Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

Hr Block 1040x

1040 ComFederal Income Tax Ez Form 2011Utahtaxhelp OrgFree Tax ReturnFile 1040x Online FreeHow To File State Return For Free2010 1040 Tax FormFree Tax Forms1040ez FreeFiling Amended Federal Tax Return1040ez Electronic FilingWww.irs.gov1040xFile Taxes Previous Years2013 Tax Form 1040xHow To Fill Out A 1040x Step By Step1040 NrFree Downloadable Irs Tax FormsIs It Too Late To File 2012 Tax ReturnFree TaxH&r Block Tax ReturnsAmend A Tax Return 20111040ez OnlineIrs Tax Tables 1040ez2010 Taxes Online1040 Ez Forms And InstructionsTurbo Tax Form 1040xHow Do I Amend My 2011 Tax ReturnIrs GovState Income Tax FilingE File 2011 Tax ReturnFile Taxes 2012 FreeHow To File 2010 TaxesFile Free State Taxes1040 Ez State Tax FormIrs AmendmentsWww Irs GovlefileAmend My Taxes OnlineFile Federal Taxes Online FreeAmended 1040xAmended Federal Tax Return Form

Hr Block 1040x

Hr block 1040x 27. Hr block 1040x   Tax Benefits for Work-Related Education Table of Contents What's New Introduction Useful Items - You may want to see: Qualifying Work-Related EducationEducation Required by Employer or by Law Education To Maintain or Improve Skills Education To Meet Minimum Requirements Education That Qualifies You for a New Trade or Business What Expenses Can Be DeductedUnclaimed reimbursement. Hr block 1040x Transportation Expenses Travel Expenses No Double Benefit Allowed Reimbursements Deducting Business ExpensesSelf-Employed Persons Employees Performing Artists and Fee-Basis Officials Impairment-Related Work Expenses Recordkeeping What's New Standard mileage rate. Hr block 1040x  Generally, if you claim a business deduction for work-related education and you drive your car to and from school, the amount you can deduct for miles driven from January 1, 2013, through December 31, 2013, is 56½ cents per mile. Hr block 1040x For more information, see Transportation Expenses under What Expenses Can Be Deducted. Hr block 1040x Introduction This chapter discusses work-related education expenses that you may be able to deduct as business expenses. Hr block 1040x To claim such a deduction, you must: Itemize your deductions on Schedule A (Form 1040) if you are an employee, File Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040) if you are self-employed, and Have expenses for education that meet the requirements discussed under Qualifying Work-Related Education . Hr block 1040x If you are an employee and can itemize your deductions, you may be able to claim a deduction for the expenses you pay for your work-related education. Hr block 1040x Your deduction will be the amount by which your qualifying work-related education expenses plus other job and certain miscellaneous expenses (except for impairment-related work expenses of disabled individuals) is greater than 2% of your adjusted gross income. Hr block 1040x See chapter 28. Hr block 1040x If you are self-employed, you deduct your expenses for qualifying work-related education directly from your self-employment income. Hr block 1040x Your work-related education expenses may also qualify you for other tax benefits, such as the American opportunity and lifetime learning credits (see chapter 35). Hr block 1040x You may qualify for these other benefits even if you do not meet the requirements listed earlier. Hr block 1040x Also, keep in mind that your work-related education expenses may qualify you to claim more than one tax benefit. Hr block 1040x Generally, you may claim any number of benefits as long as you use different expenses to figure each one. Hr block 1040x When you figure your taxes, you may want to compare these tax benefits so you can choose the method(s) that give you the lowest tax liability. Hr block 1040x Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 970 Tax Benefits for Education Form (and Instructions) 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses Schedule A (Form 1040) Itemized Deductions Qualifying Work-Related Education You can deduct the costs of qualifying work-related education as business expenses. Hr block 1040x This is education that meets at least one of the following two tests. Hr block 1040x The education is required by your employer or the law to keep your present salary, status, or job. Hr block 1040x The required education must serve a bona fide business purpose of your employer. Hr block 1040x The education maintains or improves skills needed in your present work. Hr block 1040x However, even if the education meets one or both of the above tests, it is not qualifying work-related education if it: Is needed to meet the minimum educational requirements of your present trade or business, or Is part of a program of study that will qualify you for a new trade or business. Hr block 1040x You can deduct the costs of qualifying work-related education as a business expense even if the education could lead to a degree. Hr block 1040x Use Figure 27-A, later, as a quick check to see if your education qualifies. Hr block 1040x Education Required by Employer or by Law Once you have met the minimum educational requirements for your job, your employer or the law may require you to get more education. Hr block 1040x This additional education is qualifying work-related education if all three of the following requirements are met. Hr block 1040x It is required for you to keep your present salary, status, or job, The requirement serves a bona fide business purpose of your employer, and The education is not part of a program that will qualify you for a new trade or business. Hr block 1040x When you get more education than your employer or the law requires, the additional education can be qualifying work-related education only if it maintains or improves skills required in your present work. Hr block 1040x See Education To Maintain or Improve Skills , later. Hr block 1040x Example. Hr block 1040x You are a teacher who has satisfied the minimum requirements for teaching. Hr block 1040x Your employer requires you to take an additional college course each year to keep your teaching job. Hr block 1040x If the courses will not qualify you for a new trade or business, they are qualifying work-related education even if you eventually receive a master's degree and an increase in salary because of this extra education. Hr block 1040x Education To Maintain or Improve Skills If your education is not required by your employer or the law, it can be qualifying work-related education only if it maintains or improves skills needed in your present work. Hr block 1040x This could include refresher courses, courses on current developments, and academic or vocational courses. Hr block 1040x Example. Hr block 1040x You repair televisions, radios, and stereo systems for XYZ Store. Hr block 1040x To keep up with the latest changes, you take special courses in radio and stereo service. Hr block 1040x These courses maintain and improve skills required in your work. Hr block 1040x Maintaining skills vs. Hr block 1040x qualifying for new job. Hr block 1040x   Education to maintain or improve skills needed in your present work is not qualifying education if it will also qualify you for a new