   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). H and r block free military Credit for startup costs. H and r block free military   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. H and r block free military For more information, see Credit for startup costs under Reminders, earlier. H and r block free military Adopting a Written Plan You must adopt a written plan. H and r block free military The plan can be an IRS-approved master or prototype plan offered by a sponsoring organization. H and r block free military Or it can be an individually designed plan. H and r block free military Written plan requirement. H and r block free military   To qualify, the plan you set up must be in writing and must be communicated to your employees. H and r block free military The plan's provisions must be stated in the plan. H and r block free military It is not sufficient for the plan to merely refer to a requirement of the Internal Revenue Code. H and r block free military Master or prototype plans. H and r block free military   Most qualified plans follow a standard form of plan (a master or prototype plan) approved by the IRS. H and r block free military Master and prototype plans are plans made available by plan providers for adoption by employers (including self-employed individuals). H and r block free military 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. H and r block free military Under a prototype plan, a separate trust or custodial account is established for each employer. H and r block free military Plan providers. H and r block free military   The following organizations generally can provide IRS-approved master or prototype plans. H and r block free military Banks (including some savings and loan associations and federally insured credit unions). H and r block free military Trade or professional organizations. H and r block free military Insurance companies. H and r block free military Mutual funds. H and r block free military Individually designed plan. H and r block free military   If you prefer, you can set up an individually designed plan to meet specific needs. H and r block free military Although advance IRS approval is not required, you can apply for approval by paying a fee and requesting a determination letter. H and r block free military You may need professional help for this. H and r block free military See Rev. H and r block free military Proc. H and r block free military 2014-6, 2014-1 I. H and r block free military R. H and r block free military B. H and r block free military 198, available at www. H and r block free military irs. H and r block free military gov/irb/2014-1_IRB/ar10. H and r block free military html, as annually updated, that may help you decide whether to apply for approval. H and r block free military Internal Revenue Bulletins are available on the IRS website at IRS. H and r block free military gov They are also available at most IRS offices and at certain libraries. H and r block free military User fee. H and r block free military   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. H and r block free military At least one of them must be a non-highly compensated employee participating in the plan. H and r block free military The fee does not apply to requests made by the later of the following dates. H and r block free military The end of the 5th plan year the plan is in effect. H and r block free military The end of any remedial amendment period for the plan that begins within the first 5 plan years. H and r block free military The request cannot be made by the sponsor of a prototype or similar plan the sponsor intends to market to participating employers. H and r block free military   For more information about whether the user fee applies, see Rev. H and r block free military Proc. H and r block free military 2014-8, 2014-1 I. H and r block free military R. H and r block free military B. H and r block free military 242, available at www. H and r block free military irs. H and r block free military gov/irb/2014-1_IRB/ar12. H and r block free military html, as may be annually updated; Notice 2003-49, 2003-32 I. H and r block free military R. H and r block free military B. H and r block free military 294, available at www. H and r block free military irs. H and r block free military gov/irb/2003-32_IRB/ar13. H and r block free military html; and Notice 2011-86, 2011-45 I. H and r block free military R. H and r block free military B. H and r block free military 698, available at www. H and r block free military irs. H and r block free military gov/irb/2011-45_IRB/ar11. H and r block free military html. H and r block free military Investing Plan Assets In setting up a qualified plan, you arrange how the plan's funds will be used to build its assets. H and r block free military You can establish a trust or custodial account to invest the funds. H and r block free military You, the trust, or the custodial account can buy an annuity contract from an insurance company. H and r block free military Life insurance can be included only if it is incidental to the retirement benefits. H and r block free military You set up a trust by a legal instrument (written document). H and r block free military You may need professional help to do this. H and r block free military 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. H and r block free military 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. H and r block free military If anyone other than a trustee holds them, however, the contracts or certificates must state they are not transferable. H and r block free military Other plan requirements. H and r block free military   For information on other important plan requirements, see Qualification Rules , earlier in this chapter. H and r block free military 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. H and r block free military 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. H and r block free military For information on this funding requirement, see section 412 and its regulations. H and r block free military Quarterly installments of required contributions. H and r block free military   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. H and r block free military If you do not pay the full installments timely, you may have to pay interest on any underpayment for the period of the underpayment. H and r block free military Due dates. H and r block free military   The due dates for the installments are 15 days after the end of each quarter. H and r block free military For a calendar-year plan, the installments are due April 15, July 15, October 15, and January 15 (of the following year). H and r block free military Installment percentage. H and r block free military   Each quarterly installment must be 25% of the required annual payment. H and r block free military Extended period for making contributions. H and r block free military   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. H and r block free military Contributions A qualified plan is generally funded by your contributions. H and r block free military However, employees participating in the plan may be permitted to make contributions, and you may be permitted to make contributions on your own behalf. H and r block free military See Employee Contributions and Elective Deferrals later. H and r block free military Contributions deadline. H and r block free military   You can make deductible contributions for a tax year up to the due date of your return (plus extensions) for that year. H and r block free military Self-employed individual. H and r block free military   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. H