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How to file back taxes for free 31. How to file back taxes for free   Tax on Unearned Income of Certain Children Table of Contents What's New Introduction Useful Items - You may want to see: Which Parent's Return To UseParents Who Do Not File a Joint Return Parent's Election To Report Child's Interest and DividendsEffect of Making the Election Figuring Child's Income Figuring Additional Tax Tax for Certain Children Who Have Unearned IncomeProviding Parental Information (Form 8615, lines A–C) Step 1. How to file back taxes for free Figuring the Child's Net Unearned Income (Form 8615, Part I) Step 2. How to file back taxes for free Figuring Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) Step 3. How to file back taxes for free Figuring the Child's Tax (Form 8615, Part III) What's New Net Investment Income Tax. How to file back taxes for free . How to file back taxes for free  For tax years beginning after December 31, 2012, a child whose tax is figured on Form 8615 may be subject to the Net Investment Income Tax (NIIT). How to file back taxes for free NIIT is a 3. How to file back taxes for free 8% tax on the lesser of the net investment income or the excess of the child's modified adjusted gross income (MAGI) over the threshold amount. How to file back taxes for free Use Form 8960, Net Investment Income Tax, to figure this tax. How to file back taxes for free For more information on NIIT, go to www. How to file back taxes for free irs. How to file back taxes for free gov and enter “Net Investment Income Tax” in the search box. How to file back taxes for free Introduction This chapter discusses the following two rules that may affect the tax on unearned income of certain children. How to file back taxes for free If the child's interest and dividend income (including capital gain distributions) total less than $10,000, the child's parent may be able to choose to include that income on the parent's return rather than file a return for the child. How to file back taxes for free (See Parent's Election To Report Child's Interest and Dividends , later. How to file back taxes for free ) If the child's interest, dividends, and other unearned income total more than $2,000, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. How to file back taxes for free (See Tax for Certain Children Who Have Unearned Income , later. How to file back taxes for free ) For these rules, the term “child” includes a legally adopted child and a stepchild. How to file back taxes for free These rules apply whether or not the child is a dependent. How to file back taxes for free Useful Items - You may want to see: Publication 929 Tax Rules for Children and Dependents Form (and Instructions) 8615 Tax for Certain Children Who Have Unearned Income 8814 Parents' Election To Report Child's Interest and Dividends Which Parent's Return To Use If a child's parents are married to each other and file a joint return, use the joint return to figure the tax on the child's unearned income. How to file back taxes for free The tax rate and other return information from that return are used to figure the child's tax as explained later under Tax for Certain Children Who Have Unearned Income . How to file back taxes for free Parents Who Do Not File a Joint Return For parents who do not file a joint return, the following discussions explain which parent's tax return must be used to figure the tax. How to file back taxes for free Only the parent whose tax return is used can make the election described under Parent's Election To Report Child's Interest and Dividends . How to file back taxes for free Parents are married. How to file back taxes for free   If the child's parents file separate returns, use the return of the parent with the greater taxable income. How to file back taxes for free Parents not living together. How to file back taxes for free   If the child's parents are married to each other but not living together, and the parent with whom the child lives (the custodial parent) is considered unmarried, use the return of the custodial parent. How to file back taxes for free If the custodial parent is not considered unmarried, use the return of the parent with the greater taxable income. How to file back taxes for free   For an explanation of when a married person living apart from his or her spouse is considered unmarried, see Head of Household in chapter 2. How to file back taxes for free Parents are divorced. How to file back taxes for free   If the child's parents are divorced or legally separated, and the parent who had custody of the child for the greater part of the year (the custodial parent) has not remarried, use the return of the custodial parent. How to file back taxes for free Custodial parent remarried. How to file back taxes for free   If the custodial parent has remarried, the stepparent (rather than the noncustodial parent) is treated as the child's other parent. How to file back taxes for free Therefore, if the custodial parent and the stepparent file a joint return, use that joint return. How to file back taxes for free Do not use the return of the noncustodial parent. How to file back taxes for free   If the custodial parent and the stepparent are married, but file separate returns, use the return of the one with the greater taxable income. How to file back taxes for free If the custodial parent and the stepparent are married but not living together, the earlier discussion under Parents not living together applies. How to file back taxes for free Parents never married. How to file back taxes for free   If a child's parents have never been married to each other, but lived together all year, use the return of the parent with the greater taxable income. How to file back taxes for free If the parents did not live together all year, the rules explained earlier under Parents are divorced apply. How to file back taxes for free Widowed parent remarried. How to file back taxes for free   If a widow or widower remarries, the new spouse is treated as the child's other parent. How to file back taxes for free The rules explained earlier under Custodial parent remarried apply. How to file back taxes for free Parent's Election To Report Child's Interest and Dividends You may be able to elect to include your child's interest and dividend income (including capital gain distributions) on your tax return. How to file back taxes for free If you do, your child will not have to file a return. How to file back taxes for free You can make this election only if all the following conditions are met. How to file back taxes for free Your child was under age 19 (or under age 24 if a full-time student) at the end of the year. How to file back taxes for free Your child had income only from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends). How to file back taxes for free The child's gross income was less than $10,000. How to file back taxes for free The child is required to file a return unless you make this election. How to file back taxes for free The child does not file a joint return for the year. How to file back taxes for free No estimated tax payment was made for the year, and no overpayment from the previous year (or from any amended return) was applied to this year under your child's name and social security number. How to file back taxes for free No federal income tax was taken out of your child's income under the backup withholding rules. How to file back taxes for free You are the parent whose return must be used when applying the special tax rules for children. How to file back taxes for free (See Which Parent's Return To Use , earlier. How to file back taxes for free ) These conditions are also shown in Figure 31-A. How to file back taxes for free Certain January 1 birthdays. How to file back taxes for free   A child born on January 1, 1995, is considered to be age 19 at the end of 2013. How to file back taxes for free You cannot make this election for such a child unless the child was a full-time student. How to file back taxes for free   A child born on January 1, 1990, is considered to be age 24 at the end of 2013. How to file back taxes for free You cannot make this election for such a child. How to file back taxes for free Full-time student. How to file back taxes for free   A full-time student is a child who during some part of each of any 5 calendar months of the year was enrolled as a full-time student at a school, or took a full-time on-farm