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Irs free efile 1. Irs free efile   Nonresident Alien or Resident Alien? Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Nonresident Aliens Resident AliensGreen Card Test Substantial Presence Test Effect of Tax Treaties Dual-Status AliensFirst Year of Residency Choosing Resident Alien Status Last Year of Residency Nonresident Spouse Treated as a ResidentHow To Make the Choice Aliens From American Samoa or Puerto Rico Introduction You should first determine whether, for income tax purposes, you are a nonresident alien or a resident alien. Irs free efile If you are both a nonresident and resident in the same year, you have a dual status. Irs free efile Dual status is explained later. Irs free efile Also explained later are a choice to treat your nonresident spouse as a resident and some other special situations. Irs free efile Topics - This chapter discusses: How to determine if you are a nonresident, resident, or dual-status alien, and How to treat a nonresident spouse as a resident alien. Irs free efile Useful Items - You may want to see: Form (and Instructions) 1040 U. Irs free efile S. Irs free efile Individual Income Tax Return 1040A U. Irs free efile S. Irs free efile Individual Income Tax Return 1040NR U. Irs free efile S. Irs free efile Nonresident Alien Income Tax Return 8833 Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b) 8840 Closer Connection Exception Statement for Aliens 8843 Statement for Exempt Individuals and Individuals With a Medical Condition See chapter 12 for information about getting these forms. Irs free efile Nonresident Aliens If you are an alien (not a U. Irs free efile S. Irs free efile citizen), you are considered a nonresident alien unless you meet one of the two tests described next under Resident Aliens. Irs free efile Resident Aliens You are a resident alien of the United States for tax purposes if you meet either the green card test or the substantial presence test for calendar year 2013 (January 1–December 31). Irs free efile Even if you do not meet either of these tests, you may be able to choose to be treated as a U. Irs free efile S. Irs free efile resident for part of the year. Irs free efile See First-Year Choice under Dual-Status Aliens, later. Irs free efile Green Card Test You are a resident for tax purposes if you are a lawful permanent resident of the United States at any time during calendar year 2013. Irs free efile (However, see Dual-Status Aliens , later. Irs free efile ) This is known as the “green card” test. Irs free efile You are a lawful permanent resident of the United States at any time if you have been given the privilege, according to the immigration laws, of residing permanently in the United States as an immigrant. Irs free efile You generally have this status if the U. Irs free efile S. Irs free efile Citizenship and Immigration Services (USCIS) (or its predecessor organization) has issued you an alien registration card, also known as a “green card. Irs free efile ” You continue to have resident status under this test unless the status is taken away from you or is administratively or judicially determined to have been abandoned. Irs free efile Resident status taken away. Irs free efile   Resident status is considered to have been taken away from you if the U. Irs free efile S. Irs free efile government issues you a final administrative or judicial order of exclusion or deportation. Irs free efile A final judicial order is an order that you may no longer appeal to a higher court of competent jurisdiction. Irs free efile Resident status abandoned. Irs free efile   An administrative or judicial determination of abandonment of resident status may be initiated by you, the USCIS, or a U. Irs free efile S. Irs free efile consular officer. Irs free efile    If you initiate the determination, your resident status is considered to be abandoned when you file either of the following with the USCIS or U. Irs free efile S. Irs free efile consular officer. Irs free efile Your application for abandonment. Irs free efile Your Alien Registration Receipt Card attached to a letter stating your intent to abandon your resident status. Irs free efile You must file the letter by certified mail, return receipt requested. Irs free efile You must keep a copy of the letter and proof that it was mailed and received. Irs free efile    Until you have proof your letter was received, you remain a resident alien for tax purposes even if the USCIS would not recognize the validity of your green card because it is more than ten years old or because you have been absent from the United States for a period of time. Irs free efile   If the USCIS or U. Irs free efile S. Irs free efile consular officer initiates this determination, your resident status will be considered to be abandoned when the final administrative order of abandonment is issued. Irs free efile If you are granted an appeal to a federal court of competent jurisdiction, a final judicial order is required. Irs free efile   Under U. Irs free efile S. Irs free efile immigration law, a lawful permanent resident who is required to file a tax return as a resident and fails to do so may be regarded as having abandoned status and may lose permanent resident status. Irs free efile    A long-term resident who ceases to be a lawful permanent resident may be subject to special reporting requirements and tax provisions. Irs free efile See Expatriation Tax in chapter 4. Irs free efile Termination of residency after June 3, 2004, and before June 17, 2008. Irs free efile   If you terminated your residency after June 3, 2004, and before June 17, 2008, you will still be considered a U. Irs free efile S. Irs free efile resident for tax purposes until you notify the Secretary of Homeland Security and file Form 8854, Initial and Annual Expatriation Statement. Irs free efile Termination of residency after June 16, 2008. Irs free efile   For information on your residency termination date, see Former long-term resident under Expatriation After June 16, 2008, in chapter 4. Irs free efile Substantial Presence Test You will be considered a U. Irs free efile S. Irs free efile resident for tax purposes if you meet the substantial presence test for calendar year 2013. Irs free efile To meet this test, you must be physically present in the United States on at least: 31 days during 2013, and 183 days during the 3-year period that includes 2013, 2012, and 2011, counting: All the days you were present in 2013, and 1/3 of the days you were present in 2012, and 1/6 of the days you were present in 2011. Irs free efile Example. Irs free efile You were physically present in the United States on 120 days in each of the years 2011, 2012, and 2013. Irs free efile To determine if you meet the substantial presence test for 2013, count the full 120 days of presence in 2013, 40 days in 2012 (1/3 of 120), and 20 days in 2011 (1/6 of 120). Irs free efile Because the total for the 3-year period is 180 days, you are not considered a resident under the substantial presence test for 2013. Irs free efile The term United States includes the following areas. Irs free efile All 50 states and the District of Columbia. Irs free efile The territorial waters of the United States. Irs free efile The seabed and subsoil of those submarine areas that are adjacent to U. Irs free efile S. Irs free efile territorial waters and over which the United States has exclusive rights under international law to explore and exploit natural resources. Irs free efile The term does not include U. Irs free efile S. Irs free efile possessions and territories or U. Irs free efile S. Irs free efile airspace. Irs free efile Days of Presence in the United States You are treated as present in the United States on any day you are physically present in the