trade or business. Hr block 1040x Education during temporary absence. Hr block 1040x   If you stop working for a year or less in order to get education to maintain or improve skills needed in your present work and then return to the same general type of work, your absence is considered temporary. Hr block 1040x Education that you get during a temporary absence is qualifying work-related education if it maintains or improves skills needed in your present work. Hr block 1040x Example. Hr block 1040x You quit your biology research job to become a full-time biology graduate student for one year. Hr block 1040x If you return to work in biology research after completing the courses, the education is related to your present work even if you do not go back to work with the same employer. Hr block 1040x Education during indefinite absence. Hr block 1040x   If you stop work for more than a year, your absence from your job is considered indefinite. Hr block 1040x Education during an indefinite absence, even if it maintains or improves skills needed in the work from which you are absent, is considered to qualify you for a new trade or business. Hr block 1040x Therefore, it is not qualifying work-related education. Hr block 1040x Education To Meet Minimum Requirements Education you need to meet the minimum educational requirements for your present trade or business is not qualifying work-related education. Hr block 1040x The minimum educational requirements are determined by: Laws and regulations, Standards of your profession, trade, or business, and Your employer. Hr block 1040x Once you have met the minimum educational requirements that were in effect when you were hired, you do not have to meet any new minimum educational requirements. Hr block 1040x This means that if the minimum requirements change after you were hired, any education you need to meet the new requirements can be qualifying education. Hr block 1040x You have not necessarily met the minimum educational requirements of your trade or business simply because you are already doing the work. Hr block 1040x Example 1. Hr block 1040x You are a full-time engineering student. Hr block 1040x Although you have not received your degree or certification, you work part-time as an engineer for a firm that will employ you as a full-time engineer after you finish college. Hr block 1040x Although your college engineering courses improve your skills in your present job, they are also needed to meet the minimum job requirements for a full-time engineer. Hr block 1040x The education is not qualifying work-related education. Hr block 1040x Example 2. Hr block 1040x You are an accountant and you have met the minimum educational requirements of your employer. Hr block 1040x Your employer later changes the minimum educational requirements and requires you to take college courses to keep your job. Hr block 1040x These additional courses can be qualifying work-related education because you have already satisfied the minimum requirements that were in effect when you were hired. Hr block 1040x Requirements for Teachers States or school districts usually set the minimum educational requirements for teachers. Hr block 1040x The requirement is the college degree or the minimum number of college hours usually required of a person hired for that position. Hr block 1040x If there are no requirements, you will have met the minimum educational requirements when you become a faculty member. Hr block 1040x The determination of whether you are a faculty member of an educational institution must be made on the basis of the particular practices of the institution. Hr block 1040x You generally will be considered a faculty member when one or more of the following occurs. Hr block 1040x You have tenure. Hr block 1040x Your years of service count toward obtaining tenure. Hr block 1040x You have a vote in faculty decisions. Hr block 1040x Your school makes contributions for you to a retirement plan other than social security or a similar program. Hr block 1040x Example 1. Hr block 1040x The law in your state requires beginning secondary school teachers to have a bachelor's degree, including 10 professional education courses. Hr block 1040x In addition, to keep the job a teacher must complete a fifth year of training within 10 years from the date of hire. Hr block 1040x If the employing school certifies to the state Department of Education that qualified teachers cannot be found, the school can hire persons with only 3 years of college. Hr block 1040x However, to keep their jobs, these teachers must get a bachelor's degree and the required professional education courses within 3 years. Hr block 1040x Under these facts, the bachelor's degree, whether or not it includes the 10 professional education courses, is considered the minimum educational requirement for qualification as a teacher in your state. Hr block 1040x If you have all the required education except the fifth year, you have met the minimum educational requirements. Hr block 1040x The fifth year of training is qualifying work-related education unless it is part of a program of study that will qualify you for a new trade or business. Hr block 1040x Figure 27-A Does Your Work-Related Education Qualify? Please click here for the text description of the image. Hr block 1040x Figure 27-A. Hr block 1040x Does Your Work-Related Education Qualify?" Example 2. Hr block 1040x Assume the same facts as in Example 1 except that you have a bachelor's degree and only six professional education courses. Hr block 1040x The additional four education courses can be qualifying work-related education. Hr block 1040x Although you do not have all the required courses, you have already met the minimum educational requirements. Hr block 1040x Example 3. Hr block 1040x Assume the same facts as in Example 1 except that you are hired with only 3 years of college. Hr block 1040x The courses you take that lead to a bachelor's degree (including those in education) are not qualifying work-related education. Hr block 1040x They are needed to meet the minimum educational requirements for employment as a teacher. Hr block 1040x Example 4. Hr block 1040x You have a bachelor's degree and you work as a temporary instructor at a university. Hr block 1040x At the same time, you take graduate courses toward an advanced degree. Hr block 1040x The rules of the university state that you can become a faculty member only if you get a graduate degree. Hr block 1040x Also, you can keep your job as an instructor only as long as you show satisfactory progress toward getting this degree. Hr block 1040x You have not met the minimum educational requirements to qualify you as a faculty member. Hr block 1040x The graduate courses are not qualifying work-related education. Hr block 1040x Certification in a new state. Hr block 1040x   Once you have met the minimum educational requirements for teachers for your state, you are considered to have met the minimum educational requirements in all states. Hr block 1040x This is true even if you must get additional education to be certified in another state. Hr block 1040x Any additional education you need is qualifying