training course given by a school or a state, county, or local government agency. How to file back taxes for free A school includes a technical, trade, or mechanical school. How to file back taxes for free It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. How to file back taxes for free How to make the election. How to file back taxes for free   Make the election by attaching Form 8814 to your Form 1040. How to file back taxes for free (If you make this election, you cannot file Form 1040A or Form 1040EZ. How to file back taxes for free ) Attach a separate Form 8814 for each child for whom you make the election. How to file back taxes for free You can make the election for one or more children and not for others. How to file back taxes for free Effect of Making the Election The federal income tax on your child's income may be more if you make the Form 8814 election. How to file back taxes for free Rate may be higher. How to file back taxes for free   If your child received qualified dividends or capital gain distributions, you may pay up to $100 more tax if you make this election instead of filing a separate tax return for the child. How to file back taxes for free This is because the tax rate on the child's income between $1,000 and $2,000 is 10% if you make this election. How to file back taxes for free However, if you file a separate return for the child, the tax rate may be as low as 0% (zero percent) because of the preferential tax rates for qualified dividends and capital gain distributions. How to file back taxes for free Deductions you cannot take. How to file back taxes for free   By making the Form 8814 election, you cannot take any of the following deductions that the child would be entitled to on his or her return. How to file back taxes for free The additional standard deduction if the child is blind. How to file back taxes for free The deduction for a penalty on an early withdrawal of your child's savings. How to file back taxes for free Itemized deductions (such as your child's investment expenses or charitable contributions). How to file back taxes for free Reduced deductions or credits. How to file back taxes for free   If you use Form 8814, your increased adjusted gross income may reduce certain deductions or credits on your return including the following. How to file back taxes for free Deduction for contributions to a traditional individual retirement arrangement (IRA). How to file back taxes for free Deduction for student loan interest. How to file back taxes for free Itemized deductions for medical expenses, casualty and theft losses, and certain miscellaneous expenses. How to file back taxes for free Credit for child and dependent care expenses. How to file back taxes for free Child tax credit. How to file back taxes for free Education tax credits. How to file back taxes for free Earned income credit. How to file back taxes for free Penalty for underpayment of estimated tax. How to file back taxes for free   If you make this election for 2013 and did not have enough tax withheld or pay enough estimated tax to cover the tax you owe, you may be subject to a penalty. How to file back taxes for free If you plan to make this election for 2014, you may need to increase your federal income tax withholding or your estimated tax payments to avoid the penalty. How to file back taxes for free See chapter 4 for more information. How to file back taxes for free Figuring Child's Income Use Form 8814, Part I, to figure your child's interest and dividend income to report on your return. How to file back taxes for free Only the amount over $2,000 is added to your income. How to file back taxes for free The amount over $2,000 is shown on Form 8814, line 6. How to file back taxes for free Unless the child's income includes qualified dividends or capital gain distributions (discussed next), the same amount is shown on Form 8814, line 12. How to file back taxes for free Include the amount from Form 8814, line 12, on Form 1040, line 21. How to file back taxes for free Enter “Form 8814” on the dotted line next to line 21. How to file back taxes for free If you file more than one Form 8814, include the total amounts from line 12 of all your Forms 8814 on Form 1040, line 21. How to file back taxes for free Capital gain distributions and qualified dividends. How to file back taxes for free   If your child's dividend income included any capital gain distributions, see Capital gain distributions under Figuring Child's Income in Publication 929, Part 2. How to file back taxes for free If your child's dividend income included any qualified dividends, see Qualified dividends under Figuring Child's Income in Publication 929, Part 2. How to file back taxes for free Figuring Additional Tax Use Form 8814, Part II, to figure the tax on the $2,000 of your child's interest and dividends that you do not include in your income. How to file back taxes for free This tax is added to the tax figured on your income. How to file back taxes for free This additional tax is the smaller of: 10% × (your child's gross income − $1,000), or $100. How to file back taxes for free Include the amount from line 15 of all your Forms 8814 in the total on Form 1040, line 44. How to file back taxes for free Check box a on Form 1040, line 44. How to file back taxes for free Figure 31-A. How to file back taxes for free Can You Include Your Child's Income On Your Tax Return? Please click here for the text description of the image. How to file back taxes for free Figure 31–A. How to file back taxes for free Can You Include Your Child's Income On Your Tax Return? Tax for Certain Children Who Have Unearned Income If a child's interest, dividends, and other unearned income total more than $2,000, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. How to file back taxes for free If the parent does not or cannot choose to include the child's income on the parent's return, use Form 8615 to figure the child's tax. How to file back taxes for free Attach the completed form to the child's Form 1040 or Form 1040A. How to file back taxes for free When Form 8615 must be filed. How to file back taxes for free   Form 8615 must be filed for a child if all of the following statements are true. How to file back taxes for free The child's investment income was more than $2,000. How to file back taxes for free The child is required to file a return for 2013. How to file back taxes for free The child either: Was under age 18 at the end of the year, Was age 18 at the end of the year and did not have earned income that was more than half of his or her support, or Was over age 18 and under age 24 at the end of the year, was a full-time student, and did not have earned income that was more than half of his or her support. How to file back taxes for free At least one of the child's parents was alive at the end of 2013. How to file back taxes for free The child does not file a joint return for 2013. How to file back taxes for free These conditions are also shown in  Figure 31-B. How to file back taxes for free Earned income. How to file back taxes for free   Earned income includes salaries, wages, tips, and other payments received for personal services performed. How to file back taxes for free It does not include unearned income as defined later in this chapter. How to file back taxes for free Support. How to file back taxes for free   Your child's support includes all amounts spent to provide the child with food, lodging, clothing, education, medical and dental care, recreation, transportation, and similar necessities. How to file back taxes for free To figure your child's support, count support provided by you, your child, and others. How to file back taxes for free However, a scholarship received by your child is not considered support if your child is a full-time student. How to file back taxes for free See chapter 3 for details about support. How to file back taxes for free Certain January 1 birthdays. How to file back taxes for free   Use the following chart to determine whether certain children with January 1 birthdays meet condition 3 under When Form 8615 must be filed. How to file back taxes for free Figure 31-B. How to file back taxes for free Do You Have To Use Form 8615 To Figure Your Child's Tax? Please click here for the text description of the image. How to file back taxes for free Figure 31-B. How to file back taxes for free Do You Have To Use Form 8615 To Figure Your Child's Tax?    