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Hrblock taxes Publication 957 - Introductory Material Table of Contents Future Developments Introduction Future Developments For the latest information about developments related to Publication 957, such as legislation enacted after it was published, go to www. Hrblock taxes irs. Hrblock taxes gov/pub957. Hrblock taxes Introduction The Social Security Administration (SSA) has special rules for back pay awarded by a court or government agency to enforce a worker protection statute (law). Hrblock taxes The SSA also has rules for reporting special wage payments made to employees after they retire. Hrblock taxes These rules enable the SSA to correctly compute an employee's benefits under the social security earnings test. Hrblock taxes These rules are for social security coverage and benefit purposes only. Hrblock taxes This publication, written primarily for employers, discusses back pay under a statute and special wage payments. Hrblock taxes It also explains how to report these payments to the SSA. Hrblock taxes For more information, visit SSA's website at www. Hrblock taxes socialsecurity. Hrblock taxes gov/employer. Hrblock taxes To get a copy of Form SSA-131, Employer Report of Special Wage Payments, visit SSA's website at www. Hrblock taxes socialsecurity. Hrblock taxes gov/online/ssa-131. Hrblock taxes html. Hrblock taxes Prev Up Next Home More Online Publications
Types of Loans
There are different types of loans. Some are secured loans. This mean that your property and things you own are used as collateral, and if you cannot pay back the loan, the lender will take your collateral to get their money back. Other types of loans, unsecured loans, don’t use property as collateral. Lenders consider these as more risky than secured loans, so they charge a higher interest rate for them. Most credit cards are unsecured loans, although some consumers have secured credit cards. Two very common secured loans are home equity and installment loans.
A home equity loan could be a smart way to pay off high-interest debt or pay for home repairs. But consider carefully before taking out a home equity loan. If you are unable to make payments on time, you could lose your home.
Home equity loans can either be a revolving line of credit or a lump sum. Revolving credit lets you withdraw funds when you need them. A lump sum is a one-time closed-end loan, for a particular purpose, such as remodeling or tuition. Apply for a home equity loan through a bank or credit union first. These loans are likely to cost less than those offered by finance companies.
Before you sign an agreement for a loan to buy a house, a car or other large purchase, make sure you fully understand all the lender's terms and conditions, including:
- The dollar amount you are borrowing.
- The payment amounts and when they are due.
- The total finance charge, the total of all the interest and fees you must pay to get the loan.
- The Annual Percentage Rate (APR), the rate of interest you will pay over the full term of the loan.
- Penalties for late payments.
- What the lender will do if you can't pay back the loan.
- Penalties if you pay the loan back early
The Truth in Lending Act requires lenders to give you this information so you can compare different offers.
Payday and Tax Refund Loans
Payday loans are illegal in some states. Recent changes in the law for payday lenders have also made payday loans illegal for members of the military. With a typical payday loan, you might write a personal check for $115 to borrow $100 for two weeks, until payday. The annual percentage rate (APR) in this example is 390 percent! If you can repay the loan quickly, it may not appear such a bad deal. But if you can't pay off the loan quickly, that relatively small loan can grow into a large amount of debt. At 390 percent, a $100 loan will become $490 in a year and $2,401 in two years.
Another high cost way to borrow money is a tax refund loan. This type of credit lets you get an advance on a tax refund for a fee. APRs as high as 774% have been reported. If you are short of cash, avoid both of these loans by asking for more time to pay a bill or seeking a traditional loan. Even a cash advance on your credit card may cost less.