country at any time during the day. Irs free efile However, there are exceptions to this rule. Irs free efile Do not count the following as days of presence in the United States for the substantial presence test. Irs free efile Days you commute to work in the United States from a residence in Canada or Mexico if you regularly commute from Canada or Mexico. Irs free efile Days you are in the United States for less than 24 hours when you are in transit between two places outside the United States. Irs free efile Days you are in the United States as a crew member of a foreign vessel. Irs free efile Days you are unable to leave the United States because of a medical condition that arose while you are in the United States. Irs free efile Days you are an exempt individual. Irs free efile The specific rules that apply to each of these categories are discussed next. Irs free efile Regular commuters from Canada or Mexico. Irs free efile   Do not count the days on which you commute to work in the United States from your residence in Canada or Mexico if you regularly commute from Canada or Mexico. Irs free efile You are considered to commute regularly if you commute to work in the United States on more than 75% of the workdays during your working period. Irs free efile   For this purpose, “commute” means to travel to work and return to your residence within a 24-hour period. Irs free efile “Workdays” are the days on which you work in the United States or Canada or Mexico. Irs free efile “Working period” means the period beginning with the first day in the current year on which you are physically present in the United States to work and ending on the last day in the current year on which you are physically present in the United States to work. Irs free efile If your work requires you to be present in the United States only on a seasonal or cyclical basis, your working period begins on the first day of the season or cycle on which you are present in the United States to work and ends on the last day of the season or cycle on which you are present in the United States to work. Irs free efile You can have more than one working period in a calendar year, and your working period can begin in one calendar year and end in the following calendar year. Irs free efile Example. Irs free efile Maria Perez lives in Mexico and works for Compañía ABC in its office in Mexico. Irs free efile She was assigned to her firm's office in the United States from February 1 through June 1. Irs free efile On June 2, she resumed her employment in Mexico. Irs free efile On 69 days, Maria commuted each morning from her home in Mexico to work in Compañía ABC's U. Irs free efile S. Irs free efile office. Irs free efile She returned to her home in Mexico on each of those evenings. Irs free efile On 7 days, she worked in her firm's Mexico office. Irs free efile For purposes of the substantial presence test, Maria does not count the days she commuted to work in the United States because those days equal more than 75% of the workdays during the working period (69 workdays in the United States divided by 76 workdays in the working period equals 90. Irs free efile 8%). Irs free efile Days in transit. Irs free efile   Do not count the days you are in the United States for less than 24 hours and you are in transit between two places outside the United States. Irs free efile You are considered to be in transit if you engage in activities that are substantially related to completing travel to your foreign destination. Irs free efile For example, if you travel between airports in the United States to change planes en route to your foreign destination, you are considered to be in transit. Irs free efile However, you are not considered to be in transit if you attend a business meeting while in the United States. Irs free efile This is true even if the meeting is held at the airport. Irs free efile Crew members. Irs free efile   Do not count the days you are temporarily present in the United States as a regular crew member of a foreign vessel (boat or ship) engaged in transportation between the United States and a foreign country or a U. Irs free efile S. Irs free efile possession. Irs free efile However, this exception does not apply if you otherwise engage in any trade or business in the United States on those days. Irs free efile Medical condition. Irs free efile   Do not count the days you intended to leave, but could not leave the United States because of a medical condition or problem that arose while you were in the United States. Irs free efile Whether you intended to leave the United States on a particular day is determined based on all the facts and circumstances. Irs free efile For example, you may be able to establish that you intended to leave if your purpose for visiting the United States could be accomplished during a period that is not long enough to qualify you for the substantial presence test. Irs free efile However, if you need an extended period of time to accomplish the purpose of your visit and that period would qualify you for the substantial presence test, you would not be able to establish an intent to leave the United States before the end of that extended period. Irs free efile   In the case of an individual who is judged mentally incompetent, proof of intent to leave the United States can be determined by analyzing the individual's pattern of behavior before he or she was judged mentally incompetent. Irs free efile   If you qualify to exclude days of presence because of a medical condition, you must file a fully completed Form 8843 with the IRS. Irs free efile See Form 8843 , later. Irs free efile   You cannot exclude any days of presence in the United States under the following circumstances. Irs free efile You were initially prevented from leaving, were then able to leave, but remained in the United States beyond a reasonable period for making arrangements to leave. Irs free efile You returned to the United States for treatment of a medical condition that arose during a prior stay. Irs free efile The condition existed before your arrival in the United States and you were aware of the condition. Irs free efile It does not matter whether you needed treatment for the condition when you entered the United States. Irs free efile Exempt individual. Irs free efile   Do not count days for which you are an exempt individual. Irs free efile The term “exempt individual” does not refer to someone exempt from U. Irs free efile S. Irs free efile tax, but to anyone in the following categories. Irs free efile An individual temporarily present in the United States as a foreign government-related individual under an “A” or “G” visa. Irs free efile A teacher or trainee temporarily present in the United States under a “J” or “Q” visa, who substantially complies with the requirements of the visa. Irs free efile A student temporarily present in the United States under an “F,” “J,” “M,” or “Q” visa, who substantially complies with the requirements of the visa. Irs free efile A professional athlete temporarily in the United States to compete in a charitable sports event. Irs free efile   The specific rules for each of these four categories (including any rules on the length of time you will be an exempt individual) are discussed next. Irs free efile Foreign government-related individuals. Irs free efile   A foreign government-related individual is an individual (or a member of the individual's immediate family) who is temporarily present in the United States: As a full-time employee of an international organization, By reason of diplomatic status, or By reason of a visa (other than a visa that grants lawful permanent residence) that the Secretary of the Treasury determines represents full-time diplomatic or consular status. Irs free efile Note. Irs free efile You are