IF a child was born on. How to file back taxes for free . How to file back taxes for free . How to file back taxes for free THEN, at the end of 2013, the child is considered to be. How to file back taxes for free . How to file back taxes for free . How to file back taxes for free January 1, 1996 18* January 1, 1995 19** January 1, 1990 24*** *This child is not under age 18. How to file back taxes for free The child meets condition 3 only if the child did not have earned income that was more than half of the child's support. How to file back taxes for free  **This child meets condition 3 only if the child was a full-time student who did not have earned income that was more than half of the child's support. How to file back taxes for free  ***Do not use Form 8615 for this child. How to file back taxes for free Providing Parental Information (Form 8615, lines A–C) On Form 8615, lines A and B, enter the parent's name and social security number. How to file back taxes for free (If the parents filed a joint return, enter the name and social security number listed first on the joint return. How to file back taxes for free ) On line C, check the box for the parent's filing status. How to file back taxes for free See Which Parent's Return To Use at the beginning of this chapter for information on which parent's return information must be used on Form 8615. How to file back taxes for free Parent with different tax year. How to file back taxes for free   If the parent and the child do not have the same tax year, complete Form 8615 using the information on the parent's return for the tax year that ends in the child's tax year. How to file back taxes for free Parent's return information not known timely. How to file back taxes for free   If the information needed from the parent's return is not known by the time the child's return is due (usually April 15), you can file the return using estimates. How to file back taxes for free   You can use any reasonable estimate. How to file back taxes for free This includes using information from last year's return. How to file back taxes for free If you use an estimated amount on Form 8615, enter “Estimated” on the line next to the amount. How to file back taxes for free    When you get the correct information, file an amended return on Form 1040X, Amended U. How to file back taxes for free S. How to file back taxes for free Individual Income Tax Return. How to file back taxes for free   Instead of using estimates, you can get an automatic 6-month extension of time to file if, by the date your return is due, you file Form 4868, Application for Automatic Extension of Time To File U. How to file back taxes for free S. How to file back taxes for free Individual Income Tax Return. How to file back taxes for free Extensions are discussed in chapter 1. How to file back taxes for free Step 1. How to file back taxes for free Figuring the Child's Net Unearned Income (Form 8615, Part I) The first step in figuring a child's tax using Form 8615 is to figure the child's net unearned income. How to file back taxes for free To do that, use Form 8615, Part I. How to file back taxes for free Line 1 (unearned income). How to file back taxes for free   If the child had no earned income, enter on this line the adjusted gross income shown on the child's return. How to file back taxes for free Adjusted gross income is shown on Form 1040, line 38, or Form 1040A, line 22. How to file back taxes for free Form 1040EZ cannot be used if Form 8615 must be filed. How to file back taxes for free   If the child had earned income, figure the amount to enter on Form 8615, line 1, by using the worksheet in the instructions for the form. How to file back taxes for free   However, if the child has: excluded any foreign earned income, deducted either a loss from self-employment, or deducted a net operating loss from another year, then use the Alternate Worksheet for Form 8615, Line 1, in Publication 929 to figure the amount to enter on Form 8615, line 1. How to file back taxes for free Unearned income defined. How to file back taxes for free   Unearned income is generally all income other than salaries, wages, and other amounts received as pay for work actually done. How to file back taxes for free It includes taxable interest, dividends (including capital gain distributions), capital gains, unemployment compensation, the taxable part of social security and pension payments, and certain distributions from trusts. How to file back taxes for free Unearned income includes amounts produced by assets the child obtained with earned income (such as interest on a savings account into which the child deposited wages). How to file back taxes for free Nontaxable income. How to file back taxes for free   For this purpose, unearned income includes only amounts the child must include in total income. How to file back taxes for free Nontaxable unearned income, such as tax-exempt interest and the nontaxable part of social security and pension payments, is not included. How to file back taxes for free Income from property received as a gift. How to file back taxes for free   A child's unearned income includes all income produced by property belonging to the child. How to file back taxes for free This is true even if the property was transferred to the child, regardless of when the property was transferred or purchased or who transferred it. How to file back taxes for free   A child's unearned income includes income produced by property given as a gift to the child. How to file back taxes for free This includes gifts to the child from grandparents or any other person and gifts made under the Uniform Gift to Minors Act. How to file back taxes for free Example. How to file back taxes for free Amanda Black, age 13, received the following income. How to file back taxes for free Dividends — $800 Wages — $2,100 Taxable interest — $1,200 Tax-exempt interest — $100 Net capital gains — $100 The dividends were qualified dividends on stock given to her by her grandparents. How to file back taxes for free Amanda's unearned income is $2,100. How to file back taxes for free This is the total of the dividends ($800), taxable interest ($1,200), and net capital gains ($100). How to file back taxes for free Her wages are earned (not unearned) income because they are received for work actually done. How to file back taxes for free Her tax-exempt interest is not included because it is nontaxable. How to file back taxes for free Trust income. How to file back taxes for free   If a child is the beneficiary of a trust, distributions of taxable interest, dividends, capital gains, and other unearned income from the trust are unearned income to the child. How to file back taxes for free   However, for purposes of completing Form 8615, a taxable distribution from a qualified disability trust is considered earned income, not unearned income. How to file back taxes for free Line 2 (deductions). How to file back taxes for free   If the child does not itemize deductions on Schedule A (Form 1040), enter $2,000 on line 2. How to file back taxes for free   If the child does itemize deductions, enter on line 2 the larger of: $1,000 plus the portion of the child's itemized deductions on Schedule A (Form 1040), line 29, that are directly connected with the production of unearned income entered on line 1, or $2,000. How to file back taxes for free Directly connected. How to file back taxes for free   Itemized deductions are directly connected with the production of unearned income if they are for expenses paid to produce or collect taxable income or to manage, conserve, or maintain property held for producing income. How to file back taxes for free These expenses include custodian fees and service charges, service fees to collect taxable interest and dividends, and certain investment counsel fees. How to file back taxes for free   These expenses are added to certain other miscellaneous itemized deductions on Schedule A (Form 1040). How to file back taxes for free Only the amount greater than 2% of the child's adjusted gross income can be deducted. How to file back taxes for free See chapter 28 for more information. How to file back taxes for free Example 1. How to file back taxes for free Roger, age 12, has unearned income of $8,000, no other income, no adjustments to income, and itemized deductions of $300 (net of the 2% limit) that are directly connected with his unearned income. How to file back taxes for free His adjusted gross income is $8,000, which is entered on Form 