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Filing Taxes For 2013

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Filing Taxes For 2013

Filing taxes for 2013 Publication 575 - Main Content Table of Contents General InformationPension. Filing taxes for 2013 Annuity. Filing taxes for 2013 Qualified employee plan. Filing taxes for 2013 Qualified employee annuity. Filing taxes for 2013 Designated Roth account. Filing taxes for 2013 Tax-sheltered annuity plan. Filing taxes for 2013 Fixed-period annuities. Filing taxes for 2013 Annuities for a single life. Filing taxes for 2013 Joint and survivor annuities. Filing taxes for 2013 Variable annuities. Filing taxes for 2013 Disability pensions. Filing taxes for 2013 Variable Annuities Section 457 Deferred Compensation Plans Disability Pensions Insurance Premiums for Retired Public Safety Officers Railroad Retirement Benefits Withholding Tax and Estimated Tax Cost (Investment in the Contract)Foreign employment contributions while a nonresident alien. Filing taxes for 2013 Taxation of Periodic PaymentsPeriod of participation. Filing taxes for 2013 Fully Taxable Payments Partly Taxable Payments Taxation of Nonperiodic PaymentsFiguring the Taxable Amount Loans Treated as Distributions Transfers of Annuity Contracts Lump-Sum Distributions RolloversExceptions. Filing taxes for 2013 No tax withheld. Filing taxes for 2013 Partial rollovers. Filing taxes for 2013 Frozen deposits. Filing taxes for 2013 Reasonable period of time. Filing taxes for 2013 20% Mandatory withholding. Filing taxes for 2013 How to report. Filing taxes for 2013 How to report. Filing taxes for 2013 Special rule for Roth IRAs and designated Roth accounts. Filing taxes for 2013 Special Additional TaxesTax on Early Distributions Tax on Excess Accumulation Survivors and BeneficiariesGuaranteed payments. Filing taxes for 2013 How To Get Tax HelpLow Income Taxpayer Clinics General Information Definitions. Filing taxes for 2013   Some of the terms used in this publication are defined in the following paragraphs. Filing taxes for 2013 Pension. Filing taxes for 2013   A pension is generally a series of definitely determinable payments made to you after you retire from work. Filing taxes for 2013 Pension payments are made regularly and are based on such factors as years of service and prior compensation. Filing taxes for 2013 Annuity. Filing taxes for 2013   An annuity is a series of payments under a contract made at regular intervals over a period of more than one full year. Filing taxes for 2013 They can be either fixed (under which you receive a definite amount) or variable (not fixed). Filing taxes for 2013 You can buy the contract alone or with the help of your employer. Filing taxes for 2013 Qualified employee plan. Filing taxes for 2013   A qualified employee plan is an employer's stock bonus, pension, or profit-sharing plan that is for the exclusive benefit of employees or their beneficiaries and that meets Internal Revenue Code requirements. Filing taxes for 2013 It qualifies for special tax benefits, such as tax deferral for employer contributions and capital gain treatment or the 10-year tax option for lump-sum distributions (if participants qualify). Filing taxes for 2013 To determine whether your plan is a qualified plan, check with your employer or the plan administrator. Filing taxes for 2013 Qualified employee annuity. Filing taxes for 2013   A qualified employee annuity is a retirement annuity purchased by an employer for an employee under a plan that meets Internal Revenue Code requirements. Filing taxes for 2013 Designated Roth account. Filing taxes for 2013   A designated Roth account is a separate account created under a qualified Roth contribution program to which participants may elect to have part or all of their elective deferrals to a 401(k), 403(b), or 457(b) plan designated as Roth contributions. Filing taxes for 2013 Elective deferrals that are designated as Roth contributions are included in your income. Filing taxes for 2013 However, qualified distributions (explained later) are not included in your income. Filing taxes for 2013 You should check with your plan administrator to determine if your plan will accept designated Roth contributions. Filing taxes for 2013 Tax-sheltered annuity plan. Filing taxes for 2013   A tax-sheltered annuity plan (often referred to as a 403(b) plan or a tax-deferred annuity plan) is a retirement plan for employees of public schools and certain tax-exempt organizations. Filing taxes for 2013 Generally, a tax-sheltered annuity plan provides retirement benefits by purchasing annuity contracts for its participants. Filing taxes for 2013 Types of pensions and annuities. Filing taxes for 2013   Pensions and annuities include the following types. Filing taxes for 2013 Fixed-period annuities. Filing taxes for 2013   You receive definite amounts at regular intervals for a specified length of time. Filing taxes for 2013 Annuities for a single life. Filing taxes for 2013   You receive definite amounts at regular intervals for life. Filing taxes for 2013 The payments end at death. Filing taxes for 2013 Joint and survivor annuities. Filing taxes for 2013   The first annuitant receives a definite amount at regular intervals for life. Filing taxes for 2013 After he or she dies, a second annuitant receives a definite amount at regular intervals for life. Filing taxes for 2013 The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant. Filing taxes for 2013 