File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

1040 Irs

Free E-file 1040ez1040 Ez Tax Form 2011File 2011 Taxes Online For FreeFederal Tax 2012 Form 1040Www.irs.gov/1040xDownload 2010 Tax FormsHow To Get A 1040x FormAmending TaxesAarp Tax LocationsHow Much Does It Cost To Do State Taxes On Turbotax1040nr Free SoftwareFiling Amended ReturnState Tax Forms OnlineTurbotax 2008 E File1040x FillableAmend Tax FormsHow Do I File Taxes From 20091040ez Tax FormsE File 2012 Federal TaxesHow To Fill Out 1040xSoftware For 1040nrIrs FormsIrs Form 1040Amended Tax Return FormFiling 1040x OnlineIrs Forms 1040ezAmending 2009 Tax ReturnState Taxes OnlineCt 1040nr PyFreetaxesHow Do I Amend My Tax Return OnlineFiling Free State Taxes OnlineFree Tax Amendment2012 1040ez Tax Form1040 Tax Forms 2011Tax Cut Free1040ez 2011 Online1040ez 2010 File OnlineFree E-file 2012Students Exempt From Income Tax

1040 Irs

1040 irs 35. 1040 irs   Education Credits Table of Contents Introduction Useful Items - You may want to see: Who Can Claim an Education Credit Qualified Education ExpensesNo Double Benefit Allowed Adjustments to Qualified Education Expenses Introduction For 2013, there are two tax credits available to persons who pay expenses for higher (postsecondary) education. 1040 irs They are: The American opportunity credit, and The lifetime learning credit. 1040 irs The chapter will present an overview of these education credits. 1040 irs To get the detailed information you will need to claim either of the credits, and for examples illustrating that information, see chapters 2 and 3 of Publication 970. 1040 irs Can you claim more than one education credit this year?   For each student, you can choose for any year only one of the credits. 1040 irs For example, if you choose to take the American opportunity credit for a child on your 2013 tax return, you cannot, for that same child, also claim the lifetime learning credit for 2013. 1040 irs   If you are eligible to claim the American opportunity credit and you are also eligible to claim the lifetime learning credit for the same student in the same year, you can choose to claim either credit, but not both. 1040 irs   If you pay qualified education expenses for more than one student in the same year, you can choose to take the American opportunity and the lifetime learning credits on a per-student, per-year basis. 1040 irs This means that, for example, you can claim the American opportunity credit for one student and the lifetime learning credit for another student in the same year. 1040 irs Table 35-1. 1040 irs Comparison of Education Credits Caution. 1040 irs You can claim both the American opportunity credit and the lifetime learning credit on the same return—but not for the same student. 1040 irs   American Opportunity Credit Lifetime Learning Credit Maximum credit Up to $2,500 credit per eligible student Up to $2,000 credit per return Limit on modified adjusted gross income (MAGI) $180,000 if married filing jointly;  $90,000 if single, head of household, or qualifying widow(er) $127,000 if married filing jointly;  $63,000 if single, head of household, or qualifying widow(er) Refundable or nonrefundable 40% of credit may be refundable Credit limited to the amount of tax you must pay on your taxable income Number of years of postsecondary education Available ONLY if the student had not completed the first 4 years of postsecondary education before 2013 Available for all years of postsecondary education and for courses to acquire or improve job skills Number of tax years credit available Available ONLY for 4 tax years per eligible student (including any year(s) the Hope credit was claimed) Available for an unlimited number of years Type of program required Student must be pursuing a program leading to a degree or other recognized education credential Student does not need to be pursuing a program leading to a degree or other recognized education credential Number of courses Student must be enrolled at least half time for at least one academic period beginning during the tax year Available for one or more courses Felony drug conviction At the end of 2013, the student had not been convicted of a felony for possessing or distributing a controlled substance Felony drug convictions do not make the student ineligible Qualified expenses Tuition, required enrollment fees, and course materials that the student needs for a course of study whether or not the materials are bought at the educational institution as a condition of enrollment or attendance Tuition and fees required for enrollment or attendance (including amounts required to be paid to the institution for course-related books, supplies, and equipment) Payments for academic periods Payments made in 2013 for academic periods beginning in 2013 or beginning in the first 3 months of 2014 Differences between the American opportunity and lifetime learning credits. 1040 irs   There are several differences between these two credits. 1040 irs These differences are summarized in Table 35-1, later. 1040 irs Useful Items - You may want to see: Publication 970 Tax Benefits for Education Form (and Instructions) 8863 Education Credits (American Opportunity and Lifetime Learning Credits) Who Can Claim an Education Credit You may be able to claim an education credit if you, your spouse, or a dependent you claim on your tax return was a student enrolled at or attending an eligible educational institution. 1040 irs The credits are based on the amount of qualified education expenses paid for the student in 2013 for academic periods beginning in 2013 and in the first 3 months of 2014. 1040 irs For example, if you paid $1,500 in December 2013 for qualified tuition for the spring 2014 semester beginning in January 2014, you may be able to use that $1,500 in figuring your 2013 education credit(s). 1040 irs Academic period. 1040 irs   An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. 1040 irs In the case of an educational institution that uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period. 1040 irs Eligible educational institution. 1040 irs   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. 1040 irs S. 1040 irs Department of Education. 1040 irs It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. 1040 irs The educational institution should be able to tell you if it is an eligible educational institution. 1040 irs   Certain educational institutions located outside the United States also participate in the U. 1040 irs S. 1040 irs Department of Education's Federal Student Aid (FSA) programs. 1040 irs Who can claim a dependent's expenses. 1040 irs   If an exemption is allowed as a deduction for any person who claims the student as a dependent, all qualified education expenses of the student are treated as having been paid by that person. 1040 irs Therefore, only that person can claim an education credit for the student. 1040 irs If a student is not claimed as a dependent on another person's tax return, only the student can claim a credit. 1040 irs Expenses paid by a third party. 