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Tax Forms 1040x

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Tax Forms 1040x

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Know Your Rights as a Car Owner

Sometimes a manufacturer makes a design or production mistake on a motor vehicle. A service bulletin notifies the dealer of the problem and how to resolve it. Because these free repairs are not publicized, they are called "secret warranties." The National Highway Traffic Safety Administration maintains a database of service bulletins filed by manufacturers.

If you have a problem with a vehicle that is a safety hazard, check whether the manufacturer has recalled your vehicle. Click on Recalls or call NHTSA at 1-800-424-9393.Hazards that aren't listed should be reported to your dealer, the manufacturer of the vehicle, and NHTSA. If a safety-related defect exists, the maker must fix it at no cost to you-even if your warranty has expired.

If you have a vehicle with a unique problem that just never seems to get fixed, you may have a lemon. Some states have laws concerning lemons that require a refund or replacement if a problem is not fixed within a reasonable number of tries or if you haven't been able to use your vehicle for a certain number of days. Contact your local consumer protection office to learn whether you have such protections and what steps you must take to solve your problem. If you believe your car is a lemon:

  • Give the dealer a list of the problems every time you bring it in for repairs.
  • Get and keep copies of the repair orders listing the problems, the work done, and the dates the car was in the shop.
  • Contact the manufacturer, as well as the dealer, to report the problem. Check your owner's manual or the directory for the auto manufacturers.
  • Help other consumers avoid purchasing your lemon by registering it at safetyforum.com.

The Center for Auto Safety gathers information and complaints concerning safety defects, recalls, service bulletins and state lemon laws.

The Tax Forms 1040x

Tax forms 1040x 1. Tax forms 1040x   Traditional IRAs Table of Contents What's New for 2013 What's New for 2014 Introduction Who Can Open a Traditional IRA?What Is Compensation? When Can a Traditional IRA Be Opened? How Can a Traditional IRA Be Opened?Individual Retirement Account Individual Retirement Annuity Individual Retirement Bonds Simplified Employee Pension (SEP) Employer and Employee Association Trust Accounts Required Disclosures How Much Can Be Contributed?Limit. Tax forms 1040x When repayment contributions can be made. Tax forms 1040x No deduction. Tax forms 1040x Reserve component. Tax forms 1040x Figuring your IRA deduction. Tax forms 1040x Reporting the repayment. Tax forms 1040x Example. Tax forms 1040x General Limit Kay Bailey Hutchison Spousal IRA Limit Filing Status Less Than Maximum Contributions More Than Maximum Contributions When Can Contributions Be Made? How Much Can You Deduct?Kay Bailey Hutchison Spousal IRA. Tax forms 1040x Are You Covered by an Employer Plan? Limit if Covered by Employer Plan Reporting Deductible Contributions Nondeductible Contributions Examples — Worksheet for Reduced IRA Deduction for 2013 What if You Inherit an IRA?Treating it as your own. Tax forms 1040x Can You Move Retirement Plan Assets?Transfers to Roth IRAs from other retirement plans. Tax forms 1040x Trustee-to-Trustee Transfer Rollovers Transfers Incident To Divorce Converting From Any Traditional IRA Into a Roth IRA Recharacterizations When Can You Withdraw or Use Assets?Contributions Returned Before Due Date of Return When Must You Withdraw Assets? (Required Minimum Distributions)IRA Owners IRA Beneficiaries Which Table Do You Use To Determine Your Required Minimum Distribution? What Age(s) Do You Use With the Table(s)? Miscellaneous Rules for Required Minimum Distributions Are Distributions Taxable?January 2013 QCDs treated as made in 2012. Tax forms 1040x 2013 Reporting. Tax forms 1040x Additional reporting requirements if you made the election to treat a January 2013 QCD as made in 2012. Tax forms 1040x One-time transfer. Tax forms 1040x Testing period rules apply. Tax forms 1040x More information. Tax forms 1040x Distributions Fully or Partly Taxable Figuring the Nontaxable and Taxable Amounts Recognizing Losses on Traditional IRA Investments Other Special IRA Distribution Situations Reporting and Withholding Requirements for Taxable Amounts What Acts Result in Penalties or Additional Taxes?Prohibited Transactions Investment in Collectibles Excess Contributions Early Distributions Excess Accumulations (Insufficient Distributions) Reporting Additional Taxes What's New for 2013 Traditional IRA contribution and deduction limit. Tax forms 1040x  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. Tax forms 1040x 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. Tax forms 1040x For more information, see How Much Can Be Contributed? in this chapter. Tax forms 1040x Modified AGI limit for traditional IRA contributions increased. Tax forms 1040x  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. Tax forms 1040x 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. Tax forms 1040x If your modified AGI is $188,000 or more, you cannot take a deduction for contributions to a traditional IRA. Tax forms 1040x See How Much Can You Deduct? in this chapter. Tax forms 1040x Net Investment Income Tax. Tax forms 1040x  For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan (for example, 401(a), 403(a), 403(b), 457(b) plans, and IRAs). Tax forms 1040x However, these distributions are taken into account when determining the modified adjusted gross income threshold. Tax forms 1040x Distributions from a nonqualified retirement plan are included in net investment income. Tax forms 1040x See Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions for more information. Tax forms 1040x What's New for 2014 Modified AGI limit for traditional IRA contributions increased. Tax forms 1040x  For 2014, if you are 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 $96,000 but less than $116,000 for a married couple filing a joint return or a qualifying widow(er), More than $60,000 but less than $70,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. Tax forms 1040x If you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work, but you are not, your deduction is phased out if your modified AGI is more than $181,000 but less than $191,000. Tax forms 1040x If your modified AGI is $191,000 or more, you cannot take a deduction for contributions to a traditional IRA. Tax forms 1040x Introduction This chapter discusses the original IRA. Tax forms 1040x In this publication the original IRA (sometimes called an ordinary or regular IRA) is referred to as a “traditional IRA. Tax forms 1040x ” A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA. Tax forms 1040x The following are two advantages of a traditional IRA: You may be able to deduct some or all of your contributions to it, depending on your circumstances. Tax forms 1040x Generally, amounts in your IRA, including earnings and gains, are not taxed until they are distributed. Tax forms 1040x 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. Tax forms 1040x You can have a traditional IRA whether or not you are covered by any other retirement plan. Tax forms 1040x However, you may not be able to deduct all of your contributions if you or your spouse is covered by an employer retirement plan. Tax forms 1040x See How Much Can You Deduct , later. Tax forms 1040x Both spouses have compensation. Tax forms 1040x   If both you and your spouse have compensation and are under age 70½, each of you can open an IRA. Tax forms 1040x You cannot both participate in the same IRA. Tax forms 1040x If you file a joint return, only one of you needs to have compensation. Tax forms 1040x What Is Compensation? Generally, compensation is what you earn from working. Tax forms 1040x For a summary of what compensation does and does not include, see Table 1-1. Tax forms 1040x Compensation includes all of the items discussed next (even if you have more than one type). Tax forms 1040x Wages, salaries, etc. Tax forms 1040x   Wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services are compensation. Tax forms 1040x 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). Tax forms 1040x Scholarship