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Taxes For Military Members

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Taxes For Military Members

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

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