1040 irs   Qualified education expenses paid on behalf of the student by someone other than the student (such as a relative) are treated as paid by the student. 1040 irs However, qualified education expenses paid (or treated as paid) by a student who is claimed as a dependent on your tax return are treated as paid by you. 1040 irs Therefore, you are treated as having paid expenses that were paid by the third party. 1040 irs For more information and an example see Who Can Claim a Dependent's Expenses in Pub. 1040 irs 970, chapter 2 or 3. 1040 irs Who cannot claim a credit. 1040 irs   You cannot take an education credit if any of the following apply. 1040 irs You are claimed as a dependent on another person's tax return, such as your parent's return. 1040 irs Your filing status is married filing separately. 1040 irs You (or your spouse) were a nonresident alien for any part of 2013 and did not elect to be treated as a resident alien for tax purposes. 1040 irs Your MAGI is one of the following. 1040 irs American opportunity credit: $180,000 or more if married filing jointly, or $90,000 or more if single, head of household, or qualifying widow(er). 1040 irs Lifetime learning credit: $127,000 or more if married filing jointly, or $63,000 or more if single, head of household, or qualifying widow(er) . 1040 irs   Generally, your MAGI is the amount on your Form 1040, line 38, or Form 1040A, line 22. 1040 irs However, if you are filing Form 2555, Form 2555–EZ, or Form 4563, or are excluding income from Puerto RIco, add to the amount on your Form 1040, line 38, or Form 1040A, line 22, the amount of income you excluded. 1040 irs For details, see Pub. 1040 irs 970. 1040 irs    Figure 35-A may be helpful in determining if you can claim an education credit on your tax return. 1040 irs The American opportunity credit will always be greater than or equal to the lifetime learning credit for any student who is eligible for both credits. 1040 irs However, if any of the conditions for the American opportunity credit, listed in Table 35-1 earlier, are not met for any student, you cannot take the American opportunity credit for that student. 1040 irs You may be able to take the lifetime learning credit for part or all of that student's qualified education expenses instead. 1040 irs See Pub. 1040 irs 970 for information on other education benefits. 1040 irs Qualified Education Expenses Generally, qualified education expenses are amounts paid in 2013 for tuition and fees required for the student's enrollment or attendance at an eligible educational institution. 1040 irs It does not matter whether the expenses were paid in cash, by check, by credit or debit card, or with borrowed funds. 1040 irs For course-related books, supplies, and equipment, only certain expenses qualify. 1040 irs American opportunity credit: Qualified education expenses include amounts spent on books, supplies, and equipment needed for a course of study, whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance. 1040 irs Lifetime learning credit: Qualified education expenses include amounts for books, supplies, and equipment only if required to be paid to the institution as a condition of enrollment or attendance. 1040 irs Qualified education expenses include nonacademic fees, such as student activity fees, athletic fees, or other expenses unrelated to the academic course of instruction, only if the fee must be paid to the institution as a condition of enrollment or attendance. 1040 irs However, fees for personal expenses (described below) are never qualified education expenses. 1040 irs Qualified education expenses for either credit do not include amounts paid for: Personal expenses. 1040 irs This means room and board, insurance, medical expenses (including student health fees), transportation, and other similar personal, living, or family expenses. 1040 irs Any course or other education involving sports, games, or hobbies, or any noncredit course, unless such course or other education is part of the student's degree program or (for the lifetime learning credit only) helps the student acquire or improve job skills. 1040 irs You should receive Form 1098–T, Tuition Statement, from the institution reporting either payments received in 2013 (box 1) or amounts billed in 2013 (box 2). 1040 irs However, the amount in box 1 or 2 of Form 1098–T may be different from the amount you paid (or are treated as having paid). 1040 irs In completing Form 8863, use only the amounts you actually paid (plus any amounts you are treated as having paid) in 2013, reduced as necessary, as described in Adjustments to Qualified Education Expenses , later. 1040 irs Qualified education expenses paid on behalf of the student by someone other than the student (such as a relative) are treated as paid by the student. 1040 irs Qualified education expenses paid (or treated as paid) by a student who is claimed as a dependent on your tax return are treated as paid by you. 1040 irs If you or the student takes a deduction for higher education expenses, such as on Schedule A or C (Form 1040), you cannot use those expenses in your qualified education expenses when figuring your education credits. 1040 irs Qualified education expenses for any academic period must be reduced by any tax-free educational assistance allocable to that academic period. 1040 irs See Adjustments to Qualified Education Expenses, later. 1040 irs Prepaid Expenses. 1040 irs   Qualified education expenses paid in 2013 for an academic period that begins in the first 3 months of 2014 can be used in figuring an education credit for 2013 only. 1040 irs See Academic period , earlier. 1040 irs For example, if you pay $2,000 in December 2013 for qualified tuition for the 2014 winter quarter that begins in January 2014, you can use that $2,000 in figuring an education credit for 2013 only (if you meet all the other requirements). 1040 irs    You cannot use any amount you paid in 2012 or 2014 to figure the qualified education expenses you use to figure your 2013 education credit(s). 1040 irs Paid with borrowed funds. 1040 irs   You can claim an education credit for qualified education expenses paid with the proceeds of a loan. 1040 irs Use the expenses to figure the credit for the year in which the expenses are paid, not the year in which the loan is repaid. 1040 irs Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account. 1040 irs Student withdraws from class(es). 1040 irs   You can claim an education credit for qualified education expenses not refunded when a student withdraws. 1040 irs No Double Benefit Allowed You cannot do any of the following. 1040 irs Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim an education credit based on those same expenses. 1040 irs Claim more than one education credit based on the same qualified education expenses. 1040 irs Claim an education credit based on the same expenses used to figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or qualified tuition program (QTP). 