and r block free military Your net earnings must be from your personal services, not from your investments. H and r block free military 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. H and r block free military Employer Contributions There are certain limits on the contributions and other annual additions you can make each year for plan participants. H and r block free military There are also limits on the amount you can deduct. H and r block free military See Deduction Limits , later. H and r block free military Limits on Contributions and Benefits Your plan must provide that contributions or benefits cannot exceed certain limits. H and r block free military The limits differ depending on whether your plan is a defined contribution plan or a defined benefit plan. H and r block free military Defined benefit plan. H and r block free military   For 2013, the annual benefit for a participant under a defined benefit plan cannot exceed the lesser of the following amounts. H and r block free military 100% of the participant's average compensation for his or her highest 3 consecutive calendar years. H and r block free military $205,000 ($210,000 for 2014). H and r block free military Defined contribution plan. H and r block free military   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. H and r block free military 100% of the participant's compensation. H and r block free military $51,000 ($52,000 for 2014). H and r block free military   Catch-up contributions (discussed later under Limit on Elective Deferrals) are not subject to the above limit. H and r block free military Employee Contributions Participants may be permitted to make nondeductible contributions to a plan in addition to your contributions. H and r block free military Even though these employee contributions are not deductible, the earnings on them are tax free until distributed in later years. H and r block free military 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. H and r block free military See Regulations sections 1. H and r block free military 401(k)-2 and 1. H and r block free military 401(m)-2 for further guidance relating to the nondiscrimination rules under sections 401(k) and 401(m). H and r block free military When Contributions Are Considered Made You generally apply your plan contributions to the year in which you make them. H and r block free military But you can apply them to the previous year if all the following requirements are met. H and r block free military You make them by the due date of your tax return for the previous year (plus extensions). H and r block free military The plan was established by the end of the previous year. H and r block free military The plan treats the contributions as though it had received them on the last day of the previous year. H and r block free military You do either of the following. H and r block free military You specify in writing to the plan administrator or trustee that the contributions apply to the previous year. H and r block free military You deduct the contributions on your tax return for the previous year. H and r block free military A partnership shows contributions for partners on Form 1065. H and r block free military Employer's promissory note. H and r block free military   Your promissory note made out to the plan is not a payment that qualifies for the deduction. H and r block free military Also, issuing this note is a prohibited transaction subject to tax. H and r block free military See Prohibited Transactions , later. H and r block free military Employer Deduction You can usually deduct, subject to limits, contributions you make to a qualified plan, including those made for your own retirement. H and r block free military The contributions (and earnings and gains on them) are generally tax free until distributed by the plan. H and r block free military Deduction Limits The deduction limit for your contributions to a qualified plan depends on the kind of plan you have. H and r block free military Defined contribution plans. H and r block free military   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. H and r block free military If you are self-employed, you must reduce this limit in figuring the deduction for contributions you make for your own account. H and r block free military See Deduction Limit for Self-Employed Individuals , later. H and r block free military   When figuring the deduction limit, the following rules apply. H and r block free military Elective deferrals (discussed later) are not subject to the limit. H and r block free military Compensation includes elective deferrals. H and r block free military The maximum compensation that can be taken into account for each employee in 2013 is $255,000 ($260,000 for 2014). H and r block free military Defined benefit plans. H and r block free military   The deduction for contributions to a defined benefit plan is based on actuarial assumptions and computations. H and r block free military Consequently, an actuary must figure your deduction limit. H and r block free military    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. H and r block free military Table 4–1. H and r block free military 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. H and r block free military 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. H and r block free military Compensation is your net earnings from self-employment, defined in chapter 1. H and r block free military This definition takes into account both the following items. H and r block free military The deduction for the deductible part of your self-employment tax. H and r block free military The deduction for contributions on your behalf to the plan. H and r block free military The deduction for your own contributions and your net earnings depend on each other. H and r block free military For this reason, you determine the deduction for your own contributions indirectly by reducing the contribution rate called for in your plan. H and r block free military To do this, use either the Rate Table for Self-Employed or the Rate Worksheet for Self-Employed in chapter 5. H and r block free military Then figure your maximum deduction by using the Deduction Worksheet for Self-Employed in chapter 5. H and r block free military Where To Deduct Contributions Deduct the contributions you make for your common-law employees on your tax return. H and r block free military 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. H and r block free military Sole proprietors and partners deduct contributions for themselves on line 28 of Form 1040. H and r block free military (If you are a partner, contributions for yourself are shown on the Schedule K-1 (Form 1065) you get from the partnership. H and r block free military ) 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. H and r block free military Your combined deduction in a later year is limited to 25% of the participating employees' compensation for that year. H and r block free military For purposes of this limit, a SEP is treated as a profit-sharing (defined contribution) plan. H and r block free military However, this percentage limit must be reduced to figure your maximum deduction for contributions you make for yourself. H and r block free military See Deduction Limit for Self-Employed Individuals, earlier. H and r block free military The amount you carry over and deduct may be subject to the excise tax discussed next. H and r block free military Table 4-1, earlier, illustrates the carryover of excess contributions to a profit-sharing plan. H and r block free military 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. H