considered temporarily present in the United States regardless of the actual amount of time you are present in the United States. Irs free efile    An international organization is any public international organization that the President of the United States has designated by Executive Order as being entitled to the privileges, exemptions, and immunities provided for in the International Organizations Act. Irs free efile An individual is a full-time employee if his or her work schedule meets the organization's standard full-time work schedule. Irs free efile   An individual is considered to have full-time diplomatic or consular status if he or she: Has been accredited by a foreign government that is recognized by the United States, Intends to engage primarily in official activities for that foreign government while in the United States, and Has been recognized by the President, Secretary of State, or a consular officer as being entitled to that status. Irs free efile Note. Irs free efile If you are present in the United States under an “A” or “G” visa you are considered a foreign government-related individual (with full-time diplomatic or consular status). Irs free efile None of your days count for purposes of the substantial presence test. Irs free efile   Members of the immediate family include the individual's spouse and unmarried children (whether by blood or adoption) but only if the spouse's or unmarried children's visa statuses are derived from and dependent on the exempt individual's visa classification. Irs free efile Unmarried children are included only if they: Are under 21 years of age, Reside regularly in the exempt individual's household, and Are not members of another household. Irs free efile Teachers and trainees. Irs free efile   A teacher or trainee is an individual, other than a student, who is temporarily in the United States under a “J” or “Q” visa and substantially complies with the requirements of that visa. Irs free efile You are considered to have substantially complied with the visa requirements if you have not engaged in activities that are prohibited by U. Irs free efile S. Irs free efile immigration laws and could result in the loss of your visa status. Irs free efile   Also included are immediate family members of exempt teachers and trainees. Irs free efile See the definition of immediate family, earlier, under Foreign government-related individuals . Irs free efile   You will not be an exempt individual as a teacher or trainee in 2013 if you were exempt as a teacher, trainee, or student for any part of 2 of the 6 preceding calendar years. Irs free efile However, you will be an exempt individual if all of the following conditions are met. Irs free efile You were exempt as a teacher, trainee, or student for any part of 3 (or fewer) of the 6 preceding calendar years, A foreign employer paid all of your compensation during 2013, and A foreign employer paid all of your compensation during each of the preceding 6 years you were present in the United States as a teacher or trainee. Irs free efile A foreign employer includes an office or place of business of an American entity in a foreign country or a U. Irs free efile S. Irs free efile possession. Irs free efile   If you qualify to exclude days of presence as a teacher or trainee, you must file a fully completed Form 8843 with the IRS. Irs free efile See Form 8843 , later. Irs free efile Example. Irs free efile Carla was temporarily in the United States during the year as a teacher on a “J” visa. Irs free efile Her compensation for the year was paid by a foreign employer. Irs free efile Carla was treated as an exempt teacher for the previous 2 years but her compensation was not paid by a foreign employer. Irs free efile She will not be considered an exempt individual for the current year because she was exempt as a teacher for at least 2 of the past 6 years. Irs free efile If her compensation for the past 2 years had been paid by a foreign employer, she would be an exempt individual for the current year. Irs free efile Students. Irs free efile   A student is any individual who is temporarily in the United States on an “F,” “J,” “M,” or “Q” visa and who substantially complies with the requirements of that visa. Irs free efile You are considered to have substantially complied with the visa requirements if you have not engaged in activities that are prohibited by U. Irs free efile S. Irs free efile immigration laws and could result in the loss of your visa status. Irs free efile   Also included are immediate family members of exempt students. Irs free efile See the definition of immediate family, earlier, under Foreign government-related individuals . Irs free efile   You will not be an exempt individual as a student in 2013 if you have been exempt as a teacher, trainee, or student for any part of more than 5 calendar years unless you meet both of the following requirements. Irs free efile You establish that you do not intend to reside permanently in the United States. Irs free efile You have substantially complied with the requirements of your visa. Irs free efile The facts and circumstances to be considered in determining if you have demonstrated an intent to reside permanently in the United States include, but are not limited to, the following. Irs free efile Whether you have maintained a closer connection to a foreign country (discussed later). Irs free efile Whether you have taken affirmative steps to change your status from nonimmigrant to lawful permanent resident as discussed later under Closer Connection to a Foreign Country . Irs free efile   If you qualify to exclude days of presence as a student, you must file a fully completed Form 8843 with the IRS. Irs free efile See Form 8843 , later. Irs free efile Professional athletes. Irs free efile   A professional athlete who is temporarily in the United States to compete in a charitable sports event is an exempt individual. Irs free efile A charitable sports event is one that meets the following conditions. Irs free efile The main purpose is to benefit a qualified charitable organization. Irs free efile The entire net proceeds go to charity. Irs free efile Volunteers perform substantially all the work. Irs free efile   In figuring the days of presence in the United States, you can exclude only the days on which you actually competed in a sports event. Irs free efile You cannot exclude the days on which you were in the United States to practice for the event, to perform promotional or other activities related to the event, or to travel between events. Irs free efile   If you qualify to exclude days of presence as a professional athlete, you must file a fully completed Form 8843 with the IRS. Irs free efile See Form 8843 , next. Irs free efile Form 8843. Irs free efile   If you exclude days of presence in the United States because you fall into any of the following categories, you must file a fully completed Form 8843. Irs free efile You were unable to leave the United States as planned because of a medical condition or problem. Irs free efile You were temporarily in the United States as a teacher or trainee on a “J” or “Q” visa. Irs free efile You were temporarily in the United States as a student on an “F,” “J,” “M,” or “Q” visa. Irs free efile You were a professional athlete competing in a charitable sports event. Irs free efile Attach Form 8843 to your 2013 income tax return. Irs free efile If you do not have to file a return, send Form 8843 to the Department of the Treasury, Internal Revenue Service Center, Austin, TX 73301-0215, by the due date for filing Form 1040NR or Form 1040NR-EZ. Irs free efile The due date for filing is discussed in chapter 7. Irs free efile If you do not timely file Form 8843, you cannot exclude the days you were present in the United States as a professional