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Taxact 2010 Free Version

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Taxact 2010 Free Version

Taxact 2010 free version 3. Taxact 2010 free version   Abandonments Table of Contents You abandon property when you voluntarily and permanently give up possession and use of the property with the intention of ending your ownership but without passing it on to anyone else. Taxact 2010 free version Whether an abandonment has occurred is determined in light of all the facts and circumstances. Taxact 2010 free version You must both show an intention to abandon the property and affirmatively act to abandon the property. Taxact 2010 free version A voluntary conveyance of the property in lieu of foreclosure is not an abandonment and is treated as the exchange of property to satisfy a debt. Taxact 2010 free version For more information, see Sales and Exchanges in Publication 544. Taxact 2010 free version The tax consequences of abandonment of property that secures a debt depend on whether you were personally liable for the debt (recourse debt) or were not personally liable for the debt (nonrecourse debt). Taxact 2010 free version See Publication 544 if you abandoned property that did not secure debt. Taxact 2010 free version This publication only discusses the tax consequences of abandoning property that secured a debt. Taxact 2010 free version Abandonment of property securing recourse debt. Taxact 2010 free version    In most cases, if you abandon property that secures debt for which you are personally liable (recourse debt), you do not have gain or loss until the later foreclosure is completed. Taxact 2010 free version For details on figuring gain or loss on the foreclosure, see chapter 2. Taxact 2010 free version Example 1—abandonment of personal-use property securing recourse debt. Taxact 2010 free version In 2009, Anne purchased a home for $200,000. Taxact 2010 free version She borrowed the entire purchase price, for which she was personally liable, and gave the bank a mortgage on the home. Taxact 2010 free version In 2013, Anne lost her job and was unable to continue making her mortgage loan payments. Taxact 2010 free version Because her mortgage loan balance was $185,000 and the FMV of her home was only $150,000, Anne decided to abandon her home by permanently moving out on August 1, 2013. Taxact 2010 free version Because Anne was personally liable for the debt and the bank did not complete a foreclosure of the property in 2013, Anne has neither gain nor loss in tax year 2013 from abandoning the home. Taxact 2010 free version If the bank sells the house at a foreclosure sale in 2014, Anne will have to figure her gain or nondeductible loss for tax year 2014 as discussed earlier in chapter 2. Taxact 2010 free version Example 2—abandonment of business or investment property securing recourse debt. Taxact 2010 free version In 2009, Sue purchased business property for $200,000. Taxact 2010 free version She borrowed the entire purchase price, for which she was personally liable, and gave the lender a security interest in the property. Taxact 2010 free version In 2013, Sue was unable to continue making her loan payments. Taxact 2010 free version Because her loan balance was $185,000 and the FMV of the property was only $150,000, Sue abandoned the property on August 1, 2013. Taxact 2010 free version Because Sue was personally liable for the debt and the lender did not complete a foreclosure of the property in 2013, Sue has neither gain nor loss in tax year 2013 from abandoning the property. Taxact 2010 free version If the lender sells the property at a foreclosure sale in 2014, Sue will have to figure her gain or deductible loss for tax year 2014 as discussed earlier in chapter 2. Taxact 2010 free version Abandonment of property securing nonrecourse debt. Taxact 2010 free version    If you abandon property that secures debt for which you are not personally liable (nonrecourse debt), the abandonment is treated as a sale or exchange. Taxact 2010 free version   The amount you realize on the abandonment of property that secured nonrecourse debt is the amount of the nonrecourse debt. Taxact 2010 free version If the amount you realize is more than your adjusted basis, then you have a gain. Taxact 2010 free version If your adjusted basis is more than the amount you realize, then you have a loss. Taxact 2010 free version For more information on how to figure gain and loss, see Gain or Loss from Sales or Exchanges in Publication 544. Taxact 2010 free version   Loss from abandonment of business or investment property is deductible as a loss. Taxact 2010 free version The character of the loss depends on the character of the property. Taxact 2010 free version The amount of deductible capital loss may be limited. Taxact 2010 free version For more information, see Treatment of Capital Losses in Publication 544. Taxact 2010 free version You cannot deduct any loss from abandonment of your home or other property held for personal use. Taxact 2010 free version Example 1—abandonment of personal-use property securing nonrecourse debt. Taxact 2010 free version In 2009, Timothy purchased a home for $200,000. Taxact 2010 free version He borrowed the entire purchase price, for which he was not personally liable, and gave the bank a mortgage on the home. Taxact 2010 free version In 2013, Timothy lost his job and was unable to continue making his mortgage loan payments. Taxact 2010 free version Because his mortgage loan balance was $185,000 and the FMV of his home was only $150,000, Timothy decided to abandon his home by permanently moving out on August 1, 2013. Taxact 2010 free version Because Timothy was not personally liable for the debt, the abandonment is treated as a sale or exchange of the home in tax year 2013. Taxact 2010 free version Timothy's amount realized is $185,000 and his adjusted basis in the home is $200,000. Taxact 2010 free version Timothy has a $15,000 nondeductible loss in tax year 2013. Taxact 2010 free version (Had Timothy’s adjusted basis been less than the amount realized, Timothy would have had a gain that he would have to include in gross income. Taxact 2010 free version ) The bank sells the house at a foreclosure sale in 2014. Taxact 2010 free version Timothy has neither gain nor loss from the foreclosure sale. Taxact 2010 free version Because he was not personally liable for the debt, he also has no cancellation of debt income. Taxact 2010 free version Example 2—abandonment of business or investment property securing nonrecourse debt. Taxact 2010 free version In 2009, Robert purchased business property for $200,000. Taxact 2010 free version He borrowed the entire purchase price, for which he was not personally liable, and gave the lender a security interest in the property. Taxact 2010 free version In 2013, Robert was unable to continue making his loan payments. Taxact 2010 free version Because his loan balance was $185,000 and the FMV of the property was only $150,000, Robert decided to abandon the property on August 1, 2013. Taxact 2010 free version Because Robert was not personally liable for the debt, the abandonment is treated as a sale or exchange of the property in tax year 2013. Taxact 2010 free version Robert's amount realized is $185,000 and his adjusted basis in the property is $180,000 (as a result of $20,000 of depreciation deductions on the property). Taxact 2010 free version Robert has a $5,000 gain in tax year 2013. Taxact 2010 free version (Had Robert’s adjusted basis been greater than the amount realized, he would have had a deductible loss. Taxact 2010 free version ) The lender sells the property at a foreclosure sale in 2014. Taxact 2010 free version Robert has neither gain nor loss from the foreclosure sale. Taxact 2010 free version Because he was not personally liable for the debt, he also has no cancellation of debt income. Taxact 2010 free version Canceled debt. Taxact 2010 free version    If the abandoned property secures a debt for which you are personally liable and the debt is canceled, you will realize ordinary income equal to the canceled debt. Taxact 2010 free version This income is separate from any amount realized from abandonment of the property. Taxact 2010 free version You must report this income on your return unless one of the exceptions or exclusions described in chapter 1 applies. Taxact 2010 free version See chapter 1 for more details. Taxact 2010 free version Forms 1099-A and 1099-C. Taxact 2010 free version    In most cases, if you abandon real property (such as a home), intangible property, or tangible personal property held (wholly or partly) for use in a trade or business or for investment, that secures a loan and the lender knows the property has been abandoned, the lender should send you Form 1099-A showing information you need to figure your gain or loss from the abandonment. Taxact 2010 free version Also, if your debt is canceled and the lender must file Form 1099-C, the lender can include the information about the abandonment on that form instead of on Form 1099-A. Taxact 2010 free version The lender must file Form 1099-C and send you a copy if the amount of debt canceled is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. Taxact 2010 free version For abandonments of property and debt cancellations occurring in 2013, these forms should be sent to you by January 31, 2014. Taxact 2010 free version Prev  Up  Next   Home   More Online Publications
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IRS Virtual Currency Guidance : Virtual Currency Is Treated as Property for U.S. Federal Tax Purposes; General Rules for Property Transactions Apply

IR-2014-36, March. 25, 2014

WASHINGTON — The Internal Revenue Service today issued a notice providing answers to frequently asked questions (FAQs) on virtual currency, such as bitcoin. These FAQs provide basic information on the U.S. federal tax implications of transactions in, or transactions that use, virtual currency.

