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Prior taxes 12. Prior taxes   Self-Employment Tax Table of Contents What's New for 2013 What's New for 2014 Introduction Topics - This chapter discusses: Useful Items - You may want to see: Why Pay Self-Employment Tax? How To Pay Self-Employment TaxReplacing a lost social security card. Prior taxes Name change. Prior taxes Penalty for underpayment of estimated tax. Prior taxes Who Must Pay Self-Employment Tax?Limited partner. Prior taxes Community property. Prior taxes Figuring Self-Employment EarningsLandlord Participation in Farming Methods for Figuring Net EarningsRegular Method Farm Optional Method Nonfarm Optional Method Using Both Optional Methods Reporting Self-Employment Tax What's New for 2013 Tax rates. Prior taxes  For tax years beginning in 2013, the social security part of the self-employment tax increases from 10. Prior taxes 4% to 12. Prior taxes 4%. Prior taxes The Medicare part of the tax remains at 2. Prior taxes 9%. Prior taxes As a result, the self-employment tax is increased from 13. Prior taxes 3% to 15. Prior taxes 3%. Prior taxes Additional Medicare Tax. Prior taxes . Prior taxes  For tax years beginning in 2013, a 0. Prior taxes 9% Additional Medicare Tax applies to your Medicare wages, Railroad Retirement Tax Act (RRTA) compensation, and self-employment income above a threshold amount. Prior taxes Use Form 8959, Additional Medicare Tax, to figure this tax. Prior taxes For more information, see the Instructions for Form 8959. Prior taxes Maximum net earnings. Prior taxes  The maximum net self-employment earnings subject to the social security part (12. Prior taxes 4%) of the self-employment tax increased to $113,700 for 2013. Prior taxes There is no maximum limit on earnings subject to the Medicare part (2. Prior taxes 9%). Prior taxes What's New for 2014 Maximum net earnings. Prior taxes  The maximum net self-employment earnings subject to the social security part of the self-employment tax for 2014 will be discussed in the 2013 Publication 334. Prior taxes Introduction Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. Prior taxes It is similar to the social security and Medicare taxes withheld from the pay of most wage earners. Prior taxes You usually have to pay SE tax if you are self-employed. Prior taxes You are usually self-employed if you operate your own farm on land you either own or rent. Prior taxes You have to figure SE tax on Schedule SE (Form 1040). Prior taxes Farmers who have employees may have to pay the employer's share of social security and Medicare taxes, as well. Prior taxes See chapter 13 for information on employment taxes. Prior taxes Self-employment tax rate. Prior taxes   For tax years beginning in 2013, the self-employment tax rate is 15. Prior taxes 3%. Prior taxes The rate consists of two parts: 12. Prior taxes 4% for social security (old-age, survivors, and disability insurance) and 2. Prior taxes 9% for Medicare (hospital insurance). Prior taxes Topics - This chapter discusses: Why pay self-employment tax How to pay self-employment tax Who must pay self-employment tax Figuring self-employment earnings Landlord participation in farming Methods for figuring net earnings Reporting self-employment tax Useful Items - You may want to see: Publication 541 Partnerships Form (and Instructions) 1040 U. Prior taxes S. Prior taxes Individual Income Tax Return Sch F (Form 1040) Profit or Loss From Farming Sch SE (Form 1040) Self-Employment Tax 1065 U. Prior taxes S. Prior taxes Return of Partnership Income Sch K-1 (Form 1065) Partner's Share of Income, Deductions, Credits, etc. Prior taxes See chapter 16 for information about getting publications and forms. Prior taxes Why Pay Self-Employment Tax? Social security benefits are available to self-employed persons just as they are to wage earners. Prior taxes Your payments of SE tax contribute to your coverage under the social security system. Prior taxes Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits. Prior taxes How to become insured under social security. Prior taxes   You must be insured under the social security system before you begin receiving social security benefits. Prior taxes You are insured if you have the required number of credits (also called quarters of coverage). Prior taxes Earning credits in 2013. Prior taxes   You can earn a maximum of four credits per year. Prior taxes For 2013, you earn one credit for each $1,160 of combined wages and self-employment earnings subject to social security tax. Prior taxes You need $4,640 ($1,160 × 4) of combined wages and self-employment earnings subject to social security tax to earn four credits in 2013. Prior taxes It does not matter whether the income is earned in 1 quarter or is spread over 2 or more quarters. Prior taxes For an explanation of the number of credits you must have to be insured and the benefits available to you and your family under the social security program, consult your nearest Social Security Administration (SSA) office or visit the SSA website at www. Prior taxes socialsecurity. Prior taxes gov. Prior taxes Making false statements to get or to increase social security benefits may subject you to penalties. Prior taxes The Social Security Administration (SSA) time limit for posting self-employment earnings. Prior taxes   Generally, the SSA will give you credit only for self-employment earnings reported on a tax return filed within 3 years, 3 months, and 15 days after the tax year you earned the income. Prior taxes    If you file your tax return or report a change in your self-employment earnings after the SSA time limit for posting self-employment earnings, the SSA may change its records, but only to remove or reduce the amount. Prior taxes The SSA will not change its records to increase your self-employment earnings after the SSA time limit listed above. Prior taxes How To Pay Self-Employment Tax To pay SE tax, you must have a social security number (SSN) or an individual taxpayer identification number (ITIN). Prior taxes This section explains how to: Obtain an SSN or ITIN, and Pay your SE tax using estimated tax. Prior taxes An ITIN does not entitle you to social security benefits. Prior taxes Obtaining an ITIN does not change your immigration or employment status under U. Prior taxes S. Prior taxes law. Prior taxes Obtaining a social security number. Prior taxes   If you have never had an SSN, apply for one using Form SS-5, Application for a Social Security Card. Prior taxes The application is also available in Spanish. Prior taxes You can get this form at any Social Security office or by calling 1-800-772-1213. Prior taxes    You can also download Form SS-5 from the Social Security Administration website at  www. Prior taxes socialsecurity. Prior taxes gov. Prior taxes   If you have a social security number from the time you were an employee, you must use that number. Prior taxes Do not apply for a new one. Prior taxes Replacing a lost social security card. Prior taxes   If you have a number but lost your card, file Form SS-5. Prior taxes You will get a new card showing your original number, not a new number. Prior taxes Name change. Prior taxes   If your name has changed since you received your social security card, complete Form SS-5 to report a name change. Prior taxes Obtaining an individual taxpayer identification number. Prior taxes   The IRS will issue you an ITIN, for tax use only, if you are a nonresident or resident alien and you do not have, and are not eligible to get, an SSN. Prior taxes To apply for an ITIN, file Form W-7, Application for IRS Individual Taxpayer Identification Number. Prior taxes You can get this form by calling 1-800-829-3676. Prior taxes For more information on ITINs, see Publication 1915, Understanding Your IRS Individual Taxpayer Identification Number. Prior taxes Form W-7 and Publication 1915 are also available in Spanish. Prior taxes    You can also download Form W-7 from the IRS website at IRS. Prior taxes gov. Prior taxes Paying estimated tax. Prior taxes   Estimated tax is the method used to pay tax (including SE tax) on income not subject to withholding. Prior taxes You generally have to make estimated tax payments if you expect to owe tax, including SE tax, of $1,000 or more when you file your return. Prior taxes Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay the tax. Prior taxes   However, if at least two-thirds of your gross income for 2013 or 2014 was from farming and you file your 2014 Form 1040 and pay all the tax due by March 2, 2015, you do not have to pay any estimated tax. Prior taxes For more information about estimated tax for farmers, see chapter 15. Prior taxes Penalty for underpayment of estimated tax. Prior taxes   You may have to pay a penalty if you do not pay enough estimated tax by its due date. Prior taxes Who Must Pay Self-Employment Tax? You must pay SE tax and file Schedule SE (Form 1040) if your net earnings from self-employment were $400 or more. Prior taxes The SE tax rules apply no matter how old you are and even if you are already receiving social security or Medicare benefits. Prior taxes Aliens. Prior taxes   Generally, resident aliens must pay self-employment tax under the same rules that apply to U. Prior taxes S. Prior taxes citizens. Prior taxes Nonresident aliens are not subject to self-employment tax. Prior taxes However, residents of the Virgin Islands, Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, or American Samoa are subject to self-employment tax, as they are considered U. Prior taxes S. Prior taxes residents for self-employment tax purposes. Prior taxes For more information on aliens, see Publication 519, U. Prior taxes S. Prior taxes Tax Guide for Aliens. Prior taxes Are you self-employed?   