athlete or because of a medical condition that arose while you were in the United States. Irs free efile This does not apply if you can show by clear and convincing evidence that you took reasonable actions to become aware of the filing requirements and significant steps to comply with those requirements. Irs free efile Closer Connection to a Foreign Country Even if you meet the substantial presence test, you can be treated as a nonresident alien if you: Are present in the United States for less than 183 days during the year, Maintain a tax home in a foreign country during the year, and Have a closer connection during the year to one foreign country in which you have a tax home than to the United States (unless you have a closer connection to two foreign countries, discussed next). Irs free efile Closer connection to two foreign countries. Irs free efile   You can demonstrate that you have a closer connection to two foreign countries (but not more than two) if you meet all of the following conditions. Irs free efile You maintained a tax home beginning on the first day of the year in one foreign country. Irs free efile You changed your tax home during the year to a second foreign country. Irs free efile You continued to maintain your tax home in the second foreign country for the rest of the year. Irs free efile You had a closer connection to each foreign country than to the United States for the period during which you maintained a tax home in that foreign country. Irs free efile You are subject to tax as a resident under the tax laws of either foreign country for the entire year or subject to tax as a resident in both foreign countries for the period during which you maintained a tax home in each foreign country. Irs free efile Tax home. Irs free efile   Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. Irs free efile Your tax home is the place where you permanently or indefinitely work as an employee or a self-employed individual. Irs free efile If you do not have a regular or main place of business because of the nature of your work, then your tax home is the place where you regularly live. Irs free efile If you do not fit either of these categories, you are considered an itinerant and your tax home is wherever you work. Irs free efile   For determining whether you have a closer connection to a foreign country, your tax home must also be in existence for the entire current year, and must be located in the same foreign country to which you are claiming to have a closer connection. Irs free efile Foreign country. Irs free efile   In determining whether you have a closer connection to a foreign country, the term “foreign country” means: Any territory under the sovereignty of the United Nations or a government other than that of the United States, The territorial waters of the foreign country (determined under U. Irs free efile S. Irs free efile law), The seabed and subsoil of those submarine areas which are adjacent to the territorial waters of the foreign country and over which the foreign country has exclusive rights under international law to explore and exploit natural resources, and Possessions and territories of the United States. Irs free efile Establishing a closer connection. Irs free efile   You will be considered to have a closer connection to a foreign country than the United States if you or the IRS establishes that you have maintained more significant contacts with the foreign country than with the United States. Irs free efile In determining whether you have maintained more significant contacts with the foreign country than with the United States, the facts and circumstances to be considered include, but are not limited to, the following. Irs free efile The country of residence you designate on forms and documents. Irs free efile The types of official forms and documents you file, such as Form W-9, Form W-8BEN, or Form W-8ECI. Irs free efile The location of: Your permanent home, Your family, Your personal belongings, such as cars, furniture, clothing, and jewelry, Your current social, political, cultural, professional, or religious affiliations, Your business activities (other than those that constitute your tax home), The jurisdiction in which you hold a driver's license, The jurisdiction in which you vote, and Charitable organizations to which you contribute. Irs free efile It does not matter whether your permanent home is a house, an apartment, or a furnished room. Irs free efile It also does not matter whether you rent or own it. Irs free efile It is important, however, that your home be available at all times, continuously, and not solely for short stays. Irs free efile When you cannot have a closer connection. Irs free efile   You cannot claim you have a closer connection to a foreign country if either of the following applies: You personally applied, or took other steps during the year, to change your status to that of a permanent resident, or You had an application pending for adjustment of status during the current year. Irs free efile Steps to change your status to that of a permanent resident include, but are not limited to, the filing of the following forms. Irs free efile Form I-508, Waiver of Rights, Privileges, Exemptions and Immunities Form I-485, Application to Register Permanent Residence or Adjust Status Form I-130, Petition for Alien Relative, on your behalf Form I-140, Immigrant Petition for Alien Worker, on your behalf Form ETA-750, Application for Alien Employment Certification, on your behalf Form DS-230, Application for Immigrant Visa and Alien Registration Form 8840. Irs free efile   You must attach a fully completed Form 8840 to your income tax return to claim you have a closer connection to a foreign country or countries. Irs free efile   If you do not have to file a return, send the form to the Department of the Treasury, Internal Revenue Service Center, Austin, TX 73301-0215, by the due date for filing Form 1040NR or Form 1040NR-EZ. Irs free efile The due date for filing is discussed later in chapter 7. Irs free efile   If you do not timely file Form 8840, you cannot claim a closer connection to a foreign country or countries. Irs free efile This does not apply if you can show by clear and convincing evidence that you took reasonable actions to become aware of the filing requirements and significant steps to comply with those requirements. Irs free efile Effect of Tax Treaties The rules given here to determine if you are a U. Irs free efile S. Irs free efile resident do not override tax treaty definitions of residency. Irs free efile If you are a dual-resident taxpayer, you can still claim the benefits under an income tax treaty. Irs free efile A dual-resident taxpayer is one who is a resident of both the United States and another country under each country's tax laws. Irs free efile The income tax treaty between the two countries must contain a provision that provides for resolution of conflicting claims of residence (tie-breaker rule). Irs free efile If you are treated as a resident of a foreign country under a tax treaty, you are treated as a nonresident alien in figuring your U. Irs free efile S. Irs free efile income tax. Irs free efile For purposes other than figuring your tax, you will be treated as a U. Irs free efile S. Irs free efile resident. Irs free efile For example, the rules discussed here do not affect your residency time periods as discussed later under Dual-Status Aliens . Irs free efile Information to be reported. Irs free efile   If you are a dual-resident taxpayer and you claim treaty benefits, you must file a return by the due date (including extensions) using Form 1040NR or Form 1040NR-EZ, and compute your tax as a nonresident alien. Irs free efile You must also attach a fully completed Form 8833 if you determine your residency under a tax treaty