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H R Block Tax Preparation

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H R Block Tax Preparation

H r block tax preparation 17. H r block tax preparation   Individual Retirement Arrangements (IRAs) Table of Contents What's New Reminders Introduction Useful Items - You may want to see: Traditional IRAsWho Can Open a Traditional IRA? When and How Can a Traditional IRA Be Opened? How Much Can Be Contributed? When Can Contributions Be Made? How Much Can You Deduct? Nondeductible Contributions Inherited IRAs Can You Move Retirement Plan Assets? When Can You Withdraw or Use IRA Assets? When Must You Withdraw IRA Assets? (Required Minimum Distributions) Are Distributions Taxable? What Acts Result in Penalties or Additional Taxes? Roth IRAsWhat Is a Roth IRA? When Can a Roth IRA Be Opened? Can You Contribute to a Roth IRA? Can You Move Amounts Into a Roth IRA? Are Distributions Taxable? What's New Traditional IRA contribution and deduction limit. H r block tax preparation  The contribution limit to your traditional IRA for 2013 will be increased to the smaller of the following amounts: $5,500, or Your taxable compensation for the year. H r block tax preparation If you were age 50 or older before 2014, the most that can be contributed to your traditional IRA for 2013 will be the smaller of the following amounts: $6,500, or Your taxable compensation for the year. H r block tax preparation For more information, see How Much Can Be Contributed? later. H r block tax preparation Roth IRA contribution limit. H r block tax preparation  If contributions on your behalf are made only to Roth IRAs, your contribution limit for 2013 will generally be the lesser of: $5,500, or Your taxable compensation for the year. H r block tax preparation If you were age 50 or older before 2014 and contributions on your behalf were made only to Roth IRAs, your contribution limit for 2013 will generally be the lesser of: $6,500, or Your taxable compensation for the year. H r block tax preparation However, if your modified adjusted gross income (AGI) is above a certain amount, your contribution limit may be reduced. H r block tax preparation For more information, see How Much Can Be Contributed? under Can You Contribute to a Roth IRA? later. H r block tax preparation Modified AGI limit for traditional IRA contributions increased. H r block tax preparation  For 2013, if you were covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is: More than $95,000 but less than $115,000 for a married couple filing a joint return or a qualifying widow(er), More than $59,000 but less than $69,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. H r block tax preparation If you either lived with your spouse or file a joint return, and your spouse was covered by a retirement plan at work, but you were not, your deduction is phased out if your modified AGI is more than $178,000 but less than $188,000. H r block tax preparation If your modified AGI is $188,000 or more, you cannot take a deduction for contributions to a traditional IRA. H r block tax preparation See How Much Can You Deduct , later. H r block tax preparation Modified AGI limit for Roth IRA contributions increased. H r block tax preparation  For 2013, your Roth IRA contribution limit is reduced (phased out) in the following situations. H r block tax preparation Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $178,000. H r block tax preparation You cannot make a Roth IRA contribution if your modified AGI is $188,000 or more. H r block tax preparation Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2013 and your modified AGI is at least $112,000. H r block tax preparation You cannot make a Roth IRA contribution if your modified AGI is $127,000 or more. H r block tax preparation Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. H r block tax preparation You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more. H r block tax preparation See Can You Contribute to a Roth IRA , later. H r block tax preparation Net Investment Income Tax. H r block tax preparation   For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan including IRAs (for example; 401(a), 403(a), 403(b), 408, 408A, or 457(b) plans). H r block tax preparation However, these distributions are taken into account when determining the modified adjusted gross income threshold. H r block tax preparation Distributions from a nonqualified retirement plan are included in net investment income. H r block tax preparation See Form 8960, Net Investment Income Tax - Individuals, Estates, and Trusts, and its instructions for more information. H r block tax preparation Name change. H r block tax preparation  All spousal IRAs have been renamed Kay Bailey Hutchison Spousal IRAs. H r block tax preparation There are no changes to the rules regarding these IRAs. H r block tax preparation See Kay Bailey Hutchison Spousal IRA Limit , later, for more information. H r block tax preparation Reminders 2014 limits. H r block tax preparation   You can find information about the 2014 contribution and AGI limits in Publication 590. H r block tax preparation Contributions to both traditional and Roth IRAs. H r block tax preparation   For information on your combined contribution limit if you contribute to both traditional and Roth IRAs, see Roth IRAs and traditional IRAs under How Much Can Be Contributed? in Roth IRAs, later. H r block tax preparation Statement of required minimum distribution. H r block tax preparation  If a minimum distribution from your IRA is required, the trustee, custodian, or issuer that held the IRA at the end of the preceding year must either report the amount of the required minimum distribution to you, or offer to calculate it for you. H r block tax preparation The report or offer must include the date by which the amount must be distributed. H r block tax preparation The report is due January 31 of the year in which the minimum distribution is required. H r block tax preparation It can be provided with the year-end fair market value statement that you normally get each year. H r block tax preparation No report is required for IRAs of owners who have died. H r block tax preparation IRA interest. H r block tax preparation  Although interest earned from your IRA is generally not taxed in the year earned, it is not tax-exempt interest. H r block tax preparation Tax on your traditional IRA is generally deferred until you take a distribution. H r block tax preparation Do not report this interest on your tax return as tax-exempt interest. H r block tax preparation Form 8606. H r block tax preparation   To designate contributions as nondeductible, you must file Form 8606, Nondeductible IRAs. H r block tax preparation The term “50 or older” is used several times in this chapter. H r block tax preparation It refers to an IRA owner who is age 50 or older by the end of the tax year. H r block tax preparation Introduction An individual retirement arrangement (IRA) is a personal savings plan that gives you tax advantages for setting aside money for your retirement. H r block tax preparation This chapter discusses the following topics. H r block tax preparation The rules for a traditional IRA (any IRA that is not a Roth or SIMPLE IRA). H r block tax preparation The Roth IRA, which features nondeductible contributions and tax-free distributions. H r block tax preparation Simplified Employee Pensions (SEPs) and Savings Incentive Match Plans for Employees (SIMPLEs) are not discussed in this chapter. H r block tax preparation For more information on these plans and employees' SEP IRAs and SIMPLE IRAs that are part of these plans, see Publications 560 and 590. H r block tax preparation For information about contributions, deductions, withdrawals, transfers, rollovers, and other transactions, see Publication 590. H r block tax preparation Useful Items - You may want to see: Publication 560 Retirement Plans for Small Business 590 Individual Retirement Arrangements (IRAs) Form (and Instructions) 5329 Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts 8606 Nondeductible IRAs Traditional IRAs In this chapter, the original IRA (sometimes called an ordinary or regular IRA) is referred to as a “traditional IRA. H r block tax preparation ” A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA. H r block tax preparation Two advantages of a traditional IRA are: You may be able to deduct some or all of your contributions to it, depending on your circumstances, and Generally, amounts in your IRA, including earnings and gains, are not taxed until they are distributed. H r block tax preparation Who Can Open a Traditional IRA? You can open and make contributions to a traditional IRA if: You (or, if you file a joint return, your spouse) received taxable compensation during the year, and You were not age 70½ by the end of the year. H r block tax preparation What is compensation?   Generally, compensation is what you earn from working. H r block tax preparation Compensation includes wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services. H r block tax preparation The IRS treats as compensation any amount properly shown in box 1 (Wages, tips, other compensation) of Form W-2, Wage and Tax Statement, provided that amount is reduced by any amount properly shown in box 11 (Nonqualified plans). H r block tax preparation   Scholarship and fellowship payments are compensation for this purpose only if shown in box 1 of Form W-2. H r block tax preparation   Compensation also includes commissions and taxable alimony and separate maintenance payments. H r block tax preparation Self-employment income. H r block tax preparation   If you are self-employed (a sole proprietor or a partner), compensation is the net earnings from your trade or business (provided your personal services are a material income-producing factor) reduced by the total of: The deduction for contributions made on your behalf to retirement plans, and The deductible part of your self-employment tax. H r block tax preparation   Compensation includes earnings from self-employment even if they are not subject to self-employment tax because of your religious beliefs. H r block tax preparation Nontaxable combat pay. H r block tax preparation   For IRA purposes, if you were a member of the U. H r block tax preparation S. H r block tax preparation Armed Forces, your compensation includes any nontaxable combat pay you receive. H r block tax preparation What is not compensation?   