and fellowship payments are compensation for IRA purposes only if shown in box 1 of Form W-2. Tax forms 1040x Commissions. Tax forms 1040x   An amount you receive that is a percentage of profits or sales price is compensation. Tax forms 1040x Self-employment income. Tax forms 1040x   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 deduction allowed for the deductible part of your self-employment taxes. Tax forms 1040x   Compensation includes earnings from self-employment even if they are not subject to self-employment tax because of your religious beliefs. Tax forms 1040x Self-employment loss. Tax forms 1040x   If you have a net loss from self-employment, do not subtract the loss from your salaries or wages when figuring your total compensation. Tax forms 1040x Alimony and separate maintenance. Tax forms 1040x   For IRA purposes, compensation includes any taxable alimony and separate maintenance payments you receive under a decree of divorce or separate maintenance. Tax forms 1040x Nontaxable combat pay. Tax forms 1040x   If you were a member of the U. Tax forms 1040x S. Tax forms 1040x Armed Forces, compensation includes any nontaxable combat pay you received. Tax forms 1040x This amount should be reported in box 12 of your 2013 Form W-2 with code Q. Tax forms 1040x Table 1-1. Tax forms 1040x Compensation for Purposes of an IRA Includes . Tax forms 1040x . Tax forms 1040x . Tax forms 1040x Does not include . Tax forms 1040x . Tax forms 1040x . Tax forms 1040x   earnings and profits from property. Tax forms 1040x wages, salaries, etc. Tax forms 1040x     interest and dividend income. Tax forms 1040x commissions. Tax forms 1040x     pension or annuity income. Tax forms 1040x self-employment income. Tax forms 1040x     deferred compensation. Tax forms 1040x alimony and separate maintenance. Tax forms 1040x     income from certain  partnerships. Tax forms 1040x nontaxable combat pay. Tax forms 1040x     any amounts you exclude from income. Tax forms 1040x     What Is Not Compensation? Compensation does not include any of the following items. Tax forms 1040x Earnings and profits from property, such as rental income, interest income, and dividend income. Tax forms 1040x Pension or annuity income. Tax forms 1040x Deferred compensation received (compensation payments postponed from a past year). Tax forms 1040x Income from a partnership for which you do not provide services that are a material income-producing factor. Tax forms 1040x Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b. Tax forms 1040x Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs. Tax forms 1040x When Can a Traditional IRA Be Opened? You can open a traditional IRA at any time. Tax forms 1040x However, the time for making contributions for any year is limited. Tax forms 1040x See When Can Contributions Be Made , later. Tax forms 1040x How Can a Traditional IRA Be Opened? You can open different kinds of IRAs with a variety of organizations. Tax forms 1040x You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. Tax forms 1040x You can also open an IRA through your stockbroker. Tax forms 1040x Any IRA must meet Internal Revenue Code requirements. Tax forms 1040x The requirements for the various arrangements are discussed below. Tax forms 1040x Kinds of traditional IRAs. Tax forms 1040x   Your traditional IRA can be an individual retirement account or annuity. Tax forms 1040x It can be part of either a simplified employee pension (SEP) or an employer or employee association trust account. Tax forms 1040x Individual Retirement Account An individual retirement account is a trust or custodial account set up in the United States for the exclusive benefit of you or your beneficiaries. Tax forms 1040x The account is created by a written document. Tax forms 1040x The document must show that the account meets all of the following requirements. Tax forms 1040x The trustee or custodian must be a bank, a federally insured credit union, a savings and loan association, or an entity approved by the IRS to act as trustee or custodian. Tax forms 1040x The trustee or custodian generally cannot accept contributions of more than the deductible amount for the year. Tax forms 1040x However, rollover contributions and employer contributions to a simplified employee pension (SEP) can be more than this amount. Tax forms 1040x Contributions, except for rollover contributions, must be in cash. Tax forms 1040x See Rollovers , later. Tax forms 1040x You must have a nonforfeitable right to the amount at all times. Tax forms 1040x Money in your account cannot be used to buy a life insurance policy. Tax forms 1040x Assets in your account cannot be combined with other property, except in a common trust fund or common investment fund. Tax forms 1040x You must start receiving distributions by April 1 of the year following the year in which you reach age 70½. Tax forms 1040x See When Must You Withdraw Assets? (Required Minimum Distributions) , later. Tax forms 1040x Individual Retirement Annuity You can open an individual retirement annuity by purchasing an annuity contract or an endowment contract from a life insurance company. Tax forms 1040x An individual retirement annuity must be issued in your name as the owner, and either you or your beneficiaries who survive you are the only ones who can receive the benefits or payments. Tax forms 1040x An individual retirement annuity must meet all the following requirements. Tax forms 1040x Your entire interest in the contract must be nonforfeitable. Tax forms 1040x The contract must provide that you cannot transfer any portion of it to any person other than the issuer. Tax forms 1040x There must be flexible premiums so that if your compensation changes, your payment can also change. Tax forms 1040x This provision applies to contracts issued after November 6, 1978. Tax forms 1040x The contract must provide that contributions cannot be more than the deductible amount for an IRA for the year, and that you must use any refunded premiums to pay for future premiums or to buy more benefits before the end of the calendar year after the year in which you receive the refund. Tax forms 1040x Distributions must begin by April 1 of the year following the year in which you reach age 70½. Tax forms 1040x See When Must You Withdraw Assets? (Required Minimum Distributions) , later. Tax forms 1040x Individual Retirement Bonds The sale of individual retirement bonds issued by the federal government was suspended after April 30, 1982. Tax forms 1040x The bonds have the following features. Tax forms 1040x They stop earning interest when you reach age 70½. Tax forms 1040x If you die, interest will stop 5 years after your death, or on the date you would have reached age 70½, whichever is earlier. Tax forms 1040x You cannot transfer the bonds. Tax forms 1040x If you cash (redeem) the bonds before the year in which you reach age 59½, you may be subject to a 10% additional tax. Tax forms 1040x See Age 59½ Rule under Early Distributions, later. Tax forms 1040x You can roll over redemption proceeds into IRAs. Tax forms 1040x Simplified Employee Pension (SEP) A simplified employee pension (SEP) is a written arrangement that allows your employer to make deductible contributions to a traditional IRA (a SEP IRA) set up for you to receive such contributions. Tax forms 1040x Generally, distributions from SEP IRAs are subject to the withdrawal and tax rules that apply to traditional IRAs. Tax forms 1040x See Publication 560 for more information about SEPs. Tax forms 1040x Employer and Employee Association Trust Accounts Your employer or your labor union or other employee association can set up a trust to provide individual retirement accounts for employees or members. Tax forms 1040x The requirements for individual retirement accounts apply to these traditional IRAs. Tax forms 1040x Required Disclosures The trustee or issuer (sometimes called the sponsor) of your traditional IRA generally must give you a disclosure statement at least 7 days before you open your IRA. Tax forms 1040x However, the sponsor does not have to give you the statement until the date you open (or purchase, if earlier) your IRA, provided you are given at least 7 days from that date to revoke the IRA. Tax forms 1040x The disclosure statement must explain certain items in plain language. Tax forms 1040x For example, the statement should