and receive payments or income items totaling more than $100,000. Irs free efile You may also have to attach Form 8938 (discussed in chapter 7). Irs free efile See Reporting Treaty Benefits Claimed in chapter 9 for more information on reporting treaty benefits. Irs free efile Dual-Status Aliens You can be both a nonresident alien and a resident alien during the same tax year. Irs free efile This usually occurs in the year you arrive in or depart from the United States. Irs free efile Aliens who have dual status should see chapter 6 for information on filing a return for a dual-status tax year. Irs free efile First Year of Residency If you are a U. Irs free efile S. Irs free efile resident for the calendar year, but you were not a U. Irs free efile S. Irs free efile resident at any time during the preceding calendar year, you are a U. Irs free efile S. Irs free efile resident only for the part of the calendar year that begins on the residency starting date. Irs free efile You are a nonresident alien for the part of the year before that date. Irs free efile Residency starting date under substantial presence test. Irs free efile   If you meet the substantial presence test for a calendar year, your residency starting date is generally the first day you are present in the United States during that calendar year. Irs free efile However, you do not have to count up to 10 days of actual presence in the United States if on those days you establish that: You had a closer connection to a foreign country than to the United States, and Your tax home was in that foreign country. Irs free efile See Closer Connection to a Foreign Country , earlier. Irs free efile   In determining whether you can exclude up to 10 days, the following rules apply. Irs free efile You can exclude days from more than one period of presence as long as the total days in all periods are not more than 10. Irs free efile You cannot exclude any days in a period of consecutive days of presence if all the days in that period cannot be excluded. Irs free efile Although you can exclude up to 10 days of presence in determining your residency starting date, you must include those days when determining whether you meet the substantial presence test. Irs free efile Example. Irs free efile Ivan Ivanovich is a citizen of Russia. Irs free efile He came to the United States for the first time on January 6, 2013, to attend a business meeting and returned to Russia on January 10, 2013. Irs free efile His tax home remained in Russia. Irs free efile On March 1, 2013, he moved to the United States and resided here for the rest of the year. Irs free efile Ivan is able to establish a closer connection to Russia for the period January 6–10. Irs free efile Thus, his residency starting date is March 1. Irs free efile Statement required to exclude up to 10 days of presence. Irs free efile   You must file a statement with the IRS if you are excluding up to 10 days of presence in the United States for purposes of your residency starting date. Irs free efile You must sign and date this statement and include a declaration that it is made under penalties of perjury. Irs free efile The statement must contain the following information (as applicable). Irs free efile Your name, address, U. Irs free efile S. Irs free efile taxpayer identification number (if any), and U. Irs free efile S. Irs free efile visa number (if any). Irs free efile Your passport number and the name of the country that issued your passport. Irs free efile The tax year for which the statement applies. Irs free efile The first day that you were present in the United States during the year. Irs free efile The dates of the days you are excluding in figuring your first day of residency. Irs free efile Sufficient facts to establish that you have maintained your tax home in and a closer connection to a foreign country during the period you are excluding. Irs free efile   Attach the required statement to your income tax return. Irs free efile If you are not required to file a return, send the statement to the Department of the Treasury, Internal Revenue Service Center, Austin, TX 73301-0215, on or before the due date for filing Form 1040NR or Form 1040NR-EZ. Irs free efile The due date for filing is discussed in chapter 7. Irs free efile   If you do not file the required statement as explained above, you cannot claim that you have a closer connection to a foreign country or countries. Irs free efile Therefore, your first day of residency will be the first day you are present in the United States. Irs free efile This does not apply if you can show by clear and convincing evidence that you took reasonable actions to become aware of the requirements for filing the statement and significant steps to comply with those requirements. Irs free efile Residency starting date under green card test. Irs free efile   If you meet the green card test at any time during a calendar year, but do not meet the substantial presence test for that year, your residency starting date is the first day in the calendar year on which you are present in the United States as a lawful permanent resident. Irs free efile   If you meet both the substantial presence test and the green card test, your residency starting date is the earlier of the first day during the year you are present in the United States under the substantial presence test or as a lawful permanent resident. Irs free efile Residency during the preceding year. Irs free efile   If you were a U. Irs free efile S. Irs free efile resident during any part of the preceding calendar year and you are a U. Irs free efile S. Irs free efile resident for any part of the current year, you will be considered a U. Irs free efile S. Irs free efile resident at the beginning of the current year. Irs free efile This applies whether you are a resident under the substantial presence test or green card test. Irs free efile Example. Irs free efile Robert Bach is a citizen of Switzerland. Irs free efile He came to the United States as a U. Irs free efile S. Irs free efile resident for the first time on May 1, 2012, and remained until November 5, 2012, when he returned to Switzerland. Irs free efile Robert came back to the United States on March 5, 2013, as a lawful permanent resident and still resides here. Irs free efile In calendar year 2013, Robert's U. Irs free efile S. Irs free efile residency is deemed to begin on January 1, 2013, because he qualified as a resident in calendar year 2012. Irs free efile First-Year Choice If you do not meet either the green card test or the substantial presence test for 2012 or 2013 and you did not choose to be treated as a resident for part of 2012, but you meet the substantial presence test for 2014, you can choose to be treated as a U. Irs free efile S. Irs free efile resident for part of 2013. Irs free efile To make this choice, you must: Be present in the United States for at least 31 days in a row in 2013, and Be present in the United States for at least 75% of the number of days beginning with the first day of the 31-day period and ending with the last day of 2013. Irs free efile For purposes of this 75% requirement, you can treat up to 5 days of absence from the United States as days of presence in the United States. Irs free efile When counting the days of presence in (1) and (2) above, do not count the days you were in the United States under any of the exceptions discussed earlier under Days of Presence in the United States. Irs free efile If you make the first-year choice, your residency starting date for 2013 is the first day of the earliest 31-day period (described in (1) above) that you use to qualify for the choice. Irs free efile You are treated as a U. Irs free efile S. Irs free efile resident for the rest of the year. Irs free efile If you are present for more than