1040, line 38, and on Form 8615, line 1. How to file back taxes for free Roger enters $2,000 on line 2 because that is more than the total of $1,000 plus his directly connected itemized deductions of $300. How to file back taxes for free Example 2. How to file back taxes for free Eleanor, age 8, has unearned income of $16,000 and an early withdrawal penalty of $100. How to file back taxes for free She has no other income. How to file back taxes for free She has itemized deductions of $1,050 (net of the 2% limit) that are directly connected with the production of her unearned income. How to file back taxes for free Her adjusted gross income, entered on line 1, is $15,900 ($16,000 − $100). How to file back taxes for free The amount on line 2 is $2,050. How to file back taxes for free This is the larger of: $1,000 plus the $1,050 of directly connected itemized deductions, or $2,000. How to file back taxes for free Line 3. How to file back taxes for free   Subtract line 2 from line 1 and enter the result on this line. How to file back taxes for free If zero or less, do not complete the rest of the form. How to file back taxes for free However, you must still attach Form 8615 to the child's tax return. How to file back taxes for free Figure the tax on the child's taxable income in the normal manner. How to file back taxes for free Line 4 (child's taxable income). How to file back taxes for free   Enter on line 4 the child's taxable income from Form 1040, line 43, or Form 1040A, line 27. How to file back taxes for free   However, if the child files Form 2555 or 2555-EZ to claim the foreign earned income exclusion, housing exclusion, or housing deduction, see the Form 8615 instructions or Pub. How to file back taxes for free 929. How to file back taxes for free Line 5 (net unearned income). How to file back taxes for free   A child's net unearned income cannot be more than his or her taxable income. How to file back taxes for free Enter on Form 8615, line 5, the smaller of line 3 or line 4. How to file back taxes for free This is the child's net unearned income. How to file back taxes for free   If zero or less, do not complete the rest of the form. How to file back taxes for free However, you must still attach Form 8615 to the child's tax return. How to file back taxes for free Figure the tax on the child's taxable income in the normal manner. How to file back taxes for free Step 2. How to file back taxes for free Figuring Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) The next step in completing Form 8615 is to figure a tentative tax on the child's net unearned income at the parent's tax rate. How to file back taxes for free The tentative tax at the parent's tax rate is the difference between the tax on the parent's taxable income figured with the child's net unearned income (plus the net unearned income of any other child whose Form 8615 includes the tax return information of that parent) and the tax figured without it. How to file back taxes for free When figuring the tentative tax at the parent's tax rate on Form 8615, do not refigure any of the exclusions, deductions, or credits on the parent's return because of the child's net unearned income. How to file back taxes for free For example, do not refigure the medical expense deduction. How to file back taxes for free Figure the tentative tax on Form 8615, lines 6 through 13. How to file back taxes for free Note. How to file back taxes for free If the child or parent has any capital gains or losses, get Publication 929 for help in completing Form 8615, Part II. How to file back taxes for free Line 6 (parent's taxable income). How to file back taxes for free   Enter on line 6 the parent's taxable income from Form 1040, line 43, Form 1040A, line 27, or Form 1040EZ, line 6. How to file back taxes for free   If the Foreign Earned Income Tax Worksheet (in the Form 1040 instructions) was used to figure the parent's tax, enter the amount from line 3 of that worksheet instead of the parent's taxable income. How to file back taxes for free Line 7 (net unearned income of other children). How to file back taxes for free   If the tax return information of the parent is also used on any other child's Form 8615, enter on line 7 the total of the amounts from line 5 of all the other children's Forms 8615. How to file back taxes for free Do not include the amount from line 5 of the Form 8615 being completed. How to file back taxes for free Example. How to file back taxes for free Paul and Jane Persimmon have three children, Sharon, Jerry, and Mike, who must attach Form 8615 to their tax returns. How to file back taxes for free The children's net unearned income amounts on line 5 of their Forms 8615 are: Sharon — $800 Jerry — $600 Mike — $1,000 Line 7 of Sharon's Form 8615 will show $1,600, the total of the amounts on line 5 of Jerry's and Mike's Forms 8615. How to file back taxes for free Line 7 of Jerry's Form 8615 will show $1,800 ($800 + $1,000). How to file back taxes for free Line 7 of Mike's Form 8615 will show $1,400 ($800 + $600). How to file back taxes for free Other children's information not available. How to file back taxes for free   If the net unearned income of the other children is not available when the return is due, either file the return using estimates or get an extension of time to file. How to file back taxes for free See Parent's return information not known timely , earlier. How to file back taxes for free Line 11 (tentative tax). How to file back taxes for free   Subtract line 10 from line 9 and enter the result on this line. How to file back taxes for free This is the tentative tax. How to file back taxes for free   If line 7 is blank, skip lines 12a and 12b and enter the amount from line 11 on line 13. How to file back taxes for free Also skip the discussion for lines 12a and 12b that follows. How to file back taxes for free Lines 12a and 12b (dividing the tentative tax). How to file back taxes for free   If an amount is entered on line 7, divide the tentative tax shown on line 11 among the children according to each child's share of the total net unearned income. How to file back taxes for free This is done on lines 12a, 12b, and 13. How to file back taxes for free Add the amount on line 7 to the amount on line 5 and enter the total on line 12a. How to file back taxes for free Divide the amount on line 5 by the amount on line 12a and enter the result, as a decimal, on line 12b. How to file back taxes for free Example. How to file back taxes for free In the earlier example under Line 7 (net unearned income of other children), Sharon's Form 8615 shows $1,600 on line 7. How to file back taxes for free The amount entered on line 12a is $2,400, the total of the amounts on lines 5 and 7 ($800 + $1,600). How to file back taxes for free The decimal on line 12b is  . How to file back taxes for free 333, figured as follows and rounded to three places. How to file back taxes for free   $800 = . How to file back taxes for free 333     $2,400   Step 3. How to file back taxes for free Figuring the Child's Tax (Form 8615, Part III) The final step in figuring a child's tax using Form 8615 is to determine the larger of: The total of: The child's share of the tentative tax based on the parent's tax rate, plus The tax on the child's taxable income in excess of net unearned income, figured at the child's tax rate, or The tax on the child's taxable income, figured at the child's tax rate. How to file back taxes for free This is the child's tax. How to file back taxes for free It is figured on Form 8615, lines 14 through 18. How to file back taxes for free Alternative minimum tax. How to file back taxes for free   A child may be subject to alternative minimum tax (AMT) if he or she has certain items given preferential treatment under the tax law. How to file back taxes for free See Alternative Minimum Tax (AMT) in chapter 30. How to file back taxes for free    For more information on who is liable for AMT and how to figure it, see Form 6251, Alternative Minimum Tax—Individuals. How to file back taxes for free For information on special limits that apply to a child who files Form 6251, see Certain Children Under Age 24 in the Instructions for Form 6251. How to file back taxes for free Prev  Up  Next   Home   More Online Publications
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Understanding Your CP285 Notice

CP285 notifies BMF taxpayers the reason their Form 1128, Application To Adopt, Change, or Retain a Tax Year, was denied.