explain when and how you can revoke the IRA, and include the name, address, and telephone number of the person to receive the notice of cancellation. Tax forms 1040x This explanation must appear at the beginning of the disclosure statement. Tax forms 1040x If you revoke your IRA within the revocation period, the sponsor must return to you the entire amount you paid. Tax forms 1040x The sponsor must report on the appropriate IRS forms both your contribution to the IRA (unless it was made by a trustee-to-trustee transfer) and the amount returned to you. Tax forms 1040x These requirements apply to all sponsors. Tax forms 1040x How Much Can Be Contributed? There are limits and other rules that affect the amount that can be contributed to a traditional IRA. Tax forms 1040x These limits and rules are explained below. Tax forms 1040x Community property laws. Tax forms 1040x   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. Tax forms 1040x This is the rule even in states with community property laws. Tax forms 1040x Brokers' commissions. Tax forms 1040x   Brokers' commissions paid in connection with your traditional IRA are subject to the contribution limit. Tax forms 1040x For information about whether you can deduct brokers' commissions, see Brokers' commissions , later, under How Much Can You Deduct. Tax forms 1040x Trustees' fees. Tax forms 1040x   Trustees' administrative fees are not subject to the contribution limit. Tax forms 1040x For information about whether you can deduct trustees' fees, see Trustees' fees , later, under How Much Can You Deduct. Tax forms 1040x Qualified reservist repayments. Tax forms 1040x   If you 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 (defined later under Early Distributions) you received. Tax forms 1040x 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. Tax forms 1040x 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 a similar arrangement. Tax forms 1040x Limit. Tax forms 1040x   Your qualified reservist repayments cannot be more than your qualified reservist distributions, explained under Early Distributions , later. Tax forms 1040x When repayment contributions can be made. Tax forms 1040x   You cannot make these repayment contributions later than the date that is 2 years after your active duty period ends. Tax forms 1040x No deduction. Tax forms 1040x   You cannot deduct qualified reservist repayments. Tax forms 1040x Reserve component. Tax forms 1040x   The term “reserve component” means the: Army National Guard of the United States, Army Reserve, Naval Reserve, Marine Corps Reserve, Air National Guard of the United States, Air Force Reserve, Coast Guard Reserve, or Reserve Corps of the Public Health Service. Tax forms 1040x Figuring your IRA deduction. Tax forms 1040x   The repayment of qualified reservist distributions does not affect the amount you can deduct as an IRA contribution. Tax forms 1040x Reporting the repayment. Tax forms 1040x   If you repay a qualified reservist distribution, include the amount of the repayment with nondeductible contributions on line 1 of Form 8606. Tax forms 1040x Example. Tax forms 1040x   In 2013, your IRA contribution limit is $5,500. Tax forms 1040x However, because of your filing status and AGI, the limit on the amount you can deduct is $3,500. Tax forms 1040x You can make a nondeductible contribution of $2,000 ($5,500 - $3,500). Tax forms 1040x In an earlier year you received a $3,000 qualified reservist distribution, which you would like to repay this year. Tax forms 1040x   For 2013, you can contribute a total of $8,500 to your IRA. Tax forms 1040x This is made up of the maximum deductible contribution of $3,500; a nondeductible contribution of $2,000; and a $3,000 qualified reservist repayment. Tax forms 1040x You contribute the maximum allowable for the year. Tax forms 1040x Since you are making a nondeductible contribution ($2,000) and a qualified reservist repayment ($3,000), you must file Form 8606 with your return and include $5,000 ($2,000 + $3,000) on line 1 of Form 8606. Tax forms 1040x The qualified reservist repayment is not deductible. Tax forms 1040x Contributions on your behalf to a traditional IRA reduce your limit for contributions to a Roth IRA. Tax forms 1040x See chapter 2 for information about Roth IRAs. Tax forms 1040x General Limit For 2013, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts: $5,500 ($6,500 if you are age 50 or older), or Your taxable compensation (defined earlier) for the year. Tax forms 1040x Note. Tax forms 1040x This limit is reduced by any contributions to a section 501(c)(18) plan (generally, a pension plan created before June 25, 1959, that is funded entirely by employee contributions). Tax forms 1040x 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. Tax forms 1040x (See Nondeductible Contributions , later. Tax forms 1040x ) Qualified reservist repayments do not affect this limit. Tax forms 1040x Examples. Tax forms 1040x George, who is 34 years old and single, earns $24,000 in 2013. Tax forms 1040x His IRA contributions for 2013 are limited to $5,500. Tax forms 1040x Danny, an unmarried college student working part time, earns $3,500 in 2013. Tax forms 1040x His IRA contributions for 2013 are limited to $3,500, the amount of his compensation. Tax forms 1040x More than one IRA. Tax forms 1040x   If you have more than one IRA, the limit applies to the total contributions made on your behalf to all your traditional IRAs for the year. Tax forms 1040x Annuity or endowment contracts. Tax forms 1040x   If you invest in an annuity or endowment contract under an individual retirement annuity, no more than $5,500 ($6,500 if you are age 50 or older) can be contributed toward its cost for the tax year, including the cost of life insurance coverage. Tax forms 1040x If more than this amount is contributed, the annuity or endowment contract is disqualified. Tax forms 1040x Kay Bailey Hutchison Spousal IRA Limit 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 two amounts: $5,500 ($6,500 if you are age 50 or older), or The total compensation includible in the gross income of both you and your spouse for the year, reduced by the following two amounts. Tax forms 1040x Your spouse's IRA contribution for the year to a traditional IRA. Tax forms 1040x Any contributions for the year to a Roth IRA on behalf of your spouse. Tax forms 1040x 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 age 50 or older or $13,000 if both of you are age 50 or older). Tax forms 1040x Note. Tax forms 1040x This traditional IRA limit is reduced by any contributions to a section 501(c)(18) plan (generally, a pension plan created before June 25, 1959, that is funded entirely by employee contributions). Tax forms 1040x Example. Tax forms 1040x Kristin, a full-time student with no taxable compensation, marries Carl during the year. Tax forms 1040x Neither of them was age 50 by the end of 2013. Tax forms 1040x For the year, Carl has taxable compensation of $30,000. Tax forms 1040x He plans to contribute (and deduct) $5,500 to a traditional IRA. Tax forms 1040x If he and Kristin file a joint return, each can contribute $5,500 to a traditional IRA. Tax forms 1040x This is because Kristin, who has no compensation, can add Carl's compensation, reduced by the amount of his IRA contribution ($30,000 − $5,500 = $24,500), to her own compensation (-0-) to figure her maximum contribution to a traditional IRA. Tax forms 1040x In her case, $5,500 is her contribution limit, because $5,500 is less than $24,500 (her compensation for purposes of figuring her contribution limit). Tax forms 1040x Filing Status Generally, except as discussed earlier under Kay Bailey Hutchison Spousal IRA Limit , your filing status has no effect on the amount of allowable contributions to your traditional IRA. Tax forms 1040x However, if during the year either you or your spouse was covered by a retirement plan at work, your deduction may be reduced or eliminated, depending on your filing status and income. Tax forms 1040x See How Much Can You Deduct , later. Tax forms 1040x Example. Tax forms 1040x Tom and Darcy are married and both are 53. Tax forms 1040x They both work and each has a traditional IRA. Tax forms 1040x Tom earned $3,800 and Darcy earned $48,000 in 2013. Tax forms 1040x Because of the Kay Bailey Hutchison Spousal IRA limit rule, even though Tom earned less