In some environments, virtual currency operates like “real” currency -- i.e., the coin and paper money of the United States or of any other country that is designated as legal tender, circulates, and is customarily used and accepted as a medium of exchange in the country of issuance -- but it does not have legal tender status in any jurisdiction.

The notice provides that virtual currency is treated as property for U.S. federal tax purposes.  General tax principles that apply to property transactions apply to transactions using virtual currency.  Among other things, this means that:

  • Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a Form W-2, and are subject to federal income tax withholding and payroll taxes.
  • Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply.  Normally, payers must issue Form 1099.
  • The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.
  • A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property. 

Further details, including a set of 16 questions and answers, are in Notice 2014-21, posted today on IRS.gov.

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The Taxact 2010 Free Version

Taxact 2010 free version 2. Taxact 2010 free version   Roth IRAs Table of Contents What's New for 2013 What's New for 2014 Reminders Introduction What Is a Roth IRA? When Can a Roth IRA Be Opened? Can You Contribute to a Roth IRA?How Much Can Be Contributed? When Can You Make Contributions? What if You Contribute Too Much? Can You Move Amounts Into a Roth IRA?Conversions Rollover From Employer's Plan Into a Roth IRA Military Death Gratuities and Servicemembers' Group Life Insurance (SGLI) Payments Rollover From a Roth IRA Rollover of Exxon Valdez Settlement Income Rollover of Airline Payments Are Distributions Taxable?What Are Qualified Distributions? Additional Tax on Early Distributions Ordering Rules for Distributions How Do You Figure the Taxable Part? Must You Withdraw or Use Assets?Minimum distributions. Taxact 2010 free version Recognizing Losses on Investments Distributions After Owner's Death What's New for 2013 Roth IRA contribution limit. Taxact 2010 free version  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. Taxact 2010 free version 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. Taxact 2010 free version However, if your modified adjusted gross income (AGI) is above a certain amount, your contribution limit may be reduced. Taxact 2010 free version For more information, see How Much Can Be Contributed? under Can You Contribute to a Roth IRA? in this chapter. Taxact 2010 free version Modified AGI limit for Roth IRA contributions increased. Taxact 2010 free version  For 2013, your Roth IRA contribution limit is reduced (phased out) in the following situations. Taxact 2010 free version Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $178,000. Taxact 2010 free version You cannot make a Roth IRA contribution if your modified AGI is $188,000 or more. Taxact 2010 free version 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. Taxact 2010 free version You cannot make a Roth IRA contribution if your modified AGI is $127,000 or more. Taxact 2010 free version 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-. Taxact 2010 free version You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more. Taxact 2010 free version See Can You Contribute to a Roth IRA? in this chapter. Taxact 2010 free version Net Investment Income Tax. Taxact 2010 free version  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). Taxact 2010 free version However, these distributions are taken into account when determining the modified adjusted gross income threshold. Taxact 2010 free version Distributions from a nonqualified retirement plan are included in net investment income. Taxact 2010 free version See Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions for more information. Taxact 2010 free version What's New for 2014 Modified AGI limit for Roth IRA contributions increased. Taxact 2010 free version  For 2014, your Roth IRA contribution limit is reduced (phased out) in the following situations. Taxact 2010 free version Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $181,000. Taxact 2010 free version You cannot make a Roth IRA contribution if your modified AGI is $191,000 or more. Taxact 2010 free version Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2014 and your modified AGI is at least $114,000. Taxact 2010 free version You cannot make a Roth IRA contribution if your modified AGI is $129,000 or more. Taxact 2010 free version 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-. Taxact 2010 free version You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more. Taxact 2010 free version Reminders Deemed IRAs. Taxact 2010 free version  For plan years beginning after 2002, a qualified employer plan (retirement plan) can maintain a separate account or annuity under the plan (a deemed IRA) to receive voluntary employee contributions. Taxact 2010 free version If the separate account or annuity otherwise meets the requirements of an IRA, it will be subject only to IRA rules. Taxact 2010 free version An employee's account can be treated as a traditional IRA or a Roth IRA. Taxact 2010 free version For this purpose, a “qualified employer plan” includes: A qualified pension, profit-sharing, or stock bonus plan (section 401(a) plan), A qualified employee annuity plan (section 403(a) plan), A tax-sheltered annuity plan (section 403(b) plan), and A deferred compensation plan (section 457 plan) maintained by a state, a political subdivision of a state, or an agency or instrumentality of a state or political subdivision of a state. Taxact 2010 free version Designated Roth accounts. Taxact 2010 free version  Designated Roth accounts are separate accounts under 401(k), 403(b), or 457(b) plans that accept elective deferrals that are referred to as Roth contributions. Taxact 2010 free version These elective deferrals are included in your income, but qualified distributions from these accounts are not included in your income. Taxact 2010 free version Designated Roth accounts are not IRAs and should not be confused with Roth IRAs. Taxact 2010 free version Contributions, up to their respective limits, can be made to Roth IRAs and designated Roth accounts according to your eligibility to participate. Taxact 2010 free version A contribution to one does not impact your eligibility to contribute to the other. Taxact 2010 free version See Publication 575, for more information on designated Roth accounts. Taxact 2010 free version Introduction Regardless of your age, you may be able to establish and make nondeductible contributions to an individual retirement plan called a Roth IRA. Taxact 2010 free version Contributions not reported. Taxact 2010 free version   You do not report Roth IRA contributions on your return. Taxact 2010 free version What Is a Roth IRA? A Roth IRA is an individual retirement plan that, except as explained in this chapter, is subject to the rules that apply to a traditional IRA (defined next). Taxact 2010 free version It can be either an account or an annuity. Taxact 2010 free version Individual retirement accounts and annuities are described in chapter 1 under How Can a Traditional IRA Be Opened. Taxact 2010 free version To be a Roth IRA, the account or annuity must be designated as a Roth IRA when it is opened. Taxact 2010 free version A deemed IRA can be a Roth IRA, but neither a SEP IRA nor a SIMPLE IRA can be designated as a Roth IRA. Taxact 2010 free version Unlike a traditional IRA, you cannot deduct contributions to a Roth IRA. Taxact 2010 free version But, if you satisfy the requirements, qualified distributions (discussed later) are tax free. Taxact 2010 free version Contributions can be made to your Roth IRA after you reach age 70½ and you can leave amounts in your Roth IRA as long as you live. Taxact 2010 free version Traditional IRA. Taxact 2010 free version   A traditional IRA is any IRA that is not a Roth IRA or SIMPLE IRA. Taxact 2010 free version Traditional IRAs are discussed in chapter 1. Taxact 2010 free version When Can a Roth IRA Be Opened? You can open a Roth IRA at any time. Taxact 2010 free version However, the time for making contributions for any year is limited. Taxact 2010 free version See When Can You Make Contributions , later under Can You Contribute to a Roth IRA. Taxact 2010 free version Can You Contribute to a Roth IRA? Generally, you can contribute to a Roth IRA if you have taxable compensation (defined later) and your modified AGI (defined later) is less than: $188,000 for married filing jointly or qualifying widow(er), $127,000 for single, head of household, or married filing separately and you did not live with your spouse at any time during the year, and $10,000 for married filing separately and you lived with your spouse at any time during the year. Taxact 2010 free version You may be able to claim a credit for contributions to your Roth IRA. Taxact 2010 free version For more information, see chapter 4. Taxact 2010 free version Is there an age limit for contributions?   