1040 irs Claim an education credit based on qualified education expenses paid with educational assistance, such as a tax-free scholarship, grant, or employer-provided educational assistance. 1040 irs See Adjustments to Qualified Education Expenses, next. 1040 irs Adjustments to Qualified Education Expenses For each student, reduce the qualified education expenses paid in 2013 by or on behalf of that student under the following rules. 1040 irs The result is the amount of adjusted qualified education expenses for each student. 1040 irs Tax-free educational assistance. 1040 irs   For tax-free educational assistance received in 2013, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance allocable to that academic period. 1040 irs See Academic period , earlier. 1040 irs      Tax-free educational assistance includes:    Tax-free parts of scholarships and fellowships (see chapter 12 of this publication and chapter 1 of Pub. 1040 irs 970), The tax-free part of Pell grants (see chapter 1 of Pub. 1040 irs 970), The tax-free part of employer-provided educational assistance (see Pub. 1040 irs 970), Veterans' educational assistance (see chapter 1 of Pub. 1040 irs 970), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. 1040 irs Generally, any scholarship or fellowship is treated as tax-free educational assistance. 1040 irs However, a scholarship or fellowship is not treated as tax-free educational assistance to the extent the student includes it in gross income (if the student is required to file a tax return) for the year the scholarship or fellowship is received and either: The scholarship or fellowship (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. 1040 irs 970, chapter 1; or The scholarship or fellowship (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in Pub. 1040 irs 970, chapter 1. 1040 irs You may be able to increase the combined value of an education credit and certain educational assistance if the student includes some or all of the educational assistance in income in the year received. 1040 irs For details, see Adjustments of Qualified Education Expenses, in chapters 2 and 3 of Pub. 1040 irs 970. 1040 irs Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. 1040 irs This tax-free educational assistance is any tax-free educational assistance received by you or anyone else after 2013 for qualified education expenses paid on behalf of a student in 2013 (or attributable to enrollment at an eligible educational institution during 2013). 1040 irs If this tax-free educational assistance is received after 2013 but before you file your 2013 income tax return, see Refunds received after 2013 but before your income tax return is filed, later. 1040 irs If this tax-free educational assistance is received after 2013 and after you file your 2013 income tax return, see Refunds received after 2013 and after your income tax return is filed, later. 1040 irs Refunds. 1040 irs   A refund of qualified education expenses may reduce qualified education expenses for the tax year or may require you to repay (recapture) the credit that you claimed in an earlier year. 1040 irs Some tax-free educational assistance received after 2013 may be treated as a refund. 1040 irs See Tax-free educational assistance, earlier. 1040 irs Refunds received in 2013. 1040 irs   For each student, figure the adjusted qualified education expenses for 2013 by adding all the qualified education expenses paid in 2013 and subtracting any refunds of those expenses received from the eligible educational institution during 2013. 1040 irs Refunds received after 2013 but before your income tax return is filed. 1040 irs   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is received before you file your 2013 income tax return, reduce the amount of qualified education expenses for 2013 by the amount of the refund. 1040 irs Refunds received after 2013 and after your income tax return is filed. 1040 irs   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is received after you file your 2013 income tax return, you may need to repay some or all of the credit that you claimed. 1040 irs See Credit recapture, next. 1040 irs Credit recapture. 1040 irs    If any tax-free educational assistance for the qualified education expenses paid in 2013, or any refund of your qualified education expenses paid in 2013, is received after you file your 2013 income tax return, you must recapture (repay) any excess credit. 1040 irs You do this by refiguring the amount of your adjusted qualified education expenses for 2013 by reducing the expenses by the amount of the refund or tax-free educational assistance. 1040 irs You then refigure your education credit(s) for 2013 and figure the amount by which your 2013 tax liability would have increased if you had claimed the refigured credit(s). 1040 irs Include that amount as an additional tax for the year the refund or tax-free assistance was received. 1040 irs Example. 1040 irs    You paid $8,000 tuition and fees in December 2013 for your child's Spring semester beginning in January 2014. 1040 irs You filed your 2013 tax return on February 3, 2014, and claimed a lifetime learning credit of $1,600 ($8,000 qualified education expense paid x . 1040 irs 20). 1040 irs You claimed no other tax credits. 1040 irs After you filed your return, your child withdrew from two courses and you received a refund of $1,400. 1040 irs You must refigure your 2013 lifetime learning credit using $6,600 ($8,000 qualified education expenses − $1,400 refund). 1040 irs The refigured credit is $1,320 and your tax liability increased by $280. 1040 irs You must include the difference of $280 ($1,600 credit originally claimed − $1,320 refigured credit) as additional tax on your 2014 income tax return. 1040 irs See the instructions for your 2014 income tax return to determine where to include this tax. 1040 irs If you also pay qualified education expenses in 2014 for an academic period that begins in the first 3 months of 2014 and you receive tax-free educational assistance, or a refund, as described above, you may choose to reduce your qualified education expenses for 2014 instead of reducing your expenses for 2013. 1040 irs Amounts that do not reduce qualified education expenses. 1040 irs   Do not reduce qualified education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. 1040 irs   Do not reduce the qualified education expenses by any scholarship or fellowship reported as income on the student's tax return in the following situations. 1040 irs The use of the money is restricted, by the terms of the scholarship or fellowship, to costs of attendance (such as room and board) other than qualified education expenses, as defined in Chapter 1 of Pub. 1040 irs 970. 1040 irs The use of the money is not restricted. 1040 irs   For examples, see chapter 2 in Pub. 1040 irs 970. 1040 irs Figure 35-A. 1040 irs Can You Claim an Education Credit for 2013? This image is too large to be displayed in the current screen. 1040 irs Please click the link to view the image. 1040 irs Figure 35-A. 1040 irs Can You Claim an Education Credit for 2013? Prev  Up  Next   Home   More Online Publications
Español