than $6,500, they can contribute up to $6,500 to his IRA for 2013 if they file a joint return. Tax forms 1040x They can contribute up to $6,500 to Darcy's IRA. Tax forms 1040x If they file separate returns, the amount that can be contributed to Tom's IRA is limited by his earned income, $3,800. Tax forms 1040x Less Than Maximum Contributions If contributions to your traditional IRA for a year were less than the limit, you cannot contribute more after the due date of your return for that year to make up the difference. Tax forms 1040x Example. Tax forms 1040x Rafael, who is 40, earns $30,000 in 2013. Tax forms 1040x Although he can contribute up to $5,500 for 2013, he contributes only $3,000. Tax forms 1040x After April 15, 2014, Rafael cannot make up the difference between his actual contributions for 2013 ($3,000) and his 2013 limit ($5,500). Tax forms 1040x He cannot contribute $2,500 more than the limit for any later year. Tax forms 1040x More Than Maximum Contributions If contributions to your IRA for a year were more than the limit, you can apply the excess contribution in one year to a later year if the contributions for that later year are less than the maximum allowed for that year. Tax forms 1040x However, a penalty or additional tax may apply. Tax forms 1040x See Excess Contributions , later, under What Acts Result in Penalties or Additional Taxes. Tax forms 1040x 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). Tax forms 1040x Contributions must be in the form of money (cash, check, or money order). Tax forms 1040x Property cannot be contributed. Tax forms 1040x Although property cannot be contributed, your IRA may invest in certain property. Tax forms 1040x For example, your IRA may purchase shares of stock. Tax forms 1040x For other restrictions on the use of funds in your IRA, see Prohibited Transactions , later in this chapter. Tax forms 1040x You may be able to transfer or roll over certain property from one retirement plan to another. Tax forms 1040x See the discussion of rollovers and other transfers later in this chapter under Can You Move Retirement Plan Assets . Tax forms 1040x You can make a contribution to your IRA by having your income tax refund (or a portion of your refund), if any, paid directly to your traditional IRA, Roth IRA, or SEP IRA. Tax forms 1040x For details, see the instructions for your income tax return or Form 8888, Allocation of Refund (Including Savings Bond Purchases). Tax forms 1040x Contributions can be made to your traditional IRA for each year that you receive compensation and have not reached age 70½. Tax forms 1040x For any year in which you do not work, contributions cannot be made to your IRA unless you receive alimony, nontaxable combat pay, military differential pay, or file a joint return with a spouse who has compensation. Tax forms 1040x See Who Can Open a Traditional IRA , earlier. Tax forms 1040x Even if contributions cannot be made for the current year, the amounts contributed for years in which you did qualify can remain in your IRA. Tax forms 1040x Contributions can resume for any years that you qualify. Tax forms 1040x Contributions must be made by due date. Tax forms 1040x   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. Tax forms 1040x For most people, this means that contributions for 2013 must be made by April 15, 2014, and contributions for 2014 must be made by April 15, 2015. Tax forms 1040x Age 70½ rule. Tax forms 1040x   Contributions cannot be made to your traditional IRA for the year in which you reach age 70½ or for any later year. Tax forms 1040x   You attain age 70½ on the date that is 6 calendar months after the 70th anniversary of your birth. Tax forms 1040x If you were born on or before June 30, 1943, you cannot contribute for 2013 or any later year. Tax forms 1040x Designating year for which contribution is made. Tax forms 1040x   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. Tax forms 1040x 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). Tax forms 1040x Filing before a contribution is made. Tax forms 1040x    You can file your return claiming a traditional IRA contribution before the contribution is actually made. Tax forms 1040x Generally, the contribution must be made by the due date of your return, not including extensions. Tax forms 1040x Contributions not required. Tax forms 1040x   You do not have to contribute to your traditional IRA for every tax year, even if you can. Tax forms 1040x 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 applicable) explained earlier under How Much Can Be Contributed . Tax forms 1040x However, if you or your spouse was covered by an employer retirement plan, you may not be able to deduct this amount. Tax forms 1040x See Limit if Covered by Employer Plan , later. Tax forms 1040x You may be able to claim a credit for contributions to your traditional IRA. Tax forms 1040x For more information, see chapter 4. Tax forms 1040x Trustees' fees. Tax forms 1040x   Trustees' administrative fees that are billed separately and paid in connection with your traditional IRA are not deductible as IRA contributions. Tax forms 1040x However, they may be deductible as a miscellaneous itemized deduction on Schedule A (Form 1040). Tax forms 1040x For information about miscellaneous itemized deductions, see Publication 529, Miscellaneous Deductions. Tax forms 1040x Brokers' commissions. Tax forms 1040x   These commissions are part of your IRA contribution and, as such, are deductible subject to the limits. Tax forms 1040x Full deduction. Tax forms 1040x   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 of your traditional IRAs of up to the lesser of: $5,500 ($6,500 if you are age 50 or older), or 100% of your compensation. Tax forms 1040x   This limit is reduced by any contributions made to a 501(c)(18) plan on your behalf. Tax forms 1040x Kay Bailey Hutchison Spousal IRA. Tax forms 1040x   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: $5,500 ($6,500 if the spouse with the lower compensation is age 50 or older), or The total compensation includible in the gross income of both spouses for the year reduced by the following three amounts. Tax forms 1040x The IRA deduction for the year of the spouse with the greater compensation. Tax forms 1040x Any designated nondeductible contribution for the year made on behalf of the spouse with the greater compensation. Tax forms 1040x Any contributions for the year to a Roth IRA on behalf of the spouse with the greater compensation. Tax forms 1040x   This limit is reduced by any contributions to a section 501(c)(18) plan on behalf of the spouse with the lesser compensation. Tax forms 1040x Note. Tax forms 1040x 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. Tax forms 1040x After a divorce or legal separation, you can deduct only the contributions to your own IRA. Tax forms 1040x Your deductions are subject to the rules for single individuals. Tax forms 1040x Covered by an employer retirement plan. Tax forms 1040x   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. Tax forms 1040x This is discussed later under Limit if Covered by Employer Plan . Tax forms 1040x Limits on the amount you can deduct do not affect the amount that can be contributed. Tax forms 1040x 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. Tax forms 1040x The “Retirement Plan” box should be checked if you were covered. Tax forms 1040x Reservists and volunteer firefighters should also see Situations in Which You Are Not Covered , later. Tax forms 1040x If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer. Tax forms 1040x Federal judges. Tax forms 1040x   For purposes of the IRA deduction, federal judges are covered by an employer plan. Tax forms 1040x For Which Year(s) Are You Covered? Special rules apply to determine the tax years for which you are covered by an employer plan. Tax forms 1040x These rules differ depending on whether the plan is a defined contribution plan or a defined benefit plan. Tax forms 1040x Tax year. Tax forms 1040x   Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. Tax forms 1040x For almost all people, the tax year is the calendar year. Tax forms 1040x Defined contribution plan. Tax forms 1040x   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. Tax forms 1040x However, also see Situations in Which You Are Not Covered , later. Tax forms 1040x   A