and r block free military In general, a 10% excise tax applies to nondeductible contributions made to qualified pension and profit-sharing plans and to SEPs. H and r block free military Special rule for self-employed individuals. H and r block free military   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. H and r block free military 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. H and r block free military See Minimum Funding Requirement , earlier. H and r block free military Reporting the tax. H and r block free military   You must report the tax on your nondeductible contributions on Form 5330. H and r block free military Form 5330 includes a computation of the tax. H and r block free military See the separate instructions for completing the form. H and r block free military 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. H and r block free military A plan with this type of arrangement is popularly known as a “401(k) plan. H and r block free military ” (As a self-employed individual participating in the plan, you can contribute part of your before-tax net earnings from the business. H and r block free military ) This contribution is called an “elective deferral” because participants choose (elect) to defer receipt of the money. H and r block free military In general, a qualified plan can include a cash or deferred arrangement only if the qualified plan is one of the following plans. H and r block free military A profit-sharing plan. H and r block free military A money purchase pension plan in existence on June 27, 1974, that included a salary reduction arrangement on that date. H and r block free military Partnership. H and r block free military   A partnership can have a 401(k) plan. H and r block free military Restriction on conditions of participation. H and r block free military   The plan cannot require, as a condition of participation, that an employee complete more than 1 year of service. H and r block free military Matching contributions. H and r block free military   If your plan permits, you can make matching contributions for an employee who makes an elective deferral to your 401(k) plan. H and r block free military 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. H and r block free military Matching contributions are generally subject to the ACP test discussed earlier under Employee Contributions. H and r block free military Nonelective contributions. H and r block free military   You can also make contributions (other than matching contributions) for your participating employees without giving them the choice to take cash instead. H and r block free military These are called nonelective contributions. H and r block free military Employee compensation limit. H and r block free military   No more than $255,000 of the employee's compensation can be taken into account when figuring contributions other than elective deferrals in 2013. H and r block free military This limit is $260,000 in 2014. H and r block free military SIMPLE 401(k) plan. H and r block free military   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. H and r block free military A SIMPLE 401(k) plan is not subject to the nondiscrimination and top-heavy plan requirements discussed earlier under Qualification Rules. H and r block free military For details about SIMPLE 401(k) plans, see SIMPLE 401(k) Plan in chapter 3. H and r block free military Distributions. H and r block free military   Certain rules apply to distributions from 401(k) plans. H and r block free military See Distributions From 401(k) Plans , later. H and r block free military Limit on Elective Deferrals There is a limit on the amount an employee can defer each year under these plans. H and r block free military This limit applies without regard to community property laws. H and r block free military Your plan must provide that your employees cannot defer more than the limit that applies for a particular year. H and r block free military For 2013 and 2014, the basic limit on elective deferrals is $17,500. H and r block free military This limit applies to all salary reduction contributions and elective deferrals. H and r block free military If, in conjunction with other plans, the deferral limit is exceeded, the difference is included in the employee's gross income. H and r block free military Catch-up contributions. H and r block free military   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. H and r block free military The catch-up contribution limit for 2013 and 2014 is $5,500. H and r block free military 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). H and r block free military However, the catch-up contribution a participant can make for a year cannot exceed the lesser of the following amounts. H and r block free military The catch-up contribution limit. H and r block free military The excess of the participant's compensation over the elective deferrals that are not catch-up contributions. H and r block free military Treatment of contributions. H and r block free military   Your contributions to your own 401(k) plan are generally deductible by you for the year they are contributed to the plan. H and r block free military Matching or nonelective contributions made to the plan are also deductible by you in the year of contribution. H and r block free military Your employees' elective deferrals other than designated Roth contributions are tax free until distributed from the plan. H and r block free military Elective deferrals are included in wages for social security, Medicare, and federal unemployment (FUTA) tax. H and r block free military Forfeiture. H and r block free military   Employees have a nonforfeitable right at all times to their accrued benefit attributable to elective deferrals. H and r block free military Reporting on Form W-2. H and r block free military   Do not include elective deferrals in the “Wages, tips, other compensation” box of Form W-2. H and r block free military You must, however, include them in the “Social security wages” and “Medicare wages and tips” boxes. H and r block free military You must also include them in box 12. H and r block free military Mark the “Retirement plan” checkbox in box 13. H and r block free military For more information, see the Form W-2 instructions. H and r block free military Automatic Enrollment Your 401(k) plan can have an automatic enrollment feature. H and r block free military 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. H and r block free military These contributions are elective deferrals. H and r block free military An automatic enrollment feature will encourage employees' saving for retirement and will help your plan pass nondiscrimination testing (if applicable). H and r block free military For more information, see Publication 4674, Automatic Enrollment 401(k) Plans for Small Businesses. H and r block free military Eligible automatic contribution arrangement. H and r block free military   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. H and r block free military This automatic election will remain in place until the participant specifically elects not to have such deferral percentage made (or elects a different percentage). H and r block free military There is no required deferral percentage. H and r block free military Withdrawals. H and r block free military   Under an EACA, you may allow participants to withdraw their automatic contributions to the plan if certain conditions are met. H and r block free military The participant must elect the withdrawal no later than 90 days after the date of the first elective contributions under