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Amend Federal Tax Return

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Amend Federal Tax Return

Amend federal tax return 3. Amend federal tax return   Lifetime Learning Credit Table of Contents Introduction Can You Claim the CreditWho Can Claim the Credit Who Cannot Claim the Credit What Expenses QualifyQualified Education Expenses No Double Benefit Allowed Expenses That Do Not Qualify Who Is an Eligible Student Who Can Claim a Dependent's Expenses Figuring the CreditEffect of the Amount of Your Income on the Amount of Your Credit Claiming the Credit Introduction For 2013, there are two tax credits available to help you offset the costs of higher education by reducing the amount of your income tax. Amend federal tax return They are the American opportunity credit and the lifetime learning credit. Amend federal tax return This chapter discusses the lifetime learning credit. Amend federal tax return The American opportunity credit is discussed in chapter 2, The American Opportunity Credit . Amend federal tax return This chapter explains: Who can claim the lifetime learning credit, What expenses qualify for the credit, Who is an eligible student, Who can claim a dependent's expenses, How to figure the credit, How to claim the credit, and When the credit must be repaid. Amend federal tax return What is the tax benefit of the lifetime learning credit. Amend federal tax return   For the tax year, you may be able to claim a lifetime learning credit of up to $2,000 for qualified education expenses paid for all eligible students. Amend federal tax return There is no limit on the number of years the lifetime learning credit can be claimed for each student. Amend federal tax return   A tax credit reduces the amount of income tax you may have to pay. Amend federal tax return Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. Amend federal tax return The lifetime learning credit is a nonrefundable credit. Amend federal tax return This means that it can reduce your tax to zero, but if the credit is more than your tax the excess will not be refunded to you. Amend federal tax return   Your allowable lifetime learning credit may be limited by the amount of your income and the amount of your tax. Amend federal tax return Can you claim more than one education credit this year. Amend federal tax return   For each student, you can elect for any year only one of the credits. Amend federal tax return For example, if you elect to take the lifetime learning credit for a child on your 2013 tax return, you cannot, for that same child, also claim the American opportunity credit for 2013. Amend federal tax return   If you are eligible to claim the lifetime learning credit and you are also eligible to claim the American opportunity credit for the same student in the same year, you can choose to claim either credit, but not both. Amend federal tax return   If you pay qualified education expenses for more than one student in the same year, you can choose to take certain credits on a per-student, per-year basis. Amend federal tax return 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. Amend federal tax return Differences between the American opportunity and lifetime learning credits. Amend federal tax return   There are several differences between these two credits. Amend federal tax return For example, you can claim the American opportunity credit for the same student for no more than 4 tax years, but any year in which the Hope Scholarship Credit was claimed counts toward the 4 years. Amend federal tax return However, there is no limit on the number of years for which you can claim a lifetime learning credit based on the same student's expenses. Amend federal tax return The differences between these credits are shown in Appendix B, Highlights of Education Tax Benefits for Tax Year 2013 near the end of this publication. Amend federal tax return Overview of the lifetime learning credit. Amend federal tax return   See Table 3-1, Overview of the Lifetime Learning Credit for the basics of the lifetime learning credit. Amend federal tax return The details are discussed in this chapter. Amend federal tax return Can You Claim the Credit The following rules will help you determine if you are eligible to claim the lifetime learning credit on your tax return. Amend federal tax return Who Can Claim the Credit Generally, you can claim the lifetime learning credit if all three of the following requirements are met. Amend federal tax return You pay qualified education expenses of higher education. Amend federal tax return You pay the education expenses for an eligible student. Amend federal tax return The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Amend federal tax return Table 3-1. Amend federal tax return Overview of the Lifetime Learning Credit Maximum credit Up to $2,000 credit per return Limit on modified adjusted gross income (MAGI) $127,000 if married filling jointly;  $63,000 if single, head of household, or qualifying widow(er) Refundable or nonrefundable Nonrefundable—credit limited to the amount of tax you must pay on your taxable income Number of years of postsecondary education Available for all years of postsecondary education and for courses to acquire or improve job skills Number of tax years credit available Available for an unlimited number of years Type of program required Student does not need to be pursuing a program leading to a degree or other recognized education credential Number of courses Available for one or more courses Felony drug conviction Felony drug convictions do not make the student ineligible Qualified expenses 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 Note. Amend federal tax return Qualified education expenses paid by a dependent for whom you