What you need to do

Continue filing your annual income tax return on the tax year you have historically used. If you are a new entity, use the tax year assigned when you received the notice of EIN assignment (CP575, 576, etc.).


You may want to

Submit a newly completed, timely Form 1128 for next tax year.

 

 

Page Last Reviewed or Updated: 12-Feb-2014

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The How To File Back Taxes For Free

How to file back taxes for free 3. How to file back taxes for free   SIMPLE Plans Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: SIMPLE IRA PlanWho Can Set Up a SIMPLE IRA Plan? Who Can Participate in a SIMPLE IRA Plan? How To Set Up a SIMPLE IRA Plan Notification Requirement Contribution Limits When To Deduct Contributions Where To Deduct Contributions Tax Treatment of Contributions Distributions (Withdrawals) More Information on SIMPLE IRA Plans SIMPLE 401(k) Plan Topics - This chapter discusses: SIMPLE IRA plan SIMPLE 401(k) plan Useful Items - You may want to see: Publications 590 Individual Retirement Arrangements (IRAs) 3998 Choosing A Retirement Solution for Your Small Business 4284 SIMPLE IRA Plan Checklist 4334 SIMPLE IRA Plans for Small Businesses Forms (and Instructions) W-2 Wage and Tax Statement 5304-SIMPLE Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)–Not for Use With a Designated Financial Institution 5305-SIMPLE Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)–for Use With a Designated Financial Institution 8880 Credit for Qualified Retirement Savings Contributions 8881 Credit for Small Employer Pension Plan Startup Costs A savings incentive match plan for employees (SIMPLE plan) is a written arrangement that provides you and your employees with a simplified way to make contributions to provide retirement income. How to file back taxes for free Under a SIMPLE plan, employees can choose to make salary reduction contributions to the plan rather than receiving these amounts as part of their regular pay. How to file back taxes for free In addition, you will contribute matching or nonelective contributions. How to file back taxes for free SIMPLE plans can only be maintained on a calendar-year basis. How to file back taxes for free A SIMPLE plan can be set up in either of the following ways. How to file back taxes for free Using SIMPLE IRAs (SIMPLE IRA plan). How to file back taxes for free As part of a 401(k) plan (SIMPLE 401(k) plan). How to file back taxes for free Many financial institutions will help you set up a SIMPLE plan. How to file back taxes for free SIMPLE IRA Plan A SIMPLE IRA plan is a retirement plan that uses SIMPLE IRAs for each eligible employee. How to file back taxes for free Under a SIMPLE IRA plan, a SIMPLE IRA must be set up for each eligible employee. How to file back taxes for free For the definition of an eligible employee, see Who Can Participate in a SIMPLE IRA Plan , later. How to file back taxes for free Who Can Set Up a SIMPLE IRA Plan? You can set up a SIMPLE IRA plan if you meet both the following requirements. How to file back taxes for free You meet the employee limit. How to file back taxes for free You do not maintain another qualified plan unless the other plan is for collective bargaining employees. How to file back taxes for free Employee limit. How to file back taxes for free   You can set up a SIMPLE IRA plan only if you had 100 or fewer employees who received $5,000 or more in compensation from you for the preceding year. How to file back taxes for free Under this rule, you must take into account all employees employed at any time during the calendar year regardless of whether they are eligible to participate. How to file back taxes for free Employees include self-employed individuals who received earned income and leased employees (defined in chapter 1). How to file back taxes for free   Once you set up a SIMPLE IRA plan, you must continue to meet the 100-employee limit each year you maintain the plan. How to file back taxes for free Grace period for employers who cease to meet the 100-employee limit. How to file back taxes for free   If you maintain the SIMPLE IRA plan for at least 1 year and you cease to meet the 100-employee limit in a later year, you will be treated as meeting it for the 2 calendar years immediately following the calendar year for which you last met it. How to file back taxes for free   A different rule applies if you do not meet the 100-employee limit because of an acquisition, disposition, or similar transaction. How to file back taxes for free Under this rule, the SIMPLE IRA plan will be treated as meeting the 100-employee limit for the year of the transaction and the 2 following years if both the following conditions are satisfied. How to file back taxes for free Coverage under the plan has not significantly changed during the grace period. How to file back taxes for free The SIMPLE IRA plan would have continued to qualify after the transaction if you had remained a separate employer. How to file back taxes for free    The grace period for acquisitions, dispositions, and similar transactions also applies if, because of these types of transactions, you do not meet the rules explained under Other qualified plan or Who Can Participate in a SIMPLE IRA Plan, below. How to file back taxes for free Other qualified plan. How to file back taxes for free   The SIMPLE IRA plan generally must be the only retirement plan to which you make contributions, or to which benefits accrue, for service in any year beginning with the year the SIMPLE IRA plan becomes effective. How to file back taxes for free Exception. How to file back taxes for free   If you maintain a qualified plan for collective bargaining employees, you are permitted to maintain a SIMPLE IRA plan for other employees. How to file back taxes for free Who Can Participate in a SIMPLE IRA Plan? Eligible employee. How to file back taxes for free   Any employee who received at least $5,000 in compensation during any 2 years preceding the current calendar year and is reasonably expected to receive at least $5,000 during the current calendar year is eligible to participate. How to file back taxes for free The term “employee” includes a self-employed individual who received earned income. How to file back taxes for free   You can use less restrictive eligibility requirements (but not more restrictive ones) by eliminating or reducing the prior year compensation requirements, the current year compensation requirements, or both. How to file back taxes for free For example, you can allow participation for employees who received at least $3,000 in compensation during any preceding calendar year. How to file back taxes for free However, you cannot impose any other conditions for participating in a SIMPLE IRA plan. How to file back taxes for free Excludable employees. How to file back taxes for free   The following employees do not need to be covered under a SIMPLE IRA plan. How to file back taxes for free Employees who are covered by a union agreement and whose retirement benefits were bargained for in good faith by the employees' union