the EACA. H and r block free military The participant must withdraw the entire amount of EACA default contributions, including any earnings thereon. H and r block free military   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. H and r block free military The additional 10% tax on early distributions will not apply to the distribution. H and r block free military Notice requirement. H and r block free military   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. H and r block free military The notice must be written in a manner calculated to be understood by the average employee and be sufficiently accurate and comprehensive in order to apprise the employee of his or her rights and obligations under the EACA. H and r block free military The notice must include an explanation of the employee's right to elect not to have elective contributions made on his or her behalf, or to elect a different percentage, and the employee must be given a reasonable period of time after receipt of the notice before the first elective contribution is made. H and r block free military The notice also must explain how contributions will be invested in the absence of an investment election by the employee. H and r block free military Qualified automatic contribution arrangement. H and r block free military    A qualified automatic contribution arrangement (QACA) is a type of safe harbor plan. H and r block free military It contains an automatic enrollment feature, and mandatory employer contributions are required. H and r block free military If your plan includes a QACA, it will not be subject to the ADP test (discussed later) nor the top-heavy requirements (discussed earlier). H and r block free military Additionally, your plan will not be subject to the actual contribution percentage (ACP) test if certain additional requirements are met. H and r block free military Under a QACA, each employee who is eligible to participate in the plan will be treated as having elected to make elective deferral contributions equal to a certain default percentage of compensation. H and r block free military In order to not have default elective deferrals made, an employee must make an affirmative election specifying a deferral percentage (including zero, if desired). H and r block free military If an employee does not make an affirmative election, the default deferral percentage must meet the following conditions. H and r block free military It must be applied uniformly. H and r block free military It must not exceed 10%. H and r block free military It must be at least 3% in the first plan year it applies to an employee and through the end of the following year. H and r block free military It must increase to at least 4% in the following plan year. H and r block free military It must increase to at least 5% in the following plan year. H and r block free military It must increase to at least 6% in subsequent plan years. H and r block free military Matching or nonelective contributions. H and r block free military   Under the terms of the QACA, you must make either matching or nonelective contributions according to the following terms. H and r block free military Matching contributions. H and r block free military You must make matching contributions on behalf of each non-highly compensated employee in the following amounts. H and r block free military An amount equal to 100% of elective deferrals, up to 1% of compensation. H and r block free military An amount equal to 50% of elective deferrals, from 1% up to 6% of compensation. H and r block free military Other formulas may be used as long as they are at least as favorable to non-highly compensated employees. H and r block free military The rate of matching contributions for highly compensated employees, including yourself, must not exceed the rates for non-highly compensated employees. H and r block free military Nonelective contributions. H and r block free military 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. H and r block free military Vesting requirements. H and r block free military   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. H and r block free military These contributions are subject to special withdrawal restrictions, discussed later. H and r block free military Notice requirements. H and r block free military   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. H and r block free military The notice must be written in a manner calculated to be understood by the average employee, and it must be accurate and comprehensive. H and r block free military 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. H and r block free military Additionally, the notice must explain how contributions will be invested in the absence of any investment election by the employee. H and r block free military 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. H and r block free military 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. H and r block free military 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. H and r block free military The plan must then pay the employee that amount, plus earnings on the amount through the end of 2013, by April 15, 2014. H and r block free military Excess withdrawn by April 15. H and r block free military   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. H and r block free military However, any income earned in 2013 on the excess deferral taken out is taxable in the tax year in which it is taken out. H and r block free military The distribution is not subject to the additional 10% tax on early distributions. H and r block free military   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. H and r block free military   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. H and r block free military Excess not withdrawn by April 15. H and r block free military   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. H and r block free military In effect, an excess deferral left in the plan is taxed twice, once when contributed and again when distributed. H and r block free military 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. H and r block free military Reporting corrective distributions on Form 1099-R. H and r block free military   Report corrective distributions of excess deferrals (including any earnings) on Form 1099-R. H and r block free military For specific information about reporting corrective distributions, see the Instructions for Forms 1099-R and 5498. H and r block free military Tax on excess contributions of highly compensated employees. H and r block free military   The law provides tests to detect discrimination in a plan. H and r block free military 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. H and r block free military Report the tax on Form 5330. H and r block free military The ADP test does not apply to a safe harbor 401(k) plan (discussed next) nor to a QACA. H and r block free military Also, the ACP test does not apply to these plans if certain additional requirements are met. H and r block free military   The tax for the year is 10% of the excess contributions for the plan year ending in your tax year. H and r block free military 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. H and r block free military   See Regulations sections 1. H and r block free military 401(k)-2 and 1. H and r block free military 401(m)-2 for further guidance relating to the nondiscrimination rules under sections 401(k) and 401(m). H and r block free military    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. H and r block free military Safe harbor 401(k) plan. H and r block free military 