You are self-employed if you carry on a trade or business (such as running a farm) as a sole proprietor, an independent contractor, a member of a partnership, or are otherwise in business for yourself. Prior taxes A trade or business is generally an activity carried on for a livelihood or in good faith to make a profit. Prior taxes Share farmer. Prior taxes   You are a self-employed farmer under an income-sharing arrangement if both the following apply. Prior taxes You produce a crop or raise livestock on land belonging to another person. Prior taxes Your share of the crop or livestock, or the proceeds from their sale, depends on the amount produced. Prior taxes Your net farm profit or loss from the income-sharing arrangement is reported on Schedule F (Form 1040) and included in your self-employment earnings. Prior taxes   If you produce a crop or livestock on land belonging to another person and are to receive a specified rate of pay, a fixed sum of money, or a fixed quantity of the crop or livestock, and not a share of the crop or livestock or their proceeds, you may be either self-employed or an employee of the landowner. Prior taxes This will depend on whether the landowner has the right to direct or control your performance of services. Prior taxes Example. Prior taxes A share farmer produces a crop on land owned by another person on a 50-50 crop-share basis. Prior taxes Under the terms of their agreement, the share farmer furnishes the labor and half the cost of seed and fertilizer. Prior taxes The landowner furnishes the machinery and equipment used to produce and harvest the crop, and half the cost of seed and fertilizer. Prior taxes The share farmer is provided a house in which to live. Prior taxes The landowner and the share farmer decide on a cropping plan. Prior taxes The share farmer is a self-employed farmer for purposes of the agreement to produce the crops, and the share farmer's part of the profit or loss from the crops is reported on Schedule F (Form 1040) and included in self-employment earnings. Prior taxes The tax treatment of the landowner is discussed later under Landlord Participation in Farming. Prior taxes Contract farming. Prior taxes   Under typical contract farming arrangements, the grower receives a fixed payment per unit of crops or finished livestock delivered to the processor or packing company. Prior taxes Since the grower typically furnishes labor and bears some production risk, the payments are reported on Schedule F and are therefore subject to self-employment tax. Prior taxes 4-H Club or FFA project. Prior taxes   If an individual participates in a 4-H Club or Future Farmers of America (FFA) project, any net income received from sales or prizes related to the project may be subject to income tax. Prior taxes Report the net income as “Other income” on line 21 of Form 1040. Prior taxes If necessary, attach a statement showing the gross income and expenses. Prior taxes The net income may not be subject to SE tax if the project is primarily for educational purposes and not for profit, and is completed by the individual under the rules and economic restrictions of the sponsoring 4-H or FFA organization. Prior taxes Such a project is generally not considered a trade or business. Prior taxes Partners in a partnership. Prior taxes   Generally, you are self-employed if you are a member of a partnership that carries on a trade or business. Prior taxes Limited partner. Prior taxes   If you are a limited partner, your partnership income is generally not subject to SE tax. Prior taxes However, guaranteed payments you receive for services you perform for the partnership are subject to SE tax and should be reported to you in box 14 of your Schedule K-1 (Form 1065). Prior taxes Business Owned and Operated by Spouses. Prior taxes   If you and your spouse jointly own and operate a farm as an unincorporated business and share in the profits and losses, you are partners in a partnership whether or not you have a formal partnership agreement. Prior taxes You must file Form 1065, instead of Schedule F, unless you make a joint election to be treated as a qualified joint venture. Prior taxes Making this election will allow you to avoid the complexity of Form 1065 but still give each spouse credit for social security earnings on which retirement benefits are based. Prior taxes Qualified joint venture. Prior taxes   If you and your spouse each materially participate as the only members of a jointly owned and operated farm, and you file a joint tax return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership for the tax year. Prior taxes For an explanation of “material participation,” see the instructions for Schedule C, line G, and the instructions for Schedule F, line E. Prior taxes   To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. Prior taxes Each of you must file a separate Schedule F and a separate Schedule SE. Prior taxes For more information, see Qualified Joint Venture in the Instructions for Schedule SE (Form 1040). Prior taxes Spouse employee. Prior taxes   If your spouse is your employee, not your partner, you must withhold and pay social security and Medicare taxes for him or her. Prior taxes For more information about employment taxes, see chapter 13. Prior taxes Community property. Prior taxes   If you are a partner and your distributive share of any income or loss from a trade or business carried on by the partnership is community property, treat your share as your self-employment earnings. Prior taxes Do not treat any of your share as self-employment earnings of your spouse. Prior taxes Figuring Self-Employment Earnings Farmer. Prior taxes   If you are self-employed as a farmer, use Schedule F (Form 1040) to figure your self-employment earnings. Prior taxes Partnership income or loss. Prior taxes   If you are a member of a partnership that carries on a trade or business, the partnership should report your self-employment earnings in box 14, code A, of your Schedule K-1 (Form 1065). Prior taxes Box 14 of Schedule K-1 may also provide amounts for gross farming or fishing income (code B) and gross nonfarm income (code C). Prior taxes Use these amounts if you use the farm or nonfarm optional method to figure net earnings from self-employment (see Methods for Figuring Net Earnings , later). Prior taxes   If you are a general partner, you may need to reduce these reported earnings by amounts you claim as a section 179 deduction, unreimbursed partnership expenses, or depletion on oil and gas properties. Prior taxes   If the amount reported is a loss, include only the deductible amount when you figure your total self-employment earnings. Prior taxes   For more information, see the Partner's Instructions for Schedule K-1 (Form 1065). Prior taxes   For general information on partnerships, see Publication 541. Prior taxes More than one business. Prior taxes   If you have self-employment earnings from more than one trade, business, or profession, you generally must combine the net profit or loss from each to determine your total self-employment earnings. Prior taxes A loss from one business reduces your profit from another business. Prior taxes However, do not combine earnings from farm and nonfarm businesses if you are using one of the optional methods (discussed later) to figure net earnings. Prior taxes Community property. Prior taxes   If any of the income from a farm or business, other than a partnership, is community property under state law, it is included in the self-employment earnings of the spouse carrying on the trade or business. Prior taxes Lost income payments. Prior taxes   Lost income payments received from insurance or other sources for reducing or stopping farming activities are included in self-employment earnings. Prior taxes These include USDA payments to compensate for lost income resulting from reductions in tobacco quotas and allotments. Prior taxes Even if you are not farming when you receive the payment, it is included in self-employment earnings if it relates to your farm business (even though it is temporarily inactive). Prior taxes A connection exists if it is clear the payment would not have been made but for your conduct of your farm business. Prior taxes Gain or loss. Prior taxes   A gain or loss from the disposition of property that is neither stock in trade nor held primarily for sale to customers is not included in self-employment earnings. Prior taxes It does not matter whether the disposition is a sale, exchange, or involuntary conversion. Prior taxes For example, gains or losses from the disposition of the following types of property are not included in self-employment earnings. Prior taxes Investment property. Prior taxes Depreciable property or other fixed assets used in your trade or business. Prior taxes Livestock held for draft, breeding, sport, or dairy purposes, and not held primarily for sale, regardless of how long the livestock was held, or whether it was raised or purchased. Prior taxes Unharvested standing crops sold with land held more than 1 year. Prior taxes Timber, coal, or iron ore held for more than 1 year if an economic interest was retained, such as a right to receive coal royalties. Prior taxes   A gain or loss from the cutting of timber is not included in self-employment earnings if the cutting is treated as a sale or exchange. Prior taxes For more information on electing to treat the cutting of timber as a sale or exchange, see Timber in chapter 8. Prior taxes Wages and salaries. Prior taxes   Wages and salaries received for services performed as an employee and covered by social security or railroad retirement are not included in self-employment earnings. Prior taxes   Wages paid in kind to you for agricultural labor, such as commodity wages, are not included in self-employment earnings. Prior taxes Retired partner. Prior taxes   Retirement income received by a partner from his or her partnership under a written plan is not included in self-employment earnings if all the following apply. Prior taxes The retired partner performs no services for the partnership during the year. Prior taxes The retired partner is owed only the retirement payments. Prior taxes The retired partner's share (if any) of the partnership capital was fully paid to the retired partner. Prior taxes The payments to the retired partner are lifelong periodic payments. Prior taxes Conservation Reserve Program (CRP) payments. Prior taxes   Under the Conservation Reserve Program (CRP), if you own or operate highly erodible or other specified cropland, you may enter into a longterm contract with the USDA, agreeing to convert to a less intensive use of that cropland. Prior taxes You must include the annual rental payments and any onetime incentive payment you receive under the program on Schedule F, lines 4a and 4b. Prior taxes Cost share payments you receive may qualify for the costsharing exclusion. Prior taxes See Cost-Sharing Exclusion (Improvements), above. Prior taxes CRP payments are reported to you on Form 1099G. Prior taxes Individuals who are receiving Social Security retirement or disability benefits may exclude CRP payments when calculating self-employment tax. Prior taxes See the instructions for Schedule SE (Form 1040). Prior taxes Self-employed health insurance deduction. Prior taxes   You cannot deduct the self-employed health insurance deduction you report on Form 1040, line 29, from self-employment earnings on Schedule SE (Form 1040). Prior taxes Landlord Participation in Farming As a general rule, income and deductions from rentals and from personal property leased with real estate are not included in