work-related education. Hr block 1040x You have already met the minimum requirements for teaching. Hr block 1040x Teaching in another state is not a new trade or business. Hr block 1040x Example. Hr block 1040x You hold a permanent teaching certificate in State A and are employed as a teacher in that state for several years. Hr block 1040x You move to State B and are promptly hired as a teacher. Hr block 1040x You are required, however, to complete certain prescribed courses to get a permanent teaching certificate in State B. Hr block 1040x These additional courses are qualifying work-related education because the teaching position in State B involves the same general kind of work for which you were qualified in State A. Hr block 1040x Education That Qualifies You for a New Trade or Business Education that is part of a program of study that will qualify you for a new trade or business is not qualifying work-related education. Hr block 1040x This is true even if you do not plan to enter that trade or business. Hr block 1040x If you are an employee, a change of duties that involves the same general kind of work is not a new trade or business. Hr block 1040x Example 1. Hr block 1040x You are an accountant. Hr block 1040x Your employer requires you to get a law degree at your own expense. Hr block 1040x You register at a law school for the regular curriculum that leads to a law degree. Hr block 1040x Even if you do not intend to become a lawyer, the education is not qualifying because the law degree will qualify you for a new trade or business. Hr block 1040x Example 2. Hr block 1040x You are a general practitioner of medicine. Hr block 1040x You take a 2-week course to review developments in several specialized fields of medicine. Hr block 1040x The course does not qualify you for a new profession. Hr block 1040x It is qualifying work-related education because it maintains or improves skills required in your present profession. Hr block 1040x Example 3. Hr block 1040x While working in the private practice of psychiatry, you enter a program to study and train at an accredited psychoanalytic institute. Hr block 1040x The program will lead to qualifying you to practice psychoanalysis. Hr block 1040x The psychoanalytic training does not qualify you for a new profession. Hr block 1040x It is qualifying work-related education because it maintains or improves skills required in your present profession. Hr block 1040x Bar or CPA Review Course Review courses to prepare for the bar examination or the certified public accountant (CPA) examination are not qualifying work-related education. Hr block 1040x They are part of a program of study that can qualify you for a new profession. Hr block 1040x Teaching and Related Duties All teaching and related duties are considered the same general kind of work. Hr block 1040x A change in duties in any of the following ways is not considered a change to a new business. Hr block 1040x Elementary school teacher to secondary school teacher. Hr block 1040x Teacher of one subject, such as biology, to teacher of another subject, such as art. Hr block 1040x Classroom teacher to guidance counselor. Hr block 1040x Classroom teacher to school administrator. Hr block 1040x What Expenses Can Be Deducted If your education meets the requirements described earlier under Qualifying Work-Related Education , you can generally deduct your education expenses as business expenses. Hr block 1040x If you are not self-employed, you can deduct business expenses only if you itemize your deductions. Hr block 1040x You cannot deduct expenses related to tax-exempt and excluded income. Hr block 1040x Deductible expenses. Hr block 1040x   The following education expenses can be deducted. Hr block 1040x Tuition, books, supplies, lab fees, and similar items. Hr block 1040x Certain transportation and travel costs. Hr block 1040x Other education expenses, such as costs of research and typing when writing a paper as part of an educational program. Hr block 1040x Nondeductible expenses. Hr block 1040x   You cannot deduct personal or capital expenses. Hr block 1040x For example, you cannot deduct the dollar value of vacation time or annual leave you take to attend classes. Hr block 1040x This amount is a personal expense. Hr block 1040x Unclaimed reimbursement. Hr block 1040x   If you do not claim reimbursement that you are entitled to receive from your employer, you cannot deduct the expenses that apply to that unclaimed reimbursement. Hr block 1040x Example. Hr block 1040x Your employer agrees to pay your education expenses if you file a voucher showing your expenses. Hr block 1040x You do not file a voucher, and you do not get reimbursed. Hr block 1040x Because you did not file a voucher, you cannot deduct the expenses on your tax return. Hr block 1040x Transportation Expenses If your education qualifies, you can deduct local transportation costs of going directly from work to school. Hr block 1040x If you are regularly employed and go to school on a temporary basis, you can also deduct the costs of returning from school to home. Hr block 1040x Temporary basis. Hr block 1040x   You go to school on a temporary basis if either of the following situations applies to you. Hr block 1040x Your attendance at school is realistically expected to last 1 year or less and does indeed last for 1 year or less. Hr block 1040x Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. Hr block 1040x Your attendance is temporary up to the date you determine it will last more than 1 year. Hr block 1040x Note. Hr block 1040x If you are in either situation (1) or (2), your attendance is not temporary if facts and circumstances indicate otherwise. Hr block 1040x Attendance not on a temporary basis. Hr block 1040x   You do not go to school on a temporary basis if either of the following situations apply to you. Hr block 1040x Your attendance at school is realistically expected to last more than 1 year. Hr block 1040x It does not matter how long you actually attend. Hr block 1040x Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. Hr block 1040x Your attendance is not temporary after the date you determine it will last more than 1 year. Hr block 1040x Deductible Transportation Expenses If you are regularly employed and go directly from home to school on a temporary basis, you can deduct the round-trip costs of transportation between your home and school. Hr block 1040x This is true regardless of the location of the school, the distance traveled, or whether you attend school on nonwork days. Hr block 1040x Transportation expenses include the actual costs of bus, subway, cab, or other fares, as well as the costs of using your car. Hr block 1040x Transportation expenses do not include amounts spent for travel, meals, or lodging while you are away from home overnight. Hr block 1040x Example 1. Hr block 1040x You regularly work in a nearby town, and go directly from work to home. Hr block 1040x You also attend school every work night for 3 months to take a course that improves your job skills. Hr block 1040x Since you are attending school on a temporary basis, you can deduct your daily round-trip transportation expenses