The Hrblock Taxes
Hrblock taxes 3. Hrblock taxes Savings Incentive Match Plans for Employees (SIMPLE) Table of Contents Introduction What Is a SIMPLE Plan?Eligible Employees How Are Contributions Made? How Much Can Be Contributed on Your Behalf?Matching contributions less than 3%. Hrblock taxes Traditional IRA mistakenly moved to SIMPLE IRA. Hrblock taxes When Can You Withdraw or Use Assets?Are Distributions Taxable? Introduction This chapter is for employees who need information about savings incentive match plans for employees (SIMPLE plans). Hrblock taxes It explains what a SIMPLE plan is, contributions to a SIMPLE plan, and distributions from a SIMPLE plan. Hrblock taxes Under a SIMPLE plan, SIMPLE retirement accounts for participating employees can be set up either as: Part of a 401(k) plan, or A plan using IRAs (SIMPLE IRA). Hrblock taxes This chapter only discusses the SIMPLE plan rules that relate to SIMPLE IRAs. Hrblock taxes See chapter 3 of Publication 560 for information on any special rules for SIMPLE plans that do not use IRAs. Hrblock taxes If your employer maintains a SIMPLE plan, you must be notified, in writing, that you can choose the financial institution that will serve as trustee for your SIMPLE IRA and that you can roll over or transfer your SIMPLE IRA to another financial institution. Hrblock taxes See Rollovers and Transfers Exception, later under When Can You Withdraw or Use Assets. Hrblock taxes What Is a SIMPLE Plan? A SIMPLE plan is a tax-favored retirement plan that certain small employers (including self-employed individuals) can set up for the benefit of their employees. Hrblock taxes See chapter 3 of Publication 560 for information on the requirements employers must satisfy to set up a SIMPLE plan. Hrblock taxes A SIMPLE plan is a written agreement (salary reduction agreement) between you and your employer that allows you, if you are an eligible employee (including a self-employed individual), to choose to: Reduce your compensation (salary) by a certain percentage each pay period, and Have your employer contribute the salary reductions to a SIMPLE IRA on your behalf. Hrblock taxes These contributions are called salary reduction contributions. Hrblock taxes All contributions under a SIMPLE IRA plan must be made to SIMPLE IRAs, not to any other type of IRA. Hrblock taxes The SIMPLE IRA can be an individual retirement account or an individual retirement annuity, described in chapter 1. Hrblock taxes Contributions are made on behalf of eligible employees. Hrblock taxes (See Eligible Employees below. Hrblock taxes ) Contributions are also subject to various limits. Hrblock taxes (See How Much Can Be Contributed on Your Behalf , later. Hrblock taxes ) In addition to salary reduction contributions, your employer must make either matching contributions or nonelective contributions. Hrblock taxes See How Are Contributions Made , later. Hrblock taxes You may be able to claim a credit for contributions to your SIMPLE plan. Hrblock taxes For more information, see chapter 4. Hrblock taxes Eligible Employees You must be allowed to participate in your employer's SIMPLE plan if you: Received at least $5,000 in compensation from your employer during any 2 years prior to the current year, and Are reasonably expected to receive at least $5,000 in compensation during the calendar year for which contributions are made. Hrblock taxes Self-employed individual. Hrblock taxes For SIMPLE plan purposes, the term employee includes a self-employed individual who received earned income. Hrblock taxes Excludable employees. Hrblock taxes Your employer can exclude the following employees from participating in the SIMPLE plan. Hrblock taxes Employees whose retirement benefits are covered by a collective bargaining agreement (union contract). Hrblock taxes Employees who are nonresident aliens and received no earned income from sources within the United States. Hrblock taxes Employees who would not have been eligible employees if an acquisition, disposition, or similar transaction had not occurred during the year. Hrblock taxes Compensation. Hrblock taxes For purposes of the SIMPLE plan rules, your compensation for a year generally includes the following amounts. Hrblock taxes Wages, tips, and other pay from your employer that is subject to income tax withholding. Hrblock taxes Deferred amounts elected under any 401(k) plans, 403(b) plans, government (section 457) plans, SEP plans, and SIMPLE plans. Hrblock taxes Self-employed individual compensation. Hrblock taxes For purposes of the SIMPLE plan rules, if you are self-employed, your compensation for a year is your net earnings from self-employment (Schedule SE (Form 1040), Section A, line 4, or Section B, line 6) before subtracting any contributions made to a SIMPLE IRA on your behalf. Hrblock taxes For these purposes, net earnings from self-employment include services performed while claiming exemption from self-employment tax as a member of a group conscientiously opposed to social security benefits. Hrblock taxes How Are Contributions Made? Contributions under a salary reduction agreement are called salary reduction contributions. Hrblock taxes They are made on your behalf by your employer. Hrblock taxes Your employer must also make either matching contributions or nonelective contributions. Hrblock taxes Salary reduction contributions. Hrblock taxes During the 60-day period before the beginning of any year, and during the 60-day period before you are eligible, you can choose salary reduction contributions expressed either as a percentage of compensation, or as a specific dollar amount (if your employer offers this