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. H and r block free military For your plan to be a safe harbor plan, you must meet the following conditions. H and r block free military Matching or nonelective contributions. H and r block free military You must make matching or nonelective contributions according to one of the following formulas. H and r block free military Matching contributions. H and r block free military You must make matching contributions according to the following rules. H and r block free military You must contribute an amount equal to 100% of each non-highly compensated employee's elective deferrals, up to 3% of compensation. H and r block free military You must contribute an amount equal to 50% of each non-highly compensated employee's elective deferrals, from 3% up to 5% of compensation. H and r block free military The rate of matching contributions for highly compensated employees, including yourself, must not exceed the rates for non-highly compensated employees. H and r block free military Nonelective contributions. H and r block free military 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. H and r block free military These mandatory matching and nonelective contributions must be immediately 100% vested and are subject to special withdrawal restrictions. H and r block free military Notice requirement. H and r block free military 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. H and r block free military 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. H and r block free military 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. H and r block free military Elective deferrals designated as Roth contributions must be maintained in a separate Roth account. H and r block free military 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. H and r block free military 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. H and r block free military 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. H and r block free military 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. H and r block free military An employee's nonexclusion period for a plan is the 5-tax-year period beginning with the earlier of the following tax years. H and r block free military 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. H and r block free military Rollover. H and r block free military   Beginning September 28, 2010, a rollover from another account can be made to a designated Roth account in the same plan. H and r block free military For additional information on these in-plan Roth rollovers, see Notice 2010-84, 2010-51 I. H and r block free military R. H and r block free military B. H and r block free military 872, available at www. H and r block free military irs. H and r block free military gov/irb/2010-51_IRB/ar11. H and r block free military html, and Notice 2013-74. H and r block free military A distribution from a designated Roth account can only be rolled over to another designated Roth account or a Roth IRA. H and r block free military Rollover amounts do not apply toward the annual deferral limit. H and r block free military 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. H and r block free military See the Form W-2 and 1099-R instructions for detailed information. H and r block free military Distributions Amounts paid to plan participants from a qualified plan are called distributions. H and r block free military Distributions may be nonperiodic, such as lump-sum distributions, or periodic, such as annuity payments. H and r block free military Also, certain loans may be treated as distributions. H and r block free military See Loans Treated as Distributions in Publication 575. H and r block free military 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). H and r block free military These distribution rules apply individually to each qualified plan. H and r block free military You cannot satisfy the requirement for one plan by taking a distribution from another. H and r block free military The plan must provide that these rules override any inconsistent distribution options previously offered. H and r block free military Minimum distribution. H and r block free military   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. H and r block free military This minimum is figured by dividing the account balance by the applicable life expectancy. H and r block free military The plan administrator can use the life expectancy tables in Appendix C of Publication 590 for this purpose. H and r block free military For more information on figuring the minimum distribution, see Tax on Excess Accumulation in Publication 575. H and r block free military Required beginning date. H and r block free military   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. H and r block free military   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. H and r block free military Calendar year in which he or she reaches age 70½. H and r block free military Calendar year in which he or she retires from employment with the employer maintaining the plan. H and r block free military 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. H and r block free military   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. H and r block free military For more information, see Tax on Excess Accumulation in Publication 575. H and r block free military Distributions after the starting year. H and r block free military   The distribution required to be made by April 1 is treated as a distribution for the starting year. H and r block free military (The starting year is the year in which the participant meets (1) or (2) above, whichever applies. H and r block free military ) After the starting year, the participant must receive the required distribution for each year by December 31 of that year. H and r block free military 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). H and r block free military Distributions after participant's death. H and r block free military   See Publication 575 for the special rules covering distributions made after the death of a participant. H and r block free military Distributions From 401(k) Plans Generally, distributions cannot be made until one of the following occurs. H and r block free military The employee retires, dies, becomes disabled, or otherwise severs employment. H and r block free military The plan ends and no other defined contribution plan is established or continued. H and r block free military 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. H and r block free military For the rules on hardship distributions, including the limits on them, see Regulations section 1. H and r block free military 401(k)-1(d). H and r block free military The employee becomes eligible for a qualified reservist distribution (defined next). H and r block free military Certain distributions listed above may be subject to the tax on early distributions discussed later. H and r block free military Qualified reservist distributions. H and r block free military   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. H and r block free military All or part of a qualified reservist distribution can be recontributed to an IRA. H and r block free military The additional 10% tax on early distributions does not apply to a qualified reservist distribution. H and r block free military 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. H and r block free military Since most recipients have no cost basis, a distribution is generally fully taxable. H and r block free military An exception is a distribution that is properly rolled over as discussed under Rollover, next. H and r block free military The