in going between home and school. Hr block 1040x This is true regardless of the distance traveled. Hr block 1040x Example 2. Hr block 1040x Assume the same facts as in Example 1 except that on certain nights you go directly from work to school and then home. Hr block 1040x You can deduct your transportation expenses from your regular work site to school and then home. Hr block 1040x Example 3. Hr block 1040x Assume the same facts as in Example 1 except that you attend the school for 9 months on Saturdays, nonwork days. Hr block 1040x Since you are attending school on a temporary basis, you can deduct your round-trip transportation expenses in going between home and school. Hr block 1040x Example 4. Hr block 1040x Assume the same facts as in Example 1 except that you attend classes twice a week for 15 months. Hr block 1040x Since your attendance in school is not considered temporary, you cannot deduct your transportation expenses in going between home and school. Hr block 1040x If you go directly from work to school, you can deduct the one-way transportation expenses of going from work to school. Hr block 1040x If you go from work to home to school and return home, your transportation expenses cannot be more than if you had gone directly from work to school. Hr block 1040x Using your car. Hr block 1040x   If you use your car (whether you own or lease it) for transportation to school, you can deduct your actual expenses or use the standard mileage rate to figure the amount you can deduct. Hr block 1040x The standard mileage rate for miles driven from January 1, 2013, through December 31, 2013 is 56½ cents per mile. Hr block 1040x Whichever method you use, you can also deduct parking fees and tolls. Hr block 1040x See chapter 26 for information on deducting your actual expenses of using a car. Hr block 1040x Travel Expenses You can deduct expenses for travel, meals (see 50% limit on meals , later), and lodging if you travel overnight mainly to obtain qualifying work-related education. Hr block 1040x Travel expenses for qualifying work-related education are treated the same as travel expenses for other employee business purposes. Hr block 1040x For more information, see chapter 26. Hr block 1040x You cannot deduct expenses for personal activities, such as sightseeing, visiting, or entertaining. Hr block 1040x Mainly personal travel. Hr block 1040x   If your travel away from home is mainly personal, you cannot deduct all of your expenses for travel, meals, and lodging. Hr block 1040x You can deduct only your expenses for lodging and 50% of your expenses for meals during the time you attend the qualified educational activities. Hr block 1040x   Whether a trip's purpose is mainly personal or educational depends upon the facts and circumstances. Hr block 1040x An important factor is the comparison of time spent on personal activities with time spent on educational activities. Hr block 1040x If you spend more time on personal activities, the trip is considered mainly educational only if you can show a substantial nonpersonal reason for traveling to a particular location. Hr block 1040x Example 1. Hr block 1040x John works in Newark, New Jersey. Hr block 1040x He traveled to Chicago to take a deductible 1-week course at the request of his employer. Hr block 1040x His main reason for going to Chicago was to take the course. Hr block 1040x While there, he took a sight-seeing trip, entertained some friends, and took a side trip to Pleasantville for a day. Hr block 1040x Since the trip was mainly for business, John can deduct his round-trip airfare to Chicago. Hr block 1040x He cannot deduct his transportation expenses of going to Pleasantville. Hr block 1040x He can deduct only the meals (subject to the 50% limit) and lodging connected with his educational activities. Hr block 1040x Example 2. Hr block 1040x Sue works in Boston. Hr block 1040x She went to a university in Michigan to take a course for work. Hr block 1040x The course is qualifying work-related education. Hr block 1040x She took one course, which is one-fourth of a full course load of study. Hr block 1040x She spent the rest of the time on personal activities. Hr block 1040x Her reasons for taking the course in Michigan were all personal. Hr block 1040x Sue's trip is mainly personal because three-fourths of her time is considered personal time. Hr block 1040x She cannot deduct the cost of her round-trip train ticket to Michigan. Hr block 1040x She can deduct one-fourth of the meals (subject to the 50% limit) and lodging costs for the time she attended the university. Hr block 1040x Example 3. Hr block 1040x Dave works in Nashville and recently traveled to California to take a 2-week seminar. Hr block 1040x The seminar is qualifying work-related education. Hr block 1040x While there, he spent an extra 8 weeks on personal activities. Hr block 1040x The facts, including the extra 8-week stay, show that his main purpose was to take a vacation. Hr block 1040x Dave cannot deduct his round-trip airfare or his meals and lodging for the 8 weeks. Hr block 1040x He can deduct only his expenses for meals (subject to the 50% limit) and lodging for the 2 weeks he attended the seminar. Hr block 1040x Cruises and conventions. Hr block 1040x   Certain cruises and conventions offer seminars or courses as part of their itinerary. Hr block 1040x Even if the seminars or courses are work-related, your deduction for travel may be limited. Hr block 1040x This applies to: Travel by ocean liner, cruise ship, or other form of luxury water transportation, and Conventions outside the North American area. Hr block 1040x   For a discussion of the limits on travel expense deductions that apply to cruises and conventions, see Luxury Water Travel and Conventions in chapter 1 of Publication 463. Hr block 1040x 50% limit on meals. Hr block 1040x   You can deduct only 50% of the cost of your meals while traveling away from home to obtain qualifying work-related education. Hr block 1040x You cannot have been reimbursed for the meals. Hr block 1040x   Employees must use Form 2106 or Form 2106-EZ to apply the 50% limit. Hr block 1040x Travel as Education You cannot deduct the cost of travel as a form of education even if it is directly related to your duties in your work or business. Hr block 1040x Example. Hr block 1040x You are a French language teacher. Hr block 1040x While on sabbatical leave granted for travel, you traveled through France to improve your knowledge of the French language. Hr block 1040x You chose your itinerary and most of your activities to improve your French language skills. Hr block 1040x You cannot deduct your travel expenses as education expenses. Hr block 1040x This is true even if you spent most of your time learning French by visiting French schools and families, attending movies or plays, and engaging in similar activities. Hr block 1040x No Double Benefit Allowed You cannot do either of the following. Hr block 1040x Deduct work-related education expenses as business expenses if you benefit from these expenses under any other provision of the law, for example, the tuition and fees deduction (see chapter 35). Hr block 1040x Deduct