choice). Hrblock taxes You can choose to cancel the election at any time during the year. Hrblock taxes Salary reduction contributions are also referred to as “elective deferrals. Hrblock taxes ” Your employer cannot place restrictions on the contributions amount (such as by limiting the contributions percentage), except to comply with the salary reduction contributions limit, discussed under How Much Can Be Contributed on Your Behalf, later. Hrblock taxes Matching contributions. Hrblock taxes Unless your employer chooses to make nonelective contributions, your employer must make contributions equal to the salary reduction contributions you choose (elect), but only up to certain limits. Hrblock taxes See How Much Can Be Contributed on Your Behalf below. Hrblock taxes These contributions are in addition to the salary reduction contributions and must be made to the SIMPLE IRAs of all eligible employees (defined earlier) who chose salary reductions. Hrblock taxes These contributions are referred to as matching contributions. Hrblock taxes Matching contributions on behalf of a self-employed individual are not treated as salary reduction contributions. Hrblock taxes Nonelective contributions. Hrblock taxes Instead of making matching contributions, your employer may be able to choose to make nonelective contributions on behalf of all eligible employees. Hrblock taxes These nonelective contributions must be made on behalf of each eligible employee who has at least $5,000 of compensation from your employer, whether or not the employee chose salary reductions. Hrblock taxes One of the requirements your employer must satisfy is notifying the employees that the election was made. Hrblock taxes For other requirements that your employer must satisfy, see chapter 3 of Publication 560. Hrblock taxes How Much Can Be Contributed on Your Behalf? The limits on contributions to a SIMPLE IRA vary with the type of contribution that is made. Hrblock taxes Salary reduction contributions limit. Hrblock taxes Salary reduction contributions (employee-chosen contributions or elective deferrals) that your employer can make on your behalf under a SIMPLE plan are limited to $12,000 for 2013. Hrblock taxes The limitation remains at $12,000 for 2014. Hrblock taxes If you are a participant in any other employer plans during 2013 and you have elective salary reductions or deferred compensation under those plans, the salary reduction contributions under the SIMPLE plan also are included in the annual limit of $17,500 for 2013 on exclusions of salary reductions and other elective deferrals. Hrblock taxes You, not your employer, are responsible for monitoring compliance with these limits. Hrblock taxes Additional elective deferrals can be contributed to your SIMPLE plan if: You reached age 50 by the end of 2013, and No other elective deferrals can be made for you to the plan for the year because of limits or restrictions, such as the regular annual limit. Hrblock taxes The most that can be contributed in additional elective deferrals to your SIMPLE plan is the lesser of the following two amounts. Hrblock taxes $2,500 for 2013, or Your compensation for the year reduced by your other elective deferrals for the year. Hrblock taxes The additional deferrals are not subject to any other contribution limit and are not taken into account in applying other contribution limits. Hrblock taxes The additional deferrals are not subject to the nondiscrimination rules as long as all eligible participants are allowed to make them. Hrblock taxes Matching employer contributions limit. Hrblock taxes Generally, your employer must make matching contributions to your SIMPLE IRA in an amount equal to your salary reduction contributions. Hrblock taxes These matching contributions cannot be more than 3% of your compensation for the calendar year. Hrblock taxes See Matching contributions less than 3% below. Hrblock taxes Example 1. Hrblock taxes In 2013, Joshua was a participant in his employer's SIMPLE plan. Hrblock taxes His compensation, before SIMPLE plan contributions, was $41,600 ($800 per week). Hrblock taxes Instead of taking it all in cash, Joshua elected to have 12. Hrblock taxes 5% of his weekly pay ($100) contributed to his SIMPLE IRA. Hrblock taxes For the full year, Joshua's salary reduction contributions were $5,200, which is less than the $12,000 limit on these contributions. Hrblock taxes Under the plan, Joshua's employer was required to make matching contributions to Joshua's SIMPLE IRA. Hrblock taxes Because his employer's matching contributions must equal Joshua's salary reductions, but cannot be more than 3% of his compensation (before salary reductions) for the year, his employer's matching contribution was limited to $1,248 (3% of $41,600). Hrblock taxes Example 2. Hrblock taxes Assume the same facts as in Example 1 , except that Joshua's compensation for the year was $408,163 and he chose to have 2. Hrblock taxes 94% of his weekly pay contributed to his SIMPLE IRA. Hrblock taxes In this example, Joshua's salary reduction contributions for the year (2. Hrblock taxes 94% × $408,163) were equal to the 2013 limit for salary reduction contributions ($12,000). Hrblock taxes Because 3% of Joshua's compensation ($12,245) is more than the amount his employer was required to match ($12,000), his employer's matching contributions were limited to $12,000. Hrblock taxes In this example, total contributions made on Joshua's behalf for the year were $24,000 ($12,000 (Joshua's contributions) + $12,000 (matching contributions)), the maximum contributions permitted under a SIMPLE IRA for 2013. Hrblock taxes Matching contributions