one 31-day period and you satisfy condition (2) above for each of those periods, your residency starting date is the first day of the first 31-day period. Irs free efile If you are present for more than one 31-day period but you satisfy condition (2) above only for a later 31-day period, your residency starting date is the first day of the later 31-day period. Irs free efile Note. Irs free efile You do not have to be married to make this choice. Irs free efile Example 1. Irs free efile Juan DaSilva is a citizen of the Philippines. Irs free efile He came to the United States for the first time on November 1, 2013, and was here on 31 consecutive days (from November 1 through December 1, 2013). Irs free efile Juan returned to the Philippines on December 1 and came back to the United States on December 17, 2013. Irs free efile He stayed in the United States for the rest of the year. Irs free efile During 2014, Juan was a resident of the United States under the substantial presence test. Irs free efile Juan can make the first-year choice for 2013 because he was in the United States in 2013 for a period of 31 days in a row (November 1 through December 1) and for at least 75% of the days following (and including) the first day of his 31-day period (46 total days of presence in the United States divided by 61 days in the period from November 1 through December 31 equals 75. Irs free efile 4%). Irs free efile If Juan makes the first-year choice, his residency starting date will be November 1, 2013. Irs free efile Example 2. Irs free efile The facts are the same as in Example 1, except that Juan was also absent from the United States on December 24, 25, 29, 30, and 31. Irs free efile He can make the first-year choice for 2013 because up to 5 days of absence are considered days of presence for purposes of the 75% requirement. Irs free efile Statement required to make the first-year choice for 2013. Irs free efile   You must attach a statement to Form 1040 to make the first-year choice for 2013. Irs free efile The statement must contain your name and address and specify the following. Irs free efile That you are making the first-year choice for 2013. Irs free efile That you were not a resident in 2012. Irs free efile That you are a resident under the substantial presence test in 2014. Irs free efile The number of days of presence in the United States during 2014. Irs free efile The date or dates of your 31-day period of presence and the period of continuous presence in the United States during 2013. Irs free efile The date or dates of absence from the United States during 2013 that you are treating as days of presence. Irs free efile You cannot file Form 1040 or the statement until you meet the substantial presence test for 2014. Irs free efile If you have not met the test for 2014 as of April 15, 2014, you can request an extension of time for filing your 2013 Form 1040 until a reasonable period after you have met that test. Irs free efile To request an extension to file until October 15, 2014, use Form 4868, Application for Automatic Extension of Time To File U. Irs free efile S. Irs free efile Individual Income Tax Return. Irs free efile You can file the paper form or use one of the electronic filing options explained in the Form 4868 instructions. Irs free efile You should pay with this extension the amount of tax you expect to owe for 2013 figured as if you were a nonresident alien the entire year. Irs free efile You can use Form 1040NR or Form 1040NR-EZ to figure the tax. Irs free efile Enter the tax on Form 4868. Irs free efile If you do not pay the tax due, you will be charged interest on any tax not paid by the regular due date of your return, and you may be charged a penalty on the late payment. Irs free efile   Once you make the first-year choice, you may not revoke it without the approval of the Internal Revenue Service. Irs free efile   If you do not follow the procedures discussed here for making the first-year choice, you will be treated as a nonresident alien for all of 2013. Irs free efile However, this does not apply if you can show by clear and convincing evidence that you took reasonable actions to become aware of the filing procedures and significant steps to comply with the procedures. Irs free efile Choosing Resident Alien Status If you are a dual-status alien, you can choose to be treated as a U. Irs free efile S. Irs free efile resident for the entire year if all of the following apply. Irs free efile You were a nonresident alien at the beginning of the year. Irs free efile You are a resident alien or U. Irs free efile S. Irs free efile citizen at the end of the year. Irs free efile You are married to a U. Irs free efile S. Irs free efile citizen or resident alien at the end of the year. Irs free efile Your spouse joins you in making the choice. Irs free efile This includes situations in which both you and your spouse were nonresident aliens at the beginning of the tax year and both of you are resident aliens at the end of the tax year. Irs free efile Note. Irs free efile If you are single at the end of the year, you cannot make this choice. Irs free efile If you make this choice, the following rules apply. Irs free efile You and your spouse are treated as U. Irs free efile S. Irs free efile residents for the entire year for income tax purposes. Irs free efile You and your spouse are taxed on worldwide income. Irs free efile You and your spouse must file a joint return for the year of the choice. Irs free efile Neither you nor your spouse can make this choice for any later tax year, even if you are separated, divorced, or remarried. Irs free efile The special instructions and restrictions for dual-status taxpayers in chapter 6 do not apply to you. Irs free efile Note. Irs free efile A similar choice is available if, at the end of the tax year, one spouse is a nonresident alien and the other spouse is a U. Irs free efile S. Irs free efile citizen or resident. Irs free efile See Nonresident Spouse Treated as a Resident , later. Irs free efile If you previously made that choice and it is still in effect, you do not need to make the choice explained here. Irs free efile Making the choice. Irs free efile   You should attach a statement signed by both spouses to your joint return for the year of the choice. Irs free efile The statement must contain the following information. Irs free efile A declaration that you both qualify to make the choice and that you choose to be treated as U. Irs free efile S. Irs free efile residents for the entire tax year. Irs free efile The name, address, and taxpayer identification number (SSN or ITIN) of each spouse. Irs free efile (If one spouse died, include the name and address of the person who makes the choice for the deceased spouse. Irs free efile )   You generally make this choice when you file your joint return. Irs free efile However, you also can make the choice by filing Form 1040X, Amended U. Irs free efile S. Irs free efile Individual Income Tax Return. Irs free efile Attach Form 1040, Form 1040A, or Form 1040EZ and print “Amended” across the top of the corrected return. Irs free efile If you make the choice with an amended return, you and your spouse must also amend any returns that you may have filed after the year for which you made the choice. Irs free efile   You generally must file the amended joint return within 3 years from the date you filed your original U. Irs free efile S. Irs free efile income tax return or 2 years from the date you paid your income tax for that year, whichever is later. Irs free efile Last Year of Residency If you were a U. Irs free efile S. Irs free efile resident in 2013 but are not a U. Irs free efile S. Irs free efile resident during any part of 2014, you cease to be a U. Irs free efile S. Irs free efile resident on your residency