work-related education expenses paid with tax-free scholarship, grant, or employer-provided educational assistance. Hr block 1040x See Adjustments to Qualifying Work-Related Education Expenses , next. Hr block 1040x Adjustments to Qualifying Work-Related Education Expenses If you pay qualifying work-related education expenses with certain tax-free funds, you cannot claim a deduction for those amounts. Hr block 1040x You must reduce the qualifying expenses by the amount of such expenses allocable to the tax-free educational assistance. Hr block 1040x For more information, see chapter 12 of Publication 970. Hr block 1040x Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see chapter 1 of Publication 970), The tax-free part of Pell grants (see chapter 1 of Publication 970), The tax-free part of employer-provided educational assistance (see chapter 11 of Publication 970), Veterans' educational assistance (see chapter 1 of Publication 970), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received for education assistance. Hr block 1040x Amounts that do not reduce qualifying work-related education expenses. Hr block 1040x   Do not reduce the qualifying work-related education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. Hr block 1040x   Also, do not reduce the qualifying work-related education expenses by any scholarship or fellowship reported as income on the student's return or any scholarship which, by its terms, cannot be applied to qualifying work-related education expenses. Hr block 1040x Reimbursements How you treat reimbursements depends on the arrangement you have with your employer. Hr block 1040x There are two basic types of reimbursement arrangements—accountable plans and nonaccountable plans. Hr block 1040x You can tell the type of plan you are reimbursed under by the way the reimbursement is reported on your Form W-2. Hr block 1040x For information on how to treat reimbursements under both accountable and nonaccountable plans, see Reimbursements in chapter 26. Hr block 1040x Deducting Business Expenses Self-employed persons and employees report business expenses differently. Hr block 1040x The following information explains what forms you must use to deduct the cost of your qualifying work-related education as a business expense. Hr block 1040x Self-Employed Persons If you are self-employed, report the cost of your qualifying work-related education on the appropriate form used to report your business income and expenses (generally Schedule C, C-EZ, or F). Hr block 1040x If your educational expenses include expenses for a car or truck, travel, or meals, report those expenses the same way you report other business expenses for those items. Hr block 1040x See the instructions for the form you file for information on how to complete it. Hr block 1040x Employees If you are an employee, you can deduct the cost of qualifying work-related education only if you: Did not receive (and were not entitled to receive) any reimbursement from your employer, Were reimbursed under a nonaccountable plan (amount is included in box 1 of Form W-2), or Received reimbursement under an accountable plan, but the amount received was less than your expenses for which you claimed reimbursement. Hr block 1040x If either (1) or (2) applies, you can deduct the total qualifying cost. Hr block 1040x If (3) applies, you can deduct only the qualifying costs that were more than your reimbursement. Hr block 1040x In order to deduct the cost of your qualifying work-related education as a business expense, include the amount with your deduction for any other employee business expenses on Schedule A (Form 1040), line 21. Hr block 1040x (Special rules for expenses of certain performing artists and fee-basis officials and for impairment-related work expenses are explained later. Hr block 1040x ) This deduction (except for impairment-related work expenses of disabled individuals) is subject to the 2%-of-adjusted-gross-income limit that applies to most miscellaneous itemized deductions. Hr block 1040x See chapter 28. Hr block 1040x Form 2106 or 2106-EZ. Hr block 1040x   To figure your deduction for employee business expenses, including qualifying work-related education, you generally must complete Form 2106 or Form 2106-EZ. Hr block 1040x Form not required. Hr block 1040x   Do not complete either Form 2106 or Form 2106-EZ if: If amounts included in box 1 of your Form W-2, are not considered reimbursements, and You are not claiming travel, transportation, meal, or entertainment expenses. Hr block 1040x   If you meet both of these requirements, enter the expenses directly on Schedule A (Form 1040), line 21. Hr block 1040x (Special rules for expenses of certain performing artists and fee-basis officials and for impairment-related work expenses are explained later. Hr block 1040x ) Using Form 2106-EZ. Hr block 1040x   This form is shorter and easier to use than Form 2106. Hr block 1040x Generally, you can use this form if: All reimbursements, if any, are included in box 1 of your Form W-2, and You are using the standard mileage rate if you are claiming vehicle expenses. Hr block 1040x   If you do not meet both of these requirements, use Form 2106. Hr block 1040x Performing Artists and Fee-Basis Officials If you are a qualified performing artist, or a state (or local) government official who is paid in whole or in part on a fee basis, you can deduct the cost of your qualifying work-related education as an adjustment to gross income rather than as an itemized deduction. Hr block 1040x Include the cost of your qualifying work-related education with any other employee business expenses on Form 1040, line 24. Hr block 1040x You do not have to itemize your deductions on Schedule A (Form 1040), and, therefore, the deduction is not subject to the 2%-of-adjusted-gross-income limit. Hr block 1040x You must complete Form 2106 or 2106-EZ to figure your deduction, even if you meet the requirements described earlier under Form not required . Hr block 1040x For more information on qualified performing artists, see chapter 6 of Publication 463. Hr block 1040x Impairment-Related Work Expenses If you are disabled and have impairment-related work expenses that are necessary for you to be able to get qualifying work-related education, you can deduct these expenses on Schedule A (Form 1040), line 28. Hr block 1040x They are not subject to the 2%-of-adjusted-gross-income limit. Hr block 1040x To deduct these expenses, you must complete Form 2106 or 2106-EZ even if you meet the requirements described earlier under Form not required . Hr block 1040x For more information on impairment-related work expenses, see chapter 6 of Publication 463. Hr block 1040x Recordkeeping You must keep records as proof of any deduction claimed on your tax return. Hr block 1040x Generally, you should keep your records for 3 years from the date of filing the tax return and claiming the deduction. Hr block 1040x For specific information about keeping records of business expenses, see Recordkeeping in chapter 26. Hr block 1040x Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Tax Relief for Victims of Severe Storms, Tornadoes and Flooding in Mississippi