tax treatment of distributions depends on whether they are made periodically over several years or life (periodic distributions) or are nonperiodic distributions. H and r block free military 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. H and r block free military Note. H and r block free military 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. H and r block free military Also, a distribution from a designated Roth account is entirely tax-free if certain conditions are met. H and r block free military See Qualified distributions under Qualified Roth Contribution Program, earlier. H and r block free military Rollover. H and r block free military   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. H and r block free military However, it may be subject to withholding as discussed under Withholding requirement, later. H and r block free military 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. H and r block free military Eligible rollover distribution. H and r block free military   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. H and r block free military A required minimum distribution. H and r block free military See Required Distributions , earlier. H and r block free military Any of a series of substantially equal payments made at least once a year over any of the following periods. H and r block free military The employee's life or life expectancy. H and r block free military The joint lives or life expectancies of the employee and beneficiary. H and r block free military A period of 10 years or longer. H and r block free military A hardship distribution. H and r block free military The portion of a distribution that represents the return of an employee's nondeductible contributions to the plan. H and r block free military See Employee Contributions , earlier, and Rollover of nontaxable amounts, next. H and r block free military Loans treated as distributions. H and r block free military Dividends on employer securities. H and r block free military The cost of any life insurance coverage provided under a qualified retirement plan. H and r block free military Similar items designated by the IRS in published guidance. H and r block free military See, for example, the Instructions for Forms 1099-R and 5498. H and r block free military Rollover of nontaxable amounts. H and r block free military   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. H and r block free military 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. H and r block free military If the rollover is to an IRA, the transfer can be made by any rollover method. H and r block free military Note. H and r block free military A distribution from a designated Roth account can be rolled over to another designated Roth account or to a Roth IRA. H and r block free military 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). H and r block free military More information. H and r block free military   For more information about rollovers, see Rollovers in Pubs. H and r block free military 575 and 590. H and r block free military Withholding requirement. H and r block free military   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. H and r block free military Exceptions. H and r block free military   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. H and r block free military   If the distribution is not an eligible rollover distribution, defined earlier, the 20% withholding requirement does not apply. H and r block free military Other withholding rules apply to distributions that are not eligible rollover distributions, such as long-term periodic distributions and required distributions (periodic or nonperiodic). H and r block free military However, the participant can choose not to have tax withheld from these distributions. H and r block free military If the participant does not make this choice, the following withholding rules apply. H and r block free military For periodic distributions, withholding is based on their treatment as wages. H and r block free military For nonperiodic distributions, 10% of the taxable part is withheld. H and r block free military Estimated tax payments. H and r block free military   If no income tax is withheld or not enough tax is withheld, the recipient of a distribution may have to make estimated tax payments. H and r block free military For more information, see Withholding Tax and Estimated Tax in Publication 575. H and r block free military Section 402(f) Notice. H and r block free military   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. H and r block free military That the distribution may be directly transferred to an eligible retirement plan and information about which distributions are eligible for this direct transfer. H and r block free military That tax will be withheld from the distribution if it is not directly transferred to an eligible retirement plan. H and r block free military 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. H and r block free military Certain other rules that may be applicable. H and r block free military   Notice 2009-68, 2009-39 I. H and r block free military R. H and r block free military B. H and r block free military 423, available at www. H and r block free military irs. H and r block free military gov/irb/2009-39_IRB/ar14. H and r block free military html, contains two updated safe harbor section 402(f) notices that plan administrators may provide recipients of eligible rollover distributions. H and r block free military If the plan allows in-plan Roth rollovers, the 402(f) notice must be amended to reflect this. H and r block free military Notice 2010-84 contains guidance on how to modify a 402(f) notice for in-plan Roth rollovers. H and r block free military Timing of notice. H and r block free military   The notice generally must be provided no less than 30 days and no more than 180 days before the date of a distribution. H and r block free military Method of notice. H and r block free military   The written notice must be provided individually to each distributee of an eligible rollover distribution. H and r block free military Posting of the notice is not sufficient. H and r block free military However, the written requirement may be satisfied through the use of electronic media if certain additional conditions are met. H and r block free military See Regulations section 1. H and r block free military 401(a)-21. H and r block free military Tax on failure to give notice. H and r block free military   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. H and r block free military The tax will not be imposed if it is shown that such failure is due to reasonable cause and not to willful neglect. H and r block free military 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. H and r block free military This tax applies to the amount received that the employee must include in income. H and r block free military Exceptions. H and r block free military   The 10% tax will not apply if distributions before age 59½ are made in any of the following circumstances. H and r block free military Made to a beneficiary (or to the estate of the employee) on or after the death of the employee. H and r block free military Made due to the employee having a qualifying disability. H and r block free military 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. H and r block free military (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. H and r block free military ) Made to an employee after separation from service if the separation occurred during o
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Contact My Local Office in Maryland