Compensation does not include any of the following items. H r block tax preparation Earnings and profits from property, such as rental income, interest income, and dividend income. H r block tax preparation Pension or annuity income. H r block tax preparation Deferred compensation received (compensation payments postponed from a past year). H r block tax preparation Income from a partnership for which you do not provide services that are a material income-producing factor. H r block tax preparation Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b. H r block tax preparation Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs. H r block tax preparation When and How Can a Traditional IRA Be Opened? You can open a traditional IRA at any time. H r block tax preparation However, the time for making contributions for any year is limited. H r block tax preparation See When Can Contributions Be Made , later. H r block tax preparation You can open different kinds of IRAs with a variety of organizations. H r block tax preparation You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. H r block tax preparation You can also open an IRA through your stockbroker. H r block tax preparation Any IRA must meet Internal Revenue Code requirements. H r block tax preparation Kinds of traditional IRAs. H r block tax preparation   Your traditional IRA can be an individual retirement account or annuity. H r block tax preparation It can be part of either a simplified employee pension (SEP) or an employer or employee association trust account. H r block tax preparation How Much Can Be Contributed? There are limits and other rules that affect the amount that can be contributed to a traditional IRA. H r block tax preparation These limits and other rules are explained below. H r block tax preparation Community property laws. H r block tax preparation   Except as discussed later under Kay Bailey Hutchison Spousal IRA limit , each spouse figures his or her limit separately, using his or her own compensation. H r block tax preparation This is the rule even in states with community property laws. H r block tax preparation Brokers' commissions. H r block tax preparation   Brokers' commissions paid in connection with your traditional IRA are subject to the contribution limit. H r block tax preparation Trustees' fees. H r block tax preparation   Trustees' administrative fees are not subject to the contribution limit. H r block tax preparation Qualified reservist repayments. H r block tax preparation   If you are (or were) a member of a reserve component and you were ordered or called to active duty after September 11, 2001, you may be able to contribute (repay) to an IRA amounts equal to any qualified reservist distributions you received. H r block tax preparation You can make these repayment contributions even if they would cause your total contributions to the IRA to be more than the general limit on contributions. H r block tax preparation To be eligible to make these repayment contributions, you must have received a qualified reservist distribution from an IRA or from a section 401(k) or 403(b) plan or similar arrangement. H r block tax preparation   For more information, see Qualified reservist repayments under How Much Can Be Contributed? in chapter 1 of Publication 590. H r block tax preparation Contributions on your behalf to a traditional IRA reduce your limit for contributions to a Roth IRA. H r block tax preparation (See Roth IRAs, later. H r block tax preparation ) General limit. H r block tax preparation   For 2013, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts. H r block tax preparation $5,500 ($6,500 if you are 50 or older). H r block tax preparation Your taxable compensation (defined earlier) for the year. H r block tax preparation This is the most that can be contributed regardless of whether the contributions are to one or more traditional IRAs or whether all or part of the contributions are nondeductible. H r block tax preparation (See Nondeductible Contributions , later. H r block tax preparation ) Qualified reservist repayments do not affect this limit. H r block tax preparation Example 1. H r block tax preparation Betty, who is 34 years old and single, earned $24,000 in 2013. H r block tax preparation Her IRA contributions for 2013 are limited to $5,500. H r block tax preparation Example 2. H r block tax preparation John, an unmarried college student working part time, earned $3,500 in 2013. H r block tax preparation His IRA contributions for 2013 are limited to $3,500, the amount of his compensation. H r block tax preparation Kay Bailey Hutchison Spousal IRA limit. H r block tax preparation   For 2013, if you file a joint return and your taxable compensation is less than that of your spouse, the most that can be contributed for the year to your IRA is the smaller of the following amounts. H r block tax preparation $5,500 ($6,500 if you are 50 or older). H r block tax preparation The total compensation includible in the gross income of both you and your spouse for the year, reduced by the following two amounts. H r block tax preparation Your spouse's IRA contribution for the year to a traditional IRA. H r block tax preparation Any contribution for the year to a Roth IRA on behalf of your spouse. H r block tax preparation This means that the total combined contributions that can be made for the year to your IRA and your spouse's IRA can be as much as $11,000 ($12,000 if only one of you is 50 or older, or $13,000 if both of you are 50 or older). H r block tax preparation When Can Contributions Be Made? As soon as you open your traditional IRA, contributions can be made to it through your chosen sponsor (trustee or other administrator). H r block tax preparation Contributions must be in the form of money (cash, check, or money order). H r block tax preparation Property cannot be contributed. H r block tax preparation Contributions must be made by due date. H r block tax preparation   Contributions can be made to your traditional IRA for a year at any time during the year or by the due date for filing your return for that year, not including extensions. H r block tax preparation Age 70½ rule. H r block tax preparation   Contributions cannot be made to your traditional IRA for the year in which you reach age 70½ or for any later year. H r block tax preparation   You attain age 70½ on the date that is 6 calendar months after the 70th anniversary of your birth. H r block tax preparation If you were born on or before June 30, 1943, you cannot contribute for 2013 or any later year. H r block tax preparation Designating year for which contribution is made. H r block tax preparation   If an amount is contributed to your traditional IRA between January 1 and April 15, you should tell the sponsor which year (the current year or the previous year) the contribution is for. H r block tax preparation If you do not tell the sponsor which year it is for, the sponsor can assume, and report to the IRS, that the contribution is for the current year (the year the sponsor received it). H r block tax preparation Filing before a contribution is made. H r block tax preparation   You can file your return claiming a traditional IRA contribution before the contribution is actually made. H r block tax preparation Generally, the contribution must be made by the due date of your return, not including extensions. H r block tax preparation Contributions not required. H r block tax preparation   You do not have to contribute to your traditional IRA for every tax year, even if you can. H r block tax preparation How Much Can You Deduct? Generally, you can deduct the lesser of: The contributions to your traditional IRA for the year, or The general limit (or the Kay Bailey Hutchison Spousal IRA limit, if it applies). H r block tax preparation However, if you or your spouse was covered by an employer retirement plan, you may not be able to deduct this amount. H r block tax preparation See Limit If Covered by Employer Plan , later. H r block tax preparation You may be able to claim a credit for contributions to your traditional IRA. H r block tax preparation For more information, see chapter 37. H r block tax preparation Trustees' fees. H r block tax preparation   Trustees' administrative fees that are billed separately and paid in connection with your traditional IRA are not deductible as IRA contributions. H r block tax preparation However, they may be deductible as a miscellaneous itemized deduction on Schedule A (Form 1040). H r block tax preparation See chapter 28. H r block tax preparation Brokers' commissions. H r block tax preparation   Brokers' commissions are part of your IRA contribution and, as such, are deductible subject to the limits. H r block tax preparation Full deduction. H r block tax preparation   If neither you nor your spouse was covered for any part of the year by an employer retirement plan, you can take a deduction for total contributions to one or more traditional IRAs of up to the lesser of: $5,500 ($6,500 if you are age 50 or older in 2013). H r block tax preparation 100% of your compensation. H r block tax preparation This limit is reduced by any contributions made to a 501(c)(18) plan on your behalf. H r block tax preparation Kay Bailey Hutchison Spousal IRA. H r block tax preparation   In the case of a married couple with unequal compensation who file a joint return, the deduction for contributions to the traditional IRA of the spouse with less compensation is limited to the lesser of the following amounts. H r block tax preparation $5,500 ($6,500 if the spouse with the lower compensation is age 50 or older in 2013). H r block tax preparation The total compensation includible in the gross income of both spouses for the year reduced by the following three amounts. H r block tax preparation The IRA deduction for the year of the spouse with the greater compensation. H r block tax preparation Any designated nondeductible contribution for the year made on behalf of the spouse with the greater compensation. H r block tax preparation Any contributions for the year to a Roth IRA on behalf of the spouse with the greater compensation. H r block tax preparation This limit is reduced by any contributions to a 501(c)(18) plan on behalf of the spouse with the lesser compensation. H r block tax preparation Note. H r block tax preparation If you were divorced or legally separated (and did not remarry) before the end of the year, you cannot deduct any contributions to your spouse's IRA. H r block tax preparation After a divorce or legal separation, you can deduct only contributions to your own IRA. H r block tax preparation Your deductions are subject to the rules for