determining self-employment earnings. Prior taxes However, income and deductions from farm rentals, including government commodity program payments received by a landowner who rents land, are included if the rental arrangement provides that the landowner will, and does, materially participate in the production or management of production of the farm products on the land. Prior taxes Crop shares. Prior taxes   Rent paid in the form of crop shares is included in self-employment earnings for the year you sell, exchange, give away, or use the crop shares if you meet one of the four material participation tests (discussed next) at the time the crop shares are produced. Prior taxes Feeding such crop shares to livestock is considered using them. Prior taxes Your gross income for figuring your self-employment earnings includes the fair market value of the crop shares when they are used as feed. Prior taxes Material participation for landlords. Prior taxes   You materially participate if you have an arrangement with your tenant for your participation and you meet one or more of the following tests. Prior taxes You do at least three of the following. Prior taxes Pay, using cash or credit, at least half the direct costs of producing the crop or livestock. Prior taxes Furnish at least half the tools, equipment, and livestock used in the production activities. Prior taxes Advise or consult with your tenant. Prior taxes Inspect the production activities periodically. Prior taxes You regularly and frequently make, or take an important part in making, management decisions substantially contributing to or affecting the success of the enterprise. Prior taxes You work 100 hours or more spread over a period of 5 weeks or more in activities connected with agricultural production. Prior taxes You do things that, considered in their totality, show you are materially and significantly involved in the production of the farm commodities. Prior taxes These tests may be used as general guides for determining whether you are a material participant. Prior taxes Example. Prior taxes Drew Houston agrees to produce a crop on J. Prior taxes Clarke's cotton farm, with each receiving half the proceeds. Prior taxes Clarke advises Houston when to plant, spray, and pick the cotton. Prior taxes During the growing season, Clarke inspects the crop every few days to determine whether Houston is properly taking care of the crop. Prior taxes Houston furnishes all labor needed to grow and harvest the crop. Prior taxes The management decisions made by Clarke in connection with the care of the cotton crop and his regular inspection of the crop establish that he participates to a material degree in the cotton production operations. Prior taxes The income Clarke receives from his cotton farm is included in his self-employment earnings. Prior taxes Methods for Figuring Net Earnings There are three ways to figure your net earnings from self-employment. Prior taxes The regular method. Prior taxes The farm optional method. Prior taxes The nonfarm optional method. Prior taxes You must use the regular method unless you are eligible to use one or both of the optional methods. Prior taxes See Figure 12-1 , shown later. Prior taxes Figure 12-1. Prior taxes Can I Use the Optional Methods? Please click here for the text description of the image. Prior taxes Figure 12–1. Prior taxes Can I Use the Optional Methods? Why use an optional method?   You may want to use the optional methods (discussed later) when you have a loss or a small net profit and any one of the following applies. Prior taxes You want to receive credit for social security benefit coverage. Prior taxes You incurred child or dependent care expenses for which you could claim a credit. Prior taxes (An optional method may increase your earned income, which could increase your credit. Prior taxes ) You are entitled to the earned income credit. Prior taxes (An optional method may increase your earned income, which could increase your credit. Prior taxes ) You are entitled to the additional child tax credit. Prior taxes (An optional method may increase your earned income, which could increase your credit. Prior taxes ) Effects of using an optional method. Prior taxes   Using an optional method could increase your SE tax. Prior taxes Paying more SE tax may result in you getting higher social security disability or retirement benefits. Prior taxes   If you use either or both optional methods, you must figure and pay the SE tax due under these methods even if you would have had a smaller SE tax or no SE tax using the regular method. Prior taxes   The optional methods may be used only to figure your SE tax. Prior taxes To figure your income tax, include your actual self-employment earnings in gross income, regardless of which method you use to determine SE tax. Prior taxes Regular Method Multiply your total self-employment earnings by 92. Prior taxes 35% (. Prior taxes 9235) to get your net earnings under the regular method. Prior taxes See Short Schedule SE, line 4, or Long Schedule SE, line 4a. Prior taxes Net earnings figured using the regular method are also called “actual net earnings. Prior taxes ” Farm Optional Method Use the farm optional method only for self-employment earnings from a farming business. Prior taxes You can use this method if you meet either of the following tests. Prior taxes Your gross farm income is $6,960 or less. Prior taxes Your net farm profits are less than $5,024. Prior taxes Gross farm income. Prior taxes   Your gross farm income is the total of the amounts from: Schedule F (Form 1040), line 9, and Schedule K-1 (Form 1065), box 14, code B (from farm partnerships). Prior taxes Net farm profits. Prior taxes   Net farm profits generally are the total of the amounts from: Schedule F (Form 1040), line 34, and Schedule K-1 (Form 1065), box 14, code A (from farm partnerships). Prior taxes However, you may need to adjust the amount reported on Schedule K-1 if you are a general partner or if it is a loss. Prior taxes For more information, see Partnership income or loss , earlier. Prior taxes Figuring farm net earnings. Prior taxes   If you meet either of the two tests explained above, use Table 12-1. Prior taxes Figuring Farm Net Earnings , to figure your net earnings from self-employment under the farm optional method. Prior taxes Table 12-1. Prior taxes Figuring Farm Net Earnings IF your gross farm income  is. Prior taxes . Prior taxes . Prior taxes THEN your net earnings are equal to. Prior taxes . Prior taxes . Prior taxes $6,960 or less Two-thirds of your gross farm income. Prior taxes More than $6,960 $4,640 Optional method can reduce or eliminate SE tax. Prior taxes   If your gross farm income is $6,960 or less and your farm net earnings figured under the farm optional method are less than your actual net earnings, you can use the farm optional method to reduce or eliminate your SE tax. Prior taxes Your actual net earnings are your net earnings figured using the regular method, explained earlier. Prior taxes Example. Prior taxes Your gross farm income is $540 and your net farm profit is $460. Prior taxes Consequently, your net earnings figured under the farm optional method are $360 (2/3 of $540) and your actual net earnings are $425 (92. Prior taxes 35% of $460). Prior taxes You owe no SE tax if you use the optional method because your net earnings under the farm optional method are less than $400. Prior taxes Nonfarm Optional Method This is an optional method available for determining net earnings from nonfarm self-employment, much like the farm optional method. Prior taxes If you are also engaged in a nonfarm business, you may be able to use this method to figure your nonfarm net earnings. Prior taxes You can use this method even if you do not use the farm optional method for determining your farm net earnings and even if you have a net loss from your nonfarm business. Prior taxes For more information about the nonfarm optional method, see Publication 334. Prior taxes You cannot combine farm and nonfarm self-employment earnings to figure your net earnings under either of the optional methods. Prior taxes Using Both Optional Methods If you use both optional methods, you must add the net earnings figured under each method to arrive at your total net earnings from self-employment. Prior taxes You can report less than your total actual farm and nonfarm net earnings but not less than actual nonfarm net earnings. Prior taxes If you use both optional methods, you can report no more than $4,640 as your combined net earnings from self-employment. Prior taxes Reporting Self-Employment Tax Use Schedule SE (Form 1040) to figure and report your SE tax. Prior taxes Then, enter the SE tax on line 56 of Form 1040 and attach Schedule SE to Form 1040. Prior taxes Most taxpayers can use Section A–Short Schedule SE to figure their SE tax. Prior taxes However, certain taxpayers must use Section B–Long Schedule SE. Prior taxes Use the chart on page 1 of Schedule SE to find out which one to use. Prior taxes If you have to pay SE tax, you must file Form 1040 (with Schedule SE attached) even if you do not otherwise have to file a federal income tax return. Prior taxes Deduction for employer-equivalent portion of self-employment tax. Prior taxes   You can deduct the employer-equivalent portion of your SE tax in figuring your adjusted gross income. Prior taxes This deduction only affects your income tax. Prior taxes It does not affect either your net earnings from self-employment or your SE tax. Prior taxes   To deduct the tax, enter on Form 1040, line 27, the amount shown on Section A, Line 6, or Section B, line 13, Deduction for employer-equivalent portion of self-employment tax, of the Schedule SE. Prior taxes Joint return. Prior taxes   Even if you file a joint return, you cannot file a joint Schedule SE. Prior taxes This is true whether one spouse or both spouses have self-employment earnings. Prior taxes Your spouse is not considered self-employed just because you are. Prior taxes If both of you have self-employment earnings, each of you must complete a separate Schedule SE. Prior taxes However, if one spouse uses the Short Schedule SE and the other spouse has to use the Long Schedule SE, both can use the same form. Prior taxes Attach both schedules to the joint return. Prior taxes If you and your spouse operate a business as a partnership, see Business Owned and Operated by Spouses and Qualified joint venture , earlier, under Who Must Pay Self-Employment Tax . Prior taxes Prev  Up  Next   Home   More Online Publications
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Alivio Tributario en Situaciones de Desastre para Personas y Negocios