termination date. Irs free efile Your residency termination date is December 31, 2013, unless you qualify for an earlier date as discussed next. Irs free efile Earlier residency termination date. Irs free efile   You may qualify for a residency termination date that is earlier than December 31. Irs free efile This date is: The last day in 2013 that you are physically present in the United States, if you met the substantial presence test, The first day in 2013 that you are no longer a lawful permanent resident of the United States, if you met the green card test, or The later of (1) or (2), if you met both tests. Irs free efile You can use this date only if, for the remainder of 2013, your tax home was in a foreign country and you had a closer connection to that foreign country. Irs free efile See Closer Connection to a Foreign Country , earlier. Irs free efile    A long-term resident who ceases to be a lawful permanent resident may be subject to special reporting requirements and tax provisions. Irs free efile See Expatriation Tax in chapter 4. Irs free efile Termination of residency. Irs free efile   For information on your residency termination date, see Former long-term resident under Expatriation After June 16, 2008, in chapter 4. Irs free efile De minimis presence. Irs free efile   If you are a U. Irs free efile S. Irs free efile resident because of the substantial presence test and you qualify to use the earlier residency termination date, you can exclude up to 10 days of actual presence in the United States in determining your residency termination date. Irs free efile In determining whether you can exclude up to 10 days, the following rules apply. Irs free efile You can exclude days from more than one period of presence as long as the total days in all periods are not more than 10. Irs free efile You cannot exclude any days in a period of consecutive days of presence if all the days in that period cannot be excluded. Irs free efile Although you can exclude up to 10 days of presence in determining your residency termination date, you must include those days when determining whether you meet the substantial presence test. Irs free efile Example. Irs free efile Lola Bovary is a citizen of Malta. Irs free efile She came to the United States for the first time on March 1, 2013, and resided here until August 25, 2013. Irs free efile On December 12, 2013, Lola came to the United States for vacation and stayed here until December 16, 2013, when she returned to Malta. Irs free efile She is able to establish a closer connection to Malta for the period December 12–16. Irs free efile Lola is not a U. Irs free efile S. Irs free efile resident for tax purposes during 2014 and can establish a closer connection to Malta for the rest of calendar year 2013. Irs free efile Lola is a U. Irs free efile S. Irs free efile resident under the substantial presence test for 2013 because she was present in the United States for 183 days (178 days for the period March 1 to August 25 plus 5 days in December). Irs free efile Lola's residency termination date is August 25, 2013. Irs free efile Residency during the next year. Irs free efile   If you are a U. Irs free efile S. Irs free efile resident during any part of 2014 and you are a resident during any part of 2013, you will be treated as a resident through the end of 2013. Irs free efile This applies whether you have a closer connection to a foreign country than the United States during 2013, and whether you are a resident under the substantial presence test or green card test. Irs free efile Statement required to establish your residency termination date. Irs free efile   You must file a statement with the IRS to establish your residency termination date. Irs free efile You must sign and date this statement and include a declaration that it is made under penalties of perjury. Irs free efile The statement must contain the following information (as applicable). Irs free efile Your name, address, U. Irs free efile S. Irs free efile taxpayer identification number (if any), and U. Irs free efile S. Irs free efile visa number (if any). Irs free efile Your passport number and the name of the country that issued your passport. Irs free efile The tax year for which the statement applies. Irs free efile The last day that you were present in the United States during the year. Irs free efile Sufficient facts to establish that you have maintained your tax home in, and that you have a closer connection to, a foreign country following your last day of presence in the United States during the year or following the abandonment or rescission of your status as a lawful permanent resident during the year. Irs free efile The date that your status as a lawful permanent resident was abandoned or rescinded. Irs free efile Sufficient facts (including copies of relevant documents) to establish that your status as a lawful permanent resident has been abandoned or rescinded. Irs free efile If you can exclude days under the de minimis presence rule, discussed earlier, include the dates of the days you are excluding and sufficient facts to establish that you have maintained your tax home in and that you have a closer connection to a foreign country during the period you are excluding. Irs free efile   Attach the required statement to your income tax return. Irs free efile If you are not required to file a return, send the statement to the Department of the Treasury, Internal Revenue Service Center, Austin, TX 73301-0215, on or before the due date for filing Form 1040NR or Form 1040NR-EZ. Irs free efile The due date for filing is discussed in chapter 7. Irs free efile   If you do not file the required statement as explained above, you cannot claim that you have a closer connection to a foreign country or countries. Irs free efile This does not apply if you can show by clear and convincing evidence that you took reasonable actions to become aware of the requirements for filing the statement and significant steps to comply with those requirements. Irs free efile Nonresident Spouse Treated as a Resident If, at the end of your tax year, you are married and one spouse is a U. Irs free efile S. Irs free efile citizen or a resident alien and the other spouse is a nonresident alien, you can choose to treat the nonresident spouse as a U. Irs free efile S. Irs free efile resident. Irs free efile This includes situations in which one spouse is a nonresident alien at the beginning of the tax year, but a resident alien at the end of the year, and the other spouse is a nonresident alien at the end of the year. Irs free efile If you make this choice, you and your spouse are treated for income tax purposes as residents for your entire tax year. Irs free efile Neither you nor your spouse can claim under any tax treaty not to be a U. Irs free efile S. Irs free efile resident. Irs free efile You are both taxed on worldwide income. Irs free efile You must file a joint income tax return for the year you make the choice, but you and your spouse can file joint or separate returns in later years. Irs free efile If you file a joint return under this provision, the special instructions and restrictions for dual-status taxpayers in chapter 6 do not apply to you. Irs free efile Example. Irs free efile Bob and Sharon Williams are married and both are nonresident aliens at the beginning of the year. Irs free efile In June, Bob became a resident alien and remained a resident for the rest of the year. Irs free efile Bob and Sharon both choose to be treated as resident aliens by attaching a statement to their joint return. Irs free efile Bob and Sharon must file a joint return for the year they make the choice, but they can file either joint or separate returns for later years. Irs free efile How To Make the Choice Attach a statement, signed by both