and you. How to file back taxes for free Nonresident alien employees who have received no U. How to file back taxes for free S. How to file back taxes for free source wages, salaries, or other personal services compensation from you. How to file back taxes for free Compensation. How to file back taxes for free   Compensation for employees is the total wages, tips, and other compensation from the employer subject to federal income tax withholding and the amounts paid for domestic service in a private home, local college club, or local chapter of a college fraternity or sorority. How to file back taxes for free Compensation also includes the employee's salary reduction contributions made under this plan and, if applicable, elective deferrals under a section 401(k) plan, a SARSEP, or a section 403(b) annuity contract and compensation deferred under a section 457 plan required to be reported by the employer on Form W-2. How to file back taxes for free If you are self-employed, compensation is your net earnings from self-employment (line 4 of Short Schedule SE or line 6 of Long Schedule SE (Form 1040)) before subtracting any contributions made to the SIMPLE IRA plan for yourself. How to file back taxes for free How To Set Up a SIMPLE IRA Plan You can use Form 5304-SIMPLE or Form 5305-SIMPLE to set up a SIMPLE IRA plan. How to file back taxes for free Each form is a model savings incentive match plan for employees (SIMPLE) plan document. How to file back taxes for free Which form you use depends on whether you select a financial institution or your employees select the institution that will receive the contributions. How to file back taxes for free Use Form 5304-SIMPLE if you allow each plan participant to select the financial institution for receiving his or her SIMPLE IRA plan contributions. How to file back taxes for free Use Form 5305-SIMPLE if you require that all contributions under the SIMPLE IRA plan be deposited initially at a designated financial institution. How to file back taxes for free The SIMPLE IRA plan is adopted when you have completed all appropriate boxes and blanks on the form and you (and the designated financial institution, if any) have signed it. How to file back taxes for free Keep the original form. How to file back taxes for free Do not file it with the IRS. How to file back taxes for free Other uses of the forms. How to file back taxes for free   If you set up a SIMPLE IRA plan using Form 5304-SIMPLE or Form 5305-SIMPLE, you can use the form to satisfy other requirements, including the following. How to file back taxes for free Meeting employer notification requirements for the SIMPLE IRA plan. How to file back taxes for free Form 5304-SIMPLE and Form 5305-SIMPLE contain a Model Notification to Eligible Employees that provides the necessary information to the employee. How to file back taxes for free Maintaining the SIMPLE IRA plan records and proving you set up a SIMPLE IRA plan for employees. How to file back taxes for free Deadline for setting up a SIMPLE IRA plan. How to file back taxes for free   You can set up a SIMPLE IRA plan effective on any date from January 1 through October 1 of a year, provided you did not previously maintain a SIMPLE IRA plan. How to file back taxes for free This requirement does not apply if you are a new employer that comes into existence after October 1 of the year the SIMPLE IRA plan is set up and you set up a SIMPLE IRA plan as soon as administratively feasible after your business comes into existence. How to file back taxes for free If you previously maintained a SIMPLE IRA plan, you can set up a SIMPLE IRA plan effective only on January 1 of a year. How to file back taxes for free A SIMPLE IRA plan cannot have an effective date that is before the date you actually adopt the plan. How to file back taxes for free Setting up a SIMPLE IRA. How to file back taxes for free   SIMPLE IRAs are the individual retirement accounts or annuities into which the contributions are deposited. How to file back taxes for free A SIMPLE IRA must be set up for each eligible employee. How to file back taxes for free Forms 5305-S, SIMPLE Individual Retirement Trust Account, and 5305-SA, SIMPLE Individual Retirement Custodial Account, are model trust and custodial account documents the participant and the trustee (or custodian) can use for this purpose. How to file back taxes for free   A SIMPLE IRA cannot be a Roth IRA. How to file back taxes for free Contributions to a SIMPLE IRA will not affect the amount an individual can contribute to a Roth or traditional IRA. How to file back taxes for free Deadline for setting up a SIMPLE IRA. How to file back taxes for free   A SIMPLE IRA must be set up for an employee before the first date by which a contribution is required to be deposited into the employee's IRA. How to file back taxes for free See Time limits for contributing funds , later, under Contribution Limits. How to file back taxes for free Credit for startup costs. How to file back taxes for free   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SIMPLE IRA plan that first became effective in 2013. How to file back taxes for free For more information, see Credit for startup costs under Reminders, earlier. How to file back taxes for free Notification Requirement If you adopt a SIMPLE IRA plan, you must notify each employee of the following information before the beginning of the election period. How to file back taxes for free The employee's opportunity to make or change a salary reduction choice under a SIMPLE IRA plan. How to file back taxes for free Your decision to make either matching contributions or nonelective contributions (discussed later). How to file back taxes for free A summary description provided by the financial institution. How to file back taxes for free Written notice that his or her balance can be transferred without cost or penalty if they use a designated financial institution. How to file back taxes for free Election period. How to file back taxes for free   The election period is generally the 60-day period immediately preceding January 1 of a calendar year (November 2 to December 31 of the preceding calendar year). How to file back taxes for free However, the dates of this period are modified if you set up a SIMPLE IRA plan in mid-year (for example, on July 1) or if the 60-day period falls before the first day an employee becomes eligible to participate in the SIMPLE IRA plan. How to file back taxes for free   A SIMPLE IRA plan can provide longer periods for permitting employees to enter into salary reduction agreements or to modify prior agreements. How to file back taxes for free For example, a SIMPLE IRA plan can provide a 90-day election period instead of the 60-day period. How to file back taxes for free Similarly, in addition to the 60-day period, a SIMPLE IRA plan can provide quarterly election periods during the 30 days before each calendar quarter, other than the first quarter of each year. How to file back taxes for free Contribution Limits Contributions are made up of salary reduction contributions and employer contributions. How to