Web Measurement and Customization Opt-out

Persistent Cookies

Many websites use "persistent cookie" technology. A persistent cookie is a small text file that this website places on your web browser so that it can gather anonymous summary demographic information, and remember your browser when it is used to visit our site again later—kind of like cookie crumbs! (Hence the name.) These cookies uniquely identify a browser on a computer, but never a person. In other words, if the same person uses Chrome and Internet Explorer, two unique browser coolies will be assigned, one for each browser, so that person well be counted as two different visitors because visits are based on browsers, not computers or persons. Most Internet browsers automatically accept persistent cookies. Although using persistent cookies creates a much better experience for you while using the site, most sites will also work without them. If you don't want to accept cookies, you can edit your browser's options to stop accepting persistent cookies or to prompt you before accepting a cookie from the websites you visit. Below you'll find directions to help you disable cookies in some of the most popular desktop browsers and mobile browsers.

Important: If you choose to set your browser to reject cookies from every website you visit, this may adversely affect the functionality of non-government websites you visit.

Changing Cookies Settings in Popular Desktop Browsers

Firefox Version 3.5 or Later

  • In the "Tools" menu, select "Options"
  • Under the "Firefox will:" dropdown, select "Use custom settings for history"
  • Uncheck the "Accept Cookies from Sites" box to block all cookies Or
  • Click the "Exceptions" button to enter specific websites that you wish to allow/disallow to set cookies

Internet Explorer version 6 or later

  • In the "Tools" menu, select "Internet Options"
  • Click the "Privacy" tab
  • Move the "Settings" slider up or down to adjust your cookie acceptance settings (moving the slider all the way to the top will block all cookies) Or
  • Click the "Sites" button to enter specific websites that you wish to allow/disallow to set cookies

Safari version 4 or later

  • Click the geared wheel icon in the top right of your browser window.
  • Select "Preferences"
  • Select the "Security" tab
  • Under "Accept Cookies:", click the "Never" option to block all cookies

Chrome version 4 or later

  • Click the wrench icon in the top right of your browser window
  • Select "Options"
  • Click the "Under the Hood" tab
  • Click the "Content Settings" button
  • Click the option to "Block sites from setting any data" to block all cookies Or
  • Click the "Exceptions" button to enter specific websites that you wish to allow/disallow to set cookies

Disabling cookies in popular mobile browsers

Mobile Safari

  • From your home screen on your iPhone or iPad, click "Settings"
  • Click on "Safari"
  • Click on "Accept Cookies"
  • Select "Never" to block all cookies

Opera Mini on a Blackberry device

  • From within the Opera Mini browser, press the menu key.
  • Scroll down to access the drop down menu of options
  • Select "Settings"
  • Select "Privacy"
  • Change the "Accept cookies" option to "Off" to block all cookies

Android Browser

  • From within the Android browser, hit the menu key.
  • Select "More"
  • Select "Settings"
  • Uncheck the "Accept Cookies" option to block all cookies

Disabling Google Demographic and Interest Reports

Many sites also use Google Demographic and Interest reports to gather anonymous summary demographic information about website visitors such as gender, age range, and areas of interest for adults over the age of 18. You can prevent your data from being collected and used by Google Analytics by installing the Google Analytics opt-out browser add-on".