Contributions can be made to your Roth IRA regardless of your age. Taxact 2010 free version Can you contribute to a Roth IRA for your spouse?   You can contribute to a Roth IRA for your spouse provided the contributions satisfy the Kay Bailey Hutchison Spousal IRA limit discussed in chapter 1 under How Much Can Be Contributed, you file jointly, and your modified AGI is less than $188,000. Taxact 2010 free version Compensation. Taxact 2010 free version   Compensation includes wages, salaries, tips, professional fees, bonuses, and other amounts received for providing personal services. Taxact 2010 free version It also includes commissions, self-employment income, nontaxable combat pay, military differential pay, and taxable alimony and separate maintenance payments. Taxact 2010 free version For more information, see What Is Compensation? under Who Can Open a Traditional IRA? in chapter 1. Taxact 2010 free version Modified AGI. Taxact 2010 free version   Your modified AGI for Roth IRA purposes is your adjusted gross income (AGI) as shown on your return with some adjustments. Taxact 2010 free version Use Worksheet 2-1 , later, to determine your modified AGI. Taxact 2010 free version    Do not subtract conversion income when figuring your other AGI-based phaseouts and taxable income, such as your deduction for medical and dental expenses. Taxact 2010 free version Subtract them from AGI only for the purpose of figuring your modified AGI for Roth IRA purposes. Taxact 2010 free version How Much Can Be Contributed? The contribution limit for Roth IRAs generally depends on whether contributions are made only to Roth IRAs or to both traditional IRAs and Roth IRAs. Taxact 2010 free version Worksheet 2-1. Taxact 2010 free version Modified Adjusted Gross Income for Roth IRA Purposes Use this worksheet to figure your modified adjusted gross income for Roth IRA purposes. Taxact 2010 free version 1. Taxact 2010 free version Enter your adjusted gross income from Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37 1. Taxact 2010 free version   2. Taxact 2010 free version Enter any income resulting from the conversion of an IRA (other than a Roth IRA) to a Roth IRA (included on Form 1040, line 15b, Form 1040A, line 11b, or Form 1040NR, line 16b) and a rollover from a qualified retirement plan to a Roth IRA (included on Form 1040, line 16b, Form 1040A, line 12b, or Form 1040NR, line 17b) 2. Taxact 2010 free version   3. Taxact 2010 free version Subtract line 2 from line 1 3. Taxact 2010 free version   4. Taxact 2010 free version Enter any traditional IRA deduction from Form 1040, line 32; Form 1040A, line 17; or Form 1040NR, line 32 4. Taxact 2010 free version   5. Taxact 2010 free version Enter any student loan interest deduction from Form 1040, line 33; Form 1040A, line 18; or Form 1040NR, line 33 5. Taxact 2010 free version   6. Taxact 2010 free version Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 6. Taxact 2010 free version   7. Taxact 2010 free version Enter any domestic production activities deduction from Form 1040, line 35, or Form 1040NR, line 34 7. Taxact 2010 free version   8. Taxact 2010 free version Enter any foreign earned income exclusion and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 8. Taxact 2010 free version   9. Taxact 2010 free version Enter any foreign housing deduction from Form 2555, line 50 9. Taxact 2010 free version   10. Taxact 2010 free version Enter any excludable qualified savings bond interest from Form 8815, line 14 10. Taxact 2010 free version   11. Taxact 2010 free version Enter any excluded employer-provided adoption benefits from Form 8839, line 28 11. Taxact 2010 free version   12. Taxact 2010 free version Add the amounts on lines 3 through 11 12. Taxact 2010 free version   13. Taxact 2010 free version Enter: $188,000 if married filing jointly or qualifying widow(er), $10,000 if married filing separately and you lived with your spouse at any time during the year, or $127,000 for all others 13. Taxact 2010 free version   Is the amount on line 12 more than the amount on line 13? If yes, see the note below. Taxact 2010 free version  If no, the amount on line 12 is your modified adjusted gross income for Roth IRA purposes. Taxact 2010 free version       Note. Taxact 2010 free version If the amount on line 12 is more than the amount on line 13 and you have other income or loss items, such as social security income or passive activity losses, that are subject to AGI-based phaseouts, you can refigure your AGI solely for the purpose of figuring your modified AGI for Roth IRA purposes. Taxact 2010 free version (If you receive social security benefits, use Worksheet 1 in Appendix B to refigure your AGI. Taxact 2010 free version ) Then go to line 3 above in this Worksheet 2-1 to refigure your modified AGI. Taxact 2010 free version If you do not have other income or loss items subject to AGI-based phaseouts, your modified adjusted gross income for Roth IRA purposes is the amount on line 12 above. Taxact 2010 free version Roth IRAs only. Taxact 2010 free version   If contributions are made only to Roth IRAs, your contribution limit generally is the lesser of: $5,500 ($6,500 if you are age 50 or older), or Your taxable compensation. Taxact 2010 free version   However, if your modified AGI is above a certain amount, your contribution limit may be reduced, as explained later under Contribution limit reduced . Taxact 2010 free version Roth IRAs and traditional IRAs. Taxact 2010 free version   If contributions are made to both Roth IRAs and traditional IRAs established for your benefit, your contribution limit for Roth IRAs generally is the same as your limit would be if contributions were made only to Roth IRAs, but then reduced by all contributions for the year to all IRAs other than Roth IRAs. Taxact 2010 free version Employer contributions under a SEP or SIMPLE IRA plan do not affect this limit. Taxact 2010 free version   This means that your contribution limit is the lesser of: $5,500 ($6,500 if you are age 50 or older) minus all contributions (other than employer contributions under a SEP or SIMPLE IRA plan) for the year to all IRAs other than Roth IRAs, or Your taxable compensation minus all contributions (other than employer contributions under a SEP or SIMPLE IRA plan) for the year to all IRAs other than Roth IRAs. Taxact 2010 free version   However, if your modified AGI is above a certain amount, your contribution limit may be reduced, as explained below under Contribution limit reduced . Taxact 2010 free version   Simplified employee pensions (SEPs) are discussed in Publication 560. Taxact 2010 free version Savings incentive match plans for employees (SIMPLEs) are discussed in chapter 3. Taxact 2010 free version Repayment of reservist distributions. Taxact 2010 free version   You can repay qualified reservist distributions even if the repayments would cause your total contributions to the Roth IRA to be more than the general limit on contributions. Taxact 2010 free version However, the total repayments cannot be more than the amount of your distribution. Taxact 2010 free version Note. Taxact 2010 free version If you make repayments of qualified reservist distributions to a Roth IRA, increase your basis in the Roth IRA by the amount of the repayment. Taxact 2010 free version For more information, see Qualified reservist repayments under How Much Can Be Contributed? in chapter 1. Taxact 2010 free version Contribution limit reduced. Taxact 2010 free version   If your modified AGI is above a certain amount, your contribution limit is gradually reduced. Taxact 2010 free version Use Table 2-1, later, to determine if this reduction applies to you. Taxact 2010 free version Table 2-1. Taxact 2010 free version Effect of Modified AGI on Roth IRA Contribution This table shows whether your contribution to a Roth IRA is affected by the amount of your modified adjusted gross income (modified AGI). Taxact 2010 free version IF you have taxable compensation and your filing status is . Taxact 2010 free version . Taxact 2010 free version . Taxact 2010 free version AND your modified AGI is . Taxact 2010 free version . Taxact 2010 free version . Taxact 2010 free version THEN . Taxact 2010 free version . Taxact 2010 free version . Taxact 2010 free version married filing jointly or  qualifying widow(er) less than $178,000 you can contribute up to $5,500 ($6,500 if you are age 50 or older) as explained under How Much Can Be Contributed . Taxact 2010 free version at least $178,000 but less than $188,000 the amount you can contribute is reduced as explained under