English

Las provisiones especiales de impuesto podrían ayudar a los contribuyentes a recuperarse financieramente del impacto de un desastre, especialmente si el Presidente de los Estados Unidos declara su localidad como una Zona de Desastre. Dependiendo de las circunstancias, el IRS puede otorgar tiempo adicional para presentar la declaración federal y pagar los impuestos. Tanto los individuos como los negocios dentro de una zona designada por el Presidente como Zona de Desastre pueden obtener su reembolso más rápido reclamando las pérdidas relacionadas con el desastre en su declaración de impuestos para el año anterior, presentando una declaración enmendada.

 


Pérdidas por hechos fortuitos, desastres y robo, Tema Tributario 515
Cómo Reconstruir Sus Registros

 


Para mayor información:

Agencia Federal para el Manejo de Emergencias (FEMA)
GobiernoUSA.gov sobre Desastres y Emergencias&quot&gtInformación de GobiernoUSA.gov sobre Desastres y Emergencias

 


Publicaciones:

Publicación 547(SPP Hechos Fortuitos, Desastres y Robos
Publicación 584(SP) Registro de Pérdidas por Hechos Fortuitos (Imprevistos), Desastres y Robos (Propiedad de Uso Personal)
Publicación 3067 (SP) - Asistencia del IRS en Desastres
Publicación 1600(SP) Ayuda del IRS para contribuyentes afectados por desastres y pérdidas
Publicación 4492SP - Información para los Contribuyentes Afectados por los Huracanes Katrina, Rita y Wilma

 

 