less than 3%. Hrblock taxes Your employer can reduce the 3% limit on matching contributions for a calendar year, but only if: The limit is not reduced below 1%, The limit is not reduced for more than 2 years out of the 5-year period that ends with (and includes) the year for which the election is effective, and Employees are notified of the reduced limit within a reasonable period of time before the 60-day election period during which they can enter into salary reduction agreements. Hrblock taxes For purposes of applying the rule in item (2) in determining whether the limit was reduced below 3% for the year, any year before the first year in which your employer (or a former employer) maintains a SIMPLE IRA plan will be treated as a year for which the limit was 3%. Hrblock taxes If your employer chooses to make nonelective contributions for a year, that year also will be treated as a year for which the limit was 3%. Hrblock taxes Nonelective employer contributions limit. Hrblock taxes If your employer chooses to make nonelective contributions, instead of matching contributions, to each eligible employee's SIMPLE IRA, contributions must be 2% of your compensation for the entire year. Hrblock taxes For 2013, only $255,000 of your compensation can be taken into account to figure the contribution limit. Hrblock taxes Your employer can substitute the 2% nonelective contribution for the matching contribution for a year if both of the following requirements are met. Hrblock taxes Eligible employees are notified that a 2% nonelective contribution will be made instead of a matching contribution. Hrblock taxes This notice is provided within a reasonable period during which employees can enter into salary reduction agreements. Hrblock taxes Example 3. Hrblock taxes Assume the same facts as in Example 2 , except that Joshua's employer chose to make nonelective contributions instead of matching contributions. Hrblock taxes Because his employer's nonelective contributions are limited to 2% of up to $255,000 of Joshua's compensation, his employer's contribution to Joshua's SIMPLE IRA was limited to $5,100. Hrblock taxes In this example, total contributions made on Joshua's behalf for the year were $17,100 (Joshua's salary reductions of $12,000 plus his employer's contribution of $5,100). Hrblock taxes Traditional IRA mistakenly moved to SIMPLE IRA. Hrblock taxes If you mistakenly roll over or transfer an amount from a traditional IRA to a SIMPLE IRA, you can later recharacterize the amount as a contribution to another traditional IRA. Hrblock taxes For more information, see Recharacterizations in chapter 1. Hrblock taxes Recharacterizing employer contributions. Hrblock taxes You cannot recharacterize employer contributions (including elective deferrals) under a SEP or SIMPLE plan as contributions to another IRA. Hrblock taxes SEPs are discussed in chapter 2 of Publication 560. Hrblock taxes SIMPLE plans are discussed in this chapter. Hrblock taxes Converting from a SIMPLE IRA. Hrblock taxes Generally, you can convert an amount in your SIMPLE IRA to a Roth IRA under the same rules explained in chapter 1 under Converting From Any Traditional IRA Into a Roth IRA . Hrblock taxes However, you cannot convert any amount distributed from the SIMPLE IRA during the 2-year period beginning on the date you first participated in any SIMPLE IRA plan maintained by your employer. Hrblock taxes When Can You Withdraw or Use Assets? Generally, the same distribution (withdrawal) rules that apply to traditional IRAs apply to SIMPLE IRAs. Hrblock taxes These rules are discussed in chapter 1. Hrblock taxes Your employer cannot restrict you from taking distributions from a SIMPLE IRA. Hrblock taxes Are Distributions Taxable? Generally, distributions from a SIMPLE IRA are fully taxable as ordinary income. Hrblock taxes If the distribution is an early distribution (discussed in chapter 1), it may be subject to the additional tax on early distributions. Hrblock taxes See Additional Tax on Early Distributions, later. Hrblock taxes Rollovers and Transfers Exception Generally, rollovers and trustee-to-trustee transfers are not taxable distributions. Hrblock taxes Two-year rule. Hrblock taxes To qualify as a tax-free rollover (or a tax-free trustee-to-trustee transfer), a rollover distribution (or a transfer) made from a SIMPLE IRA during the 2-year period beginning on the date on which you first participated in your employer's SIMPLE plan must be contributed (or transferred) to another SIMPLE IRA. Hrblock taxes The 2-year period begins on the first day on which contributions made by your employer are deposited in your SIMPLE IRA. Hrblock taxes After the 2-year period, amounts in a SIMPLE IRA can be rolled over or transferred tax free to an IRA other than a SIMPLE IRA, or to a qualified plan, a tax-sheltered annuity plan (section 403(b) plan), or deferred compensation plan of a state or local government (section 457 plan). Hrblock taxes Additional Tax on Early Distributions The additional tax on early distributions (discussed in chapter 1) applies to SIMPLE IRAs. Hrblock taxes If a distribution is an early distribution and occurs during the 2-year period following the date on which you first participated in your employer's SIMPLE plan, the additional tax on early distributions is increased from 10% to 25%. Hrblock taxes If a rollover distribution (or transfer) from a SIMPLE IRA does not satisfy the 2-year rule, and is otherwise an early distribution, the additional tax imposed because of the early distribution is increased from 10% to 25% of the amount distributed. 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