claim an exemption, or by a third party for that dependent, are considered paid by you. Amend federal tax return “Qualified education expenses” are defined later under Qualified Education Expenses . Amend federal tax return “Eligible students” are defined later under Who Is an Eligible Student . Amend federal tax return A dependent for whom you claim an exemption is defined later under Who Can Claim a Dependent's Expenses . Amend federal tax return You may find Figure 3-1, Can You Claim the Lifetime Learning Credit for 2013 , later, helpful in determining if you can claim a lifetime learning credit on your tax return. Amend federal tax return Who Cannot Claim the Credit You cannot claim the lifetime learning credit for 2013 if any of the following apply. Amend federal tax return Your filing status is married filing separately. Amend federal tax return You are listed as a dependent on another person's tax return (such as your parents'). Amend federal tax return See Who Can Claim a Dependent's Expenses , later. Amend federal tax return Your modified adjusted gross income (MAGI) is $63,000 or more ($127,000 or more in the case of a joint return). Amend federal tax return MAGI is explained later under Effect of the Amount of Your Income on the Amount of Your Credit . Amend federal tax return You (or your spouse) were a nonresident alien for any part of 2013 and the nonresident alien did not elect to be treated as a resident alien for tax purposes. Amend federal tax return More information on nonresident aliens can be found in Publication 519. Amend federal tax return You claim the American Opportunity Credit (see chapter 2) or a Tuition and Fees Deduction (see chapter 6) for the same student in 2013. Amend federal tax return What Expenses Qualify The lifetime learning credit is based on qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. Amend federal tax return Generally, the credit is allowed for qualified education expenses paid in 2013 for an academic period beginning in 2013 or in the first 3 months of 2014. Amend federal tax return 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 credit. Amend federal tax return Academic period. Amend federal tax return   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. Amend federal tax return 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. Amend federal tax return Paid with borrowed funds. Amend federal tax return   You can claim a lifetime learning credit for qualified education expenses paid with the proceeds of a loan. Amend federal tax return You use the expenses to figure the lifetime learning credit for the year in which the expenses are paid, not the year in which the loan is repaid. Amend federal tax return Treat loan disbursements sent directly to the educational institution as paid on the date the institution credits the student's account. Amend federal tax return Student withdraws from class(es). Amend federal tax return   You can claim a lifetime learning credit for qualified education expenses not refunded when a student withdraws. Amend federal tax return Qualified Education Expenses For purposes of the lifetime learning credit, qualified education expenses are tuition and certain related expenses required for enrollment in a course at an eligible educational institution. Amend federal tax return The course must be either part of a postsecondary degree program or taken by the student to acquire or improve job skills. Amend federal tax return Eligible educational institution. Amend federal tax return   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. Amend federal tax return S. Amend federal tax return Department of Education. Amend federal tax return It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Amend federal tax return The educational institution should be able to tell you if it is an eligible educational institution. Amend federal tax return   Certain educational institutions located outside the United States also participate in the U. Amend federal tax return S. Amend federal tax return Department of Education's Federal Student Aid (FSA) programs. Amend federal tax return Related expenses. Amend federal tax return   Student-activity fees and expenses for course-related books, supplies, and equipment are included in qualified education expenses only if the fees and expenses must be paid to the institution for enrollment or attendance. Amend federal tax return Prepaid expenses. Amend federal tax return   Qualified education expenses paid in 2013 for an academic period that begins in the first three months of 2014 can be used in figuring an education credit for 2013 only. Amend federal tax return See Academic period , earlier. Amend federal tax return For example, 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). Amend federal tax return 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). Amend federal tax return In the following examples, assume that each student is an eligible student at an eligible educational institution. Amend federal tax return Example 1. Amend federal tax return   Jackson is a sophomore in University V's degree program in dentistry. Amend federal tax return This year, in addition to tuition, he is required to pay a fee to the university for the rental of the dental equipment he will use in this program. Amend federal tax return Because the equipment rental fee must be paid to University V for enrollment and attendance, Jackson's equipment rental fee is a qualified expense. Amend federal tax return Example 2. Amend federal tax return   Donna and Charles, both first-year students at College W, are required to have certain books and other reading materials to use in their mandatory first-year classes. Amend federal tax return The college has no policy about how students should obtain these materials, but