file back taxes for free You, as the employer, must make either matching contributions or nonelective contributions, defined later. How to file back taxes for free No other contributions can be made to the SIMPLE IRA plan. How to file back taxes for free These contributions, which you can deduct, must be made timely. How to file back taxes for free See Time limits for contributing funds , later. How to file back taxes for free Salary reduction contributions. How to file back taxes for free   The amount the employee chooses to have you contribute to a SIMPLE IRA on his or her behalf cannot be more than $12,000 for 2013 and 2014. How to file back taxes for free These contributions must be expressed as a percentage of the employee's compensation unless you permit the employee to express them as a specific dollar amount. How to file back taxes for free You cannot place restrictions on the contribution amount (such as limiting the contribution percentage), except to comply with the $12,000 limit. How to file back taxes for free   If you or an employee participates in any other qualified plan during the year and you or your employee have salary reduction contributions (elective deferrals) under those plans, the salary reduction contributions under a SIMPLE IRA plan also count toward the overall annual limit ($17,500 for 2013 and 2014) on exclusion of salary reduction contributions and other elective deferrals. How to file back taxes for free Catch-up contributions. How to file back taxes for free   A SIMPLE IRA plan can permit participants who are age 50 or over at the end of the calendar year to also make catch-up contributions. How to file back taxes for free The catch-up contribution limit for 2013 and 2014 for SIMPLE IRA plans is $2,500. How to file back taxes for free Salary reduction contributions are not treated as catch-up contributions for 2013 or 2014 until they exceed $12,000. How to file back taxes for free However, the catch-up contribution a participant can make for a year cannot exceed the lesser of the following amounts. How to file back taxes for free The catch-up contribution limit. How to file back taxes for free The excess of the participant's compensation over the salary reduction contributions that are not catch-up contributions. How to file back taxes for free Employer matching contributions. How to file back taxes for free   You are generally required to match each employee's salary reduction contributions on a dollar-for-dollar basis up to 3% of the employee's compensation. How to file back taxes for free This requirement does not apply if you make nonelective contributions as discussed later. How to file back taxes for free Example. How to file back taxes for free In 2013, your employee, John Rose, earned $25,000 and chose to defer 5% of his salary. How to file back taxes for free Your net earnings from self-employment are $40,000, and you choose to contribute 10% of your earnings to your SIMPLE IRA. How to file back taxes for free You make 3% matching contributions. How to file back taxes for free The total contribution you make for John is $2,000, figured as follows. How to file back taxes for free Salary reduction contributions ($25,000 × . How to file back taxes for free 05) $1,250 Employer matching contribution ($25,000 × . How to file back taxes for free 03) 750 Total contributions $2,000     The total contribution you make for yourself is $5,200, figured as follows. How to file back taxes for free Salary reduction contributions ($40,000 × . How to file back taxes for free 10) $4,000 Employer matching contribution ($40,000 × . How to file back taxes for free 03) 1,200 Total contributions $5,200 Lower percentage. How to file back taxes for free   If you choose a matching contribution less than 3%, the percentage must be at least 1%. How to file back taxes for free You must notify the employees of the lower match within a reasonable period of time before the 60-day election period (discussed earlier) for the calendar year. How to file back taxes for free You cannot choose a percentage less than 3% for more than 2 years during the 5-year period that ends with (and includes) the year for which the choice is effective. How to file back taxes for free Nonelective contributions. How to file back taxes for free   Instead of matching contributions, you can choose to make nonelective contributions of 2% of compensation on behalf of each eligible employee who has at least $5,000 (or some lower amount you select) of compensation from you for the year. How to file back taxes for free If you make this choice, you must make nonelective contributions whether or not the employee chooses to make salary reduction contributions. How to file back taxes for free Only $255,000 of the employee's compensation can be taken into account to figure the contribution limit in 2013 ($260,000 in 2014). How to file back taxes for free   If you choose this 2% contribution formula, you must notify the employees within a reasonable period of time before the 60-day election period (discussed earlier) for the calendar year. How to file back taxes for free Example 1. How to file back taxes for free In 2013, your employee, Jane Wood, earned $36,000 and chose to have you contribute 10% of her salary. How to file back taxes for free Your net earnings from self-employment are $50,000, and you choose to contribute 10% of your earnings to your SIMPLE IRA. How to file back taxes for free You make a 2% nonelective contribution. How to file back taxes for free Both of you are under age 50. How to file back taxes for free The total contribution you make for Jane is $4,320, figured as follows. How to file back taxes for free Salary reduction contributions ($36,000 × . How to file back taxes for free 10) $3,600 2% nonelective contributions ($36,000 × . How to file back taxes for free 02) 720 Total contributions $4,320     The total contribution you make for yourself is $6,000, figured as follows. How to file back taxes for free Salary reduction contributions ($50,000 × . How to file back taxes for free 10) $5,000 2% nonelective contributions ($50,000 × . How to file back taxes for free 02) 1,000 Total contributions $6,000 Example 2. How to file back taxes for free Using the same facts as in Example 1, above, the maximum contribution you make for Jane or for yourself if you each earned $75,000 is $13,500, figured as follows. How to file back taxes for free Salary reduction contributions (maximum amount allowed) $12,000 2% nonelective contributions ($75,000 × . How to file back taxes for free 02) 1,500 Total contributions $13,500 Time limits for contributing funds. How to file back taxes for free   You must make the salary reduction contributions to the SIMPLE IRA within 30 days after the end of the month in which the amounts would otherwise have been payable to the employee in cash. How to file back taxes for free You must make matching contributions or nonelective contributions by the due date (including extensions) for filing your federal income tax return for the year. How to file back taxes for free Certain plans subject to Department