Page Last Reviewed or Updated: 02-Dec-2013

The Prior Taxes

Prior taxes 17. Prior taxes   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. Prior taxes  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. Prior taxes 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. Prior taxes For more information, see How Much Can Be Contributed? later. Prior taxes Roth IRA contribution limit. Prior taxes  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. Prior taxes 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. Prior taxes However, if your modified adjusted gross income (AGI) is above a certain amount, your contribution limit may be reduced. Prior taxes For more information, see How Much Can Be Contributed? under Can You Contribute to a Roth IRA? later. Prior taxes Modified AGI limit for traditional IRA contributions increased. Prior taxes  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. Prior taxes 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. Prior taxes If your modified AGI is $188,000 or more, you cannot take a deduction for contributions to a traditional IRA. Prior taxes See How Much Can You Deduct , later. Prior taxes Modified AGI limit for Roth IRA contributions increased. Prior taxes  For 2013, your Roth IRA contribution limit is reduced (phased out) in the following situations. Prior taxes Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $178,000. Prior taxes You cannot make a Roth IRA contribution if your modified AGI is $188,000 or more. Prior taxes 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. Prior taxes You cannot make a Roth IRA contribution if your modified AGI is $127,000 or more. Prior taxes 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-. Prior taxes You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more. Prior taxes See Can You Contribute to a Roth IRA , later. Prior taxes Net Investment Income Tax. Prior taxes   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). Prior taxes However, these distributions are taken into account when determining the modified adjusted gross income threshold. Prior taxes Distributions from a nonqualified retirement plan are included in net investment income. Prior taxes See Form 8960, Net Investment Income Tax - Individuals, Estates, and Trusts, and its instructions for more information. Prior taxes Name change. Prior taxes  All spousal IRAs have been renamed Kay Bailey Hutchison Spousal IRAs. Prior taxes There are no changes to the rules regarding these IRAs. Prior taxes See Kay Bailey Hutchison Spousal IRA Limit , later, for more information. Prior taxes Reminders 2014 limits. Prior taxes   You can find information about the 2014 contribution and AGI limits in Publication 590. Prior taxes Contributions to both traditional and Roth IRAs. Prior taxes   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. Prior taxes Statement of required minimum distribution. Prior taxes  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. Prior taxes The report or offer must include the date by which the amount must be distributed. Prior taxes The report is due January 31 of the year in which the minimum distribution is required. Prior taxes It can be provided with the year-end fair market value statement that you normally get each year. Prior taxes No report is required for IRAs of owners who have died. Prior taxes IRA interest. Prior taxes  Although interest earned from your IRA is generally not taxed in the year earned, it is not tax-exempt interest. Prior taxes Tax on your traditional IRA is generally deferred until you take a distribution. Prior taxes Do not report this interest on your tax return as tax-exempt interest. Prior taxes Form 8606. Prior taxes   To designate contributions as nondeductible, you must file Form 8606, Nondeductible IRAs. Prior taxes The term “50 or older” is used several times in this chapter. Prior taxes It refers to an IRA owner who is age 50 or older by the end of the tax year. Prior taxes Introduction An individual retirement arrangement (IRA) is a personal savings plan that gives you tax advantages for setting aside money for your retirement. Prior taxes This chapter discusses the following topics. Prior taxes The rules for a traditional IRA (any IRA that is not a Roth or SIMPLE IRA). Prior taxes The Roth IRA, which features nondeductible contributions and tax-free distributions. Prior taxes Simplified Employee Pensions (SEPs) and Savings Incentive Match Plans for Employees (SIMPLEs) are not discussed in this chapter. Prior taxes For more information on these plans and employees' SEP IRAs and SIMPLE IRAs that are part of these plans, see Publications 560 and 590. Prior taxes For information about contributions, deductions, withdrawals, transfers, rollovers, and other transactions, see Publication 590. Prior taxes 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. Prior taxes ” A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA. Prior taxes 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. Prior taxes 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. Prior taxes What is compensation?   Generally, compensation is what you earn from working. Prior taxes Compensation includes wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services. Prior taxes 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). Prior taxes   Scholarship and fellowship payments are compensation for this purpose only if shown in box 1 of Form W-2. Prior taxes   Compensation also includes commissions and taxable alimony and separate maintenance payments. Prior taxes Self-employment income. Prior taxes   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. Prior taxes   Compensation includes earnings from self-employment even if they are not subject to self-employment tax because of your religious beliefs. Prior taxes Nontaxable combat pay. Prior taxes   For IRA purposes, if you were a member of the U. Prior taxes S. Prior taxes Armed Forces, your compensation includes any nontaxable combat pay you receive. Prior taxes What is not compensation?   Compensation does not include any of the following items. Prior taxes Earnings and profits from property, such as rental income, interest income, and dividend income. Prior taxes Pension or annuity income. Prior taxes Deferred compensation received (compensation payments postponed from a past year). Prior taxes Income from a partnership for which you do not provide services that are a material income-producing factor. Prior taxes Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b. Prior taxes Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs. Prior taxes When and How Can a Traditional IRA Be Opened? You can open a traditional IRA at any time. Prior taxes However, the time for making contributions for any year is limited. Prior taxes See When Can Contributions Be Made , later. Prior taxes You can open different kinds of IRAs with a variety of organizations. Prior taxes You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. Prior taxes You can also open an IRA through your stockbroker. Prior taxes Any IRA must meet Internal Revenue Code requirements. Prior taxes Kinds of traditional IRAs. Prior taxes   Your traditional IRA can be an individual retirement account or annuity. Prior taxes It can be part of either a simplified employee pension (SEP) or an employer or employee association trust account. Prior taxes How Much Can Be Contributed? There are limits and other rules that affect the amount that can be contributed to a traditional IRA. Prior taxes These limits and other rules are explained below. Prior taxes Community property laws. Prior taxes   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. Prior taxes This is the rule even in states with community property laws. Prior taxes Brokers' commissions. Prior taxes   Brokers' commissions paid in connection with your traditional IRA are subject to the contribution limit. Prior taxes Trustees' fees. Prior taxes   Trustees' administrative fees are not subject to the contribution limit. Prior taxes Qualified reservist repayments. Prior taxes   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. Prior taxes 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. Prior taxes 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. Prior taxes   For more information, see Qualified reservist repayments under How Much Can Be Contributed? in chapter 1 of Publication 590. Prior taxes Contributions on your behalf to a traditional IRA reduce your limit for contributions to a Roth IRA. Prior taxes (See Roth IRAs, later. Prior taxes ) General limit. Prior taxes   For 2013, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts. Prior taxes $5,500 ($6,500 if you are 50 or older). Prior taxes Your taxable compensation (defined earlier) for the year. Prior taxes 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. Prior taxes (See Nondeductible Contributions , later. Prior taxes ) Qualified reservist repayments do not affect this limit. Prior taxes Example 1. Prior taxes Betty, who is 34 years old and single, earned $24,000 in 2013. Prior taxes Her IRA contributions for 2013 are limited to $5,500. Prior taxes Example 2. Prior taxes John, an unmarried college student working part time, earned $3,500 in 2013. Prior taxes His IRA contributions for 2013 are limited to $3,500, the amount of his compensation. Prior taxes Kay Bailey Hutchison Spousal IRA limit. Prior taxes   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. Prior taxes $5,500 ($6,500 if you are 50 or older). Prior taxes The total compensation includible in the gross income of both you and your spouse for the year, reduced by the following two amounts. Prior taxes Your spouse's IRA contribution for the year to a traditional IRA. Prior taxes Any contribution for the year to a Roth IRA on behalf of your spouse. Prior taxes 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). Prior taxes 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). Prior taxes Contributions must be in the form of money (cash, check, or money order). Prior taxes Property cannot be contributed. Prior taxes Contributions must be made by due date. Prior taxes   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. Prior taxes Age 70½ rule. Prior taxes   Contributions cannot be made to your traditional IRA for the year in which you reach age 70½ or for any later year. Prior taxes   You attain age 70½ on the date that is 6 calendar months after the 70th anniversary of your birth. Prior taxes If you were born on or before June 30, 1943, you cannot contribute for 2013 or any later year. Prior taxes Designating year for which contribution is made. Prior taxes   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. Prior taxes 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). Prior taxes Filing before a contribution is made. Prior taxes   You can file your return claiming a traditional IRA contribution before the contribution is actually made. Prior taxes Generally, the contribution must be made by the due date of your return, not including extensions. Prior taxes Contributions not required. Prior taxes   You do not have to contribute to your traditional IRA for every tax year, even if you can. Prior taxes 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). Prior taxes However, if you or your spouse was covered by an employer retirement plan, you may not be able to deduct this amount. Prior taxes See Limit If Covered by Employer Plan , later. Prior taxes You may be able to claim a credit for contributions to your traditional IRA. Prior taxes For more information, see chapter 37. Prior taxes Trustees' fees. Prior taxes   Trustees' administrative fees that are billed separately and paid in connection with your traditional IRA are not deductible as IRA contributions. Prior taxes However, they may be deductible as a miscellaneous itemized deduction on Schedule A (Form 1040). Prior taxes See chapter 28. Prior taxes Brokers' commissions. Prior taxes   Brokers' commissions are part of your IRA contribution and, as such, are deductible subject to the limits. Prior taxes Full deduction. Prior taxes   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). Prior taxes 100% of your compensation. Prior taxes This limit is reduced by any contributions made to a 501(c)(18) plan on your behalf. Prior taxes Kay Bailey Hutchison Spousal IRA. Prior taxes   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. Prior taxes $5,500 ($6,500 if the spouse with the lower compensation is age 50 or older in 2013). Prior taxes The total