any student who purchases them from College W's bookstore will receive a bill directly from the college. Amend federal tax return Charles bought his books from a friend, so what he paid for them is not a qualified education expense. Amend federal tax return Donna bought hers at College W's bookstore. Amend federal tax return Although Donna paid College W directly for her first-year books and materials, her payment is not a qualified expense because the books and materials are not required to be purchased from College W for enrollment or attendance at the institution. Amend federal tax return Example 3. Amend federal tax return   When Marci enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. Amend federal tax return This activity fee is required of all students, and is used solely to fund on-campus organizations and activities run by students, such as the student newspaper and student government. Amend federal tax return No portion of the fee covers personal expenses. Amend federal tax return Although labeled as a student activity fee, the fee is required for Marci's enrollment and attendance at College X. Amend federal tax return Therefore, it is a qualified expense. Amend federal tax return No Double Benefit Allowed You cannot do any of the following: Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim a lifetime learning credit based on those same expenses. Amend federal tax return Claim a lifetime learning credit in the same year that you are claiming a tuition and fees deduction for the same student. Amend federal tax return Claim a lifetime learning credit and an American opportunity credit based on the same qualified education expenses. Amend federal tax return Claim a lifetime learning 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). Amend federal tax return See Coordination With American Opportunity and Lifetime Learning Credits in chapter 7, Coverdell Education Savings Account, and Coordination With American Opportunity and Lifetime Learning Credits in chapter 8, Qualified Tuition Program. Amend federal tax return Claim a credit based on qualified education expenses paid with tax-free educational assistance, such as a scholarship, grant, or assistance provided by an employer. Amend federal tax return See Adjustments to Qualified Education Expenses, next. Amend federal tax return This image is too large to be displayed in the current screen. Amend federal tax return Please click the link to view the image. Amend federal tax return Figure 3-1 Adjustments to Qualified Education Expenses For each student, reduce the qualified education expenses paid by or on behalf of that student under the following rules. Amend federal tax return The result is the amount of adjusted qualified education expenses for each student. Amend federal tax return Tax-free educational assistance. Amend federal tax return   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. Amend federal tax return See Academic period , earlier. Amend federal tax return   Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. Amend federal tax return 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). Amend federal tax return   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. Amend federal tax return 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. Amend federal tax return   Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Amend federal tax return Generally, any scholarship or fellowship is treated as tax free. Amend federal tax return However, a scholarship or fellowship is not treated as tax free 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 of the following is true. Amend federal tax return 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 chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Amend federal tax return 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 chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Amend federal tax return 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 it is received. Amend federal tax return For examples, see Coordination with Pell grants and other scholarships, later. Amend federal tax return Refunds. Amend federal tax return   A refund of qualified education expenses may reduce adjusted qualified education expenses for the tax year or require repayment (recapture) of a credit claimed in an earlier year. Amend federal tax return Some tax-free educational assistance received after 2013 may be treated as a refund. Amend federal tax return See Tax-free educational assistance , earlier. Amend federal tax return Refunds received in 2013. Amend federal tax return   For each student, figure the adjusted qualified education expenses for 2013 by adding all the qualified education expenses for 2013 and subtracting any refunds of those expenses received from the eligible educational institution during 2013. Amend federal tax return Refunds received after 2013 but before your income tax return is filed. Amend federal tax return   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is paid before you file an income tax return for 2013, the amount of qualified education expenses for 2013 is reduced by the amount of the refund. Amend federal tax return Refunds received after 2013 and after your income tax return is filed. Amend federal tax return   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is paid after you file an income tax return for 2013, you may need to repay some or all of the credit. Amend federal tax return See Credit recapture, next. Amend federal tax return Credit recapture. Amend federal tax return    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. Amend federal tax return 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. Amend federal tax return 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). Amend federal tax return Include