of Labor rules may have an earlier due date for salary reduction contributions. How to file back taxes for free When To Deduct Contributions You can deduct SIMPLE IRA contributions in the tax year within which the calendar year for which contributions were made ends. How to file back taxes for free You can deduct contributions for a particular tax year if they are made for that tax year and are made by the due date (including extensions) of your federal income tax return for that year. How to file back taxes for free Example 1. How to file back taxes for free Your tax year is the fiscal year ending June 30. How to file back taxes for free Contributions under a SIMPLE IRA plan for the calendar year 2013 (including contributions made in 2013 before July 1, 2013) are deductible in the tax year ending June 30, 2014. How to file back taxes for free Example 2. How to file back taxes for free You are a sole proprietor whose tax year is the calendar year. How to file back taxes for free Contributions under a SIMPLE IRA plan for the calendar year 2013 (including contributions made in 2014 by April 15, 2014) are deductible in the 2013 tax year. How to file back taxes for free Where To Deduct Contributions Deduct the contributions you make for your common-law employees on your tax return. How to file back taxes for free 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. How to file back taxes for free Sole proprietors and partners deduct contributions for themselves on line 28 of Form 1040. How to file back taxes for free (If you are a partner, contributions for yourself are shown on the Schedule K-1 (Form 1065) you receive from the partnership. How to file back taxes for free ) Tax Treatment of Contributions You can deduct your contributions and your employees can exclude these contributions from their gross income. How to file back taxes for free SIMPLE IRA plan contributions are not subject to federal income tax withholding. How to file back taxes for free However, salary reduction contributions are subject to social security, Medicare, and federal unemployment (FUTA) taxes. How to file back taxes for free Matching and nonelective contributions are not subject to these taxes. How to file back taxes for free Reporting on Form W-2. How to file back taxes for free   Do not include SIMPLE IRA plan contributions in the “Wages, tips, other compensation” box of Form W-2. How to file back taxes for free You must, however, include them in the “Social security wages” and “Medicare wages and tips” boxes. How to file back taxes for free You must also include them in box 12. How to file back taxes for free Mark the “Retirement plan” checkbox in box 13. How to file back taxes for free For more information, see the Form W-2 instructions. How to file back taxes for free Distributions (Withdrawals) Distributions from a SIMPLE IRA are subject to IRA rules and generally are includible in income for the year received. How to file back taxes for free Tax-free rollovers can be made from one SIMPLE IRA into another SIMPLE IRA. How to file back taxes for free However, a rollover from a SIMPLE IRA to a non-SIMPLE IRA can be made tax free only after a 2-year participation in the SIMPLE IRA plan. How to file back taxes for free Generally, you or your employee must begin to receive distributions from a SIMPLE IRA by April 1 of the first year after the calendar year in which you or your employee reaches age 70½. How to file back taxes for free Early withdrawals generally are subject to a 10% additional tax. How to file back taxes for free However, the additional tax is increased to 25% if funds are withdrawn within 2 years of beginning participation. How to file back taxes for free More information. How to file back taxes for free   See Publication 590 for information about IRA rules, including those on the tax treatment of distributions, rollovers, required distributions, and income tax withholding. How to file back taxes for free More Information on SIMPLE IRA Plans If you need help to set up or maintain a SIMPLE IRA plan, go to the IRS website and search SIMPLE IRA Plan. How to file back taxes for free SIMPLE 401(k) Plan You can adopt a SIMPLE plan as part of a 401(k) plan if you meet the 100-employee limit as discussed earlier under SIMPLE IRA Plan. How to file back taxes for free A SIMPLE 401(k) plan is a qualified retirement plan and generally must satisfy the rules discussed under Qualification Rules in chapter 4, including the required distribution rules. How to file back taxes for free However, a SIMPLE 401(k) plan is not subject to the nondiscrimination and top-heavy rules discussed in chapter 4 if the plan meets the conditions listed below. How to file back taxes for free Under the plan, an employee can choose to have you make salary reduction contributions for the year to a trust in an amount expressed as a percentage of the employee's compensation, but not more than $12,000 for 2013 and 2014. How to file back taxes for free If permitted under the plan, an employee who is age 50 or over can also make a catch-up contribution of up to $2,500 for 2013 and 2014. How to file back taxes for free See Catch-up contributions , earlier under Contribution Limits. How to file back taxes for free You must make either: Matching contributions up to 3% of compensation for the year, or Nonelective contributions of 2% of compensation on behalf of each eligible employee who has at least $5,000 of compensation from you for the year. How to file back taxes for free No other contributions can be made to the trust. How to file back taxes for free No contributions are made, and no benefits accrue, for services during the year under any other qualified retirement plan sponsored by you on behalf of any employee eligible to participate in the SIMPLE 401(k) plan. How to file back taxes for free The employee's rights to any contributions are nonforfeitable. How to file back taxes for free No more than $255,000 of the employee's compensation can be taken into account in figuring matching contributions and nonelective contributions in 2013 ($260,000 in 2014). How to file back taxes for free Compensation is defined earlier in this chapter. How to file back taxes for free Employee notification. How to file back taxes for free   The notification requirement that applies to SIMPLE IRA plans also applies to SIMPLE 401(k) plans. How to file back taxes for free See Notification Requirement in this chapter. How to file back taxes for free Credit for startup costs. How to file back taxes for free   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SIMPLE 401(k) plan that first became effective in 2013. How to file back taxes for free For more information, see Credit for startup costs under Reminders, earlier. How to file back taxes for free Note on Forms. How to file back taxes for free   Please note that Forms 5304-SIMPLE and 5305-SIMPLE can not be used to establish a SIMPLE 401(k) plan. How to file back taxes for free To set up a SIMPLE 401(k) plan, see Adopting a Written Plan in chapter 4. How to file back taxes for free Prev  Up  Next   Home   More Online Publications