spouses, to your joint return for the first tax year for which the choice applies. Irs free efile It should contain the following information. Irs free efile A declaration that one spouse was a nonresident alien and the other spouse a U. Irs free efile S. Irs free efile citizen or resident alien on the last day of your tax year, and that you choose to be treated as U. Irs free efile S. Irs free efile residents for the entire tax year. Irs free efile The name, address, and identification number of each spouse. Irs free efile (If one spouse died, include the name and address of the person making the choice for the deceased spouse. Irs free efile ) Amended return. Irs free efile   You generally make this choice when you file your joint return. Irs free efile However, you can also make the choice by filing a joint amended return on Form 1040X. Irs free efile Attach Form 1040, Form 1040A, or Form 1040EZ and print “Amended” across the top of the corrected return. Irs free efile If you make the choice with an amended return, you and your spouse must also amend any returns that you may have filed after the year for which you made the choice. Irs free efile   You generally must file the amended joint return within 3 years from the date you filed your original U. Irs free efile S. Irs free efile income tax return or 2 years from the date you paid your income tax for that year, whichever is later. Irs free efile Suspending the Choice The choice to be treated as a resident alien is suspended for any tax year (after the tax year you made the choice) if neither spouse is a U. Irs free efile S. Irs free efile citizen or resident alien at any time during the tax year. Irs free efile This means each spouse must file a separate return as a nonresident alien for that year if either meets the filing requirements for nonresident aliens discussed in chapter 7. Irs free efile Example. Irs free efile Dick Brown was a resident alien on December 31, 2010, and married to Judy, a nonresident alien. Irs free efile They chose to treat Judy as a resident alien and filed joint 2010 and 2011 income tax returns. Irs free efile On January 10, 2012, Dick became a nonresident alien. Irs free efile Judy had remained a nonresident alien throughout the period. Irs free efile Dick and Judy could have filed joint or separate returns for 2012 because Dick was a resident alien for part of that year. Irs free efile However, because neither Dick nor Judy is a resident alien at any time during 2013, their choice is suspended for that year. Irs free efile If either meets the filing requirements for nonresident aliens discussed in chapter 7, they must file separate returns as nonresident aliens for 2013. Irs free efile If Dick becomes a resident alien again in 2014, their choice is no longer suspended. Irs free efile Ending the Choice Once made, the choice to be treated as a resident applies to all later years unless suspended (as explained earlier under Suspending the Choice ) or ended in one of the following ways. Irs free efile If the choice is ended in one of the following ways, neither spouse can make this choice in any later tax year. Irs free efile Revocation. Irs free efile Either spouse can revoke the choice for any tax year, provided he or she makes the revocation by the due date for filing the tax return for that tax year. Irs free efile The spouse who revokes the choice must attach a signed statement declaring that the choice is being revoked. Irs free efile The statement must include the name, address, and identification number of each spouse. Irs free efile (If one spouse dies, include the name and address of the person who is revoking the choice for the deceased spouse. Irs free efile ) The statement also must include a list of any states, foreign countries, and possessions that have community property laws in which either spouse is domiciled or where real property is located from which either spouse receives income. Irs free efile File the statement as follows. Irs free efile If the spouse revoking the choice must file a return, attach the statement to the return for the first year the revocation applies. Irs free efile If the spouse revoking the choice does not have to file a return, but does file a return (for example, to obtain a refund), attach the statement to the return. Irs free efile If the spouse revoking the choice does not have to file a return and does not file a claim for refund, send the statement to the Internal Revenue Service Center where you filed the last joint return. Irs free efile Death. Irs free efile The death of either spouse ends the choice, beginning with the first tax year following the year the spouse died. Irs free efile However, if the surviving spouse is a U. Irs free efile S. Irs free efile citizen or resident and is entitled to the joint tax rates as a surviving spouse, the choice will not end until the close of the last year for which these joint rates may be used. Irs free efile If both spouses die in the same tax year, the choice ends on the first day after the close of the tax year in which the spouses died. Irs free efile Legal separation. Irs free efile A legal separation under a decree of divorce or separate maintenance ends the choice as of the beginning of the tax year in which the legal separation occurs. Irs free efile Inadequate records. Irs free efile The Internal Revenue Service can end the choice for any tax year that either spouse has failed to keep adequate books, records, and other information necessary to determine the correct income tax liability, or to provide adequate access to those records. Irs free efile Aliens From American Samoa or Puerto Rico If you are a nonresident alien in the United States and a bona fide resident of American Samoa or Puerto Rico during the entire tax year, you are taxed, with certain exceptions, according to the rules for resident aliens of the United States. Irs free efile For more information, see Bona Fide Residents of American Samoa or Puerto Rico in chapter 5. Irs free efile If you are a nonresident alien from American Samoa or Puerto Rico who does not qualify as a bona fide resident of American Samoa or Puerto Rico for the entire tax year, you are taxed as a nonresident alien. Irs free efile Resident aliens who formerly were bona fide residents of American Samoa or Puerto Rico are taxed according to the rules for resident aliens. Irs free efile Prev  Up  Next   Home   More Online Publications
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This notice is given under the Privacy Act of 1974 and the Paperwork Reduction Act of 1995. The Privacy Act and Paperwork Reduction Act requires that the Internal Revenue Service inform businesses and other entities the following when asking for information.

The information on this form will carry out the Internal Revenue laws of the United States. We will comply with Internal Revenue Code (IRC) section 6109 and the regulations hereunder, which generally require the inclusion of an Employer Identification Number (EIN) on certain returns, statements, or other documents filed with the Internal Revenue Service. Information on this form may be used to determine which Federal tax returns are required to file and to provide related forms and publications. This Form will be disclosed to the Social Security Administration for their use in determining compliance with applicable laws. An EIN will not be issued unless you provide all of the requested information, which applies to your entity.

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Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax Court case opinions issued after September 24, 1995, visit the Opinions Search page of the United States Tax Court.

Page Last Reviewed or Updated: 27-Nov-2013

The Irs Free Efile

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