that amount as an additional tax for the year the refund or tax-free assistance was received. Amend federal tax return Example. Amend federal tax return   You pay $9,300 in tuition and fees in December 2013, and your child began college in January 2014. Amend federal tax return You filed your 2013 tax return on February 14, 2014, and claimed a lifetime learning credit of $1,860. Amend federal tax return You claimed no other tax credits. Amend federal tax return After you filed your return, your child withdrew from two courses and you received a refund of $2,900. Amend federal tax return You must refigure your 2013 lifetime learning credit using $6,400 of qualified education expenses instead of $9,300. Amend federal tax return The refigured credit is $1,280 and your tax liability increased by $580. Amend federal tax return See instructions for your 2014 income tax return to determine where to include this tax. Amend federal tax return If you 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. Amend federal tax return Amounts that do not reduce qualified education expenses. Amend federal tax return   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. Amend federal tax return   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. Amend federal tax return 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 Qualified education expenses in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Amend federal tax return The use of the money is not restricted. Amend federal tax return For examples, see Adjustments to Qualified Education Expenses in chapter 2, American Opportunity Credit. Amend federal tax return Coordination with Pell grants and other scholarships. Amend federal tax return   In some cases, you may be able to reduce your tax liability by including scholarships in income. Amend federal tax return If you are claiming an education credit for a claimed dependent who received a scholarship, you may be able to reduce your tax liability if the student includes the scholarship in income. Amend federal tax return The scholarship must be one that may (by its terms) be applied to expenses (such as room and board) other than qualified education expenses. Amend federal tax return Example 1—No scholarship. Amend federal tax return Judy Green, who is unmarried, is taking courses at a public community college to be recertified to teach in public schools. Amend federal tax return Her AGI and her MAGI, for purposes of the credit, are $27,000. Amend federal tax return Judy takes the standard deduction of $5,950 and personal exemption of $3,800, reducing her AGI to taxable income of $17,250 and her tax before credits is $2,156. Amend federal tax return She claims no credits other than the lifetime learning credit. Amend federal tax return In July 2013 she paid $700 for the summer 2013 semester; in August 2013 she paid $1,900 for the fall 2013 semester; and in December 2013 she paid another $1,900 for the spring semester beginning in January 2014. Amend federal tax return Judy and the college meet all requirements for the lifetime learning tax credit. Amend federal tax return She can use all of the $4,500 tuition she paid in 2013 when figuring her 2013 lifetime learning credit. Amend federal tax return She claims a $900 lifetime learning credit and her tax after credits is $1,256. Amend federal tax return Example 2—Scholarship excluded from income. Amend federal tax return The facts are the same as in Example 1—No scholarship, except that Judy was awarded a $1,500 scholarship. Amend federal tax return Under the terms of her scholarship, it may be used to pay any educational expenses, including room and board. Amend federal tax return If Judy excludes the scholarship from income, she will be deemed (for purposes of computing her education credit) as having used the scholarship to pay for tuition, required fees, and course materials. Amend federal tax return Only $3,000 of the $4,500 tuition she paid in 2013 could be used when figuring her 2013 lifetime learning credit. Amend federal tax return Her lifetime learning credit would be reduced to $600 and her tax after credits would be $1,556. Amend federal tax return Example 3—Scholarship included in income. Amend federal tax return The facts are the same as in Example 2—Scholarship excluded from income. Amend federal tax return If, unlike Example 2, Judy includes the $1,500 scholarship in income, she will be deemed to have used the entire scholarship to pay for room and board. Amend federal tax return Judy's AGI will increase to $28,500, her taxable income would be $18,750, and her tax before credits would be $2,381. Amend federal tax return She would be able to use the $4,500 of adjusted qualified education expenses to figure her credit. Amend federal tax return Judy could claim a $900 lifetime learning credit and her tax after credits would be $1,481. Amend federal tax return Expenses That Do Not Qualify Qualified education expenses do not include amounts paid for: Insurance, Medical expenses (including student health fees), Room and board, Transportation, or Similar personal, living, or family expenses. Amend federal tax return This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. Amend federal tax return Sports, games, hobbies, and noncredit courses. Amend federal tax return   Qualified education expenses generally do not include expenses that relate to any course of instruction or other education that involves sports, games or hobbies, or any noncredit course. Amend federal tax return However, if the course of instruction or other education is part of the student's degree program or is taken by the student to acquire or improve job skills, these expenses can qualify. Amend federal tax return Comprehensive or bundled fees. Amend federal tax return   Some eligible educational