Government Cookie Policy

The Office of Management and Budget released guidance in June 2010, updating how Federal agencies can use web measurement and customization technologies, such as persistent cookies.

USA.gov is providing a central place to provide instructions for "opting-out" from one of the most common forms of web measurement and customization technologies, through disabling cookies on your web browser. We also provide instructions on opting out of Google Analytics.

The 1040 Irs

1040 irs 3. 1040 irs   Limit on Annual Additions Table of Contents Ministers and church employees. 1040 irs Includible Compensation for Your Most Recent Year of ServiceMost Recent Year of Service Includible Compensation The first component of MAC is the limit on annual additions. 1040 irs This is a limit on the total contributions (elective deferrals, nonelective contributions, and after-tax contributions) that can be made to your 403(b) account. 1040 irs The limit on annual additions generally is the lesser of: $51,000 for 2013 and $52,000 for 2014, or 100% of your includible compensation for your most recent year of service. 1040 irs More than one 403(b) account. 1040 irs If you contributed to more than one 403(b) account, you must combine the contributions made to all 403(b) accounts on your behalf by your employer. 1040 irs Ministers and church employees. 1040 irs   If you are a minister or a church employee, you may be able to increase your limit on annual additions or use different rules when figuring your limit on annual additions. 1040 irs For more information, see chapter 5. 1040 irs Participation in a qualified plan. 1040 irs If you participated in a 403(b) plan and a qualified plan, you must combine contributions made to your 403(b) account with contributions to a qualified plan and simplified employee pensions of all corporations, partnerships, and sole proprietorships in which you have more than 50% control. 1040 irs You can use Part I of Worksheet 1 in chapter 9 to figure your limit on annual additions. 1040 irs Includible Compensation for Your Most Recent Year of Service Definition. 1040 irs   Generally, includible compensation for your most recent year of service is the amount of taxable wages and benefits you received from the employer that maintained a 403(b) account for your benefit during your most recent year of service. 1040 irs When figuring your includible compensation for your most recent year of service, keep in mind that your most recent year of service may not be the same as your employer's most recent annual work period. 1040 irs This can happen if your tax year is not the same as your employer's annual work period. 1040 irs When figuring includible compensation for your most recent year of service, do not mix compensation or service of one employer with compensation or service of another employer. 1040 irs Most Recent Year of Service Your most recent year of service is your last full year of service, ending on the last day of your tax year that you worked for the employer that maintained a 403(b) account on your behalf. 1040 irs Tax year different from employer's annual work period. 1040 irs   If your tax year is not the same as your employer's annual work period, your most recent year of service is made up of parts of at least two of your employer's annual work periods. 1040 irs Example. 1040 irs A professor who reports her income on a calendar-year basis is employed on a full-time basis by a university that operates on an academic year (October through May). 1040 irs To figure her includible compensation for 2013, the professor's most recent year of service is her service from January through May 2013 and from October through December 2013. 1040 irs Figuring Your Most Recent Year of Service To figure your most recent year of service, begin by determining what is a full year of service for your position. 1040 irs A full year of service is equal to full-time employment for your employer's annual work period. 1040 irs After identifying a full year of service, begin counting the service you have provided for your employer starting with the service provided in the current year. 1040 irs Part-time or employed only part of the year. 1040 irs   If you are a part-time or a full-time employee who is employed for only part of the year, your most recent year of service is your service this year and your service for as many previous years as is necessary to total 1 full year of service. 1040 irs To determine your most recent year of service, add the following periods of service: Your service during the year for which you are figuring the limit on annual additions, and Your service during your preceding tax years until the total service equals 1 year of service or you have figured all of your service with the employer. 1040 irs Example. 1040 irs You were employed on a full-time basis from July through December 2011 (1/2 year of service), July through December 2012 (1/2 year of service), and October through December 2013 (1/4 year of service). 1040 irs Your most recent year of service for computing your limit on annual additions for 2013 is the total of your service during 2013 (1/4 year of service), your service during 2012 (1/2 year of service), and your service during the months October through December 2011 (1/4 year of service). 