Contribution limit reduced . Taxact 2010 free version $188,000 or more you cannot contribute to a Roth IRA. Taxact 2010 free version married filing separately and you lived with your spouse at any time during the year zero (-0-) you can contribute up to $5,500 ($6,500 if you are age 50 or older) as explained under How Much Can Be Contributed . Taxact 2010 free version more than zero (-0-) but less than $10,000 the amount you can contribute is reduced as explained under Contribution limit reduced . Taxact 2010 free version $10,000 or more you cannot contribute to a Roth IRA. Taxact 2010 free version single, head of household,  or married filing separately and you did not live with your spouse at any time during the year less than $112,000 you can contribute up to $5,500 ($6,500 if you are age 50 or older) as explained under How Much Can Be Contributed . Taxact 2010 free version at least $112,000 but less than $127,000 the amount you can contribute is reduced as explained under Contribution limit reduced . Taxact 2010 free version $127,000 or more you cannot contribute to a Roth IRA. Taxact 2010 free version Figuring the reduction. Taxact 2010 free version   If the amount you can contribute must be reduced, use Worksheet 2-2, later, to figure your reduced contribution limit. Taxact 2010 free version Worksheet 2-2. Taxact 2010 free version Determining Your Reduced Roth IRA Contribution Limit Before using this worksheet, check Table 2-1, earlier, to determine whether or not your Roth IRA contribution limit is reduced. Taxact 2010 free version If it is, use this worksheet to determine how much it is reduced. Taxact 2010 free version 1. Taxact 2010 free version Enter your modified AGI for Roth IRA purposes (Worksheet 2-1, line 12) 1. Taxact 2010 free version   2. Taxact 2010 free version Enter: $178,000 if filing a joint return or qualifying widow(er), $-0- if married filing a separate return and you lived with your spouse at any time in 2013, or $112,000 for all others 2. Taxact 2010 free version   3. Taxact 2010 free version Subtract line 2 from line 1 3. Taxact 2010 free version   4. Taxact 2010 free version Enter: $10,000 if filing a joint return or qualifying widow(er) or married filing a separate return and you lived with your spouse at any time during the year, or $15,000 for all others 4. Taxact 2010 free version   5. Taxact 2010 free version Divide line 3 by line 4 and enter the result as a decimal (rounded to at least three places). Taxact 2010 free version If the result is 1. Taxact 2010 free version 000 or more, enter 1. Taxact 2010 free version 000 5. Taxact 2010 free version   6. Taxact 2010 free version Enter the lesser of: $5,500 ($6,500 if you are age 50 or older), or Your taxable compensation 6. Taxact 2010 free version   7. Taxact 2010 free version Multiply line 5 by line 6 7. Taxact 2010 free version   8. Taxact 2010 free version Subtract line 7 from line 6. Taxact 2010 free version Round the result up to the nearest $10. Taxact 2010 free version If the result is less than $200, enter $200 8. Taxact 2010 free version   9. Taxact 2010 free version Enter contributions for the year to other IRAs 9. Taxact 2010 free version   10. Taxact 2010 free version Subtract line 9 from line 6 10. Taxact 2010 free version   11. Taxact 2010 free version Enter the lesser of line 8 or line 10. Taxact 2010 free version This is your reduced Roth IRA contribution limit 11. Taxact 2010 free version      Round your reduced contribution limit up to the nearest $10. Taxact 2010 free version If your reduced contribution limit is more than $0, but less than $200, increase the limit to $200. Taxact 2010 free version Example. Taxact 2010 free version You are a 45-year-old, single individual with taxable compensation of $113,000. Taxact 2010 free version You want to make the maximum allowable contribution to your Roth IRA for 2013. Taxact 2010 free version Your modified AGI for 2013 is $113,000. Taxact 2010 free version You have not contributed to any traditional IRA, so the maximum contribution limit before the modified AGI reduction is $5,500. Taxact 2010 free version You figure your reduced Roth IRA contribution of $5,140 as shown on Worksheet 2-2. Taxact 2010 free version Example—Illustrated, later. Taxact 2010 free version   Worksheet 2-2. Taxact 2010 free version Example—Illustrated Before using this worksheet, check Table 2-1, earlier, to determine whether or not your Roth IRA contribution limit is reduced. Taxact 2010 free version If it is, use this worksheet to determine how much it is reduced. Taxact 2010 free version 1. Taxact 2010 free version Enter your modified AGI for Roth IRA purposes (Worksheet 2-1, line 12) 1. Taxact 2010 free version 113,000 2. Taxact 2010 free version Enter: $178,000 if filing a joint return or qualifying widow(er), $-0- if married filing a separate return and you lived with your spouse at any time in 2013, or $112,000 for all others 2. Taxact 2010 free version 112,000 3. Taxact 2010 free version Subtract line 2 from line 1 3. Taxact 2010 free version 1,000 4. Taxact 2010 free version Enter: $10,000 if filing a joint return or qualifying widow(er) or married filing a separate return and you lived with your spouse at any time during the year, or $15,000 for all others 4. Taxact 2010 free version 15,000 5. Taxact 2010 free version Divide line 3 by line 4 and enter the result as a decimal (rounded to at least three places). Taxact 2010 free version If the result is 1. Taxact 2010 free version 000 or more, enter 1. Taxact 2010 free version 000 5. Taxact 2010 free version . Taxact 2010 free version 067 6. Taxact 2010 free version Enter the lesser of: $5,500 ($6,500 if you are age 50 or older), or Your taxable compensation 6. Taxact 2010 free version 5,500 7. Taxact 2010 free version Multiply line 5 by line 6 7. Taxact 2010 free version 369 8. Taxact 2010 free version Subtract line 7 from line 6. Taxact 2010 free version Round the result up to the nearest $10. Taxact 2010 free version If the result is less than $200, enter $200 8. Taxact 2010 free version 5,140 9. Taxact 2010 free version Enter contributions for the year to other IRAs 9. Taxact 2010 free version 0 10. Taxact 2010 free version Subtract line 9 from line 6 10. Taxact 2010 free version 5,500 11. Taxact 2010 free version Enter the lesser of line 8 or line 10. Taxact 2010 free version This is your reduced Roth IRA contribution limit 11. Taxact 2010 free version 5,140 When Can You Make Contributions? You can make contributions to a Roth IRA for a year at any time during the year or by the due date of your return for that year (not including extensions). Taxact 2010 free version You can make contributions for 2013 by the due date (not including extensions) for filing your 2013 tax return. Taxact 2010 free version This means that most people can make contributions for 2013 by April 15, 2014. Taxact 2010 free version What if You Contribute Too Much? A 6% excise tax applies to any excess contribution to a Roth IRA. Taxact 2010 free version Excess contributions. Taxact 2010 free version   These are the contributions to your Roth IRAs for a year that equal the total of: Amounts contributed for the tax year to your Roth IRAs (other than amounts properly and timely rolled over from a Roth IRA or properly converted from a traditional IRA or rolled over from a qualified retirement plan, as described later) that are more than your contribution limit for the year (explained earlier under How Much Can Be Contributed? ), plus Any excess contributions for the preceding year, reduced by the total of: Any distributions out of your Roth IRAs for the year, plus Your contribution limit for the year minus your contributions to all your IRAs for the year. Taxact 2010 free version Withdrawal of excess contributions. Taxact 2010 free version   For purposes of determining excess contributions, any contribution that is withdrawn on or before the due date (including extensions) for filing your tax return for the year is treated as an amount not contributed. Taxact 2010 free version This treatment only applies if any earnings on the contributions are also withdrawn. Taxact 2010 free version The earnings are considered earned and received in the year the excess contribution was made. Taxact 2010 free version   If you timely filed your 2013 tax return without withdrawing a contribution that you made in 2013, you can still have the contribution returned to you within 6 months of the due date of your 2013 tax return, excluding extensions. Taxact 2010 free version If you do, file an amended return with “Filed pursuant to section 301. Taxact 2010 free version 9100-2” written at the top. Taxact 2010 free version Report any related earnings on the amended return and include an explanation of the withdrawal. Taxact 2010 free version Make any other necessary changes on the amended return. Taxact 