Updated 3/5/2013 to include Greene and Perry counties.

Updated 3/4/2013 to include Jefferson Davis county.

Updated 2/19/2013 to include Marion and Wayne counties.

LA-MS-2013-01, Feb. 14, 2013

NEW ORLEANS — Victims of the severe storms, tornadoes and flooding that took place on Feb. 10, 2013 in parts of Mississippi may qualify for tax relief from the Internal Revenue Service.

The President has declared Forrest, Greene, Jefferson Davis, Lamar, Marion, Perry and Wayne counties a federal disaster area. Individuals who reside or have a business in these counties may qualify for tax relief.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Feb. 10, and on or before April 30, have been postponed to April 30, 2013. This includes the April 15 deadline for filing 2012 individual income tax returns, making income tax payments and making 2012 contributions to an individual retirement account (IRA).  

In addition, the IRS is waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after Feb. 10, and on or before Feb. 27, as long as the deposits are made by Feb. 27, 2013.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the postponement period.

The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 866-562-5227 to request this tax relief.

Covered Disaster Area

The counties listed above constitute a covered disaster area for purposes of Treas. Reg. § 301.7508A-1(d)(2) and are entitled to the relief detailed below.

Affected Taxpayers

Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. § 301.7508A-1(d)(1), and include individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.

Grant of Relief

Under section 7508A, the IRS gives affected taxpayers until April 30 to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns), or to make tax payments, including estimated tax payments, that have either an original or extended due date occurring on or after Feb. 10 and on or before April 30.

The IRS also gives affected taxpayers until April 30 to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2007-56, 2007-34 I.R.B. 388 (Aug. 20, 2007), that are due to be performed on or after Feb. 10 and on or before April 30.

This relief also includes the filing of Form 5500 series returns, in the manner described in section 8 of Rev. Proc. 2007-56. The relief described in section 17 of Rev. Proc. 2007-56, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.

The postponement of time to file and pay does not apply to information returns in the W-2, 1098, 1099 series, or to Forms 1042-S or 8027. Penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause. Likewise, the postponement does not apply to employment and excise tax deposits. The IRS, however, will abate penalties for failure to make timely employment and excise tax deposits due on or after Feb. 10 and on or before Feb. 27 provided the taxpayer makes these deposits by Feb. 27.

Casualty Losses

Affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either this year or last year. Claiming the loss on an original or amended return for last year will get the taxpayer an earlier refund, but waiting to claim the loss on this year’s return could result in a greater tax saving, depending on other income factors.

Individuals may deduct personal property losses that are not covered by insurance or other reimbursements. For details, see Form 4684 and its instructions.

Affected taxpayers claiming the disaster loss on last year’s return should put the Disaster Designation “Mississippi/Severe Storms, Tornadoes, and Flooding” at the top of the form so that the IRS can expedite the processing of the refund.

Other Relief

The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned Disaster Designation in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS.

Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.

Taxpayers may download forms and publications from the official IRS website, irs.gov, or order them by calling 800-TAX-FORM (800-829-3676). The IRS toll-free number for general tax questions is 800-829-1040.