1040 irs Not yet employed for 1 year. 1040 irs   If, at the close of the year, you have not yet worked for your employer for 1 year (including time you worked for the same employer in all earlier years), use the period of time you have worked for the employer as your most recent year of service. 1040 irs Includible Compensation After identifying your most recent year of service, the next step is to identify the includible compensation associated with that full year of service. 1040 irs Includible compensation is not the same as income included on your tax return. 1040 irs Compensation is a combination of income and benefits received in exchange for services provided to your employer. 1040 irs Generally, includible compensation is the amount of income and benefits: Received from the employer who maintains your 403(b) account, and Must be included in your income. 1040 irs Includible compensation includes the following amounts. 1040 irs Elective deferrals (employer's contributions made on your behalf under a salary reduction agreement). 1040 irs Amounts contributed or deferred by your employer under a section 125 cafeteria plan. 1040 irs Amounts contributed or deferred, at the election of the employee, under an eligible section 457 nonqualified deferred compensation plan (state or local government or tax-exempt organization plan). 1040 irs  Note. 1040 irs For information about treating elective deferrals under section 457 plans as Roth contributions, see Publication 575. 1040 irs Wages, salaries, and fees for personal services earned with the employer maintaining your 403(b) account. 1040 irs Income otherwise excluded under the foreign earned income exclusion. 1040 irs Pre-tax contributions (employer's contributions made on your behalf according to your election) to a qualified transportation fringe benefit plan. 1040 irs Includible compensation does not include the following items. 1040 irs Your employer's contributions to your 403(b) account. 1040 irs Compensation earned while your employer was not an eligible employer. 1040 irs Your employer's contributions to a qualified plan that: Are on your behalf, and Are excludable from income. 1040 irs The cost of incidental life insurance. 1040 irs See Cost of Incidental Life Insurance, later. 1040 irs If you are a church employee or a foreign missionary, figure includible compensation using the rules explained in chapter 5. 1040 irs Contributions after retirement. 1040 irs   Nonelective contributions may be made for an employee for up to 5 years after retirement. 1040 irs These contributions would be based on includible compensation for the last year of service before retirement. 1040 irs Cost of Incidental Life Insurance Includible compensation does not include the cost of incidental life insurance. 1040 irs If all of your 403(b) accounts invest only in mutual funds, then you have no incidental life insurance. 1040 irs If you have an annuity contract, a portion of the cost of that contract may be for incidental life insurance. 1040 irs If so, the cost of the insurance is taxable to you in the year contributed and is considered part of your basis when distributed. 1040 irs Your employer will include the cost of your insurance as taxable wages in box 1 of Form W-2. 1040 irs Not all annuity contracts include life insurance. 1040 irs Contact your plan administrator to determine if your contract includes incidental life insurance. 1040 irs If it does, you will need to figure the cost of life insurance each year the policy is in effect. 1040 irs Figuring the cost of incidental life insurance. 1040 irs If you have determined that part of the cost of your annuity contract is for an incidental life insurance premium, you will need to determine the amount of the premium and subtract it from your includible compensation. 1040 irs To determine the amount of the life insurance premiums, you will need to know the following information. 1040 irs The value of your life insurance contract, which is the amount payable upon your death. 1040 irs The cash value of your life insurance contract at the end of the tax year. 1040 irs Your age on your birthday nearest the beginning of the policy year. 1040 irs Your current life insurance protection under an ordinary retirement income life insurance policy, which is the amount payable upon your death minus the cash value of the contract at the end of the year. 1040 irs You can use Worksheet A, in chapter 9, to determine the cost of your incidental life insurance. 1040 irs Example. 1040 irs Your new contract provides that your beneficiary will receive $10,000 if you should die before retirement. 1040 irs Your cash value in the contract at the end of the first year is zero. 1040 irs Your current life insurance protection for the first year is $10,000 ($10,000 − 0). 1040 irs The cash value in the contract at the end of year two is $1,000, and the current life insurance protection for the second year is $9,000 ($10,000 – $1,000). 1040 irs The 1-year cost of the protection can be calculated by using Figure 3-1, Table of One-Year Term Premiums for $1,000 Life Insurance Protection . 1040 irs The premium rate is determined based on your age on your birthday nearest the beginning of the policy year. 1040 irs Figure 3-1. 1040 irs Table of One-Year Term Premiums for $1,000 Life Insurance Protection Age Cost   Age Cost   Age Cost 0 $0. 1040 irs 70   35 $0. 