2010 free version Applying excess contributions. Taxact 2010 free version    If contributions to your Roth 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. Taxact 2010 free version Can You Move Amounts Into a Roth IRA? You may be able to convert amounts from either a traditional, SEP, or SIMPLE IRA into a Roth IRA. Taxact 2010 free version You may be able to roll over amounts from a qualified retirement plan to a Roth IRA. Taxact 2010 free version You may be able to recharacterize contributions made to one IRA as having been made directly to a different IRA. Taxact 2010 free version You can roll amounts over from a designated Roth account or from one Roth IRA to another Roth IRA. Taxact 2010 free version Conversions You can convert a traditional IRA to a Roth IRA. Taxact 2010 free version The conversion is treated as a rollover, regardless of the conversion method used. Taxact 2010 free version Most of the rules for rollovers, described in chapter 1 under Rollover From One IRA Into Another , apply to these rollovers. Taxact 2010 free version However, the 1-year waiting period does not apply. Taxact 2010 free version Conversion methods. Taxact 2010 free version   You can convert amounts from a traditional IRA to a Roth IRA in any of the following three ways. Taxact 2010 free version Rollover. Taxact 2010 free version You can receive a distribution from a traditional IRA and roll it over (contribute it) to a Roth IRA within 60 days after the distribution. Taxact 2010 free version Trustee-to-trustee transfer. Taxact 2010 free version You can direct the trustee of the traditional IRA to transfer an amount from the traditional IRA to the trustee of the Roth IRA. Taxact 2010 free version Same trustee transfer. Taxact 2010 free version If the trustee of the traditional IRA also maintains the Roth IRA, you can direct the trustee to transfer an amount from the traditional IRA to the Roth IRA. Taxact 2010 free version Same trustee. Taxact 2010 free version   Conversions made with the same trustee can be made by redesignating the traditional IRA as a Roth IRA, rather than opening a new account or issuing a new contract. Taxact 2010 free version Income. Taxact 2010 free version   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. Taxact 2010 free version 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. Taxact 2010 free version If you must include any amount in your gross income, you may have to increase your withholding or make estimated tax payments. Taxact 2010 free version See Publication 505, Tax Withholding and Estimated Tax. Taxact 2010 free version More information. Taxact 2010 free version   For more information on conversions, see Converting From Any Traditional IRA Into a Roth IRA in chapter 1. Taxact 2010 free version Rollover From Employer's Plan Into a Roth IRA You can roll over into a Roth 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 (including a 401(k) plan); Annuity plan; Tax-sheltered annuity plan (section 403(b) plan); or Governmental deferred compensation plan (section 457 plan). Taxact 2010 free version Any amount rolled over is subject to the same rules for converting a traditional IRA into a Roth IRA. Taxact 2010 free version See Converting From Any Traditional IRA Into a Roth IRA in chapter 1. Taxact 2010 free version Also, the rollover contribution must meet the rollover requirements that apply to the specific type of retirement plan. Taxact 2010 free version Rollover methods. Taxact 2010 free version   You can roll over amounts from a qualified retirement plan to a Roth IRA in one of the following ways. Taxact 2010 free version Rollover. Taxact 2010 free version You can receive a distribution from a qualified retirement plan and roll it over (contribute) to a Roth IRA within 60 days after the distribution. Taxact 2010 free version Since the distribution is paid directly to you, the payer generally must withhold 20% of it. Taxact 2010 free version Direct rollover option. Taxact 2010 free version Your employer's qualified plan must give you the option to have any part of an eligible rollover distribution paid directly to a Roth IRA. Taxact 2010 free version Generally, no tax is withheld from any part of the designated distribution that is directly paid to the trustee of the Roth IRA. Taxact 2010 free version Rollover by nonspouse beneficiary. Taxact 2010 free version   If you are a designated beneficiary (other than a surviving spouse) of a deceased employee, you can roll over all or part of an eligible rollover distribution from one of the types of plans listed above into a Roth IRA. Taxact 2010 free version You must make the rollover by a direct trustee-to-trustee transfer into an inherited Roth IRA. Taxact 2010 free version   You will determine your required minimum distributions in years after you make the rollover based on whether the employee died before his or her required beginning date for taking distributions from the plan. Taxact 2010 free version For more information, see Distributions after the employee’s death under Tax on Excess Accumulation in Publication 575. Taxact 2010 free version Income. Taxact 2010 free version   You must include in your gross income distributions from a qualified retirement plan that you would have had to include in income if you had not rolled them over into a Roth IRA. Taxact 2010 free version You do not include in gross income any part of a distribution from a qualified retirement plan that is a return of contributions (after-tax contributions) to the plan that were taxable to you when paid. Taxact 2010 free version These amounts are normally included in income on your return for the year of the rollover from the qualified employer plan to a Roth IRA. Taxact 2010 free version If you must include any amount in your gross income, you may have to increase your withholding or make estimated tax payments. Taxact 2010 free version See Publication 505, Tax Withholding and Estimated Tax. Taxact 2010 free version For more information on eligible rollover distributions from qualified retirement plans and withholding, see Rollover From Employer's Plan Into an IRA in chapter 1. Taxact 2010 free version Military Death Gratuities and Servicemembers' Group Life Insurance (SGLI) Payments If you received a military death gratuity or SGLI payment with respect to a death from injury that occurred after October 6, 2001, you can contribute (roll over) all or part of the amount received to your Roth IRA. Taxact 2010 free version The contribution is treated as a qualified rollover contribution. Taxact 2010 free version The amount you can roll over to your Roth IRA cannot exceed the total amount that you received reduced by any part of that amount that was contributed to a Coverdell ESA or another Roth IRA. Taxact 2010 free version Any military death gratuity or SGLI payment contributed to a Roth IRA is disregarded for purposes of the 1-year waiting period between rollovers. Taxact 2010 free version The rollover must be completed before the end of the 1-year period beginning on the date you received the payment. Taxact 2010 free version The amount contributed to your Roth IRA is treated as part of your cost basis (investment in the contract) in the Roth IRA that is not taxable when distributed. Taxact 2010 free version Rollover From a Roth IRA You can withdraw, tax free, all or part of the assets from one Roth IRA if you contribute them within 60 days to another Roth IRA. Taxact 2010 free version Most of the rules for rollovers, described in chapter 1 under Rollover From One IRA Into Another , apply to these rollovers. Taxact 2010 free version However, rollovers from retirement plans other than Roth IRAs are disregarded for purposes of the 1-year waiting period between rollovers. Taxact 2010 free version A rollover from a Roth IRA to an employer retirement plan is not allowed. Taxact 2010 free version A rollover from a designated Roth account can only be made to another designated Roth account or to a Roth IRA. Taxact 2010 free version If you roll over an amount from one Roth IRA to another Roth IRA, the 5-year period used to determine qualified distributions does not change. Taxact 2010 free version The 5-year period begins with the first taxable year for which the contribution was made to the initial Roth IRA. Taxact 2010 free version See What are Qualified Distributions , later. Taxact 2010 free version Rollover of Exxon Valdez Settlement Income If you are a qualified taxpayer (defined in chapter 1, earlier) and you received qualified settlement income (defined in chapter 1, earlier), you can contribute all or part of the amount received to an eligible retirement plan which includes a Roth IRA. Taxact 2010 free version The rules for contributing qualified settlement income to a Roth IRA are the same as the rules for contributing qualified settlement income