Related Information

Page Last Reviewed or Updated: 04-Feb-2014

The Hr Block 1040x

Hr block 1040x 3. Hr block 1040x   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. Hr block 1040x 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. Hr block 1040x In addition, you will contribute matching or nonelective contributions. Hr block 1040x SIMPLE plans can only be maintained on a calendar-year basis. Hr block 1040x A SIMPLE plan can be set up in either of the following ways. Hr block 1040x Using SIMPLE IRAs (SIMPLE IRA plan). Hr block 1040x As part of a 401(k) plan (SIMPLE 401(k) plan). Hr block 1040x Many financial institutions will help you set up a SIMPLE plan. Hr block 1040x SIMPLE IRA Plan A SIMPLE IRA plan is a retirement plan that uses SIMPLE IRAs for each eligible employee. Hr block 1040x Under a SIMPLE IRA plan, a SIMPLE IRA must be set up for each eligible employee. Hr block 1040x For the definition of an eligible employee, see Who Can Participate in a SIMPLE IRA Plan , later. Hr block 1040x Who Can Set Up a SIMPLE IRA Plan? You can set up a SIMPLE IRA plan if you meet both the following requirements. Hr block 1040x You meet the employee limit. Hr block 1040x You do not maintain another qualified plan unless the other plan is for collective bargaining employees. Hr block 1040x Employee limit. Hr block 1040x   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. Hr block 1040x 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. Hr block 1040x Employees include self-employed individuals who received earned income and leased employees (defined in chapter 1). Hr block 1040x   Once you set up a SIMPLE IRA plan, you must continue to meet the 100-employee limit each year you maintain the plan. Hr block 1040x Grace period for employers who cease to meet the 100-employee limit. Hr block 1040x   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. Hr block 1040x   A different rule applies if you do not meet the 100-employee limit because of an acquisition, disposition, or similar transaction. Hr block 1040x 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. Hr block 1040x Coverage under the plan has not significantly changed during the grace period. Hr block 1040x The SIMPLE IRA plan would have continued to qualify after the transaction if you had remained a separate employer. Hr block 1040x    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. Hr block 1040x Other qualified plan. Hr block 1040x   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. Hr block 1040x Exception. Hr block 1040x   If you maintain a qualified plan for collective bargaining employees, you are permitted to maintain a SIMPLE IRA plan for other employees. Hr block 1040x Who Can Participate in a SIMPLE IRA Plan? Eligible employee. Hr block 1040x   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. Hr block 1040x The term “employee” includes a self-employed individual who received earned income. Hr block 1040x   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. Hr block 1040x For example, you can allow participation for employees who received at least $3,000 in compensation during any preceding calendar year. Hr block 1040x However, you cannot impose any other conditions for participating in a SIMPLE IRA plan. Hr block 1040x Excludable employees. Hr block 1040x   The following employees do not need to be covered under a SIMPLE IRA plan. Hr block 1040x Employees who are covered by a union agreement and whose retirement benefits were bargained for in good faith by the employees' union and you. Hr block 1040x Nonresident alien employees who have received no U. Hr block 1040x S. Hr block 1040x source wages, salaries, or other personal services compensation from you. Hr block 1040x Compensation. Hr block 1040x   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. Hr block 1040x 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. Hr block 1040x 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. Hr block 1040x 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. Hr block 1040x Each form is a model savings incentive match plan for employees (SIMPLE) plan document. Hr block 1040x Which form you use depends on whether you select a financial institution or your employees select the institution that will receive the contributions. Hr block 1040x Use Form 5304-SIMPLE if you allow each plan participant to select the financial institution for receiving his or her SIMPLE IRA plan contributions. Hr block 1040x Use Form 5305-SIMPLE if you require that all contributions under the SIMPLE IRA plan be deposited initially at a designated financial institution. Hr block 1040x 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. Hr block 1040x Keep the original form. Hr block 1040x Do not file it with the IRS. Hr block 1040x Other uses of the forms. Hr block 1040x   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. Hr block 1040x Meeting employer notification requirements for the SIMPLE IRA plan. Hr block 1040x Form 5304-SIMPLE and Form 5305-SIMPLE contain a Model Notification to Eligible Employees that provides the necessary information to the employee. Hr block 1040x Maintaining the SIMPLE IRA plan records and proving you set up a SIMPLE IRA plan for employees. Hr block 1040x Deadline for setting up a SIMPLE IRA plan. Hr block 1040x   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. Hr block 1040x 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. Hr block 1040x If you previously maintained a SIMPLE IRA plan, you can set up a SIMPLE IRA plan effective only on January 1 of a year. Hr block 1040x A SIMPLE IRA plan cannot have an effective date that is before the date you actually adopt the plan. Hr block 1040x Setting up a SIMPLE IRA. Hr block 1040x   SIMPLE IRAs are the individual retirement accounts or annuities into which the contributions are deposited. Hr block 1040x A SIMPLE IRA must be set up for each eligible employee. Hr block 1040x 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. Hr block 1040x   A SIMPLE IRA cannot be a Roth IRA. Hr block 1040x Contributions to a SIMPLE IRA will not affect the amount an individual can contribute to a Roth or traditional IRA. Hr block 1040x Deadline for setting up a SIMPLE IRA. Hr block 1040x   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. Hr block 1040x See Time limits for contributing funds , later, under Contribution Limits. Hr block 1040x Credit for startup costs. Hr block 1040x   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. Hr block 1040x For more information, see Credit for startup costs under Reminders, earlier. Hr block 1040x 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. Hr block 1040x The employee's opportunity to make or change a salary reduction choice under a SIMPLE IRA plan. Hr block 1040x Your decision to make either matching contributions or nonelective contributions (discussed later). Hr block 1040x A summary description provided by the financial institution. Hr block 1040x Written notice that his or her balance can be transferred without cost or penalty if they use a designated financial institution. Hr block 1040x Election period. Hr block 1040x   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). Hr block 1040x 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. Hr block 1040x   A SIMPLE IRA plan can provide longer periods for permitting employees to enter into salary reduction agreements or to modify prior agreements. Hr block 1040x For example, a SIMPLE IRA plan can provide a 90-day election period instead of the 60-day period. Hr block 1040x 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. Hr block 1040x Contribution Limits Contributions are made up of salary reduction contributions and employer contributions. Hr block 1040x You, as the employer, must make either matching contributions or nonelective contributions, defined later. Hr block 1040x No other contributions can be made to the SIMPLE IRA plan. Hr block 1040x These contributions, which you can deduct, must be made timely. Hr block 1040x See Time limits for contributing funds , later. Hr block 1040x Salary reduction contributions. Hr block 1040x   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. Hr block 1040x 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. Hr block 1040x You cannot place restrictions on the contribution amount (such as limiting the contribution percentage), except to comply with the $12,000 limit. Hr block 1040x   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. Hr block 1040x Catch-up contributions. Hr block 1040x   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. Hr block 1040x The catch-up contribution limit for 2013 and 2014 for SIMPLE IRA plans is $2,500. Hr block 1040x Salary reduction contributions are not treated as catch-up contributions for 2013 or 2014 until they exceed $12,000. Hr block 1040x However, the catch-up contribution a participant can make for a year cannot exceed the lesser of the following amounts. Hr block 1040x The catch-up contribution limit. Hr block 1040x The excess of the participant's compensation over the salary reduction contributions that are not catch-up contributions. Hr block 1040x Employer matching contributions. Hr block 1040x   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. Hr block 1040x This requirement does not apply if you make nonelective contributions as discussed later. Hr block 1040x Example. Hr block 1040x In 2013, your employee, John Rose, earned $25,000 and chose to defer 5% of his salary. Hr block 1040x Your net earnings from self-employment are $40,000, and you choose to contribute 10% of your earnings to your SIMPLE IRA. Hr block 1040x You make 3% matching contributions. Hr block 1040x The total contribution you make for John is $2,000, figured as follows. Hr block 1040x Salary reduction contributions ($25,000 × . Hr block 1040x 05) $1,250 Employer matching contribution ($25,000 × . Hr block 1040x 03) 750 Total contributions $2,000     The total contribution you make for yourself is $5,200, figured as follows. Hr block 1040x Salary reduction contributions ($40,000 × . Hr block 1040x 10) $4,000 Employer matching contribution ($40,000 × . Hr block 1040x 03) 1,200 Total contributions $5,200 Lower percentage. Hr block 1040x   If you choose a matching contribution less than 3%, the percentage must be at least 1%. Hr block 1040x 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. Hr block 1040x 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. Hr block 1040x Nonelective contributions. Hr block 1040x   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. Hr block 1040x If you make this choice, you must make nonelective contributions whether or not the employee chooses to make salary reduction contributions. Hr block 1040x Only $255,000 of the employee's compensation can be taken into account to figure the contribution limit in 2013 ($260,000 in 2014). Hr block 1040x   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. Hr block 1040x Example 1. Hr block 1040x In 2013, your employee, Jane Wood, earned $36,000 and chose to have you contribute 10% of her salary. Hr block 1040x Your net earnings from self-employment are $50,000, and you choose to contribute 10% of your earnings to your SIMPLE IRA. Hr block 1040x You make a 2% nonelective contribution. Hr block 1040x Both of you are under age 50. Hr block 1040x The total contribution you make for Jane is $4,320, figured as follows. Hr block 1040x Salary reduction contributions ($36,000 × . Hr block 1040x 10) $3,600 2% nonelective contributions ($36,000 × . Hr block 1040x 02) 720 Total contributions $4,320     The total contribution you make for yourself is $6,000, figured as follows. Hr block 1040x Salary reduction contributions ($50,000 × . Hr block 1040x 10) $5,000 2% nonelective contributions ($50,000 × . Hr block 1040x 02) 1,000 Total contributions $6,000 Example 2. Hr block 1040x 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. Hr block 1040x Salary reduction contributions (maximum amount allowed) $12,000 2% nonelective contributions ($75,000 × . Hr block 1040x 02) 1,500 Total contributions $13,500 Time limits for contributing funds. Hr block 1040x   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. Hr block 1040x You must make matching contributions or nonelective contributions by the due date (including extensions) for filing your federal income tax return for the year. Hr block 1040x Certain plans subject to Department of Labor rules may have an earlier due date for salary reduction contributions. Hr block 1040x 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. Hr block 1040x 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. Hr block 1040x Example 1. Hr block 1040x Your tax year is the fiscal year ending June 30. Hr block 1040x 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. Hr block 1040x Example 2. Hr block 1040x You are a sole proprietor whose tax year is the calendar year. Hr block 1040x 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. Hr block 1040x Where To Deduct Contributions Deduct the contributions you make for your common-law employees on your tax return. Hr block 1040x 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. Hr block 1040x Sole proprietors and partners deduct contributions for themselves on line 28 of Form 1040. Hr block 1040x (If you are a partner, contributions for yourself are shown on the Schedule K-1 (Form 1065) you receive from the partnership. Hr block 1040x ) Tax Treatment of Contributions You can deduct your contributions and your employees can exclude these contributions from their gross income. Hr block 1040x SIMPLE IRA plan contributions are not subject to federal income tax withholding. Hr block 1040x However, salary reduction contributions are subject to social security, Medicare, and federal unemployment (FUTA) taxes. Hr block 1040x Matching and nonelective contributions are not subject to these taxes. Hr block 1040x Reporting on Form W-2. Hr block 1040x   Do not include SIMPLE IRA plan contributions in the “Wages, tips, other compensation” box of Form W-2. Hr block 1040x You must, however, include them in the “Social security wages” and “Medicare wages and tips” boxes. Hr block 1040x You must also include them in box 12. Hr block 1040x Mark the “Retirement plan” checkbox in box 13. Hr block 1040x For more information, see the Form W-2 instructions. Hr block 1040x Distributions (Withdrawals) Distributions from a SIMPLE IRA are subject to IRA rules and generally are includible in income for the year received. Hr block 1040x Tax-free rollovers can be made from one SIMPLE IRA into another SIMPLE IRA. Hr block 1040x 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. Hr block 1040x 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. Hr block 1040x Early withdrawals generally are subject to a 10% additional tax. Hr block 1040x However, the additional tax is increased to 25% if funds are withdrawn within 2 years of beginning participation. Hr block 1040x More information. Hr block 1040x   See Publication 590 for information about IRA rules, including those on the tax treatment of distributions, rollovers, required distributions, and income tax withholding. Hr block 1040x 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. Hr block 1040x 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. Hr block 1040x 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. Hr block 1040x 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. Hr block 1040x 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. Hr block 1040x 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. Hr block 1040x See Catch-up contributions , earlier under Contribution Limits. Hr block 1040x 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. Hr block 1040x No other contributions can be made to the trust. Hr block 1040x 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. Hr block 1040x The employee's rights to any contributions are nonforfeitable. Hr block 1040x 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). Hr block 1040x Compensation is defined earlier in this chapter. Hr block 1040x Employee notification. Hr block 1040x   The notification requirement that applies to SIMPLE IRA plans also applies to SIMPLE 401(k) plans. Hr block 1040x See Notification Requirement in this chapter. Hr block 1040x Credit for startup costs. Hr block 1040x   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. Hr block 1040x For more information, see Credit for startup costs under Reminders, earlier. Hr block 1040x Note on Forms. Hr block 1040x   Please note that Forms 5304-SIMPLE and 5305-SIMPLE can not be used to establish a SIMPLE 401(k) plan. Hr block 1040x To set up a SIMPLE 401(k) plan, see Adopting a Written Plan in chapter 4. Hr block 1040x Prev  Up  Next   Home   More Online Publications