single individuals. H r block tax preparation Covered by an employer retirement plan. H r block tax preparation   If you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, your deduction may be further limited. H r block tax preparation This is discussed later under Limit If Covered by Employer Plan . H r block tax preparation Limits on the amount you can deduct do not affect the amount that can be contributed. H r block tax preparation See Nondeductible Contributions , later. H r block tax preparation Are You Covered by an Employer Plan? The Form W-2 you receive from your employer has a box used to indicate whether you were covered for the year. H r block tax preparation The “Retirement plan” box should be checked if you were covered. H r block tax preparation Reservists and volunteer firefighters should also see Situations in Which You Are Not Covered by an Employer Plan , later. H r block tax preparation If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer. H r block tax preparation Federal judges. H r block tax preparation   For purposes of the IRA deduction, federal judges are covered by an employer retirement plan. H r block tax preparation For Which Year(s) Are You Covered by an Employer Plan? Special rules apply to determine the tax years for which you are covered by an employer plan. H r block tax preparation These rules differ depending on whether the plan is a defined contribution plan or a defined benefit plan. H r block tax preparation Tax year. H r block tax preparation   Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. H r block tax preparation For almost all people, the tax year is the calendar year. H r block tax preparation Defined contribution plan. H r block tax preparation   Generally, you are covered by a defined contribution plan for a tax year if amounts are contributed or allocated to your account for the plan year that ends with or within that tax year. H r block tax preparation   A defined contribution plan is a plan that provides for a separate account for each person covered by the plan. H r block tax preparation Types of defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans. H r block tax preparation Defined benefit plan. H r block tax preparation   If you are eligible to participate in your employer's defined benefit plan for the plan year that ends within your tax year, you are covered by the plan. H r block tax preparation This rule applies even if you: Declined to participate in the plan, Did not make a required contribution, or Did not perform the minimum service required to accrue a benefit for the year. H r block tax preparation   A defined benefit plan is any plan that is not a defined contribution plan. H r block tax preparation Defined benefit plans include pension plans and annuity plans. H r block tax preparation No vested interest. H r block tax preparation   If you accrue a benefit for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the accrual. H r block tax preparation Situations in Which You Are Not Covered by an Employer Plan Unless you are covered under another employer plan, you are not covered by an employer plan if you are in one of the situations described below. H r block tax preparation Social security or railroad retirement. H r block tax preparation   Coverage under social security or railroad retirement is not coverage under an employer retirement plan. H r block tax preparation Benefits from a previous employer's plan. H r block tax preparation   If you receive retirement benefits from a previous employer's plan, you are not covered by that plan. H r block tax preparation Reservists. H r block tax preparation   If the only reason you participate in a plan is because you are a member of a reserve unit of the armed forces, you may not be covered by the plan. H r block tax preparation You are not covered by the plan if both of the following conditions are met. H r block tax preparation The plan you participate in is established for its employees by: The United States, A state or political subdivision of a state, or An instrumentality of either (a) or (b) above. H r block tax preparation You did not serve more than 90 days on active duty during the year (not counting duty for training). H r block tax preparation Volunteer firefighters. H r block tax preparation   If the only reason you participate in a plan is because you are a volunteer firefighter, you may not be covered by the plan. H r block tax preparation You are not covered by the plan if both of the following conditions are met. H r block tax preparation The plan you participate in is established for its employees by: The United States, A state or political subdivision of a state, or An instrumentality of either (a) or (b) above. H r block tax preparation Your accrued retirement benefits at the beginning of the year will not provide more than $1,800 per year at retirement. H r block tax preparation Limit If Covered by Employer Plan If either you or your spouse was covered by an employer retirement plan, you may be entitled to only a partial (reduced) deduction or no deduction at all, depending on your income and your filing status. H r block tax preparation Your deduction begins to decrease (phase out) when your income rises above a certain amount and is eliminated altogether when it reaches a higher amount. H r block tax preparation These amounts vary depending on your filing status. H r block tax preparation To determine if your deduction is subject to phaseout, you must determine your modified adjusted gross income (AGI) and your filing status. H r block tax preparation See Filing status and Modified adjusted gross income (AGI) , later. H r block tax preparation Then use Table 17-1 or 17-2 to determine if the phaseout applies. H r block tax preparation Social security recipients. H r block tax preparation   Instead of using Table 17-1 or Table 17-2, use the worksheets in Appendix B of Publication 590 if, for the year, all of the following apply. H r block tax preparation You received social security benefits. H r block tax preparation You received taxable compensation. H r block tax preparation Contributions were made to your traditional IRA. H r block tax preparation You or your spouse was covered by an employer retirement plan. H r block tax preparation Use those worksheets to figure your IRA deduction, your nondeductible contribution, and the taxable portion, if any, of your social security benefits. H r block tax preparation Deduction phaseout. H r block tax preparation   If you were covered by an employer retirement plan and you did not receive any social security retirement benefits, your IRA deduction may be reduced or eliminated depending on your filing status and modified AGI as shown in Table 17-1. H r block tax preparation Table 17-1. H r block tax preparation Effect of Modified AGI1 on Deduction if You Are Covered by Retirement Plan at Work If you are covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. H r block tax preparation IF your filing status is. H r block tax preparation . H r block tax preparation . H r block tax preparation   AND your modified AGI is. H r block tax preparation . H r block tax preparation . H r block tax preparation   THEN you can take. H r block tax preparation . H r block tax preparation . H r block tax preparation single   or  head of household   $59,000 or less   a full deduction. H r block tax preparation   more than $59,000 but less than $69,000   a partial deduction. H r block tax preparation   $69,000 or more   no deduction. H r block tax preparation married filing jointly   or  qualifying widow(er)   $95,000 or less   a full deduction. H r block tax preparation   more than $95,000 but less than $115,000   a partial deduction. H r block tax preparation   $115,000 or more   no deduction. H r block tax preparation married filing separately2   less than $10,000   a partial deduction. H r block tax preparation   $10,000 or more   no deduction. H r block tax preparation 1Modified AGI (adjusted gross income). H r block tax preparation See Modified adjusted gross income (AGI) . H r block tax preparation 2If you did not live with your spouse at any time during the year, your filing status is considered Single for this purpose (therefore, your IRA deduction is determined under the “Single” column). H r block tax preparation If your spouse is covered. H r block tax preparation   If you are not covered by an employer retirement plan, but your spouse is, and you did not receive any social security benefits, your IRA deduction may be reduced or eliminated entirely depending on your filing status and modified AGI as shown in Table 17-2. H r block tax preparation Filing status. H r block tax preparation   Your filing status depends primarily on your marital status. H r block tax preparation For this purpose, you need to know if your filing status is single or head of household, married filing jointly or qualifying widow(er), or married filing separately. H r block tax preparation If you need more information on filing status, see chapter 2. H r block tax preparation Lived apart from spouse. H r block tax preparation   If you did not live with your spouse at any time during the year and you file a separate return, your filing status, for this purpose, is single. H r block tax preparation Table 17-2. H r block tax preparation Effect of Modified AGI1 on Deduction if You Are NOT Covered by Retirement Plan at Work If you are not covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. H r block tax preparation IF your filing status is. H r block tax preparation . H r block tax preparation . H r block tax preparation   AND your modified AGI is. H r block tax preparation . H r block tax preparation . H r block tax preparation   THEN you can take. H r block tax preparation . H r block tax preparation . H r block tax preparation single, head of household, or qualifying widow(er)   any amount   a full deduction. H r block tax preparation married filing jointly or separately with a spouse who is not covered by a plan at work   any amount   a full deduction. H r block tax preparation married filing jointly with a spouse who is covered by a plan at work   $178,000 or less   a full deduction. H r block tax preparation   more than $178,000 but less than $188,000   a partial deduction. H r block tax preparation   $188,000 or more   no deduction. H r block tax preparation married filing separately with a spouse who is covered by a plan at work2   less than $10,000   a partial deduction. H r block tax preparation   $10,000 or more   no deduction. H r block tax preparation 1Modified AGI (adjusted gross income). H r block tax preparation See Modified adjusted gross income (AGI) . H r block tax preparation 2You are entitled to the full deduction if you did not live with your spouse at any time during the year. H r block tax preparation Modified adjusted gross income (AGI). H r block tax preparation   How you figure your modified AGI depends on whether you are filing Form 1040 or Form 1040A. H r block tax preparation If you made contributions to your IRA for 2013 and received a distribution from your IRA in 2013, see Publication 590. H r block tax preparation You may be able to use Worksheet 17-1 to figure your modified AGI. H r block tax preparation    Do not assume that your modified AGI is the same as your compensation. H r block tax preparation Your modified AGI may include income in addition to your compensation (discussed earlier), such as interest, dividends, and income from IRA distributions. H r block tax preparation Form 1040. H r block tax preparation   If you file Form 1040, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following eight amounts. H r block tax preparation IRA deduction. H r block tax preparation Student loan interest deduction. H r block tax preparation Tuition and fees deduction. H r block tax preparation Domestic production activities deduction. H r block tax preparation Foreign earned income exclusion. H r block tax preparation Foreign housing exclusion or deduction. H r block tax preparation Exclusion of qualified savings bond interest shown on Form 8815, Exclusion of Interest From Series EE and I U. H r block tax preparation S. H r block tax preparation Savings Bonds Issued After 1989. H r block tax preparation Exclusion of employer-provided adoption benefits shown on Form 8839, Qualified Adoption Expenses. H r block tax preparation This is your modified AGI. H r block tax preparation Form 1040A. H r block tax preparation   If you file Form 1040A, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. H r block tax preparation IRA deduction. H r block tax preparation Student loan interest deduction. H r block tax preparation Tuition and fees deduction. H r block tax preparation Exclusion of qualified savings bond interest shown on Form 8815. H r block tax preparation This is your modified AGI. H r block tax preparation Both contributions for 2013 and distributions in 2013. H r block tax preparation   If all three of the following apply, any IRA distributions you received in 2013 may be partly tax free and partly taxable. H r block tax preparation You received distributions in 2013 from one or more traditional IRAs. H r block tax preparation You made contributions to a traditional IRA for 2013. H r block tax preparation Some of those contributions may be nondeductible contributions. H r block tax preparation If this is your situation, you must figure the taxable part of the traditional IRA distribution before you can figure your modified AGI. H r block tax preparation To do this, you can use Worksheet 1-5, Figuring the Taxable Part of Your IRA Distribution, in Publication 590. H r block tax preparation   If at least one of the above does not apply, figure your modified AGI using Worksheet 17-1, later. H r block tax preparation    How to figure your reduced IRA deduction. H r block tax preparation   You can figure your reduced IRA deduction for either Form 1040 or Form 1040A by using the worksheets in chapter 1 of Publication 590. H r block tax preparation Also, the instructions for Form 1040 and Form 1040A include similar worksheets that you may be able to use instead. H r block tax preparation Worksheet 17-1. H r block tax preparation Figuring Your Modified AGI Use this worksheet to figure your modified adjusted gross income for traditional IRA purposes. H r block tax preparation 1. H r block tax preparation Enter your adjusted gross income (AGI) from Form 1040, line 38, or Form 1040A, line 22, figured without taking into account the amount from Form 1040, line 32, or Form 1040A, line 17 1. H r block tax preparation   2. H r block tax preparation Enter any student loan interest deduction from Form 1040, line 33, or Form 1040A, line 18 2. H r block tax preparation   3. H r block tax preparation Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 3. H r block tax preparation   4. H r block tax preparation Enter any domestic production activities deduction from Form 1040, line 35 4. H r block tax preparation   5. H r block tax preparation Enter any foreign earned income and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 5. H r block tax preparation   6. H r block tax preparation Enter any foreign housing deduction from Form 2555, line 50 6. H r block tax preparation   7. H r block tax preparation Enter any excludable savings bond interest from Form 8815, line 14 7. H r block tax preparation   8. H r block tax preparation Enter any excluded employer-provided adoption benefits from Form 8839, line 28 8. H r block tax preparation   9. H r block tax preparation Add lines 1 through 8. H r block tax preparation This is your Modified AGI for traditional IRA purposes 9. H r block tax preparation   Reporting Deductible Contributions If you file Form 1040, enter your IRA deduction on line 32 of that form. H r block tax preparation If you file Form 1040A, enter your IRA deduction on line 17. H r block tax preparation You cannot deduct IRA contributions on Form 1040EZ. H r block tax preparation Nondeductible Contributions Although your deduction for IRA contributions may be reduced or eliminated, contributions can be made to your IRA up to the general limit or, if it applies, the Kay Bailey Hutchison Spousal IRA limit. H r block tax preparation The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. H r block tax preparation Example. H r block tax preparation Mike is 28 years old and single. H r block tax preparation In 2013, he was covered by a retirement plan at work. H r block tax preparation His salary was $57,312. H r block tax preparation His modified AGI was $70,000. H r block tax preparation Mike made a $5,500 IRA contribution for 2013. H r block tax preparation Because he was covered by a retirement plan and his modified AGI was over $69,000, he cannot deduct his $5,500 IRA contribution. H r block tax preparation He must designate this contribution as a nondeductible contribution by reporting it on Form 8606, as explained next. H r block tax preparation Form 8606. H r block tax preparation   To designate contributions as nondeductible, you must file Form 8606. H r block tax preparation   You do not have to designate a contribution as nondeductible until you file your tax return. H r block tax preparation When you file, you can even designate otherwise deductible contributions as nondeductible. H r block tax preparation   You must file Form 8606 to report nondeductible contributions even if you do not have to file a tax return for the year. H r block tax preparation A Form 8606 is not used for the year that you make a rollover from a qualified retirement plan to a traditional IRA and the rollover includes nontaxable amounts. H r block tax preparation In those situations, a Form 8606 is completed for the year you take a distribution from that IRA. H r block tax preparation See Form 8606 under Distributions Fully or Partly Taxable, later. H r block tax preparation Failure to report nondeductible contributions. H r block tax preparation   If you do not report nondeductible contributions, all of the contributions to your traditional IRA will be treated as deductible contributions when withdrawn. H r block tax preparation All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. H r block tax preparation Penalty for overstatement. H r block tax preparation   If you overstate the amount of nondeductible contributions on your Form 8606 for any tax year, you must pay a penalty of $100 for each overstatement, unless it was due to reasonable cause. H r block tax preparation Penalty for failure to file Form 8606. H r block tax preparation   You will have to pay a $50 penalty if you do not file a required Form 8606, unless you can prove that the failure was due to reasonable cause. H r block tax preparation    Tax on earnings on nondeductible contributions. H r block tax preparation   As long as contributions are within the contribution limits, none of the earnings or gains on contributions (deductible or nondeductible) will be taxed until they are distributed. H r block tax preparation See When Can You Withdraw or Use IRA Assets , later. H r block tax preparation Cost basis. H r block tax preparation   You will have a cost basis in your traditional IRA if you made any nondeductible contributions. H r block tax preparation Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions. H r block tax preparation Inherited IRAs If you inherit a traditional IRA, you are called a beneficiary. H r block tax preparation A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. H r block tax preparation Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive. H r block tax preparation Inherited from spouse. H r block tax preparation   If you inherit a traditional IRA from your spouse, you generally have the following three choices. H r block tax preparation You can: Treat it as your own IRA by designating yourself as the account owner. H r block tax preparation Treat it as your own by rolling it over into your IRA, or to the extent it is taxable, into a: Qualified employer plan, Qualified employee annuity plan (section 403(a) plan), Tax-sheltered annuity plan (section 403(b) plan), or Deferred compensation plan of a state or local government (section 457 plan). H r block tax preparation Treat yourself as the beneficiary rather than treating the IRA as your own. H r block tax preparation Treating it as your own. H r block tax preparation   You will be considered to have chosen to treat the IRA as your own if: Contributions (including rollover contributions) are made to the inherited IRA, or You do not take the required minimum distribution for a year as a beneficiary of the IRA. H r block tax preparation You will only be considered to have chosen to treat the IRA as your own if: You are the sole beneficiary of the IRA, and You have an unlimited right to withdraw amounts from it. H r block tax preparation   However, if you receive a distribution from your deceased spouse's IRA, you can roll that distribution over into your own IRA within the 60-day time limit, as long as the distribution is not a required distribution, even if you are not the sole beneficiary of your deceased spouse's IRA. H r block tax preparation Inherited