Face-to-face Tax Help

IRS Taxpayer Assistance Centers (TACs) are your source for personal tax help when you believe your tax issue can only be handled face-to-face. No appointment is necessary.

Keep in mind, many questions can be resolved online without waiting in line. Through IRS.gov you can:
• Set up a payment plan.
• Get a transcript of your tax return.
• Make a payment.
• Check on your refund.
• Find answers to many of your tax questions.

We are now referring all requests for tax return preparation services to other available resources. You can take advantage of free tax preparation through Free File, Free File Fillable Forms or through a volunteer site in your community. To find the nearest volunteer site location or to get more information about Free File, go to the top of the page and enter “Free Tax Help” in the Search box.

If you have a tax account issues and feel that it requires talking with someone face-to-face, visit your local TAC.

Caution:  Many of our offices are located in Federal Office Buildings. These buildings may not allow visitors to bring in cell phones with camera capabilities.

Multilingual assistance is available in every office. Hours of operation are subject to change.

Before visiting your local office click on "Services Provided" in the chart below to see what services are available. Services are limited and not all services are available at every TAC office and may vary from site to site. You can get these services on a walk-in basis.

City Street Address Days/Hours of Service Telephone*
Annapolis 190 Admiral Cochrane Dr.
Annapolis, MD 21401

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.)

 

**This office will be open until 6:00 p.m. on 4/14 & 4/15**

 

Services Provided

(301) 695-7615
Baltimore 31 Hopkins Plaza
Baltimore, MD 21201

Monday-Friday - 8:30 a.m.- 4:30 p.m.


Services Provided

(410) 962-7969 
Frederick  201 Thomas- Johnson Dr.
Frederick, MD 21702 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 1:00 p.m. - 2:00 p.m.) 

 

Services Provided

(301) 695-7615 
Hagerstown  1260 Maryland Ave.
Hagerstown, MD 21740 

Monday-Friday - 8:30 a.m.- 4:30 p.m.
(Closed for lunch 12:30 p.m. - 1:30 p.m.) 

 

Services Provided

(301) 797-6624 
Landover  8401 Corporate Dr.
Landover, MD 20785 

Monday-Friday - 8:30 a.m.- 4:30 p.m. 
(Closed for lunch 12:30 p.m. - 1:30 p.m.)


Services Provided

(240) 613-7952 
LaVale  14701 National Highway 
LaVale, MD 21502 

Monday-Friday - 8:30 a.m.- 2:30 p.m.
(Closed for lunch 11:30 a.m. - 12:30 p.m.)
 

Services Provided

(301) 729-6397 
Salisbury  212 West Main St.
Salisbury, MD 21801 

Monday-Friday - 8:30 a.m.- 4:30 p.m. 


Services Provided

(410) 677-6718
Wheaton  11510 Georgia Ave.
Wheaton, MD 20902 

Monday-Friday - 8:30 a.m.- 4:30 p.m. 

 

Services Provided

(240) 613-8976 

* Note: The phone numbers in the chart above are not toll-free for all locations. When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office. If face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses).

For information on where to file your tax return please see Where to File Addresses.

The Taxpayer Advocate Service: Call (443) 853-6000 in Baltimore or 1-877-777-4778 elsewhere, or see  Publication 1546, The Taxpayer Advocate Service of the IRS. For further information, see Tax Topic 104.