defined contribution plan is a plan that provides for a separate account for each person covered by the plan. Tax forms 1040x In a defined contribution plan, the amount to be contributed to each participant's account is spelled out in the plan. Tax forms 1040x The level of benefits actually provided to a participant depends on the total amount contributed to that participant's account and any earnings and losses on those contributions. Tax forms 1040x Types of defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans. Tax forms 1040x Example. Tax forms 1040x Company A has a money purchase pension plan. Tax forms 1040x Its plan year is from July 1 to June 30. Tax forms 1040x The plan provides that contributions must be allocated as of June 30. Tax forms 1040x Bob, an employee, leaves Company A on December 31, 2012. Tax forms 1040x The contribution for the plan year ending on June 30, 2013, is made February 15, 2014. Tax forms 1040x Because an amount is contributed to Bob's account for the plan year, Bob is covered by the plan for his 2013 tax year. Tax forms 1040x   A special rule applies to certain plans in which it is not possible to determine if an amount will be contributed to your account for a given plan year. Tax forms 1040x If, for a plan year, no amounts have been allocated to your account that are attributable to employer contributions, employee contributions, or forfeitures, by the last day of the plan year, and contributions are discretionary for the plan year, you are not covered for the tax year in which the plan year ends. Tax forms 1040x If, after the plan year ends, the employer makes a contribution for that plan year, you are covered for the tax year in which the contribution is made. Tax forms 1040x Example. Tax forms 1040x Mickey was covered by a profit-sharing plan and left the company on December 31, 2012. Tax forms 1040x The plan year runs from July 1 to June 30. Tax forms 1040x Under the terms of the plan, employer contributions do not have to be made, but if they are made, they are contributed to the plan before the due date for filing the company's tax return. Tax forms 1040x Such contributions are allocated as of the last day of the plan year, and allocations are made to the accounts of individuals who have any service during the plan year. Tax forms 1040x As of June 30, 2013, no contributions were made that were allocated to the June 30, 2013, plan year, and no forfeitures had been allocated within the plan year. Tax forms 1040x In addition, as of that date, the company was not obligated to make a contribution for such plan year and it was impossible to determine whether or not a contribution would be made for the plan year. Tax forms 1040x On December 31, 2013, the company decided to contribute to the plan for the plan year ending June 30, 2013. Tax forms 1040x That contribution was made on February 15, 2014. Tax forms 1040x Mickey is an active participant in the plan for his 2014 tax year but not for his 2013 tax year. Tax forms 1040x No vested interest. Tax forms 1040x   If an amount is allocated to your account for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the account. Tax forms 1040x Defined benefit plan. Tax forms 1040x   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. Tax forms 1040x 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. Tax forms 1040x   A defined benefit plan is any plan that is not a defined contribution plan. Tax forms 1040x In a defined benefit plan, the level of benefits to be provided to each participant is spelled out in the plan. Tax forms 1040x The plan administrator figures the amount needed to provide those benefits and those amounts are contributed to the plan. Tax forms 1040x Defined benefit plans include pension plans and annuity plans. Tax forms 1040x Example. Tax forms 1040x Nick, an employee of Company B, is eligible to participate in Company B's defined benefit plan, which has a July 1 to June 30 plan year. Tax forms 1040x Nick leaves Company B on December 31, 2012. Tax forms 1040x Because Nick is eligible to participate in the plan for its year ending June 30, 2013, he is covered by the plan for his 2013 tax year. Tax forms 1040x No vested interest. Tax forms 1040x   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. Tax forms 1040x Situations in Which You Are Not Covered Unless you are covered by another employer plan, you are not covered by an employer plan if you are in one of the situations described below. Tax forms 1040x Social security or railroad retirement. Tax forms 1040x   Coverage under social security or railroad retirement is not coverage under an employer retirement plan. Tax forms 1040x Benefits from previous employer's plan. Tax forms 1040x   If you receive retirement benefits from a previous employer's plan, you are not covered by that plan. Tax forms 1040x Reservists. Tax forms 1040x   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. Tax forms 1040x You are not covered by the plan if both of the following conditions are met. Tax forms 1040x 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. Tax forms 1040x You did not serve more than 90 days on active duty during the year (not counting duty for training). Tax forms 1040x Volunteer firefighters. Tax forms 1040x   If the only reason you participate in a plan is because you are a volunteer firefighter, you may not be covered by the plan. Tax forms 1040x You are not covered by the plan if both of the following conditions are met. Tax forms 1040x 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. Tax forms 1040x Your accrued retirement benefits at the beginning of the year will not provide more than $1,800 per year at retirement. Tax forms 1040x Limit if Covered by Employer Plan As discussed earlier, the deduction you can take for contributions made to your traditional IRA depends on whether you or your spouse was covered for any part of the year by an employer retirement plan. Tax forms 1040x Your deduction is also affected by how much income you had and by your filing status. Tax forms 1040x Your deduction may also be affected by social security benefits you received. Tax forms 1040x Reduced or no deduction. Tax forms 1040x   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. Tax forms 1040x   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. Tax forms 1040x These amounts vary depending on your filing status. Tax forms 1040x   To determine if your deduction is subject to the phaseout, you must determine your modified adjusted gross income (AGI) and your filing status, as explained later under Deduction Phaseout . Tax forms 1040x Once you have determined your modified AGI and your filing status, you can use Table 1-2 or Table 1-3 to determine if the phaseout applies. Tax forms 1040x Social Security Recipients Instead of using Table 1-2 or Table 1-3 and Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, later, complete the worksheets in Appendix B of this publication if, for the year, all of the following apply. Tax forms 1040x You received social security benefits. Tax forms 1040x You received taxable compensation. Tax forms 1040x Contributions were made to your traditional IRA. Tax forms 1040x You or your spouse was covered by an employer retirement plan. Tax forms 1040x Use the worksheets in Appendix B to figure your IRA deduction, your nondeductible contribution, and the taxable portion, if any, of your social security benefits. Tax forms 1040x Appendix B includes an example with filled-in worksheets to assist you. Tax forms 1040x Table 1-2. Tax forms 1040x Effect of Modified AGI1 on Deduction if You Are Covered by a 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. Tax forms 1040x IF your filing status is . Tax forms 1040x . Tax forms 1040x . Tax forms 1040x AND your modified adjusted gross income (modified AGI) is . Tax forms 1040x . Tax forms 1040x . Tax forms 1040x THEN you can take . Tax forms 1040x . Tax forms 1040x . Tax forms 1040x single or head of household $59,000 or less a full deduction. Tax forms 1040x more than $59,000 but less than $69,000 a partial deduction. Tax forms 1040x $69,000 or more no deduction. Tax forms 1040x married filing jointly or  qualifying widow(er) $95,000 or less a full deduction. Tax forms 1040x more than $95,000 but less than $115,000 a partial deduction. Tax forms 1040x $115,000 or more no deduction. Tax forms 1040x married filing