compensation includible in the gross income of both spouses for the year reduced by the following three amounts. Prior taxes The IRA deduction for the year of the spouse with the greater compensation. Prior taxes Any designated nondeductible contribution for the year made on behalf of the spouse with the greater compensation. Prior taxes Any contributions for the year to a Roth IRA on behalf of the spouse with the greater compensation. Prior taxes This limit is reduced by any contributions to a 501(c)(18) plan on behalf of the spouse with the lesser compensation. Prior taxes Note. Prior taxes 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. Prior taxes After a divorce or legal separation, you can deduct only contributions to your own IRA. Prior taxes Your deductions are subject to the rules for single individuals. Prior taxes Covered by an employer retirement plan. Prior taxes   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. Prior taxes This is discussed later under Limit If Covered by Employer Plan . Prior taxes Limits on the amount you can deduct do not affect the amount that can be contributed. Prior taxes See Nondeductible Contributions , later. Prior taxes 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. Prior taxes The “Retirement plan” box should be checked if you were covered. Prior taxes Reservists and volunteer firefighters should also see Situations in Which You Are Not Covered by an Employer Plan , later. Prior taxes If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer. Prior taxes Federal judges. Prior taxes   For purposes of the IRA deduction, federal judges are covered by an employer retirement plan. Prior taxes 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. Prior taxes These rules differ depending on whether the plan is a defined contribution plan or a defined benefit plan. Prior taxes Tax year. Prior taxes   Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. Prior taxes For almost all people, the tax year is the calendar year. Prior taxes Defined contribution plan. Prior taxes   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. Prior taxes   A defined contribution plan is a plan that provides for a separate account for each person covered by the plan. Prior taxes Types of defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans. Prior taxes Defined benefit plan. Prior taxes   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. Prior taxes 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. Prior taxes   A defined benefit plan is any plan that is not a defined contribution plan. Prior taxes Defined benefit plans include pension plans and annuity plans. Prior taxes No vested interest. Prior taxes   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. Prior taxes 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. Prior taxes Social security or railroad retirement. Prior taxes   Coverage under social security or railroad retirement is not coverage under an employer retirement plan. Prior taxes Benefits from a previous employer's plan. Prior taxes   If you receive retirement benefits from a previous employer's plan, you are not covered by that plan. Prior taxes Reservists. Prior taxes   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. Prior taxes You are not covered by the plan if both of the following conditions are met. Prior taxes 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. Prior taxes You did not serve more than 90 days on active duty during the year (not counting duty for training). Prior taxes Volunteer firefighters. Prior taxes   If the only reason you participate in a plan is because you are a volunteer firefighter, you may not be covered by the plan. Prior taxes You are not covered by the plan if both of the following conditions are met. Prior taxes 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. Prior taxes Your accrued retirement benefits at the beginning of the year will not provide more than $1,800 per year at retirement. Prior taxes 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. Prior taxes 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. Prior taxes These amounts vary depending on your filing status. Prior taxes To determine if your deduction is subject to phaseout, you must determine your modified adjusted gross income (AGI) and your filing status. Prior taxes See Filing status and Modified adjusted gross income (AGI) , later. Prior taxes Then use Table 17-1 or 17-2 to determine if the phaseout applies. Prior taxes Social security recipients. Prior taxes   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. Prior taxes You received social security benefits. Prior taxes You received taxable compensation. Prior taxes Contributions were made to your traditional IRA. Prior taxes You or your spouse was covered by an employer retirement plan. Prior taxes Use those worksheets to figure your IRA deduction, your nondeductible contribution, and the taxable portion, if any, of your social security benefits. Prior taxes Deduction phaseout. Prior taxes   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. Prior taxes Table 17-1. Prior taxes 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. Prior taxes IF your filing status is. Prior taxes . Prior taxes . Prior taxes   AND your modified AGI is. Prior taxes . Prior taxes . Prior taxes   THEN you can take. Prior taxes . Prior taxes . Prior taxes single   or  head of household   $59,000 or less   a full deduction. Prior taxes   more than $59,000 but less than $69,000   a partial deduction. Prior taxes   $69,000 or more   no deduction. Prior taxes married filing jointly   or  qualifying widow(er)   $95,000 or less   a full deduction. Prior taxes   more than $95,000 but less than $115,000   a partial deduction. Prior taxes   $115,000 or more   no deduction. Prior taxes married filing separately2   less than $10,000   a partial deduction. Prior taxes   $10,000 or more   no deduction. Prior taxes 1Modified AGI (adjusted gross income). Prior taxes See Modified adjusted gross income (AGI) . Prior taxes 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). Prior taxes If your spouse is covered. Prior taxes   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. Prior taxes Filing status. Prior taxes   Your filing status depends primarily on your marital status. Prior taxes 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. Prior taxes If you need more information on filing status, see chapter 2. Prior taxes Lived apart from spouse. Prior taxes   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. Prior taxes Table 17-2. Prior taxes 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. Prior taxes IF your filing status is. Prior taxes . Prior taxes . Prior taxes   AND your modified AGI is. Prior taxes . Prior taxes . Prior taxes   THEN you can take. Prior taxes . Prior taxes . Prior taxes single, head of household, or qualifying widow(er)   any amount   a full deduction. Prior taxes married filing jointly or separately with a spouse who is not covered by a plan at work   any amount   a full deduction. Prior taxes married filing jointly with a spouse who is covered by a plan at work   $178,000 or less   a full deduction. Prior taxes   more than $178,000 but less than $188,000   a partial deduction. Prior taxes   $188,000 or more   no deduction. Prior taxes married filing separately with a spouse who is covered by a plan at work2   less than $10,000   a partial deduction. Prior taxes   $10,000 or more   no deduction. Prior taxes 1Modified AGI (adjusted gross income). Prior taxes See Modified adjusted gross income (AGI) . Prior taxes 2You are entitled to the full deduction if you did not live with your spouse at any time during the year. Prior taxes Modified adjusted gross income (AGI). Prior taxes   How you figure your modified AGI depends on whether you are filing Form 1040 or Form 1040A. Prior taxes If you made contributions to your IRA for 2013 and received a distribution from your IRA in 2013, see Publication 590. Prior taxes You may be able to use Worksheet 17-1 to figure your modified AGI. Prior taxes    Do not assume that your modified AGI is the same as your compensation. Prior taxes Your modified AGI may include income in addition to your compensation (discussed earlier), such as interest, dividends, and income from IRA distributions. Prior taxes Form 1040. Prior taxes   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. Prior taxes IRA deduction. Prior taxes Student loan interest deduction. Prior taxes Tuition and fees deduction. Prior taxes Domestic production activities deduction. Prior taxes Foreign earned income exclusion. Prior taxes Foreign housing exclusion or deduction. Prior taxes Exclusion of qualified savings bond interest shown on Form 8815, Exclusion of Interest From Series EE and I U. Prior taxes S. Prior taxes Savings Bonds Issued After 1989. Prior taxes Exclusion of employer-provided adoption benefits shown on Form 8839, Qualified Adoption Expenses. Prior taxes This is your modified AGI. Prior taxes Form 1040A. Prior taxes   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. Prior taxes IRA deduction. Prior taxes Student loan interest deduction. Prior taxes Tuition and fees deduction. Prior taxes Exclusion of qualified savings bond interest shown on Form 8815. Prior taxes This is your modified AGI. Prior taxes Both contributions for 2013 and distributions in 2013. Prior taxes   If all three of the following apply, any IRA distributions you received in 2013 may be partly tax free and partly taxable. Prior taxes You received distributions in 2013 from one or more traditional IRAs. Prior taxes You made contributions to a traditional IRA for 2013. Prior taxes Some of those contributions may be nondeductible contributions. Prior taxes If this is your situation, you must figure the taxable part of the traditional IRA distribution before you can figure your modified AGI. Prior taxes To do this, you can use Worksheet 1-5, Figuring the Taxable Part of Your IRA Distribution, in Publication 590. Prior taxes   If at least one of the above does not apply, figure your modified AGI using Worksheet 17-1, later. Prior taxes    How to figure your reduced IRA deduction. Prior taxes   You can figure your reduced IRA deduction for either Form 1040 or Form 1040A by using the worksheets in chapter 1 of Publication 590. Prior taxes Also, the instructions for Form 1040 and Form 1040A include similar worksheets that you may be able to use instead. Prior taxes Worksheet 17-1. Prior taxes Figuring Your Modified AGI Use this worksheet to figure your modified adjusted gross income for traditional IRA purposes. Prior taxes 1. Prior taxes 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. Prior taxes   2. Prior taxes Enter any student loan interest deduction from Form 1040, line 33, or Form 1040A, line 18 2. Prior taxes   3. Prior taxes Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 3. Prior taxes   4. Prior taxes Enter any domestic production activities deduction from Form 1040, line 35 4. Prior taxes   5. Prior taxes Enter any foreign earned income and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 5. Prior taxes   6. Prior taxes Enter any foreign housing deduction from Form 2555, line 50 6. Prior taxes   7. Prior taxes Enter any excludable savings bond interest from Form 8815, line 14 7. Prior taxes   8. Prior taxes Enter any excluded employer-provided adoption benefits from Form 8839, line 28 8. Prior taxes   9. Prior taxes Add lines 1 through 8. Prior taxes This is your Modified AGI for traditional IRA purposes 9. Prior taxes   Reporting Deductible Contributions If you file Form 1040, enter your IRA deduction on line 32 of that form. Prior taxes If you file Form 1040A, enter your IRA deduction on line 17. Prior taxes You cannot deduct IRA contributions on Form 1040EZ. Prior taxes 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. Prior taxes The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. Prior taxes Example. Prior taxes Mike is 28 years old and single. Prior taxes In 2013, he was covered by a retirement plan at work. Prior taxes His salary was $57,312. Prior taxes His modified AGI was $70,000. Prior taxes Mike made a $5,500 IRA contribution for 2013. Prior taxes Because he was covered by a retirement plan and his modified AGI was over $69,000, he cannot deduct his $5,500 IRA contribution. Prior taxes He must designate this contribution as a nondeductible contribution by reporting it on Form 8606, as explained next. Prior taxes Form 8606. Prior taxes   To designate