to a traditional IRA with the following exception. Taxact 2010 free version Qualified settlement income that is contributed to a Roth IRA, or to a designated Roth account, will be: Included in your taxable income for the year the qualified settlement income was received, and Treated as part of your cost basis (investment in the contract) in the Roth IRA that is not taxable when distributed. Taxact 2010 free version For more information, see Rollover of Exxon Valdez Settlement Income in chapter 1. Taxact 2010 free version Rollover of Airline Payments If you are a qualified airline employee (defined next), you may contribute any portion of an airline payment (defined below) you receive to a Roth IRA. Taxact 2010 free version The contribution must be made within 180 days from the date you received the payment. Taxact 2010 free version The contribution will be treated as a qualified rollover contribution. Taxact 2010 free version The rollover contribution is included in income to the extent it would be included in income if it were not part of the rollover contribution. Taxact 2010 free version Also, any reduction in the airline payment amount on account of employment taxes shall be disregarded when figuring the amount you can contribute to your Roth IRA. Taxact 2010 free version Qualified airline employee. Taxact 2010 free version    A current or former employee of a commercial airline carrier who was a participant in a qualified defined benefit plan maintained by the carrier which was terminated or became subject to restrictions under Section 402(b) of the Pension Protection Act of 2006. Taxact 2010 free version These provisions also apply to surviving spouses of qualified airline employees. Taxact 2010 free version Airline payment. Taxact 2010 free version    An airline payment is any payment of money or other property that is paid to a qualified airline employee from a commercial airline carrier. Taxact 2010 free version The payment also must be made both: Under the approval of an order of federal bankruptcy court in a case filed after September 11, 2001, and before January 1, 2007, and In respect of the qualified airline employee’s interest in a bankruptcy claim against the airline carrier, any note of the carrier (or amount paid in lieu of a note being issued), or any other fixed obligation of the carrier to pay a lump sum amount. Taxact 2010 free version Any reduction in the airline payment amount on account of employment taxes shall be disregarded when figuring the amount you can roll over to your traditional IRA. Taxact 2010 free version Also, an airline payment shall not include any amount payable on the basis of the airline carrier’s future earnings or profits. Taxact 2010 free version Are Distributions Taxable? You do not include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s). Taxact 2010 free version You also do not include distributions from your Roth IRA that you roll over tax free into another Roth IRA. Taxact 2010 free version You may have to include part of other distributions in your income. Taxact 2010 free version See Ordering Rules for Distributions , later. Taxact 2010 free version Basis of distributed property. Taxact 2010 free version   The basis of property distributed from a Roth IRA is its fair market value (FMV) on the date of distribution, whether or not the distribution is a qualified distribution. Taxact 2010 free version Withdrawals of contributions by due date. Taxact 2010 free version   If you withdraw contributions (including any net earnings on the contributions) by the due date of your return for the year in which you made the contribution, the contributions are treated as if you never made them. Taxact 2010 free version If you have an extension of time to file your return, you can withdraw the contributions and earnings by the extended due date. Taxact 2010 free version The withdrawal of contributions is tax free, but you must include the earnings on the contributions in income for the year in which you made the contributions. Taxact 2010 free version What Are Qualified Distributions? A qualified distribution is any payment or distribution from your Roth IRA that meets the following requirements. Taxact 2010 free version It is made after the 5-year period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for your benefit, and The payment or distribution is: Made on or after the date you reach age 59½, Made because you are disabled (defined earlier), Made to a beneficiary or to your estate after your death, or One that meets the requirements listed under First home under Exceptions in chapter 1 (up to a $10,000 lifetime limit). Taxact 2010 free version Additional Tax on Early Distributions If you receive a distribution that is not a qualified distribution, you may have to pay the 10% additional tax on early distributions as explained in the following paragraphs. Taxact 2010 free version Distributions of conversion and certain rollover contributions within 5-year period. Taxact 2010 free version   If, within the 5-year period starting with the first day of your tax year in which you convert an amount from a traditional IRA or rollover an amount from a qualified retirement plan to a Roth IRA, you take a distribution from a Roth IRA, you may have to pay the 10% additional tax on early distributions. Taxact 2010 free version You generally must pay the 10% additional tax on any amount attributable to the part of the amount converted or rolled over (the conversion or rollover contribution) that you had to include in income (recapture amount). Taxact 2010 free version A separate 5-year period applies to each conversion and rollover. Taxact 2010 free version See Ordering Rules for Distributions , later, to determine the recapture amount, if any. Taxact 2010 free version   The 5-year period used for determining whether the 10% early distribution tax applies to a distribution from a conversion or rollover contribution is separately determined for each conversion and rollover, and is not necessarily the same as the 5-year period used for determining whether a distribution is a qualified distribution. Taxact 2010 free version See What Are Qualified Distributions , earlier. Taxact 2010 free version   For example, if a calendar-year taxpayer makes a conversion contribution on February 25, 2013, and makes a regular contribution for 2012 on the same date, the 5-year period for the conversion begins January 1, 2013, while the 5-year period for the regular contribution begins on January 1, 2012. Taxact 2010 free version   Unless one of the exceptions listed later applies, you must pay the additional tax on the portion of the distribution attributable to the part of the conversion or rollover contribution that you had to include in income because of the conversion or rollover. Taxact 2010 free version   You must pay the 10% additional tax in the year of the distribution, even if you had included the conversion or rollover contribution in an earlier year. Taxact 2010 free version You also must pay the additional tax on any portion of the distribution attributable to earnings on contributions. Taxact 2010 free version Other early distributions. Taxact 2010 free version   Unless one of the exceptions listed below applies, you must pay the 10% additional tax on the taxable part of any distributions that are not qualified distributions. Taxact 2010 free version Exceptions. Taxact 2010 free version   You may not have to pay the 10% additional tax in the following situations. Taxact 2010 free version You have reached age 59½. Taxact 2010 free version You are totally and permanently disabled. Taxact 2010 free version You are the beneficiary of a deceased IRA owner. Taxact 2010 free version You use the distribution to buy, build, or rebuild a first home. Taxact 2010 free version The distributions are part of a series of substantially equal payments. Taxact 2010 free version You have unreimbursed medical expenses that are more than 10% (or 7. Taxact 2010 free version 5% if you or your spouse was born before January 2, 1949) of your adjusted gross income (defined earlier) for the year. Taxact 2010 free version You are paying medical insurance premiums during a period of unemployment. Taxact 2010 free version The distributions are not more than your qualified higher education expenses. Taxact 2010 free version The distribution is due to an IRS levy of the qualified plan. Taxact 2010 free version The distribution is a qualified reservist distribution. Taxact 2010 free version Most of these exceptions are discussed earlier in chapter 1 under Early Distributions . Taxact 2010 free version Please click here for the text description of the image. Taxact 2010 free version Is Roth Distributions a Qualified Distribution? Ordering Rules for Distributions If you receive a distribution from your Roth IRA that is not a