separately2 less than $10,000 a partial deduction. Tax forms 1040x $10,000 or more no deduction. Tax forms 1040x 1 Modified AGI (adjusted gross income). Tax forms 1040x See Modified adjusted gross income (AGI) , later. Tax forms 1040x  2 If 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” filing status). Tax forms 1040x Table 1-3. Tax forms 1040x Effect of Modified AGI1 on Deduction if You Are NOT Covered by a 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. Tax forms 1040x IF your filing status is . Tax forms 1040x . Tax forms 1040x . Tax forms 1040x AND your modified adjusted gross income (modified AGI) is . Tax forms 1040x . Tax forms 1040x . Tax forms 1040x THEN you can take . Tax forms 1040x . Tax forms 1040x . Tax forms 1040x single, head of household, or qualifying widow(er) any amount a full deduction. Tax forms 1040x married filing jointly or separately with a spouse who is not covered by a plan at work any amount a full deduction. Tax forms 1040x married filing jointly with a spouse who is covered by a plan at work $178,000 or less a full deduction. Tax forms 1040x more than $178,000 but less than $188,000 a partial deduction. Tax forms 1040x $188,000 or more no deduction. Tax forms 1040x married filing separately with a spouse who is covered by a plan at work2 less than $10,000 a partial deduction. Tax forms 1040x $10,000 or more no deduction. Tax forms 1040x 1 Modified AGI (adjusted gross income). Tax forms 1040x See Modified adjusted gross income (AGI) , later. Tax forms 1040x  2 You are entitled to the full deduction if you did not live with your spouse at any time during the year. Tax forms 1040x For 2014, if you are not covered by a retirement plan at work and you are married filing jointly with a spouse who is covered by a plan at work, your deduction is phased out if your modified AGI is more than $181,000 but less than $191,000. Tax forms 1040x If your AGI is $191,000 or more, you cannot take a deduction for a contribution to a traditional IRA. Tax forms 1040x Deduction Phaseout The amount of any reduction in the limit on your IRA deduction (phaseout) depends on whether you or your spouse was covered by an employer retirement plan. Tax forms 1040x Covered by a retirement plan. Tax forms 1040x   If you are 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 1-2. Tax forms 1040x For 2014, if you are covered by a retirement plan at work, your IRA deduction will not be reduced (phased out) unless your modified AGI is: More than $60,000 but less than $70,000 for a single individual (or head of household), More than $96,000 but less than $116,000 for a married couple filing a joint return (or a qualifying widow(er)), or Less than $10,000 for a married individual filing a separate return. Tax forms 1040x If your spouse is covered. Tax forms 1040x   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 1-3. Tax forms 1040x Filing status. Tax forms 1040x   Your filing status depends primarily on your marital status. Tax forms 1040x 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. Tax forms 1040x If you need more information on filing status, see Publication 501, Exemptions, Standard Deduction, and Filing Information. Tax forms 1040x Lived apart from spouse. Tax forms 1040x   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. Tax forms 1040x Modified adjusted gross income (AGI). Tax forms 1040x   You can use Worksheet 1-1 to figure your modified AGI. Tax forms 1040x If you made contributions to your IRA for 2013 and received a distribution from your IRA in 2013, see Both contributions for 2013 and distributions in 2013 , later. Tax forms 1040x    Do not assume that your modified AGI is the same as your compensation. Tax forms 1040x Your modified AGI may include income in addition to your compensation (discussed earlier) such as interest, dividends, and income from IRA distributions. Tax forms 1040x Form 1040. Tax forms 1040x   If you file Form 1040, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. Tax forms 1040x IRA deduction. Tax forms 1040x Student loan interest deduction. Tax forms 1040x Tuition and fees deduction. Tax forms 1040x Domestic production activities deduction. Tax forms 1040x Foreign earned income exclusion. Tax forms 1040x Foreign housing exclusion or deduction. Tax forms 1040x Exclusion of qualified savings bond interest shown on Form 8815. Tax forms 1040x Exclusion of employer-provided adoption benefits shown on Form 8839. Tax forms 1040x This is your modified AGI. Tax forms 1040x Form 1040A. Tax forms 1040x   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. Tax forms 1040x IRA deduction. Tax forms 1040x Student loan interest deduction. Tax forms 1040x Tuition and fees deduction. Tax forms 1040x Exclusion of qualified savings bond interest shown on Form 8815. Tax forms 1040x This is your modified AGI. Tax forms 1040x Form 1040NR. Tax forms 1040x   If you file Form 1040NR, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. Tax forms 1040x IRA deduction. Tax forms 1040x Student loan interest deduction. Tax forms 1040x Domestic production activities deduction. Tax forms 1040x Exclusion of qualified savings bond interest shown on Form 8815. Tax forms 1040x Exclusion of employer-provided adoption benefits shown on Form 8839. Tax forms 1040x This is your modified AGI. Tax forms 1040x Income from IRA distributions. Tax forms 1040x   If you received distributions in 2013 from one or more traditional IRAs and your traditional IRAs include only deductible contributions, the distributions are fully taxable and are included in your modified AGI. Tax forms 1040x Both contributions for 2013 and distributions in 2013. Tax forms 1040x   If all three of the following apply, any IRA distributions you received in 2013 may be partly tax free and partly taxable. Tax forms 1040x You received distributions in 2013 from one or more traditional IRAs, You made contributions to a traditional IRA for 2013, and Some of those contributions may be nondeductible contributions. Tax forms 1040x (See Nondeductible Contributions and Worksheet 1-2, later. Tax forms 1040x ) If this is your situation, you must figure the taxable part of the traditional IRA distribution before you can figure your modified AGI. Tax forms 1040x To do this, you can use Worksheet 1-5, later. Tax forms 1040x   If at least one of the above does not apply, figure your modified AGI using Worksheet 1-1, later. Tax forms 1040x How To Figure Your Reduced IRA Deduction If you or your spouse is covered by an employer retirement plan and you did not receive any social security benefits, you can figure your reduced IRA deduction by using Worksheet 1-2. Tax forms 1040x Figuring Your Reduced IRA Deduction for 2013. Tax forms 1040x The Instructions for Form 1040, Form 1040A, and Form 1040NR include similar worksheets that you can use instead of the worksheet in this publication. Tax forms 1040x If you or your spouse is covered by an employer retirement plan, and you received any social security benefits, see Social Security Recipients , earlier. Tax forms 1040x Note. Tax forms 1040x If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Tax forms 1040x Worksheet 1-1. Tax forms 1040x Figuring Your Modified AGI Use this worksheet to figure your modified AGI for traditional IRA purposes. Tax forms 1040x 1. Tax forms 1040x Enter your adjusted gross income (AGI) from Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37, figured without taking into account the amount from Form 1040, line 32; Form 1040A, line 17; or Form 1040NR, line 32 1. Tax forms 1040x   2. Tax forms 1040x Enter any student loan interest deduction from Form 1040, line 33; Form 1040A, line 18; or Form 1040NR, line 33 2. Tax forms 1040x   3. Tax forms 1040x Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 3. Tax forms 1040x   4. Tax forms 1040x Enter any domestic production activities deduction from Form 1040, line 35, or Form 1040NR, line 34 4. Tax forms 1040x   5. Tax forms 1040x Enter any foreign earned income exclusion and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 5. Tax forms 1040x   6. Tax forms 1040x Enter any foreign housing deduction from Form 2555, line 50 6. Tax forms 1040x   7. Tax forms 1040x Enter any excludable savings bond interest from Form 8815, line 14 7. Tax forms 1040x   8. Tax forms 1040x Enter any excluded employer-provided adoption benefits from Form 8839, line 28 