contributions as nondeductible, you must file Form 8606. Prior taxes   You do not have to designate a contribution as nondeductible until you file your tax return. Prior taxes When you file, you can even designate otherwise deductible contributions as nondeductible. Prior taxes   You must file Form 8606 to report nondeductible contributions even if you do not have to file a tax return for the year. Prior taxes 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. Prior taxes In those situations, a Form 8606 is completed for the year you take a distribution from that IRA. Prior taxes See Form 8606 under Distributions Fully or Partly Taxable, later. Prior taxes Failure to report nondeductible contributions. Prior taxes   If you do not report nondeductible contributions, all of the contributions to your traditional IRA will be treated as deductible contributions when withdrawn. Prior taxes All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. Prior taxes Penalty for overstatement. Prior taxes   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. Prior taxes Penalty for failure to file Form 8606. Prior taxes   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. Prior taxes    Tax on earnings on nondeductible contributions. Prior taxes   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. Prior taxes See When Can You Withdraw or Use IRA Assets , later. Prior taxes Cost basis. Prior taxes   You will have a cost basis in your traditional IRA if you made any nondeductible contributions. Prior taxes Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions. Prior taxes Inherited IRAs If you inherit a traditional IRA, you are called a beneficiary. Prior taxes A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. Prior taxes Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive. Prior taxes Inherited from spouse. Prior taxes   If you inherit a traditional IRA from your spouse, you generally have the following three choices. Prior taxes You can: Treat it as your own IRA by designating yourself as the account owner. Prior taxes 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). Prior taxes Treat yourself as the beneficiary rather than treating the IRA as your own. Prior taxes Treating it as your own. Prior taxes   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. Prior taxes 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. Prior taxes   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. Prior taxes Inherited from someone other than spouse. Prior taxes   If you inherit a traditional IRA from anyone other than your deceased spouse, you cannot treat the inherited IRA as your own. Prior taxes This means that you cannot make any contributions to the IRA. Prior taxes It also means you cannot roll over any amounts into or out of the inherited IRA. Prior taxes 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. Prior taxes For more information, see the discussion of inherited IRAs under Rollover From One IRA Into Another, later. Prior taxes 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. Prior taxes You can make the following kinds of transfers. Prior taxes Transfers from one trustee to another. Prior taxes Rollovers. Prior taxes Transfers incident to a divorce. Prior taxes Transfers to Roth IRAs. Prior taxes   Under certain conditions, you can move assets from a traditional IRA or from a designated Roth account to a Roth IRA. Prior taxes You can also move assets from a qualified retirement plan to a Roth IRA. Prior taxes See Can You Move Amounts Into a Roth IRA? under Roth IRAs, later. Prior taxes 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. Prior taxes Because there is no distribution to you, the transfer is tax free. Prior taxes 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 . Prior taxes 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. Prior taxes 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. Prior taxes The contribution to the second retirement plan is called a “rollover contribution. Prior taxes ” Note. Prior taxes 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. Prior taxes Kinds of rollovers to a traditional IRA. Prior taxes   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). Prior taxes Treatment of rollovers. Prior taxes   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 . Prior taxes Kinds of rollovers from a traditional IRA. Prior taxes   You may be able to roll over, tax free, a distribution from your traditional IRA into a qualified plan. Prior taxes 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). Prior taxes The part of the distribution that you can roll over is the part that would otherwise be taxable (includible in your income). Prior taxes Qualified plans may, but are not required to, accept such rollovers. Prior taxes Time limit for making a rollover contribution. Prior taxes   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. Prior taxes 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. Prior taxes For more information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Prior taxes Extension of rollover period. Prior taxes   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. Prior taxes For more information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Prior taxes More information. Prior taxes   For more information on rollovers, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Prior taxes 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. Prior taxes Because this is a rollover, you cannot deduct the amount that you reinvest in an IRA. Prior taxes Waiting period between rollovers. Prior taxes   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. Prior taxes 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. Prior taxes   The 1-year period begins on the date you receive the IRA distribution, not on the date you roll it over into an IRA. Prior taxes Example. Prior taxes You have two traditional IRAs, IRA-1 and IRA-2. Prior taxes You make a tax-free rollover of a distribution from IRA-1 into a new traditional IRA (IRA-3). Prior taxes 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. Prior taxes 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. Prior taxes 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. Prior taxes Exception. Prior taxes   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. Prior taxes Partial rollovers. Prior taxes   If you withdraw assets from a traditional IRA, you can roll over part of the withdrawal tax free and keep the rest of it. Prior taxes The amount you keep will generally be taxable (except for the part that is a return of nondeductible contributions). Prior taxes 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? . Prior taxes Required distributions. Prior taxes   Amounts that must be distributed during a particular year under the required distribution rules (discussed later) are not eligible for rollover treatment. Prior taxes Inherited IRAs. Prior taxes   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. Prior taxes See Treating it as your own , earlier. Prior taxes Not inherited from spouse. Prior taxes   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. Prior taxes You must withdraw the IRA assets within a certain period. Prior taxes For more information, see When Must You Withdraw Assets? in chapter 1 of Publication 590. Prior taxes Reporting rollovers from IRAs. Prior taxes   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. Prior taxes   Enter the total amount of the distribution on Form 1040, line 15a, or Form 1040A, line 11a. Prior taxes 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. Prior taxes 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. Prior taxes Put “Rollover” next to Form 1040, line 15b, or Form 1040A, line 11b. Prior taxes See your tax return instructions. Prior taxes   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. Prior taxes 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). Prior taxes A qualified plan is one that meets the requirements of the Internal Revenue Code. Prior taxes Eligible rollover distribution. Prior taxes   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. Prior taxes A required minimum distribution (explained later under When Must You Withdraw IRA Assets? (Required Minimum Distributions) ). Prior taxes A hardship distribution. Prior taxes 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. Prior taxes Corrective distributions of excess contributions or excess deferrals, and any income allocable to the excess, or of excess annual additions and any allocable gains. Prior taxes 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. Prior taxes Dividends on employer securities. Prior taxes The cost of life insurance coverage. Prior taxes Any nontaxable amounts that you roll over into your traditional IRA become part of your basis (cost) in your IRAs. Prior taxes To recover your basis when you take distributions from your IRA, you must complete Form 8606 for the year of the distribution. Prior taxes See Form 8606 under Distributions Fully or Partly Taxable, later. Prior taxes Rollover by nonspouse beneficiary. Prior taxes   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. Prior taxes The IRA is treated as an inherited IRA. Prior taxes For more information about inherited IRAs, see Inherited IRAs , earlier. Prior taxes Reporting rollovers from employer plans. Prior taxes    Enter the total distribution (before income tax or other deductions were withheld) on Form 1040, line 16a, or Form 1040A, line 12a. Prior taxes This amount should be shown in box 1 of Form 1099-R. Prior taxes From this amount, subtract any contributions (usually shown in box 5 of Form 1099-R) that were taxable to you when made. Prior taxes From that result, subtract the amount that was rolled over either directly or within 60 days of receiving the distribution. Prior taxes Enter the remaining amount, even if zero, on Form 1040, line 16b, or Form 1040A, line 12b. Prior taxes Also, enter "Rollover" next to Form 1040, line 16b, or Form 1040A, line 12b. Prior taxes 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. Prior taxes The transfer is tax free. Prior taxes For detailed information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Prior taxes Converting From Any Traditional IRA to a Roth IRA Allowable conversions. Prior taxes   You can withdraw all or part of the assets from a traditional IRA and reinvest them (within 60 days) in a Roth IRA. Prior taxes The amount that you withdraw and timely contribute (convert) to the Roth IRA is called a conversion contribution. Prior taxes If properly (and timely) rolled over, the 10% additional tax on early distributions will not apply. Prior taxes However, a part or all of the conversion contribution from your traditional IRA is included in your gross income. Prior taxes Required distributions. Prior taxes   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). Prior taxes Income. Prior taxes   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. Prior taxes 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. Prior taxes   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. Prior taxes   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. Prior taxes   If you must include any amount in your gross income, you may have to increase your withholding or make estimated tax payments. Prior taxes See chapter 4. Prior taxes 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. Prior taxes This is called recharacterizing the contribution. Prior taxes See Can You Move Retirement Plan Assets? in chapter 1 of Publication 590 for more detailed information. Prior taxes How to recharacterize a contribution. Prior taxes   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. Prior taxes 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. Prior taxes If you recharacterize your contribution, you must do all three of the following. Prior taxes Include in the transfer any net income allocable to the contribution. Prior taxes If there was a loss, the net income you must transfer may be a negative amount. Prior taxes Report the recharacterization on your tax return for the year during which the contribution was made. Prior taxes Treat the contribution as having been made to the second IRA on the date that it was actually made to the first IRA. Prior taxes No deduction allowed. Prior taxes   You cannot deduct the contribution to the first IRA. Prior taxes Any net income you transfer with the recharacterized contribution is treated as earned in the second IRA. Prior taxes Required