qualified distribution, part of it may be taxable. Taxact 2010 free version There is a set order in which contributions (including conversion contributions and rollover contributions from qualified retirement plans) and earnings are considered to be distributed from your Roth IRA. Taxact 2010 free version For these purposes, disregard the withdrawal of excess contributions and the earnings on them (discussed earlier under What if You Contribute Too Much ). Taxact 2010 free version Order the distributions as follows. Taxact 2010 free version Regular contributions. Taxact 2010 free version Conversion and rollover contributions, on a first-in, first-out basis (generally, total conversions and rollovers from the earliest year first). Taxact 2010 free version See Aggregation (grouping and adding) rules, later. Taxact 2010 free version Take these conversion and rollover contributions into account as follows: Taxable portion (the amount required to be included in gross income because of the conversion or rollover) first, and then the Nontaxable portion. Taxact 2010 free version Earnings on contributions. Taxact 2010 free version Disregard rollover contributions from other Roth IRAs for this purpose. Taxact 2010 free version Aggregation (grouping and adding) rules. Taxact 2010 free version   Determine the taxable amounts distributed (withdrawn), distributions, and contributions by grouping and adding them together as follows. Taxact 2010 free version Add all distributions from all your Roth IRAs during the year together. Taxact 2010 free version Add all regular contributions made for the year (including contributions made after the close of the year, but before the due date of your return) together. Taxact 2010 free version Add this total to the total undistributed regular contributions made in prior years. Taxact 2010 free version Add all conversion and rollover contributions made during the year together. Taxact 2010 free version For purposes of the ordering rules, in the case of any conversion or rollover in which the conversion or rollover distribution is made in 2013 and the conversion or rollover contribution is made in 2014, treat the conversion or rollover contribution as contributed before any other conversion or rollover contributions made in 2014. Taxact 2010 free version Add any recharacterized contributions that end up in a Roth IRA to the appropriate contribution group for the year that the original contribution would have been taken into account if it had been made directly to the Roth IRA. Taxact 2010 free version   Disregard any recharacterized contribution that ends up in an IRA other than a Roth IRA for the purpose of grouping (aggregating) both contributions and distributions. Taxact 2010 free version Also disregard any amount withdrawn to correct an excess contribution (including the earnings withdrawn) for this purpose. Taxact 2010 free version Example. Taxact 2010 free version On October 15, 2009, Justin converted all $80,000 in his traditional IRA to his Roth IRA. Taxact 2010 free version His Forms 8606 from prior years show that $20,000 of the amount converted is his basis. Taxact 2010 free version Justin included $60,000 ($80,000 − $20,000) in his gross income. Taxact 2010 free version On February 23, 2013, Justin made a regular contribution of $5,000 to a Roth IRA. Taxact 2010 free version On November 8, 2013, at age 60, Justin took a $7,000 distribution from his Roth IRA. Taxact 2010 free version The first $5,000 of the distribution is a return of Justin's regular contribution and is not includible in his income. Taxact 2010 free version The next $2,000 of the distribution is not includible in income because it was included previously. Taxact 2010 free version Figuring your recapture amount. Taxact 2010 free version   If you had an early distribution from your Roth IRAs in 2013, you must allocate the early distribution by using the Recapture Amount—Allocation Chart, later. Taxact 2010 free version Recapture Amount—Allocation Chart Enter the amount from your 2013 Form 8606, line 19   Before you begin: You will need your prior year Form(s) 8606 and income tax return(s) if you entered an amount on any line(s) as indicated below. Taxact 2010 free version   You will now allocate the amount you entered above (2013 Form 8606, line 19) in the order shown, to the amounts on the lines listed below (to the extent a prior year distribution was not allocable to the amount). Taxact 2010 free version The maximum amount you can enter on each line below is the amount entered on the referenced lines of the form for that year. Taxact 2010 free version Note. Taxact 2010 free version Once you have allocated the full amount from your 2013 Form 8606, line 19, STOP. Taxact 2010 free version See the Example , earlier. Taxact 2010 free version Tax Year Your Form 2013 Form 8606, line 20   Form 8606, line 22   1998 Form 8606, line 16   Form 8606, line 15   1999 Form 8606, line 16   Form 8606, line 15   2000 Form 8606, line 16   Form 8606, line 15   2001 Form 8606, line 18   Form 8606, line 17   2002 Form 8606, line 18   Form 8606, line 17   2003 Form 8606, line 18   Form 8606, line 17   2004 Form 8606, line 18   Form 8606, line 17   2005 Form 8606, line 18   Form 8606, line 17   2006 Form 8606, line 18   Form 8606, line 17   2007 Form 8606, line 18   Form 8606, line 17   2008 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2009 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2010 Form 8606, lines 18 and 23   Form 8606, lines 17 and 22   2011 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2012 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2013 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2013 Form 8606, line 25       *Only include those amounts rolled over to a Roth IRA. Taxact 2010 free version  **Only include any contributions (usually Form 1099-R, box 5) that were taxable to you when made and rolled over to a Roth IRA. Taxact 2010 free version Amount to include on Form 5329, line 1. Taxact 2010 free version   Include on line 1 of your 2013 Form 5329 the following four amounts from the Recapture Amount—Allocation Chart that you filled out. Taxact 2010 free version The amount you allocated to line 20 of your 2013 Form 8606. Taxact 2010 free version The amount(s) allocated to your 2009 through 2013 Forms 8606, line 18, and your 2010 Form 8606, line 23. Taxact 2010 free version The amount(s) allocated to your 2009, 2011, 2012, and 2013 Forms 1040, line 16b; Forms 1040A, line 12b; and Forms 1040NR, line 17b. Taxact 2010 free version The amount from your 2013 Form 8606, line 25. Taxact 2010 free version   Also, include any amount you allocated to line 20 of your 2013 Form 8606 on your 2013 Form 5329, line 2, and enter exception number 09. Taxact 2010 free version Example. Taxact 2010 free version Ishmael, age 32, opened a Roth IRA in 2000. Taxact 2010 free version He made the maximum contributions to it every year. Taxact 2010 free version In addition, he made the following transactions into his Roth IRA. Taxact 2010 free version In 2005, he converted $10,000 from his traditional IRA into his Roth IRA. Taxact 2010 free version He filled out a 2005 Form 8606 and attached it with his 2005 Form 1040. Taxact 2010 free version He entered $0 on line 17 of Form 8606 because he took a deduction for all the contributions to the traditional IRA, therefore he has no basis. Taxact 2010 free version He entered $10,000 on line 18 of Form 8606. Taxact 2010 free version In 2011, he rolled over the entire balance of his qualified retirement plan, $20,000, into a Roth IRA when he changed jobs. Taxact 2010 free version He used a 2011 Form 1040 to file his taxes. Taxact 2010 free version He entered $20,000 on line 16a of Form 1040 because that was the amount reported in box 1 of his 2011 Form 1099-R. Taxact 2010 free version Box 5 of his 2011 Form 1099-R reported $0 since he did not make any after-tax contributions to the qualified retirement plan. Taxact 2010 free version He entered $20,000 on line 16b of Form 1040 since that is the taxable amount that was rolled over in 2011. Taxact 2010 free version The total balance in his Roth IRA as of January 1, 2013 was $105,000 ($50,000 in contributions from 2000 through 2012 + $10,000 from the 2005 conversion + $20,000 from the 2011 rollover + $25,000 from earnings). Taxact 2010 free version He has not taken any early distribution from his Roth IRA before 2013. Taxact 2010 free version In 2013, he made the maximum contribution of $5,500 to his Roth IRA. Taxact 2010 free version In August of 2013, he took a $85,500 early distribution from his Roth IRA to use as a down payment on the purchase of his first home. Taxact 2010 free version See his filled out Illustrated Recapture Amount—Allocation Chart, later, to see how he allocated the amounts from the above transactions. Taxact 