institutions combine all of their fees for an academic period into one amount. Amend federal tax return If you do not receive or do not have access to an allocation showing how much you paid for qualified education expenses and how much you paid for personal expenses, such as those listed above, contact the institution. Amend federal tax return The institution is required to make this allocation and provide you with the amount you paid (or were billed) for qualified education expenses on Form 1098-T. Amend federal tax return See Figuring the Credit , later, for more information about Form 1098-T. Amend federal tax return Who Is an Eligible Student For purposes of the lifetime learning credit, an eligible student is a student who is enrolled in one or more courses at an eligible educational institution (as defined under Qualified Education Expenses , earlier). Amend federal tax return Who Can Claim a Dependent's Expenses If there are qualified education expenses for your dependent during a tax year, either you or your dependent, but not both of you, can claim a lifetime learning credit for your dependent's expenses for that year. Amend federal tax return For you to claim a lifetime learning credit for your dependent's expenses, you must also claim an exemption for your dependent. Amend federal tax return You do this by listing your dependent's name and other required information on Form 1040 (or Form 1040A), line 6c. Amend federal tax return IF you. Amend federal tax return . Amend federal tax return . Amend federal tax return THEN only. Amend federal tax return . Amend federal tax return . Amend federal tax return claim an exemption on your tax return for a dependent who is an eligible student you can claim the lifetime learning credit based on that dependent's expenses. Amend federal tax return The dependent cannot claim the credit. Amend federal tax return do not claim an exemption on your tax return for a dependent who is an eligible student (even if entitled to the exemption) the dependent can claim the lifetime learning credit. Amend federal tax return You cannot claim the credit based on this dependent's expenses. Amend federal tax return Expenses paid by dependent. Amend federal tax return   If you claim an exemption on your tax return for an eligible student who is your dependent, treat any expenses paid (or deemed paid) by your dependent as if you had paid them. Amend federal tax return Include these expenses when figuring the amount of your lifetime learning credit. Amend federal tax return    Qualified education expenses paid directly to an eligible educational institution for your dependent under a court-approved divorce decree are treated as paid by your dependent. Amend federal tax return Expenses paid by you. Amend federal tax return   If you claim an exemption for a dependent who is an eligible student, only you can include any expenses you paid when figuring the amount of the lifetime learning credit. Amend federal tax return If neither you nor anyone else claims an exemption for the dependent, only the dependent can include any expenses you paid when figuring the lifetime learning credit. Amend federal tax return Expenses paid by others. Amend federal tax return   Someone other than you, your spouse, or your dependent (such as a relative or former spouse) may make a payment directly to an eligible educational institution to pay for an eligible student's qualified education expenses. Amend federal tax return In this case, the student is treated as receiving the payment from the other person and, in turn, paying the institution. Amend federal tax return If you claim an exemption on your tax return for the student, you are considered to have paid the expenses. Amend federal tax return Example. Amend federal tax return In 2013, Ms. Amend federal tax return Allen makes a payment directly to an eligible educational institution for her grandson Todd's qualified education expenses. Amend federal tax return For purposes of claiming a lifetime learning credit, Todd is treated as receiving the money from his grandmother and, in turn, paying his qualified education expenses himself. Amend federal tax return Unless an exemption for Todd is claimed on someone else's 2013 tax return, only Todd can use the payment to claim a lifetime learning credit. Amend federal tax return If anyone, such as Todd's parents, claims an exemption for Todd on his or her 2013 tax return, whoever claims the exemption may be able to use the expenses to claim a lifetime learning credit. Amend federal tax return If anyone else claims an exemption for Todd, Todd cannot claim a lifetime learning credit. Amend federal tax return Tuition reduction. Amend federal tax return   When an eligible educational institution provides a reduction in tuition to an employee of the institution (or spouse or dependent child of an employee), the amount of the reduction may or may not be taxable. Amend federal tax return If it is taxable, the employee is treated as receiving a payment of that amount and, in turn, paying it to the educational institution on behalf of the student. Amend federal tax return For more information on tuition reductions, see Qualified Tuition Reduction in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. Amend federal tax return Figuring the Credit The amount of the lifetime learning credit is 20% of the first $10,000 of qualified education expenses you paid for all eligible students. Amend federal tax return The maximum amount of lifetime learning credit you can claim for 2013 is $2,000 (20% × $10,000). Amend federal tax return However, that amount may be reduced based on your MAGI. Amend federal tax return See Effect of the Amount of Your Income on the Amount of Your Credit , later. Amend federal tax return Example. Amend federal tax