Partnerships

IRS and organizations all over the country are partnering to assist taxpayers. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service
Fallon Federal Building
31 Hopkins Plaza, Room 1432
Baltimore, MD 21201

For more information about these programs for businesses, your local Stakeholder Liaison office establishes relationships with organizations representing small business and self-employed taxpayers. They provide information about the policies, practices and procedures the IRS uses to ensure compliance with the tax laws. To establish a relationship with us, use this list to find a contact in your state:

Stakeholder Liaison (SL) Phone Numbers for Organizations Representing Small Businesses and Self-employed Taxpayers.

Page Last Reviewed or Updated: 28-Mar-2014

The H And R Block Free Military

H and r block free military Index A Adjusted basis for installment sale, Adjusted basis for installment sale purposes. H and r block free military Assistance (see Tax help) B Basis Adjusted, Adjusted basis. H and r block free military Assumed mortgage, Buyer Assumes Mortgage Installment obligation, Basis. H and r block free military , Basis in installment obligation. H and r block free military , Basis in installment obligation. H and r block free military Installment sale, Adjusted basis for installment sale purposes. H and r block free military Repossessed property, Basis in repossessed property. H and r block free military , Basis. H and r block free military Bond, Bond. H and r block free military Buyer's note, Buyer's note. H and r block free military C Contingent payment sale, Contingent Payment Sale Contract price, Contract price. H and r block free military D Dealer sales, special rule, Dealer sales. H and r block free military Depreciation recapture income, Depreciation Recapture Income Disposition of installment obligation, Disposition of an Installment Obligation E Electing out, Electing Out of the Installment Method Escrow account, Escrow Account F Fair market value, Fair market value (FMV). H and r block free military , Fair market value (FMV). H and r block free military Figuring installment sale income, Figuring Installment Sale Income Form 4797, Form 4797, Form 4797. H and r block free military 6252, Form 6252, Reporting an Installment Sale 8594, Reporting requirement. H and r block free military Schedule D (Form 1040), Schedule D (Form 1040), Other forms. H and r block free military , Schedule D (Form 1040). H and r block free military Free tax services, Free help with your tax return. H and r block free military G Gross profit percentage, Gross profit percentage. H and r block free military Gross profit, defined, Gross profit. H and r block free military Guarantee, Debt not payable on demand. H and r block free military H Help (see Tax help) I Installment obligation Defined, Installment obligation. H and r block free military Disposition, Disposition of an Installment Obligation Used as security, Installment Obligation Used as Security (Pledge Rule) Installment Sale, What Is an Installment Sale? Interest Escrow account, Escrow Account Income, Interest Income Reporting, Seller-financed mortgage. H and r block free military Unstated, Installment income after 2013. H and r block free military Interest on deferred tax, Interest on Deferred Tax Exceptions, Exceptions. H and r block free military L Like-kind exchange, Like-Kind Exchange N Note Buyer's, Buyer's note. H and r block free military Third-party, Third-party note. H and r block free military O Original issue discount, Installment income after 2013. H and r block free military P Payments considered received, Payments Received or Considered Received Buyer assumes debts, Buyer Assumes Other Debts Buyer pays seller's expenses, Buyer Pays Seller's Expenses Mortgage assumed, Buyer Assumes Mortgage Pledge rule, Installment Obligation Used as Security (Pledge Rule) Payments received, Payments Received or Considered Received Pledge rule, Installment Obligation Used as Security (Pledge Rule) Publications (see Tax help) R Related person Land sale, Land transfers between related persons. H and r block free military Reporting sale to, Related person. H and r block free military Sale to, Sale to a Related Person Reporting installment sale, Reporting Installment Sale Income, Reporting an Installment Sale Repossession, Repossession Holding period for resale, Holding period for resales. H and r block free military Personal property, Personal Property Real property, Real Property S Sale at a loss, Sale at a loss. H and r block free military Sale of Business, Sale of a Business Home, Sale of Your Home Land between related persons, Land transfers between related persons. H and r block free military Partnership interest, Sale of Partnership Interest Several assets, Single Sale of Several Assets, Several assets. H and r block free military Stock or securities, Stock or securities. H and r block free military Sales by dealers, Dealer sales. H and r block free military Section 1274, Section 1274 Exceptions, Exceptions to Sections 1274 and 483 Section 483, Section 483 Exceptions, Exceptions to Sections 1274 and 483 Selling expenses, Selling expenses. H and r block free military Selling price Defined, Selling price. H and r block free military Reduced, Selling Price Reduced Single sale of several assets, Single Sale of Several Assets, Several assets. H and r block free military T Tax help, How To Get Tax Help Third-party note, Third-party note. H and r block free military TTY/TDD information, How To Get Tax Help U Unstated interest, Installment income after 2013. H and r block free military Prev  Up     Home   More Online Publications