from someone other than spouse. H r block tax preparation   If you inherit a traditional IRA from anyone other than your deceased spouse, you cannot treat the inherited IRA as your own. H r block tax preparation This means that you cannot make any contributions to the IRA. H r block tax preparation It also means you cannot roll over any amounts into or out of the inherited IRA. H r block tax preparation However, you can make a trustee-to-trustee transfer as long as the IRA into which amounts are being moved is set up and maintained in the name of the deceased IRA owner for the benefit of you as beneficiary. H r block tax preparation For more information, see the discussion of inherited IRAs under Rollover From One IRA Into Another, later. H r block tax preparation Can You Move Retirement Plan Assets? You can transfer, tax free, assets (money or property) from other retirement plans (including traditional IRAs) to a traditional IRA. H r block tax preparation You can make the following kinds of transfers. H r block tax preparation Transfers from one trustee to another. H r block tax preparation Rollovers. H r block tax preparation Transfers incident to a divorce. H r block tax preparation Transfers to Roth IRAs. H r block tax preparation   Under certain conditions, you can move assets from a traditional IRA or from a designated Roth account to a Roth IRA. H r block tax preparation You can also move assets from a qualified retirement plan to a Roth IRA. H r block tax preparation See Can You Move Amounts Into a Roth IRA? under Roth IRAs, later. H r block tax preparation Trustee-to-Trustee Transfer A transfer of funds in your traditional IRA from one trustee directly to another, either at your request or at the trustee's request, is not a rollover. H r block tax preparation Because there is no distribution to you, the transfer is tax free. H r block tax preparation Because it is not a rollover, it is not affected by the 1-year waiting period required between rollovers, discussed later under Rollover From One IRA Into Another . H r block tax preparation For information about direct transfers to IRAs from retirement plans other than IRAs, see Can You Move Retirement Plan Assets? in chapter 1 and Can You Move Amounts Into a Roth IRA? in chapter 2 of Publication 590. H r block tax preparation Rollovers Generally, a rollover is a tax-free distribution to you of cash or other assets from one retirement plan that you contribute (roll over) to another retirement plan. H r block tax preparation The contribution to the second retirement plan is called a “rollover contribution. H r block tax preparation ” Note. H r block tax preparation An amount rolled over tax free from one retirement plan to another is generally includible in income when it is distributed from the second plan. H r block tax preparation Kinds of rollovers to a traditional IRA. H r block tax preparation   You can roll over amounts from the following plans into a traditional IRA: A traditional IRA, An employer's qualified retirement plan for its employees, A deferred compensation plan of a state or local government (section 457 plan), or A tax-sheltered annuity plan (section 403(b) plan). H r block tax preparation Treatment of rollovers. H r block tax preparation   You cannot deduct a rollover contribution, but you must report the rollover distribution on your tax return as discussed later under Reporting rollovers from IRAs and under Reporting rollovers from employer plans . H r block tax preparation Kinds of rollovers from a traditional IRA. H r block tax preparation   You may be able to roll over, tax free, a distribution from your traditional IRA into a qualified plan. H r block tax preparation These plans include the federal Thrift Savings Fund (for federal employees), deferred compensation plans of state or local governments (section 457 plans), and tax-sheltered annuity plans (section 403(b) plans). H r block tax preparation The part of the distribution that you can roll over is the part that would otherwise be taxable (includible in your income). H r block tax preparation Qualified plans may, but are not required to, accept such rollovers. H r block tax preparation Time limit for making a rollover contribution. H r block tax preparation   You generally must make the rollover contribution by the 60th day after the day you receive the distribution from your traditional IRA or your employer's plan. H r block tax preparation The IRS may waive the 60-day requirement where the failure to do so would be against equity or good conscience, such as in the event of a casualty, disaster, or other event beyond your reasonable control. H r block tax preparation For more information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. H r block tax preparation Extension of rollover period. H r block tax preparation   If an amount distributed to you from a traditional IRA or a qualified employer retirement plan is a frozen deposit at any time during the 60-day period allowed for a rollover, special rules extend the rollover period. H r block tax preparation For more information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. H r block tax preparation More information. H r block tax preparation   For more information on rollovers, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. H r block tax preparation Rollover From One IRA Into Another You can withdraw, tax free, all or part of the assets from one traditional IRA if you reinvest them within 60 days in the same or another traditional IRA. H r block tax preparation Because this is a rollover, you cannot deduct the amount that you reinvest in an IRA. H r block tax preparation Waiting period between rollovers. H r block tax preparation   Generally, if you make a tax-free rollover of any part of a distribution from a traditional IRA, you cannot, within a 1-year period, make a tax-free rollover of any later distribution from that same IRA. H r block tax preparation You also cannot make a tax-free rollover of any amount distributed, within the same 1-year period, from the IRA into which you made the tax-free rollover. H r block tax preparation   The 1-year period begins on the date you receive the IRA distribution, not on the date you roll it over into an IRA. H r block tax preparation Example. H r block tax preparation You have two traditional IRAs, IRA-1 and IRA-2. H r block tax preparation You make a tax-free rollover of a distribution from IRA-1 into a new traditional IRA (IRA-3). H r block tax preparation You cannot, within 1 year of the distribution from IRA-1, make a tax-free rollover of any distribution from either IRA-1 or IRA-3 into another traditional IRA. H r block tax preparation However, the rollover from IRA-1 into IRA-3 does not prevent you from making a tax-free rollover from IRA-2 into any other traditional IRA. H r block tax preparation This is because you have not, within the last year, rolled over, tax free, any distribution from IRA-2 or made a tax-free rollover into IRA-2. H r block tax preparation Exception. H r block tax preparation   For an exception for distributions from failed financial institutions, see Rollover From One IRA Into Another under Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. H r block tax preparation Partial rollovers. H r block tax preparation   If you withdraw assets from a traditional IRA, you can roll over part of the withdrawal tax free and keep the rest of it. H r block tax preparation The amount you keep will generally be taxable (except for the part that is a return of nondeductible contributions). H r block tax preparation The amount you keep may be subject to the 10% additional tax on early distributions, discussed later under What Acts Result in Penalties or Additional Taxes? . H r block tax preparation Required distributions. H r block tax preparation   Amounts that must be distributed during a particular year under the required distribution rules (discussed later) are not eligible for rollover treatment. H r block tax preparation Inherited IRAs. H r block tax preparation   If you inherit a traditional IRA from your spouse, you generally can roll it over, or you can choose to make the inherited IRA your own. H r block tax preparation See Treating it as your own , earlier. H r block tax preparation Not inherited from spouse. H r block tax preparation   If you inherit a traditional IRA from someone other than your spouse, you cannot roll it over or allow it to receive a rollover contribution. H r block tax preparation You must withdraw the IRA assets within a certain period. H r block tax preparation For more information, see When Must You Withdraw Assets? in chapter 1 of Publication 590. H r block tax preparation Reporting rollovers from IRAs. H r block tax preparation   Report any rollover from one traditional IRA to the same or another traditional IRA on lines 15a and 15b, Form 1040, or lines 11a and 11b, Form 1040A, as follows. H r block tax preparation   Enter the total amount of the distribution on Form 1040, line 15a, or Form 1040A, line 11a. H r block tax preparation If the total amount on Form 1040, line 15a, or Form 1040A, line 11a, was rolled over, enter zero on Form 1040, line 15b, or Form 1040A, line 11b. H r block tax preparation If the total distribution was not rolled over, enter the taxable portion of the part that was not rolled over on Form 1040, line 15b, or Form 1040A, line 11b. H r block tax preparation Put “Rollover” next to Form 1040, line 15b, or Form 1040A, line 11b. H r block tax preparation See your tax return instructions. H r block tax preparation   If you rolled over the distribution into a qualified plan (other than an IRA) or you make the rollover in 2014, attach a statement explaining what you did. H r block tax preparation Rollover From Employer's Plan Into an IRA You can roll over into a traditional IRA all or part of an eligible rollover distribution you receive from your (or your deceased spouse's): Employer's qualified pension, profit-sharing, or stock bonus plan; Annuity plan; Tax-sheltered annuity plan (section 403(b) plan); or Governmental deferred compensation plan (section 457 plan). H r block tax preparation A qualified plan is one that meets the requirements of the Internal Revenue Code. H r block tax preparation Eligible rollover distribution. H r block tax preparation   Generally, an eligible rollover distribution is any distribution of all or part of the balance to your credit in a qualified retirement plan except the following. H r block tax preparation A required minimum distribution (explained later under When Must You Withdraw IRA