return Bruce and Toni Harper are married and file a joint tax return. Amend federal tax return For 2013, their MAGI is $75,000. Amend federal tax return Toni is attending a local college (an eligible educational institution) to earn credits toward a degree in nursing. Amend federal tax return She already has a bachelor's degree in history and wants to become a nurse. Amend federal tax return In August 2013, Toni paid $5,000 of qualified education expenses for her fall 2013 semester. Amend federal tax return Bruce and Toni can claim a $1,000 (20% × $5,000) lifetime learning credit on their 2013 joint tax return. Amend federal tax return Form 1098-T. Amend federal tax return   To help you figure your lifetime learning credit, the student should receive Form 1098-T. Amend federal tax return Generally, an eligible educational institution (such as a college or university) must send Form 1098-T (or acceptable substitute) to each enrolled student by January 31, 2014. Amend federal tax return An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. Amend federal tax return However, the amounts in boxes 1 and 2 of Form 1098-T might be different from what you paid. Amend federal tax return When figuring the credit, use only the amounts you paid or are deemed to have paid in 2013 for qualified education expenses. Amend federal tax return   In addition, Form 1098-T should give other information for that institution, such as adjustments made for prior years, the amount of scholarships or grants, reimbursements or refunds, and whether the student was enrolled at least half-time or was a graduate student. Amend federal tax return    The eligible educational institution may ask for a completed Form W-9S, or similar statement to obtain the student's name, address, and taxpayer identification number. Amend federal tax return Effect of the Amount of Your Income on the Amount of Your Credit The amount of your lifetime learning credit is phased out (gradually reduced) if your MAGI is between $53,000 and $63,000 ($107,000 and $127,000 if you file a joint return). Amend federal tax return You cannot claim a lifetime learning credit if your MAGI is $63,000 or more ($127,000 or more if you file a joint return). Amend federal tax return Modified adjusted gross income (MAGI). Amend federal tax return   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. Amend federal tax return MAGI when using Form 1040A. Amend federal tax return   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. Amend federal tax return MAGI when using Form 1040. Amend federal tax return   If you file Form 1040, your MAGI is the AGI on line 38 of that form, modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. Amend federal tax return You can use Worksheet 3-1 to figure your MAGI. Amend federal tax return Worksheet 3-1. Amend federal tax return MAGI for the Lifetime Learning Credit 1. Amend federal tax return Enter your adjusted gross income  (Form 1040, line 38)   1. Amend federal tax return   2. Amend federal tax return Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. Amend federal tax return       3. Amend federal tax return Enter your foreign housing deduction (Form 2555, line 50)   3. Amend federal tax return       4. Amend federal tax return Enter the amount of income from Puerto Rico you are excluding   4. Amend federal tax return       5. Amend federal tax return Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. Amend federal tax return       6. Amend federal tax return Add the amounts on lines 2, 3, 4, and 5   6. Amend federal tax return   7. Amend federal tax return Add the amounts on lines 1 and 6. Amend federal tax return  This is your modified adjusted  gross income. Amend federal tax return Enter this amount  on Form 8863, line 14   7. Amend federal tax return   Phaseout. Amend federal tax return   If your MAGI is within the range of incomes where the credit must be reduced, you will figure your reduced credit using lines 10-18 of Form 8863. Amend federal tax return The same method is shown in the following example. Amend federal tax return Example. Amend federal tax return You are filing a joint return with a MAGI of $112,000. Amend federal tax return In 2013, you paid $6,600 of qualified education expenses. Amend federal tax return You figure the tentative lifetime learning credit (20% of the first $10,000 of qualified education expenses you paid for all eligible students). Amend federal tax return The result is a $1,320 (20% x $6,600) tentative credit. Amend federal tax return Because your MAGI is within the range of incomes where the credit must be reduced, you must multiply your tentative credit ($1,320) by a fraction. Amend federal tax return The numerator of the fraction is $127,000 (the upper limit for those filing a joint return) minus your MAGI. Amend federal tax return The denominator is $20,000, the range of incomes for the phaseout ($107,000 to $127,000). Amend federal tax return The result is the amount of your phased out (reduced) lifetime learning credit ($990). Amend federal tax return   $1,320 × $127,000 − $112,000  $20,000 = $990   Claiming the Credit You claim the lifetime learning credit by completing Form 8863 and submitting it with your Form 1040 or 1040A. Amend federal tax return Enter the credit on Form 1040, line 49, or Form 1040A, line 31. Amend federal tax return Note. Amend federal tax return In Appendix A, Illustrated Example of Education Credits at the end of this publication, there is an example illustrating the use of Form 8863 when both the American opportunity credit and the lifetime learning credit are claimed on the same tax return. 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Page Last Reviewed or Updated: 30-Sep-2013

The Amend Federal Tax Return

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