8. Tax forms 1040x   9. Tax forms 1040x Add lines 1 through 8. Tax forms 1040x This is your Modified AGI for traditional IRA purposes 9. Tax forms 1040x   Reporting Deductible Contributions If you file Form 1040, enter your IRA deduction on line 32 of that form. Tax forms 1040x If you file Form 1040A, enter your IRA deduction on line 17 of that form. Tax forms 1040x If you file Form 1040NR, enter your IRA deduction on line 32 of that form. Tax forms 1040x You cannot deduct IRA contributions on Form 1040EZ or Form 1040NR-EZ. Tax forms 1040x Self-employed. Tax forms 1040x   If you are self-employed (a sole proprietor or partner) and have a SIMPLE IRA, enter your deduction for allowable plan contributions on Form 1040, line 28. Tax forms 1040x If you file Form 1040NR, enter your deduction on line 28 of that form. Tax forms 1040x Nondeductible Contributions Although your deduction for IRA contributions may be reduced or eliminated, contributions can be made to your IRA of up to the general limit or, if it applies, the Kay Bailey Hutchison Spousal IRA limit. Tax forms 1040x The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. Tax forms 1040x Example. Tax forms 1040x Tony is 29 years old and single. Tax forms 1040x In 2013, he was covered by a retirement plan at work. Tax forms 1040x His salary is $62,000. Tax forms 1040x His modified AGI is $70,000. Tax forms 1040x Tony makes a $5,500 IRA contribution for 2013. Tax forms 1040x Because he was covered by a retirement plan and his modified AGI is above $69,000, he cannot deduct his $5,500 IRA contribution. Tax forms 1040x He must designate this contribution as a nondeductible contribution by reporting it on Form 8606. Tax forms 1040x Repayment of reservist distributions. Tax forms 1040x   Nondeductible contributions may include repayments of qualified reservist distributions. Tax forms 1040x For more information, see Qualified reservist repayments under How Much Can Be Contributed, earlier. Tax forms 1040x Form 8606. Tax forms 1040x   To designate contributions as nondeductible, you must file Form 8606. Tax forms 1040x (See the filled-in Forms 8606 in this chapter. Tax forms 1040x )   You do not have to designate a contribution as nondeductible until you file your tax return. Tax forms 1040x When you file, you can even designate otherwise deductible contributions as nondeductible contributions. Tax forms 1040x   You must file Form 8606 to report nondeductible contributions even if you do not have to file a tax return for the year. Tax forms 1040x    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. Tax forms 1040x In those situations, a Form 8606 is completed for the year you take a distribution from that IRA. Tax forms 1040x See Form 8606 under Distributions Fully or Partly Taxable, later. Tax forms 1040x Failure to report nondeductible contributions. Tax forms 1040x   If you do not report nondeductible contributions, all of the contributions to your traditional IRA will be treated like deductible contributions when withdrawn. Tax forms 1040x All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. Tax forms 1040x Penalty for overstatement. Tax forms 1040x   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. Tax forms 1040x Penalty for failure to file Form 8606. Tax forms 1040x   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. Tax forms 1040x Tax on earnings on nondeductible contributions. Tax forms 1040x   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. Tax forms 1040x Cost basis. Tax forms 1040x   You will have a cost basis in your traditional IRA if you made any nondeductible contributions. Tax forms 1040x Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions. Tax forms 1040x    Commonly, distributions from your traditional IRAs will include both taxable and nontaxable (cost basis) amounts. Tax forms 1040x See Are Distributions Taxable, later, for more information. Tax forms 1040x Recordkeeping. Tax forms 1040x There is a recordkeeping worksheet, Appendix A. Tax forms 1040x Summary Record of Traditional IRA(s) for 2013 , that you can use to keep a record of deductible and nondeductible IRA contributions. Tax forms 1040x Examples — Worksheet for Reduced IRA Deduction for 2013 The following examples illustrate the use of Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013. Tax forms 1040x Example 1. Tax forms 1040x For 2013, Tom and Betty file a joint return on Form 1040. Tax forms 1040x They are both 39 years old. Tax forms 1040x They are both employed and Tom is covered by his employer's retirement plan. Tax forms 1040x Tom's salary is $59,000 and Betty's is $32,555. Tax forms 1040x They each have a traditional IRA and their combined modified AGI, which includes $5,000 interest and dividend income, is $96,555. Tax forms 1040x Because their modified AGI is between $95,000 and $115,000 and Tom is covered by an employer plan, Tom is subject to the deduction phaseout discussed earlier under Limit if Covered by Employer Plan . Tax forms 1040x For 2013, Tom contributed $5,500 to his IRA and Betty contributed $5,500 to hers. Tax forms 1040x Even though they file a joint return, they must use separate worksheets to figure the IRA deduction for each of them. Tax forms 1040x Tom can take a deduction of only $5,080. Tax forms 1040x He can choose to treat the $5,080 as either deductible or nondeductible contributions. Tax forms 1040x He can either leave the $420 ($5,500 − $5,080) of nondeductible contributions in his IRA or withdraw them by April 15, 2014. Tax forms 1040x He decides to treat the $5,080 as deductible contributions and leave the $420 of nondeductible contributions in his IRA. Tax forms 1040x Using Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, Tom figures his deductible and nondeductible amounts as shown on Worksheet 1-2. Tax forms 1040x Figuring Your Reduced IRA Deduction for 2013—Example 1 Illustrated. Tax forms 1040x Betty figures her IRA deduction as follows. Tax forms 1040x Betty can treat all or part of her contributions as either deductible or nondeductible. Tax forms 1040x This is because her $5,500 contribution for 2013 is not subject to the deduction phaseout discussed earlier under Limit if Covered by Employer Plan . Tax forms 1040x She does not need to use Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, because their modified AGI is not within the phaseout range that applies. Tax forms 1040x Betty decides to treat her $5,500 IRA contributions as deductible. Tax forms 1040x The IRA deductions of $5,080 and $5,500 on the joint return for Tom and Betty total $10,580. Tax forms 1040x Example 2. Tax forms 1040x For 2013, Ed and Sue file a joint return on Form 1040. Tax forms 1040x They are both 39 years old. Tax forms 1040x Ed is covered by his employer's retirement plan. Tax forms 1040x Ed's salary is $45,000. Tax forms 1040x Sue had no compensation for the year and did not contribute to an IRA. Tax forms 1040x Sue is not covered by an employer plan. Tax forms 1040x Ed contributed $5,500 to his traditional IRA and $5,500 to a traditional IRA for Sue (a Kay Bailey Hutchison Spousal IRA). Tax forms 1040x Their combined modified AGI, which includes $2,000 interest and dividend income and a large capital gain from the sale of stock, is $180,555. Tax forms 1040x Because the combined modified AGI is $115,000 or more, Ed cannot deduct any of the contribution to his traditional IRA. Tax forms 1040x He can either leave the $5,500 of nondeductible contributions in his IRA or withdraw them by April 15, 2014. Tax forms 1040x Sue figures her IRA deduction as shown on Worksheet 1-2. Tax forms 1040x Figuring Your Reduced IRA Deduction for 2013—Example 2 Illustrated. Tax forms 1040x Worksheet 1-2. Tax forms 1040x Figuring Your Reduced IRA Deduction for 2013 (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. Tax forms 1040x ) Note. Tax forms 1040x If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Tax forms 1040x IF you . Tax forms 1040x . Tax forms 1040x . Tax forms 1040x AND your  filing status is . Tax forms 1040x . Tax forms 1040x . Tax forms 1040x AND your modified AGI is over . Tax forms 1040x . Tax forms 1040x . Tax forms 1040x THEN enter on  line 1 below . Tax forms 1040x . Tax forms 1040x . Tax forms 1040x       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. Tax forms 1040x Enter applicable amount from table above 1. Tax forms 1040x   2. Tax