Assets? (Required Minimum Distributions) ). H r block tax preparation A hardship distribution. H r block tax preparation Any of a series of substantially equal periodic distributions paid at least once a year over: Your lifetime or life expectancy, The lifetimes or life expectancies of you and your beneficiary, or A period of 10 years or more. H r block tax preparation Corrective distributions of excess contributions or excess deferrals, and any income allocable to the excess, or of excess annual additions and any allocable gains. H r block tax preparation A loan treated as a distribution because it does not satisfy certain requirements either when made or later (such as upon default), unless the participant's accrued benefits are reduced (offset) to repay the loan. H r block tax preparation Dividends on employer securities. H r block tax preparation The cost of life insurance coverage. H r block tax preparation Any nontaxable amounts that you roll over into your traditional IRA become part of your basis (cost) in your IRAs. H r block tax preparation To recover your basis when you take distributions from your IRA, you must complete Form 8606 for the year of the distribution. H r block tax preparation See Form 8606 under Distributions Fully or Partly Taxable, later. H r block tax preparation Rollover by nonspouse beneficiary. H r block tax preparation   A direct transfer from a deceased employee's qualified pension, profit-sharing, or stock bonus plan; annuity plan; tax-sheltered annuity (section 403(b)) plan; or governmental deferred compensation (section 457) plan to an IRA set up to receive the distribution on your behalf can be treated as an eligible rollover distribution if you are the designated beneficiary of the plan and not the employee's spouse. H r block tax preparation The IRA is treated as an inherited IRA. H r block tax preparation For more information about inherited IRAs, see Inherited IRAs , earlier. H r block tax preparation Reporting rollovers from employer plans. H r block tax preparation    Enter the total distribution (before income tax or other deductions were withheld) on Form 1040, line 16a, or Form 1040A, line 12a. H r block tax preparation This amount should be shown in box 1 of Form 1099-R. H r block tax preparation From this amount, subtract any contributions (usually shown in box 5 of Form 1099-R) that were taxable to you when made. H r block tax preparation From that result, subtract the amount that was rolled over either directly or within 60 days of receiving the distribution. H r block tax preparation Enter the remaining amount, even if zero, on Form 1040, line 16b, or Form 1040A, line 12b. H r block tax preparation Also, enter "Rollover" next to Form 1040, line 16b, or Form 1040A, line 12b. H r block tax preparation Transfers Incident to Divorce If an interest in a traditional IRA is transferred from your spouse or former spouse to you by a divorce or separate maintenance decree or a written document related to such a decree, the interest in the IRA, starting from the date of the transfer, is treated as your IRA. H r block tax preparation The transfer is tax free. H r block tax preparation For detailed information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. H r block tax preparation Converting From Any Traditional IRA to a Roth IRA Allowable conversions. H r block tax preparation   You can withdraw all or part of the assets from a traditional IRA and reinvest them (within 60 days) in a Roth IRA. H r block tax preparation The amount that you withdraw and timely contribute (convert) to the Roth IRA is called a conversion contribution. H r block tax preparation If properly (and timely) rolled over, the 10% additional tax on early distributions will not apply. H r block tax preparation However, a part or all of the conversion contribution from your traditional IRA is included in your gross income. H r block tax preparation Required distributions. H r block tax preparation   You cannot convert amounts that must be distributed from your traditional IRA for a particular year (including the calendar year in which you reach age 70½) under the required distribution rules (discussed later). H r block tax preparation Income. H r block tax preparation   You must include in your gross income distributions from a traditional IRA that you would have had to include in income if you had not converted them into a Roth IRA. H r block tax preparation These amounts are normally included in income on your return for the year that you converted them from a traditional IRA to a Roth IRA. H r block tax preparation   You do not include in gross income any part of a distribution from a traditional IRA that is a return of your basis, as discussed later. H r block tax preparation   You must file Form 8606 to report 2013 conversions from traditional, SEP, or SIMPLE IRAs to a Roth IRA in 2013 (unless you recharacterized the entire amount) and to figure the amount to include in income. H r block tax preparation   If you must include any amount in your gross income, you may have to increase your withholding or make estimated tax payments. H r block tax preparation See chapter 4. H r block tax preparation Recharacterizations You may be able to treat a contribution made to one type of IRA as having been made to a different type of IRA. H r block tax preparation This is called recharacterizing the contribution. H r block tax preparation See Can You Move Retirement Plan Assets? in chapter 1 of Publication 590 for more detailed information. H r block tax preparation How to recharacterize a contribution. H r block tax preparation   To recharacterize a contribution, you generally must have the contribution transferred from the first IRA (the one to which it was made) to the second IRA in a trustee-to-trustee transfer. H r block tax preparation If the transfer is made by the due date (including extensions) for your tax return for the year during which the contribution was made, you can elect to treat the contribution as having been originally made to the second IRA instead of to the first IRA. H r block tax preparation If you recharacterize your contribution, you must do all three of the following. H r block tax preparation Include in the transfer any net income allocable to the contribution. H r block tax preparation If there was a loss, the net income you must transfer may be a negative amount. H r block tax preparation Report the recharacterization on your tax return for the year during which the contribution was made. H r block tax preparation Treat the contribution as having been made to the second IRA on the date that it was actually made to the first IRA. H r block tax preparation No deduction allowed. H r block tax preparation   You cannot deduct the contribution to the first IRA. H r block tax preparation Any net income you transfer with the recharacterized contribution is treated as earned in the second IRA. H r block tax preparation Required notifications. H r block tax preparation   To recharacterize a contribution, you must notify both the trustee of the first IRA (the one to which the contribution was actually made) and the trustee of the second IRA (the one to which the contribution is being moved) that you have elected to treat the contribution as having been made to the second IRA rather than the first. H r block tax preparation You must make the notifications by the date of the transfer. H r block tax preparation Only one notification is required if both IRAs are maintained by the same trustee. H r block tax preparation The notification(s) must include all of the following information. H r block tax preparation The type and amount of the contribution to the first IRA that is to be recharacterized. H r block tax preparation The date on which the contribution was made to the first IRA and the year for which it was made. H r block tax preparation A direction to the trustee of the first IRA to transfer in a trustee-to-trustee transfer the amount of the contribution and any net income (or loss) allocable to the contribution to the trustee of the second IRA. H r block tax preparation The name of the trustee of the first IRA and the name of the trustee of the second IRA. H r block tax preparation Any additional information needed to make the transfer. H r block tax preparation Reporting a recharacterization. H r block tax preparation   If you elect to recharacterize a contribution to one IRA as a contribution to another IRA, you must report the recharacterization on your tax return as directed by Form 8606 and its instructions. H r block tax preparation You must treat the contribution as having been made to the second IRA. H r block tax preparation When Can You Withdraw or Use IRA Assets? There are rules limiting use of your IRA assets and distributions from it. H r block tax preparation Violation of the rules generally results in additional taxes in the year of violation. H r block tax preparation See What Acts Result in Penalties or Additional Taxes , later. H r block tax preparation Contributions returned before the due date of return. H r block tax preparation   If you made IRA contributions in 2013, you can withdraw them tax free by the due date of your return. H r block tax preparation If you have an extension of time to file your return, you can withdraw them tax free by the extended due date. H r block tax preparation You can do this if, for each contribution you withdraw, both of the following conditions apply. H r block tax preparation You did not take a deduction for the contribution. H r block tax preparation You withdraw any interest or other income earned on the contribution. H r block tax preparation You can take into account any loss on the contribution while it was in the IRA when calculating the amount that must be withdrawn. H r block tax preparation If there was a loss, the net income earned on the contribution may be a negative amount. H r block tax preparation Note. H r block tax preparation To calculate the amount you must withdraw, see Worksheet 1-4 under When Can You Withdraw or Use Assets? in chapter 1 of Publication 590. H r block tax preparation Earnings includible in income. H r block tax preparation   You must include in income any earnings on the contributions you withdraw. H r block tax preparation Include the earnings in income for the year in which you made the contributions, not in the year in which you withdraw them. H r block tax preparation Generally, except for any part of a withdrawal that is a return of nondeductible contributions (basis), any withdrawal of your contributions after the due date (or