Variable annuities. Filing taxes for 2013   You receive payments that may vary in amount for a specified length of time or for life. Filing taxes for 2013 The amounts you receive may depend upon such variables as profits earned by the pension or annuity funds, cost-of-living indexes, or earnings from a mutual fund. Filing taxes for 2013 Disability pensions. Filing taxes for 2013   You receive disability payments because you retired on disability and have not reached minimum retirement age. Filing taxes for 2013 More than one program. Filing taxes for 2013   You may receive employee plan benefits from more than one program under a single trust or plan of your employer. Filing taxes for 2013 If you participate in more than one program, you may have to treat each as a separate pension or annuity contract, depending upon the facts in each case. Filing taxes for 2013 Also, you may be considered to have received more than one pension or annuity. Filing taxes for 2013 Your former employer or the plan administrator should be able to tell you if you have more than one contract. Filing taxes for 2013 Example. Filing taxes for 2013 Your employer set up a noncontributory profit-sharing plan for its employees. Filing taxes for 2013 The plan provides that the amount held in the account of each participant will be paid when that participant retires. Filing taxes for 2013 Your employer also set up a contributory defined benefit pension plan for its employees providing for the payment of a lifetime pension to each participant after retirement. Filing taxes for 2013 The amount of any distribution from the profit-sharing plan depends on the contributions (including allocated forfeitures) made for the participant and the earnings from those contributions. Filing taxes for 2013 Under the pension plan, however, a formula determines the amount of the pension benefits. Filing taxes for 2013 The amount of contributions is the amount necessary to provide that pension. Filing taxes for 2013 Each plan is a separate program and a separate contract. Filing taxes for 2013 If you get benefits from these plans, you must account for each separately, even though the benefits from both may be included in the same check. Filing taxes for 2013 Distributions from a designated Roth account are treated separately from other distributions from the plan. Filing taxes for 2013 Qualified domestic relations order (QDRO). Filing taxes for 2013   A QDRO is a judgment, decree, or order relating to payment of child support, alimony, or marital property rights to a spouse, former spouse, child, or other dependent of a participant in a retirement plan. Filing taxes for 2013 The QDRO must contain certain specific information, such as the name and last known mailing address of the participant and each alternate payee, and the amount or percentage of the participant's benefits to be paid to each alternate payee. Filing taxes for 2013 A QDRO may not award an amount or form of benefit that is not available under the plan. Filing taxes for 2013   A spouse or former spouse who receives part of the benefits from a retirement plan under a QDRO reports the payments received as if he or she were a plan participant. Filing taxes for 2013 The spouse or former spouse is allocated a share of the participant's cost (investment in the contract) equal to the cost times a fraction. Filing taxes for 2013 The numerator of the fraction is the present value of the benefits payable to the spouse or former spouse. Filing taxes for 2013 The denominator is the present value of all benefits payable to the participant. Filing taxes for 2013   A distribution that is paid to a child or other dependent under a QDRO is taxed to the plan participant. Filing taxes for 2013 Variable Annuities The tax rules in this publication apply both to annuities that provide fixed payments and to annuities that provide payments that vary in amount based on investment results or other factors. Filing taxes for 2013 For example, they apply to commercial variable annuity contracts, whether bought by an employee retirement plan for its participants or bought directly from the issuer by an individual investor. Filing taxes for 2013 Under these contracts, the owner can generally allocate the purchase payments among several types of investment portfolios or mutual funds and the contract value is determined by the performance of those investments. Filing taxes for 2013 The earnings are not taxed until distributed either in a withdrawal or in annuity payments. Filing taxes for 2013 The taxable part of a distribution is treated as ordinary income. Filing taxes for 2013 Net investment income tax. Filing taxes for 2013   Beginning in 2013, annuities under a nonqualified plan are included in calculating your net investment income for the net investment income tax (NIIT). Filing taxes for 2013 For information see the Instructions for Form 8960, Net Investment Income Tax — Individuals, Estates and Trusts. Filing taxes for 2013 For information on the tax treatment of a transfer or exchange of a variable annuity contract, see Transfers of Annuity Contracts under Taxation of Nonperiodic Payments, later. Filing taxes for 2013 Withdrawals. Filing taxes for 2013   If you withdraw funds before your annuity starting date and your annuity is under a qualified retirement plan, a ratable part of the amount withdrawn is tax free. Filing taxes for 2013 The tax-free part is based on the ratio of your cost (investment in the contract) to