2010 free version Based on his allocation, he would enter $20,000 on his 2013 Form 5329, line 1 (see Amount to include on Form 5329, line 1 , above). Taxact 2010 free version He should also report $10,000 on his 2013 Form 5329, line 2, and enter exception 09 since that amount is not subject to the 10% additional tax on early distributions. Taxact 2010 free version Illustrated Recapture Amount—Allocation Chart Enter the amount from your 2013 Form 8606, line 19 $85,500 Before you begin: You will need your prior year Form(s) 8606 and income tax return(s) if you entered an amount on any line(s) as indicated below. Taxact 2010 free version   You will now allocate the amount you entered above (2013 Form 8606, line 19) in the order shown, to the amounts on the lines listed below (to the extent a prior year distribution was not allocable to the amount). Taxact 2010 free version The maximum amount you can enter on each line below is the amount entered on the referenced lines of the form for that year. Taxact 2010 free version Note. Taxact 2010 free version Once you have allocated the full amount from your 2013 Form 8606, line 19, STOP. Taxact 2010 free version See the Example , earlier. Taxact 2010 free version Tax Year Your Form 2013 Form 8606, line 20 $10,000 Form 8606, line 22 $55,500 1998 Form 8606, line 16   Form 8606, line 15   1999 Form 8606, line 16   Form 8606, line 15   2000 Form 8606, line 16   Form 8606, line 15   2001 Form 8606, line 18   Form 8606, line 17   2002 Form 8606, line 18   Form 8606, line 17   2003 Form 8606, line 18   Form 8606, line 17   2004 Form 8606, line 18   Form 8606, line 17   2005 Form 8606, line 18 $10,000 Form 8606, line 17 $-0- 2006 Form 8606, line 18   Form 8606, line 17   2007 Form 8606, line 18   Form 8606, line 17   2008 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2009 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2010 Form 8606, lines 18 and 23   Form 8606, lines 17 and 22   2011 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b* $10,000 Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2012 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2013 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2013 Form 8606, line 25       *Only include those amounts rolled over to a Roth IRA. Taxact 2010 free version  **Only include any contributions (usually Form 1099-R, box 5) that were taxable to you when made and rolled over to a Roth IRA. Taxact 2010 free version How Do You Figure the Taxable Part? To figure the taxable part of a distribution that is not a qualified distribution, complete Form 8606, Part III. Taxact 2010 free version Must You Withdraw or Use Assets? You are not required to take distributions from your Roth IRA at any age. Taxact 2010 free version The minimum distribution rules that apply to traditional IRAs do not apply to Roth IRAs while the owner is alive. Taxact 2010 free version However, after the death of a Roth IRA owner, certain of the minimum distribution rules that apply to traditional IRAs also apply to Roth IRAs as explained later under Distributions After Owner's Death . Taxact 2010 free version Minimum distributions. Taxact 2010 free version   You cannot use your Roth IRA to satisfy minimum distribution requirements for your traditional IRA. Taxact 2010 free version Nor can you use distributions from traditional IRAs for required distributions from Roth IRAs. Taxact 2010 free version See Distributions to beneficiaries , later. Taxact 2010 free version Recognizing Losses on Investments If you have a loss on your Roth IRA investment, you can recognize the loss on your income tax return, but only when all the amounts in all of your Roth IRA accounts have been distributed to you and the total distributions are less than your unrecovered basis. Taxact 2010 free version Your basis is the total amount of contributions in your Roth IRAs. Taxact 2010 free version You claim the loss as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit that applies to certain miscellaneous itemized deductions on Schedule A (Form 1040). Taxact 2010 free version Any such losses are added back to taxable income for purposes of calculating the alternative minimum tax. Taxact 2010 free version Distributions After Owner's Death If a Roth IRA owner dies, the minimum distribution rules that apply to traditional IRAs apply to Roth IRAs as though the Roth IRA owner died before his or her required beginning date. Taxact 2010 free version See When Can You Withdraw or Use Assets? in chapter 1. Taxact 2010 free version Distributions to beneficiaries. Taxact 2010 free version   Generally, the entire interest in the Roth IRA must be distributed by the end of the fifth calendar year after the year of the owner's death unless the interest is payable to a designated beneficiary over the life or life expectancy of the designated beneficiary. Taxact 2010 free version (See When Must You Withdraw Assets? (Required Minimum Distributions) in chapter 1. Taxact 2010 free version )   If paid as an annuity, the entire interest must be payable over a period not greater than the designated beneficiary's life expectancy and distributions must begin before the end of the calendar year following the year of death. Taxact 2010 free version Distributions from another Roth IRA cannot be substituted for these distributions unless the other Roth IRA was inherited from the same decedent. Taxact 2010 free version   If the sole beneficiary is the spouse, he or she can either delay distributions until the decedent would have reached age 70½ or treat the Roth IRA as his or her own. Taxact 2010 free version Combining with other Roth IRAs. Taxact 2010 free version   A beneficiary can combine an inherited Roth IRA with another Roth IRA maintained by the beneficiary only if the beneficiary either: Inherited the other Roth IRA from the same decedent, or Was the spouse of the decedent and the sole beneficiary of the Roth IRA and elects to treat it as his or her own IRA. Taxact 2010 free version Distributions that are not qualified distributions. Taxact 2010 free version   If a distribution to a beneficiary is not a qualified distribution, it is generally includible in the beneficiary's gross income in the same manner as it would have been included in the owner's income had it been distributed to the IRA owner when he or she was alive. Taxact 2010 free version   If the owner of a Roth IRA dies before the end of: The 5-year period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for the owner's benefit, or The 5-year period starting with the year of a conversion contribution from a traditional IRA or a rollover from a qualified retirement plan to a Roth IRA, each type of contribution is divided among multiple beneficiaries according to the pro-rata share of each. Taxact 2010 free version See Ordering Rules for Distributions , earlier in this chapter under Are Distributions Taxable. Taxact 2010 free version Example. Taxact 2010 free version When Ms. Taxact 2010 free version Hibbard died in 2013, her Roth IRA contained regular contributions of $4,000, a conversion contribution of $10,000 that was made in 2009, and earnings of $2,000. Taxact 2010 free version No distributions had been made from her IRA. Taxact 2010 free version She had no basis in the conversion contribution in 2009. Taxact 2010 free version When she established this Roth IRA (her first) in 2009, she named each of her four children as equal beneficiaries. Taxact 2010 free version Each child will receive one-fourth of each type of contribution and one-fourth of the earnings. Taxact 2010 free version An immediate distribution of $4,000 to each child will be treated as $1,000 from regular contributions, $2,500 from conversion contributions, and $500 from earnings. Taxact 2010 free version In this case, because the distributions are made before the end of the applicable 5-year period for a qualified distribution, each beneficiary includes $500 in income for 2013. Taxact 2010 free version The 10% additional tax on early distributions does not apply because the distribution was made to the beneficiaries as a result of the death of the IRA owner. Taxact 2010 free version If distributions from an inherited Roth IRA are less than the required minimum distribution for the year, discussed in chapter 1 under When Must You Withdraw Assets? (Required Minimum Distributions), you may have to pay a 50% excise tax for that year on the amount not distributed as required. Taxact 2010 free version For the tax on excess accumulations (insufficient distributions), see Excess Accumulations (Insufficient Distributions) under What Acts Result in Penalties or Additional Taxes? in chapter 1. Taxact 2010 free version If this applies to you, substitute “Roth IRA” for “traditional IRA” in that discussion. Taxact 2010 free version Prev  Up  Next   Home   More Online Publications