1040 irs 99   70 $20. 1040 irs 62 1 0. 1040 irs 41   36 1. 1040 irs 01   71 22. 1040 irs 72 2 0. 1040 irs 27   37 1. 1040 irs 04   72 25. 1040 irs 07 3 0. 1040 irs 19   38 1. 1040 irs 06   73 27. 1040 irs 57 4 0. 1040 irs 13   39 1. 1040 irs 07   74 30. 1040 irs 18 5 0. 1040 irs 13   40 1. 1040 irs 10   75 33. 1040 irs 05 6 0. 1040 irs 14   41 1. 1040 irs 13   76 36. 1040 irs 33 7 0. 1040 irs 15   42 1. 1040 irs 20   77 40. 1040 irs 17 8 0. 1040 irs 16   43 1. 1040 irs 29   78 44. 1040 irs 33 9 0. 1040 irs 16   44 1. 1040 irs 40   79 49. 1040 irs 23 10 0. 1040 irs 16   45 1. 1040 irs 53   80 54. 1040 irs 56 11 0. 1040 irs 19   46 1. 1040 irs 67   81 60. 1040 irs 51 12 0. 1040 irs 24   47 1. 1040 irs 83   82 66. 1040 irs 74 13 0. 1040 irs 28   48 1. 1040 irs 98   83 73. 1040 irs 07 14 0. 1040 irs 33   49 2. 1040 irs 13   84 80. 1040 irs 35 15 0. 1040 irs 38   50 2. 1040 irs 30   85 88. 1040 irs 76 16 0. 1040 irs 52   51 2. 1040 irs 52   86 99. 1040 irs 16 17 0. 1040 irs 57   52 2. 1040 irs 81   87 110. 1040 irs 40 18 0. 1040 irs 59   53 3. 1040 irs 20   88 121. 1040 irs 85 19 0. 1040 irs 61   54 3. 1040 irs 65   89 133. 1040 irs 40 20 0. 1040 irs 62   55 4. 1040 irs 15   90 144. 1040 irs 30 21 0. 1040 irs 62   56 4. 1040 irs 68   91 155. 1040 irs 80 22 0. 1040 irs 64   57 5. 1040 irs 20   92 168. 1040 irs 75 23 0. 1040 irs 66   58 5. 1040 irs 66   93 186. 1040 irs 44 24 0. 1040 irs 68   59 6. 1040 irs 06   94 206. 1040 irs 70 25 0. 1040 irs 71   60 6. 1040 irs 51   95 228. 1040 irs 35 26 0. 1040 irs 73   61 7. 1040 irs 11   96 250. 1040 irs 01 27 0. 1040 irs 76   62 7. 1040 irs 96   97 265. 1040 irs 09 28 0. 1040 irs 80   63 9. 1040 irs 08   98 270. 1040 irs 11 29 0. 1040 irs 83   64 10. 1040 irs 41   99 281. 1040 irs 05 30 0. 1040 irs 87   65 11. 1040 irs 90       31 0. 1040 irs 90   66 13. 1040 irs 51       32 0. 1040 irs 93   67 15. 1040 irs 20       33 0. 1040 irs 96   68 16. 1040 irs 92       34 0. 1040 irs 98   69 18. 1040 irs 70                       If the current published premium rates per $1,000 of insurance protection charged by an insurer for individual 1-year term life insurance premiums available to all standard risks are lower than those in the preceding table, you can use the lower rates for figuring the cost of insurance in connection with individual policies issued by the same insurer. 1040 irs Example 1. 1040 irs Lynne Green, age 44, and her employer enter into a 403(b) plan that will provide her with a $500 a month annuity upon retirement at age 65. 1040 irs The agreement also provides that if she should die before retirement, her beneficiary will receive the greater of $20,000 or the cash surrender value in the life insurance contract. 1040 irs Using the facts presented we can determine the cost of Lynne's life insurance protection as shown in Table 3-1. 1040 irs Lynne's employer has included $28 for the cost of the life insurance protection in her current year's income. 1040 irs When figuring her includible compensation for this year, Lynne will subtract $28. 1040 irs Table 3-1. 1040 irs Worksheet A. 1040 irs Cost of Incidental Life Insurance Note. 1040 irs Use this worksheet to figure the cost of incidental life insurance included in your annuity contract. 1040 irs This amount will be used to figure includible compensation for your most recent year of service. 1040 irs 1. 1040 irs Enter the value of the contract (amount payable upon your death) 1. 1040 irs $20,000. 1040 irs 00 2. 1040 irs Enter the cash value in the contract at the end of the year 2. 1040 irs 0. 1040 irs 00 3. 1040 irs Subtract line 2 from line 1. 1040 irs This is the value of your current life insurance protection 3. 1040 irs $20,000. 1040 irs 00 4. 1040 irs Enter your age on your birthday nearest the beginning of the policy year 4. 1040 irs 44 5. 1040 irs Enter the 1-year term premium for $1,000 of life insurance based on your age. 1040 irs (From Figure 3-1) 5. 1040 irs $1. 1040 irs 40 6. 1040 irs Divide line 3 by $1,000 6. 1040 irs 20 7. 1040 irs Multiply line 6 by line 5. 1040 irs This is the cost of your incidental life insurance 7. 1040 irs $28. 1040 irs 00 Example 2. 1040 irs Lynne's cash value in the contract at the end of the second year is $1,000. 1040 irs In year two, the cost of Lynne's life insurance is calculated as shown in Table 3-2. 1040 irs In year two, Lynne's employer will include $29. 1040 irs 07 in her current year's income. 1040 irs Lynne will subtract this amount when figuring her includible compensation. 1040 irs Table 3-2. 1040 irs Worksheet A. 1040 irs Cost of Incidental Life Insurance Note. 1040 irs Use this worksheet to figure the cost of incidental life insurance included in your annuity contract. 1040 irs This amount will be used to figure includible compensation for your most recent year of service. 1040 irs 1. 1040 irs Enter the value of the contract (amount payable upon your death) 1. 1040 irs $20,000. 1040 irs 00 2. 1040 irs Enter the cash value in the contract at the end of the year 2. 1040 irs $1,000. 1040 irs 00 3. 1040 irs Subtract line 2 from line 1. 1040 irs This is the value of your current life insurance protection 3. 1040 irs $19,000. 1040 irs 00 4. 1040 irs Enter your age on your birthday nearest the beginning of the policy year 4. 1040 irs 45 5. 1040 irs Enter the 1-year term premium for $1,000 of life insurance based on your age. 1040 irs (From Figure 3-1) 5. 