notifications. Prior taxes   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. Prior taxes You must make the notifications by the date of the transfer. Prior taxes Only one notification is required if both IRAs are maintained by the same trustee. Prior taxes The notification(s) must include all of the following information. Prior taxes The type and amount of the contribution to the first IRA that is to be recharacterized. Prior taxes The date on which the contribution was made to the first IRA and the year for which it was made. Prior taxes 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. Prior taxes The name of the trustee of the first IRA and the name of the trustee of the second IRA. Prior taxes Any additional information needed to make the transfer. Prior taxes Reporting a recharacterization. Prior taxes   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. Prior taxes You must treat the contribution as having been made to the second IRA. Prior taxes When Can You Withdraw or Use IRA Assets? There are rules limiting use of your IRA assets and distributions from it. Prior taxes Violation of the rules generally results in additional taxes in the year of violation. Prior taxes See What Acts Result in Penalties or Additional Taxes , later. Prior taxes Contributions returned before the due date of return. Prior taxes   If you made IRA contributions in 2013, you can withdraw them tax free by the due date of your return. Prior taxes If you have an extension of time to file your return, you can withdraw them tax free by the extended due date. Prior taxes You can do this if, for each contribution you withdraw, both of the following conditions apply. Prior taxes You did not take a deduction for the contribution. Prior taxes You withdraw any interest or other income earned on the contribution. Prior taxes You can take into account any loss on the contribution while it was in the IRA when calculating the amount that must be withdrawn. Prior taxes If there was a loss, the net income earned on the contribution may be a negative amount. Prior taxes Note. Prior taxes 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. Prior taxes Earnings includible in income. Prior taxes   You must include in income any earnings on the contributions you withdraw. Prior taxes Include the earnings in income for the year in which you made the contributions, not in the year in which you withdraw them. Prior taxes 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. Prior taxes Excess contributions can also be recovered tax free as discussed under What Acts Result in Penalties or Additional Taxes?, later. Prior taxes    Early distributions tax. Prior taxes   The 10% additional tax on distributions made before you reach age 59½ does not apply to these tax-free withdrawals of your contributions. Prior taxes 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. Prior taxes When Must You Withdraw IRA Assets? (Required Minimum Distributions) You cannot keep funds in a traditional IRA indefinitely. Prior taxes Eventually they must be distributed. Prior taxes 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. Prior taxes See Excess Accumulations (Insufficient Distributions) , later. Prior taxes The requirements for distributing IRA funds differ depending on whether you are the IRA owner or the beneficiary of a decedent's IRA. Prior taxes Required minimum distribution. Prior taxes   The amount that must be distributed each year is referred to as the required minimum distribution. Prior taxes Required distributions not eligible for rollover. Prior taxes   Amounts that must be distributed (required minimum distributions) during a particular year are not eligible for rollover treatment. Prior taxes IRA owners. Prior taxes   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. Prior taxes April 1 of the year following the year in which you reach age 70½ is referred to as the required beginning date. Prior taxes Distributions by the required beginning date. Prior taxes   You must receive at least a minimum amount for each year starting with the year you reach age 70½ (your 70½ year). Prior taxes 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. Prior taxes   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. Prior taxes 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. Prior taxes Distributions after the required beginning date. Prior taxes   The required minimum distribution for any year after the year you turn 70½ must be made by December 31 of that later year. Prior taxes    Beneficiaries. Prior taxes   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. Prior taxes More information. Prior taxes   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. Prior taxes Are Distributions Taxable? In general, distributions from a traditional IRA are taxable in the year you receive them. Prior taxes Exceptions. Prior taxes   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 . Prior taxes    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. Prior taxes 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. Prior taxes Qualified charitable distributions (QCD). Prior taxes   A QCD is generally a nontaxable distribution made directly by the trustee of your IRA to an organization eligible to receive tax-deductible contributions. Prior taxes Special rules apply if you made a qualified charitable distribution in January 2013 that you elected to treat as made in 2012. Prior taxes See Qualified Charitable Distributions in Publication 590 for more information. Prior taxes Ordinary income. Prior taxes   Distributions from traditional IRAs that you include in income are taxed as ordinary income. Prior taxes No special treatment. Prior taxes   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. Prior taxes 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. Prior taxes Fully taxable. Prior taxes   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. Prior taxes Because you have no basis in your IRA, any distributions are fully taxable when received. Prior taxes See Reporting taxable distributions on your return , later. Prior taxes Partly taxable. Prior taxes    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. Prior taxes These nondeductible contributions are not taxed when they are distributed to you. Prior taxes They are a return of your investment in your IRA. Prior taxes   Only the part of the distribution that represents nondeductible contributions and rolled over after-tax amounts (your cost basis) is tax free. Prior taxes 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). Prior taxes Until all of your basis has been distributed, each distribution is partly nontaxable and partly taxable. Prior taxes Form 8606. Prior taxes   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. Prior taxes Using the form, you will figure the nontaxable distributions for 2013 and your total IRA basis for 2013 and earlier years. Prior taxes Note. Prior taxes 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. Prior taxes Send it to the IRS at the time and place you would otherwise file an income tax return. Prior taxes Distributions reported on Form 1099-R. Prior taxes   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. Prior taxes , or a similar statement. Prior taxes IRA distributions are shown in boxes 1 and 2a of Form 1099-R. Prior taxes A number or letter code in box 7 tells you what type of distribution you received from your IRA. Prior taxes Withholding. Prior taxes   Federal income tax is withheld from distributions from traditional IRAs unless you choose not to have tax withheld. Prior taxes See chapter 4. Prior taxes IRA distributions delivered outside the United States. Prior taxes   In general, if you are a U. Prior taxes S. Prior taxes 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. Prior taxes Reporting taxable distributions on your return. Prior taxes    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). Prior taxes 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. Prior taxes You cannot report distributions on Form 1040EZ. Prior taxes 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. Prior taxes There are additions to the regular tax for using your IRA funds in prohibited transactions. Prior taxes There are also additional taxes for the following activities. Prior taxes Investing in collectibles. Prior taxes Making excess contributions. Prior taxes Taking early distributions. Prior taxes Allowing excess amounts to accumulate (failing to take required distributions). Prior taxes There are penalties for overstating the amount of nondeductible contributions and for failure to file a Form 8606, if required. Prior taxes Prohibited Transactions Generally, a prohibited transaction is any improper use of your traditional IRA by you, your beneficiary, or any disqualified person. Prior taxes Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendent, and any spouse of a lineal descendent). Prior taxes The following are examples of prohibited transactions with a traditional IRA. Prior taxes Borrowing money from it. Prior taxes Selling property to it. Prior taxes Receiving unreasonable compensation for managing it. Prior taxes Using it as security for a loan. Prior taxes Buying property for personal use (present or future) with IRA funds. Prior taxes Effect on an IRA account. Prior taxes   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. Prior taxes Effect on you or your beneficiary. Prior taxes   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. Prior taxes 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. Prior taxes For information on figuring your gain and reporting it in income, see Are Distributions Taxable , earlier. Prior taxes The distribution may be subject to additional taxes or penalties. Prior taxes Taxes on prohibited transactions. Prior taxes   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. Prior taxes 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. Prior taxes More information. Prior taxes   For more information on prohibited transactions, see What Acts Result in Penalties or Additional Taxes? in chapter 1 of Publication 590. Prior taxes Investment in Collectibles If your traditional IRA invests in collectibles, the amount invested is considered distributed to you in the year invested. Prior taxes You may have to pay the 10% additional tax on early distributions, discussed later. Prior taxes Collectibles. Prior taxes   These include: Artworks, Rugs, Antiques, Metals, Gems, Stamps, Coins, Alcoholic beverages, and Certain other tangible personal property. Prior taxes Exception. Prior taxes    Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U. Prior taxes S. Prior taxes gold coins, or one-ounce silver coins minted by the Treasury Department. Prior taxes It can also invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion. Prior taxes 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. Prior taxes For 2013, this is $5,500 ($6,500 if you are 50 or older), or Your taxable compensation for the year. Prior taxes Tax on excess contributions. Prior taxes   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. Prior taxes You must pay the 6% tax each year on excess amounts that remain in your traditional IRA at the end of your tax year. Prior taxes The tax cannot be more than 6% of the combined value of all your IRAs as of the end of your tax year. Prior taxes Excess contributions withdrawn by due date of return. Prior taxes   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. Prior taxes You must complete your withdrawal by the date your tax return for that year is due, including extensions. Prior taxes How to treat withdrawn contributions. Prior taxes   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. Prior taxes No deduction was allowed for the excess contribution. Prior taxes You withdraw the interest or other income earned on the excess contribution. Prior taxes You can take into account any loss on the contribution while it was in the IRA when calculating the amount that must be withdrawn. Prior taxes If there was a loss, the net income you must withdraw may be a negative amount. Prior taxes How to treat withdrawn interest or other income. Prior taxes   You must include in your gross income the interest or other income that was earned on the excess contribution. Prior taxes Report it on your return for the year in which the excess contribution was made. Prior taxes Your withdrawal of interest or other income may be subject to an additional 10% tax on early distributions, discus