extended due date) of your return will be treated as a taxable distribution. H r block tax preparation Excess contributions can also be recovered tax free as discussed under What Acts Result in Penalties or Additional Taxes?, later. H r block tax preparation    Early distributions tax. H r block tax preparation   The 10% additional tax on distributions made before you reach age 59½ does not apply to these tax-free withdrawals of your contributions. H r block tax preparation However, the distribution of interest or other income must be reported on Form 5329 and, unless the distribution qualifies as an exception to the age 59½ rule, it will be subject to this tax. H r block tax preparation When Must You Withdraw IRA Assets? (Required Minimum Distributions) You cannot keep funds in a traditional IRA indefinitely. H r block tax preparation Eventually they must be distributed. H r block tax preparation If there are no distributions, or if the distributions are not large enough, you may have to pay a 50% excise tax on the amount not distributed as required. H r block tax preparation See Excess Accumulations (Insufficient Distributions) , later. H r block tax preparation The requirements for distributing IRA funds differ depending on whether you are the IRA owner or the beneficiary of a decedent's IRA. H r block tax preparation Required minimum distribution. H r block tax preparation   The amount that must be distributed each year is referred to as the required minimum distribution. H r block tax preparation Required distributions not eligible for rollover. H r block tax preparation   Amounts that must be distributed (required minimum distributions) during a particular year are not eligible for rollover treatment. H r block tax preparation IRA owners. H r block tax preparation   If you are the owner of a traditional IRA, you must generally start receiving distributions from your IRA by April 1 of the year following the year in which you reach age 70½. H r block tax preparation April 1 of the year following the year in which you reach age 70½ is referred to as the required beginning date. H r block tax preparation Distributions by the required beginning date. H r block tax preparation   You must receive at least a minimum amount for each year starting with the year you reach age 70½ (your 70½ year). H r block tax preparation If you do not (or did not) receive that minimum amount in your 70½ year, then you must receive distributions for your 70½ year by April 1 of the next year. H r block tax preparation   If an IRA owner dies after reaching age 70½, but before April 1 of the next year, no minimum distribution is required because death occurred before the required beginning date. H r block tax preparation Even if you begin receiving distributions before you attain age 70½, you must begin calculating and receiving required minimum distributions by your required beginning date. H r block tax preparation Distributions after the required beginning date. H r block tax preparation   The required minimum distribution for any year after the year you turn 70½ must be made by December 31 of that later year. H r block tax preparation    Beneficiaries. H r block tax preparation   If you are the beneficiary of a decedent's traditional IRA, the requirements for distributions from that IRA generally depend on whether the IRA owner died before or after the required beginning date for distributions. H r block tax preparation More information. H r block tax preparation   For more information, including how to figure your minimum required distribution each year and how to figure your required distribution if you are a beneficiary of a decedent's IRA, see When Must You Withdraw Assets? in chapter 1 of Publication 590. H r block tax preparation Are Distributions Taxable? In general, distributions from a traditional IRA are taxable in the year you receive them. H r block tax preparation Exceptions. H r block tax preparation   Exceptions to distributions from traditional IRAs being taxable in the year you receive them are: Rollovers, Qualified charitable distributions (QCD), discussed later, Tax-free withdrawals of contributions, discussed earlier, and The return of nondeductible contributions, discussed later under Distributions Fully or Partly Taxable . H r block tax preparation    Although a conversion of a traditional IRA is considered a rollover for Roth IRA purposes, it is not an exception to the rule that distributions from a traditional IRA are taxable in the year you receive them. H r block tax preparation Conversion distributions are includible in your gross income subject to this rule and the special rules for conversions explained in Converting From Any Traditional IRA Into a Roth IRA under Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. H r block tax preparation Qualified charitable distributions (QCD). H r block tax preparation   A QCD is generally a nontaxable distribution made directly by the trustee of your IRA to an organization eligible to receive tax-deductible contributions. H r block tax preparation Special rules apply if you made a qualified charitable distribution in January 2013 that you elected to treat as made in 2012. H r block tax preparation See Qualified Charitable Distributions in Publication 590 for more information. H r block tax preparation Ordinary income. H r block tax preparation   Distributions from traditional IRAs that you include in income are taxed as ordinary income. H r block tax preparation No special treatment. H r block tax preparation   In figuring your tax, you cannot use the 10-year tax option or capital gain treatment that applies to lump-sum distributions from qualified retirement plans. H r block tax preparation Distributions Fully or Partly Taxable Distributions from your traditional IRA may be fully or partly taxable, depending on whether your IRA includes any nondeductible contributions. H r block tax preparation Fully taxable. H r block tax preparation   If only deductible contributions were made to your traditional IRA (or IRAs, if you have more than one), you have no basis in your IRA. H r block tax preparation Because you have no basis in your IRA, any distributions are fully taxable when received. H r block tax preparation See Reporting taxable distributions on your return , later. H r block tax preparation Partly taxable. H r block tax preparation    If you made nondeductible contributions or rolled over any after-tax amounts to any of your traditional IRAs, you have a cost basis (investment in the contract) equal to the amount of those contributions. H r block tax preparation These nondeductible contributions are not taxed when they are distributed to you. H r block tax preparation They are a return of your investment in your IRA. H r block tax preparation   Only the part of the distribution that represents nondeductible contributions and rolled over after-tax amounts (your cost basis) is tax free. H r block tax preparation If nondeductible contributions have been made or after-tax amounts have been rolled over to your IRA, distributions consist partly of nondeductible contributions (basis) and partly of deductible contributions, earnings, and gains (if there are any). H r block tax preparation Until all of your basis has been distributed, each distribution is partly nontaxable and partly taxable. H r block tax preparation Form 8606. H r block tax preparation   You must complete Form 8606 and attach it to your return if you receive a distribution from a traditional IRA and have ever made nondeductible contributions or rolled over after-tax amounts to any of your traditional IRAs. H r block tax preparation Using the form, you will figure the nontaxable distributions for 2013 and your total IRA basis for 2013 and earlier years. H r block tax preparation Note. H r block tax preparation If you are required to file Form 8606, but you are not required to file an income tax return, you still must file Form 8606. H r block tax preparation Send it to the IRS at the time and place you would otherwise file an income tax return. H r block tax preparation Distributions reported on Form 1099-R. H r block tax preparation   If you receive a distribution from your traditional IRA, you will receive Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. H r block tax preparation , or a similar statement. H r block tax preparation IRA distributions are shown in boxes 1 and 2a of Form 1099-R. H r block tax preparation A number or letter code in box 7 tells you what type of distribution you received from your IRA. H r block tax preparation Withholding. H r block tax preparation   Federal income tax is withheld from distributions from traditional IRAs unless you choose not to have tax withheld. H r block tax preparation See chapter 4. H r block tax preparation IRA distributions delivered outside the United States. H r block tax preparation   In general, if you are a U. H r block tax preparation S. H r block tax preparation citizen or resident alien and your home address is outside the United States or its possessions, you cannot choose exemption from withholding on distributions from your traditional IRA. H r block tax preparation Reporting taxable distributions on your return. H r block tax preparation    Report fully taxable distributions, including early distributions on Form 1040, line 15b, or Form 1040A, line 11b (no entry is required on Form 1040, line 15a, or Form 1040A, line 11a). H r block tax preparation If only part of the distribution is taxable, enter the total amount on Form 1040, line 15a, or Form 1040A, line 11a, and the taxable part on Form 1040, line 15b, or Form 1040A, line 11b. H r block tax preparation You cannot report distributions on Form 1040EZ. H r block tax preparation What Acts Result in Penalties or Additional Taxes? The tax advantages of using traditional IRAs for retirement savings can be offset by additional taxes and penalties if you do not follow the rules. H r block tax preparation There are additions to the regular tax for using your IRA funds in prohibited transactions. H r block tax preparation There are also additional taxes for the following activities. H r block tax preparation Investing in collectibles. H r block tax preparation Making excess contributions. H r block tax preparation Taking early distributions. H r block tax preparation Allowing excess amounts to accumulate (failing to take required distributions). H r block tax preparation There are penalties for overstating the amount of nondeductible contributions and for failure to file a Form 8606, if required. H r block tax preparation