1040 irs $1. 1040 irs 53 6. 1040 irs Divide line 3 by $1,000 6. 1040 irs 19 7. 1040 irs Multiply line 6 by line 5. 1040 irs This is the cost of your incidental life insurance 7. 1040 irs $29. 1040 irs 07 Figuring Includible Compensation for Your Most Recent Year of Service You can use Worksheet B in chapter 9 to determine your includible compensation for your most recent year of service. 1040 irs Example. 1040 irs Floyd has been periodically working full-time for a local hospital since September 2011. 1040 irs He needs to figure his limit on annual additions for 2014. 1040 irs The hospital's normal annual work period for employees in Floyd's general type of work runs from January to December. 1040 irs During the periods that Floyd was employed with the hospital, the hospital has always been eligible to provide a 403(b) plan to employees. 1040 irs Additionally, the hospital has never provided the employees with a 457 deferred compensation plan, a transportation fringe benefit plan, or a cafeteria plan. 1040 irs Floyd has never worked abroad and there is no life insurance provided under the plan. 1040 irs Table 3-3 shows the service Floyd provided to his employer, his compensation for the periods worked, his elective deferrals, and his taxable wages. 1040 irs Table 3-3. 1040 irs Floyd's Compensation Note. 1040 irs This table shows information Floyd will use to figure includible compensation for his most recent year of service. 1040 irs   Year Years of Service Taxable Wages Elective Deferrals 2014 6/12 of  a year $42,000 $2,000 2013 4/12 of  a year $16,000 $1,650 2012 4/12 of  a year $16,000 $1,650 Before Floyd can figure his limit on annual additions, he must figure includible compensation for his most recent year of service. 1040 irs Because Floyd is not planning to work the entire 2014 year, his most recent year of service will include the time he is planning to work in 2014 plus time he worked in the preceding 3 years until the time he worked for the hospital totals 1 year. 1040 irs If the total time he worked is less than 1 year, Floyd will treat it as if it were 1 year. 1040 irs He figures his most recent year of service shown in the following list. 1040 irs Time he will work in 2014 is 6/12 of a year. 1040 irs Time worked in 2013 is 4/12 of a year. 1040 irs All of this time will be used to determine Floyd's most recent year of service. 1040 irs Time worked in 2012 is 4/12 of a year. 1040 irs Floyd only needs 2 months of the 4 months he worked in 2012 to have enough time to total 1 full year. 1040 irs Because he needs only one-half of the actual time he worked, Floyd will use only one-half of his income earned during that period to calculate wages that will be used in figuring his includible compensation. 1040 irs Using the information provided in Table 3-3, wages for Floyd's most recent year of service are $66,000 ($42,000 + $16,000 + $8,000). 1040 irs His includible compensation for his most recent year of service is figured as shown in Table 3-4. 1040 irs After figuring his includible compensation, Floyd determines his limit on annual additions for 2014 to be $52,000, the lesser of his includible compensation, $70,475 (Table 3-4), and the maximum amount of $52,000. 1040 irs Table 3-4. 1040 irs Worksheet B. 1040 irs Includible Compensation for Your Most Recent Year of Service1 Note. 1040 irs Use this worksheet to figure includible compensation for your most recent year of service. 1040 irs 1. 1040 irs Enter your includible wages from the employer maintaining your 403(b) account for your most recent year of service 1. 1040 irs $66,000 2. 1040 irs Enter elective deferrals excluded from your gross income for your most recent year of service2 2. 1040 irs 4,4753 3. 1040 irs Enter amounts contributed or deferred by your employer under a cafeteria plan for your most recent year of service 3. 1040 irs -0- 4. 1040 irs Enter amounts contributed or deferred by your employer according to your election to your 457 account (a nonqualified plan of a state or local government, or of a tax-exempt organization) for your most recent year of service 4. 1040 irs -0- 5. 1040 irs Enter pre-tax contributions (employer's contributions made on your behalf according to your election) to a qualified transportation fringe benefit plan for your most recent year of service 5. 1040 irs -0- 6. 1040 irs Enter your foreign earned income exclusion for your most recent year of service 6. 1040 irs -0- 7. 1040 irs Add lines 1, 2, 3, 4, 5, and 6 7. 1040 irs 70,475 8. 1040 irs Enter the cost of incidental life insurance that is part of your annuity contract for your most recent year of service 8. 1040 irs -0- 9. 1040 irs Enter compensation that was both: Earned during your most recent year of service, and Earned while your employer was not qualified to maintain a 403(b) plan 9. 1040 irs -0- 10. 1040 irs Add lines 8 and 9 10. 1040 irs -0- 11. 1040 irs Subtract line 10 from line 7. 1040 irs This is your includible compensation for your most recent year of service 11. 1040 irs 70,475 1Use estimated amounts if figuring includible compensation before the end of the year. 1040 irs 2Elective deferrals made to a designated Roth account are not excluded from your gross income and should not be included on this line. 1040 irs  3$4,475 ($2,000 + $1,650 + $825). 1040 irs Prev  Up  Next   Home   More Online Publications