forms 1040x Enter your modified AGI (that of both spouses, if married filing jointly) 2. Tax forms 1040x     Note. Tax forms 1040x If line 2 is equal to or more than the amount on line 1, stop here. Tax forms 1040x  Your IRA contributions are not deductible. Tax forms 1040x See Nondeductible Contributions , earlier. Tax forms 1040x     3. Tax forms 1040x Subtract line 2 from line 1. Tax forms 1040x If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. Tax forms 1040x You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. Tax forms 1040x   4. Tax forms 1040x Multiply line 3 by the percentage below that applies to you. Tax forms 1040x If the result is not a multiple of $10, round it to the next highest multiple of $10. Tax forms 1040x (For example, $611. Tax forms 1040x 40 is rounded to $620. Tax forms 1040x ) However, if the result is less than $200, enter $200. Tax forms 1040x         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Tax forms 1040x 5% (. Tax forms 1040x 275) (by 32. Tax forms 1040x 5% (. Tax forms 1040x 325) if you are age 50 or older). Tax forms 1040x All others, multiply line 3 by 55% (. Tax forms 1040x 55) (by 65% (. Tax forms 1040x 65) if you are age 50 or older). Tax forms 1040x 4. Tax forms 1040x   5. Tax forms 1040x Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). Tax forms 1040x If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. Tax forms 1040x If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Tax forms 1040x   6. Tax forms 1040x Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). Tax forms 1040x If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Tax forms 1040x 6. Tax forms 1040x   7. Tax forms 1040x IRA deduction. Tax forms 1040x Compare lines 4, 5, and 6. Tax forms 1040x Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. Tax forms 1040x If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Tax forms 1040x   8. Tax forms 1040x Nondeductible contribution. Tax forms 1040x Subtract line 7 from line 5 or 6, whichever is smaller. Tax forms 1040x  Enter the result here and on line 1 of your Form 8606 8. Tax forms 1040x   Worksheet 1-2. Tax forms 1040x Figuring Your Reduced IRA Deduction for 2013—Example 1 Illustrated (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. Tax forms 1040x ) Note. Tax forms 1040x If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Tax forms 1040x IF you . Tax forms 1040x . Tax forms 1040x . Tax forms 1040x AND your  filing status is . Tax forms 1040x . Tax forms 1040x . Tax forms 1040x AND your modified AGI is over . Tax forms 1040x . Tax forms 1040x . Tax forms 1040x THEN enter on  line 1 below . Tax forms 1040x . Tax forms 1040x . Tax forms 1040x       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. Tax forms 1040x Enter applicable amount from table above 1. Tax forms 1040x 115,000 2. Tax forms 1040x Enter your modified AGI (that of both spouses, if married filing jointly) 2. Tax forms 1040x 96,555   Note. Tax forms 1040x If line 2 is equal to or more than the amount on line 1, stop here. Tax forms 1040x  Your IRA contributions are not deductible. Tax forms 1040x See Nondeductible Contributions , earlier. Tax forms 1040x     3. Tax forms 1040x Subtract line 2 from line 1. Tax forms 1040x If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. Tax forms 1040x You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. Tax forms 1040x 18,445 4. Tax forms 1040x Multiply line 3 by the percentage below that applies to you. Tax forms 1040x If the result is not a multiple of $10, round it to the next highest multiple of $10. Tax forms 1040x (For example, $611. Tax forms 1040x 40 is rounded to $620. Tax forms 1040x ) However, if the result is less than $200, enter $200. Tax forms 1040x         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Tax forms 1040x 5% (. Tax forms 1040x 275) (by 32. Tax forms 1040x 5% (. Tax forms 1040x 325) if you are age 50 or older). Tax forms 1040x All others, multiply line 3 by 55% (. Tax forms 1040x 55) (by 65% (. Tax forms 1040x 65) if you are age 50 or older). Tax forms 1040x 4. Tax forms 1040x 5,080 5. Tax forms 1040x Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). Tax forms 1040x If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. Tax forms 1040x If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Tax forms 1040x 59,000 6. Tax forms 1040x Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). Tax forms 1040x If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Tax forms 1040x 6. Tax forms 1040x 5,500 7. Tax forms 1040x IRA deduction. Tax forms 1040x Compare lines 4, 5, and 6. Tax forms 1040x Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. Tax forms 1040x If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Tax forms 1040x 5,080 8. Tax forms 1040x Nondeductible contribution. Tax forms 1040x Subtract line 7 from line 5 or 6, whichever is smaller. Tax forms 1040x  Enter the result here and on line 1 of your Form 8606 8. Tax forms 1040x 420 Worksheet 1-2. Tax forms 1040x Figuring Your Reduced IRA Deduction for 2013—Example 2 Illustrated (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. Tax forms 1040x ) Note. Tax forms 1040x If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Tax forms 1040x IF you . Tax forms 1040x . Tax forms 1040x . Tax forms 1040x AND your  filing status is . Tax forms 1040x . Tax forms 1040x . Tax forms 1040x AND your modified AGI is over . Tax forms 1040x . Tax forms 1040x . Tax forms 1040x THEN enter on  line 1 below . Tax forms 1040x . Tax forms 1040x . Tax forms 1040x       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. Tax forms 1040x Enter applicable amount from table above 1. Tax forms 1040x 188,000 2. Tax forms 1040x Enter your modified AGI (that of both spouses, if married filing jointly) 2. Tax forms 1040x 180,555   Note. Tax forms 1040x If line 2 is equal to or more than the amount on line 1, stop here. Tax forms 1040x  Your IRA contributions are not deductible. Tax forms 1040x See Nondeductible Contributions , earlier. Tax forms 1040x     3. Tax forms 1040x Subtract line 2 from line 1. Tax forms 1040x If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. Tax forms 1040x You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. Tax forms 1040x 7,445 4. Tax forms 1040x Multiply line 3 by the percentage below that applies to you. Tax forms 1040x If the result is not a multiple of $10, round it to the next highest multiple of $10. Tax forms 1040x (For example, $611. Tax forms 1040x 40 is rounded to $620. Tax forms 1040x ) However, if the result is less than $200, enter $200. Tax forms 1040x         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Tax forms 1040x 5% (. Tax forms 1040x 275) (by 32. Tax forms 1040x 5% (. Tax forms 1040x 325) if you are age 50 or older). Tax forms 1040x All others, multiply line 3 by 55% (. Tax forms 1040x 55) (by 65% (. Tax forms 1040x 65) if you are age 50 or older). Tax forms 1040x 4. Tax forms 1040x 4,100 5. Tax forms 1040x Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). Tax forms 1040x If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. Tax forms 1040x If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Tax forms 1040x 39,500 6. Tax forms 1040x Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). Tax forms 1040x If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Tax forms 1040x 6. Tax forms 1040x 5,500 7. Tax forms 1040x IRA deduction. Tax forms 1040x Compare lines 4, 5, and 6. Tax forms 1040x Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. Tax forms 1040x If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Tax forms 1040x 4,100 8. Tax forms 1040x Nondeductible contribution. Tax forms 1040x Subtract line 7 from line 5 or 6, whichever is smaller. Tax forms 1040x  Enter the result here and on line 1 of your Form 8606 8. Tax forms 1040x 1,400 What if You Inherit an IRA? If you inherit a traditional IRA, you are called a beneficiary. Tax forms 1040x A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. Tax forms 1040x Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive. Tax forms 1040x Inherited from spouse. Tax forms 1040x   If you inherit a traditional IRA from your spouse, you generally have the following three choices. Tax forms 1040x You can: Treat it as your own IRA by designating yourself as the account owner. Tax forms 1040x 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 (s