Prohibited Transactions Generally, a prohibited transaction is any improper use of your traditional IRA by you, your beneficiary, or any disqualified person. H r block tax preparation Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendent, and any spouse of a lineal descendent). H r block tax preparation The following are examples of prohibited transactions with a traditional IRA. H r block tax preparation Borrowing money from it. H r block tax preparation Selling property to it. H r block tax preparation Receiving unreasonable compensation for managing it. H r block tax preparation Using it as security for a loan. H r block tax preparation Buying property for personal use (present or future) with IRA funds. H r block tax preparation Effect on an IRA account. H r block tax preparation   Generally, if you or your beneficiary engages in a prohibited transaction in connection with your traditional IRA account at any time during the year, the account stops being an IRA as of the first day of that year. H r block tax preparation Effect on you or your beneficiary. H r block tax preparation   If your account stops being an IRA because you or your beneficiary engaged in a prohibited transaction, the account is treated as distributing all its assets to you at their fair market values on the first day of the year. H r block tax preparation If the total of those values is more than your basis in the IRA, you will have a taxable gain that is includible in your income. H r block tax preparation For information on figuring your gain and reporting it in income, see Are Distributions Taxable , earlier. H r block tax preparation The distribution may be subject to additional taxes or penalties. H r block tax preparation Taxes on prohibited transactions. H r block tax preparation   If someone other than the owner or beneficiary of a traditional IRA engages in a prohibited transaction, that person may be liable for certain taxes. H r block tax preparation In general, there is a 15% tax on the amount of the prohibited transaction and a 100% additional tax if the transaction is not corrected. H r block tax preparation More information. H r block tax preparation   For more information on prohibited transactions, see What Acts Result in Penalties or Additional Taxes? in chapter 1 of Publication 590. H r block tax preparation Investment in Collectibles If your traditional IRA invests in collectibles, the amount invested is considered distributed to you in the year invested. H r block tax preparation You may have to pay the 10% additional tax on early distributions, discussed later. H r block tax preparation Collectibles. H r block tax preparation   These include: Artworks, Rugs, Antiques, Metals, Gems, Stamps, Coins, Alcoholic beverages, and Certain other tangible personal property. H r block tax preparation Exception. H r block tax preparation    Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U. H r block tax preparation S. H r block tax preparation gold coins, or one-ounce silver coins minted by the Treasury Department. H r block tax preparation It can also invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion. H r block tax preparation Excess Contributions Generally, an excess contribution is the amount contributed to your traditional IRA(s) for the year that is more than the smaller of: The maximum deductible amount for the year. H r block tax preparation For 2013, this is $5,500 ($6,500 if you are 50 or older), or Your taxable compensation for the year. H r block tax preparation Tax on excess contributions. H r block tax preparation   In general, if the excess contributions for a year are not withdrawn by the date your return for the year is due (including extensions), you are subject to a 6% tax. H r block tax preparation You must pay the 6% tax each year on excess amounts that remain in your traditional IRA at the end of your tax year. H r block tax preparation The tax cannot be more than 6% of the combined value of all your IRAs as of the end of your tax year. H r block tax preparation Excess contributions withdrawn by due date of return. H r block tax preparation   You will not have to pay the 6% tax if you withdraw an excess contribution made during a tax year and you also withdraw interest or other income earned on the excess contribution. H r block tax preparation You must complete your withdrawal by the date your tax return for that year is due, including extensions. H r block tax preparation How to treat withdrawn contributions. H r block tax preparation   Do not include in your gross income an excess contribution that you withdraw from your traditional IRA before your tax return is due if both the following conditions are met. H r block tax preparation No deduction was allowed for the excess contribution. H r block tax preparation You withdraw the interest or other income earned on the excess contribution. H r block tax preparation You can take into account any loss on the contribution while it was in the IRA when calculating the amount that must be withdrawn. H r block tax preparation If there was a loss, the net income you must withdraw may be a negative amount. H r block tax preparation How to treat withdrawn interest or other income. H r block tax preparation   You must include in your gross income the interest or other income that was earned on the excess contribution. H r block tax preparation Report it on your return for the year in which the excess contribution was made. H r block tax preparation Your withdrawal of interest or other income may be subject to an additional 10% tax on early distributions, discus
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The H R Block Tax Preparation

H r block tax preparation Index A Assistance (see Tax help) B Base amount, Base amount. H r block tax preparation C Canadian social security benefits, Canadian or German social security benefits paid to U. H r block tax preparation S. H r block tax preparation residents. H r block tax preparation Children's benefits, Children's benefits. H r block tax preparation Comments on publication, Comments and suggestions. H r block tax preparation D Deductions related to benefits, Deductions Related to Your Benefits $3,000 or less, Deduction $3,000 or less. H r block tax preparation $3,000. H r block tax preparation 01 or more, Deduction more than $3,000. H r block tax preparation Disability benefits repaid, Disability payments. H r block tax preparation E Estimated tax, Tax withholding and estimated tax. H r block tax preparation F Form 1040, Reporting on Form 1040. H r block tax preparation Form 1040A, Reporting on Form 1040A. H r block tax preparation Form RRB-1042S, Form RRB-1042S, Payments by the Railroad Retirement Board 2013 (Nonresident Aliens) Form RRB-1099, Lump-sum payment reported on Form SSA-1099 or RRB-1099. H r block tax preparation , Form RRB-1099, Payments by the Railroad Retirement Board 2013 Form SSA-1042S, Form SSA-1042S, Social Security Benefit Statement 2013 (Nonresident Aliens) Form SSA-1099, Lump-sum payment reported on Form SSA-1099 or RRB-1099. H r block tax preparation , Appendix Form W-4V, Tax withholding and estimated tax. H r block tax preparation Free tax services, Free help with your tax return. H r block tax preparation Future developments Product page, Reminders G German social security benefits, Canadian or German social security benefits paid to U. H r block tax preparation S. H r block tax preparation residents. H r block tax preparation H Help (see Tax help) J Joint returns, Joint return. H r block tax preparation L Legal expenses, Legal expenses. H r block tax preparation Lump-sum election, Lump-Sum Election Example, Example M Missing children, photographs of, Reminders N Nonresident aliens, Nonresident aliens. H r block tax preparation Form RRB-1042S, Form RRB-1042S, Payments by the Railroad Retirement Board 2013 (Nonresident Aliens) Form SSA-1042S, Form SSA-1042S, Social Security Benefit Statement 2013 (Nonresident Aliens) Nontaxable benefits, Benefits not taxable. H r block tax preparation P Permanent resident aliens, Lawful permanent residents. H r block tax preparation Publications (see Tax help) R Railroad retirement benefits, Introduction Repayments Benefits received in earlier year, Repayment of benefits. H r block tax preparation , Repayment of benefits received in an earlier year. H r block tax preparation Disability benefits, Disability payments. H r block tax preparation Gross benefits, Repayment of benefits. H r block tax preparation , Repayments More Than Gross Benefits Reporting requirements, How To Report Your Benefits Lump-sum payment, Lump-sum payment reported on Form SSA-1099 or RRB-1099. H r block tax preparation S Social Security benefits, Introduction Suggestions for publication, Comments and suggestions. H r block tax preparation T Tax help, How To Get Tax Help Taxable benefits Determination of, Are Any of Your Benefits Taxable?, How Much Is Taxable? Maximum taxable part, Maximum taxable part. H r block tax preparation Person receiving benefits determines, Who is taxed. H r block tax preparation Worksheets, Worksheet A. H r block tax preparation Examples, Examples, Worksheets Which to use, Which worksheet to use. H r block tax preparation Total income, figuring, Figuring total income. H r block tax preparation TTY/TDD information, How To Get Tax Help U U. H r block tax preparation S. H r block tax preparation citizens residing abroad, U. H r block tax preparation S. H r block tax preparation citizens residing abroad. H r block tax preparation U. H r block tax preparation S. H r block tax preparation residents Canadian or German social security benefits paid to, Canadian or German social security benefits paid to U. H r block tax preparation S. H r block tax preparation residents. H r block tax preparation W Withholding, Tax withholding and estimated tax. H r block tax preparation Exemption from, Exemption from withholding. H r block tax preparation Form W-4V, Tax withholding and estimated tax. H r block tax preparation Voluntary, Tax withholding and estimated tax. H r block tax preparation Worksheets Taxable benefits Blank Worksheet 1, Worksheets Filled-in Worksheet 1, Filled-in Worksheet 1. H r block tax preparation Figuring Your Taxable Benefits, Filled-in Worksheet 1. H r block tax preparation Figuring Your Taxable Benefits, Filled-in Worksheet 1. H r block tax preparation Figuring Your Taxable Benefits, Filled-in Worksheet 1. H r block tax preparation Figuring Your Taxable Benefits Quick calculation, sample, Worksheet A. H r block tax preparation Prev  Up     Home   More Online Publications