your account balance under the plan. Filing taxes for 2013   If your annuity is under a nonqualified plan (including a contract you bought directly from the issuer), the amount withdrawn is allocated first to earnings (the taxable part) and then to your cost (the tax-free part). Filing taxes for 2013 However, if you bought your annuity contract before August 14, 1982, a different allocation applies to the investment before that date and the earnings on that investment. Filing taxes for 2013 To the extent the amount withdrawn does not exceed that investment and earnings, it is allocated first to your cost (the tax-free part) and then to earnings (the taxable part). Filing taxes for 2013   If you withdraw funds (other than as an annuity) on or after your annuity starting date, the entire amount withdrawn is generally taxable. Filing taxes for 2013   The amount you receive in a full surrender of your annuity contract at any time is tax free to the extent of any cost that you have not previously recovered tax free. Filing taxes for 2013 The rest is taxable. Filing taxes for 2013   For more information on the tax treatment of withdrawals, see Taxation of Nonperiodic Payments , later. Filing taxes for 2013 If you withdraw funds from your annuity before you reach age 59½, also see Tax on Early Distributions under Special Additional Taxes, later. Filing taxes for 2013 Annuity payments. Filing taxes for 2013   If you receive annuity payments under a variable annuity plan or contract, you recover your cost tax free under either the Simplified Method or the General Rule, as explained under Taxation of Periodic Payments , later. Filing taxes for 2013 For a variable annuity paid under a qualified plan, you generally must use the Simplified Method. Filing taxes for 2013 For a variable annuity paid under a nonqualified plan (including a contract you bought directly from the issuer), you must use a special computation under the General Rule. Filing taxes for 2013 For more information, see Variable annuities in Publication 939 under Computation Under the General Rule. Filing taxes for 2013 Death benefits. Filing taxes for 2013    If you receive a single-sum distribution from a variable annuity contract because of the death of the owner or annuitant, the distribution is generally taxable only to the extent it is more than the unrecovered cost of the contract. Filing taxes for 2013 If you choose to receive an annuity, the payments are subject to tax as described above. Filing taxes for 2013 If the contract provides a joint and survivor annuity and the primary annuitant had received annuity payments before death, you figure the tax-free part of annuity payments you receive as the survivor in the same way the primary annuitant did. Filing taxes for 2013 See Survivors and Beneficiaries , later. Filing taxes for 2013 Section 457 Deferred Compensation Plans If you work for a state or local government or for a tax-exempt organization, you may be able to participate in a section 457 deferred compensation plan. Filing taxes for 2013 If your plan is an eligible plan, you are not taxed currently on pay that is deferred under the plan or on any earnings from the plan's investment of the deferred pay. Filing taxes for 2013 You are generally taxed on amounts deferred in an eligible state or local government plan only when they are distributed from the plan. Filing taxes for 2013 You are taxed on amounts deferred in an eligible tax-exempt organization plan when they are distributed or otherwise made available to you. Filing taxes for 2013 Your 457(b) plan may have a designated Roth account option. Filing taxes for 2013 If so, you may be able to roll over amounts to the designated Roth account or make contributions. Filing taxes for 2013 Elective deferrals to a designated Roth account are included in your income. Filing taxes for 2013 Qualified distributions (explained later) are not included in your income. Filing taxes for 2013 See the Designated Roth accounts discussion under Taxation of Periodic Payments, later. Filing taxes for 2013 This publication covers the tax treatment of benefits under eligible section 457 plans, but it does not cover the treatment of deferrals. Filing taxes for 2013 For information on deferrals under section 457 plans, see Retirement Plan Contributions under Employee Compensation in Publication 525. Filing taxes for 2013 Is your plan eligible?   To find out if your plan is an eligible plan, check with your employer. Filing taxes for 2013 Plans that are not eligible section 457 plans include the following: Bona fide vacation leave, sick leave, compensatory time, severance pay, disability pay, or death benefit plans. Filing taxes for 2013 Nonelective deferred compensation plans for nonemployees (independent contractors). Filing taxes for 2013 Deferred compensation plans maintained by churches. Filing taxes for 2013 Length of service award plans for bona fide volunteer firefighters and emergency medical personnel. Filing taxes for 2013 An exception applies if the total amount paid to a volunteer exceeds $3,000 for any year of service. Filing taxes for 2013 Disability Pensions If you retired on disability, you generally must include in income any disability pension you receive under a plan that is paid for by your employer. Filing taxes for 2013 You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A or on line 8 of Form 1040NR until you reach minimum retirement age. Filing taxes for 2013 Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. Filing taxes for 2013 You may be entitled to a tax credit if you were permanently and totally disabled when you retired. Filing taxes for 2013 For information on this credit, see Publication 524. Filing taxes for 2013 Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. Filing taxes for 2013 Report the payments on Form 1040, lines 16a and 16b; Form 1040A, lines 12a and 12b; or on Form 1040NR, lines 17a and 17b. Filing taxes for 2013 Disability payments for injuries incurred as a direct result of a terrorist attack directed against the United States (or its allies) are not included in income. Filing taxes for 2013 For more information about payments to survivors of terrorist attacks, see Publication 3920, Tax Relief for Victims of Terrorist Attacks. Filing taxes for 2013 Insurance Premiums for Retired Public Safety Officers If you are an eligible retired public safety officer (law enforcement officer, firefighter, chaplain, or member of a rescue squad or ambulance crew), you can elect to exclude from income distributions made from your eligible retirement plan that are used to pay the premiums for accident or health insurance or long-term care insurance. Filing taxes for 2013 The premiums can be for coverage for you, your spouse, or dependents. Filing taxes for 2013 The distribution must be made directly from the plan to the insurance provider. Filing taxes for 2013 You can exclude from income the smaller of the amount of the insurance premiums or $3,000. Filing taxes for 2013 You can only make this election for amounts that would otherwise be included in your income. Filing taxes for 2013 The amount excluded from your income cannot be used to claim a medical expense deduction. Filing taxes for 2013 An eligible retirement plan is a governmental plan that is: a qualified trust, a section 403(a) plan, a section 403(b) annuity, or a section 457(b) plan. Filing taxes for 2013 If you make this election, reduce the otherwise taxable amount of your pension or annuity by the amount excluded. Filing taxes for 2013 The amount shown in box 2a of Form 1099-R does not reflect this exclusion. Filing taxes for 2013 Report your total distributions on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. Filing taxes for 2013 Report the taxable amount on Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Filing taxes for 2013 Enter “PSO” next to the appropriate line on which you report the taxable amount. Filing taxes for 2013 If you are retired on disability and reporting your disability pension on line 7 of Form 1040 or Form 1040A, or line 8 of Form 1040NR, include only the taxable amount on that line and enter “PSO” and the amount excluded on the dotted line next to the applicable line. Filing taxes for 2013 Railroad Retirement Benefits Benefits paid under the Railroad Retirement Act fall into two categories. Filing taxes for 2013 These categories are treated differently for income tax purposes. Filing taxes for 2013 The first category is the amount of tier 1 railroad retirement benefits that equals the social security benefit that a railroad employee or beneficiary would have been entitled to receive under the social security system. Filing taxes for 2013 This part of the tier 1 benefit is the social security equivalent benefit (SSEB) and you treat it for tax purposes like social security benefits. Filing taxes for 2013 If you received, repaid, or had tax withheld from the SSEB portion of tier 1 benefits during 2013, you will receive Form RRB-1099, Payments by the Railroad Retirement Board (or Form RRB-1042S, Statement for Nonresident Alien Recipients of Payments by the Railroad Retirement Board, if you are a nonresident alien) from the U. Filing taxes for 2013 S. Filing taxes for 2013 Railroad Retirement Board (RRB). Filing taxes for 2013 For more information about the tax treatment of the SSEB portion of tier 1 benefits and Forms RRB-1099 and RRB-1042S, see Publication 915. Filing taxes for 2013 The second category contains the rest of the tier 1 railroad retirement benefits, called the non-social security equivalent benefit (NSSEB). Filing taxes for 2013 It also contains any tier 2 benefit, vested dual benefit (VDB), and supplemental annuity benefit. Filing taxes for 2013 Treat this category of benefits, shown on Form RRB-1099-R, as an amount received from a qualified employee plan. Filing taxes for 2013 This allows for the tax-free (nontaxable) recovery of employee contributions from the tier 2 benefits and the NSSEB part of the tier 1 benefits. Filing taxes for 2013 (The NSSEB and tier 2 benefits, less certain repayments, are combined into one amount called the Contributory Amount Paid on Form RRB-1099-R. Filing taxes for 2013 ) Vested dual benefits and supplemental annuity benefits are non-contributory pensions and are fully taxable. Filing taxes for 2013 See Taxation of Periodic Payments , later, for information on how to report your benefits and how to recover the employee contributions tax free. Filing taxes for 2013 Form RRB-1099-R is used for U. Filing taxes for 2013 S. Filing taxes for 2013 citizens, resident aliens, and nonresident aliens. Filing taxes for 2013 Nonresident aliens. Filing taxes for 2013   A nonresident alien is an individual who is not a citizen or a resident alien of the United States. Filing taxes for 2013 Nonresident aliens are subject to mandatory U. Filing taxes for 2013 S. Filing taxes for 2013 tax withholding unless exempt under a tax treaty between the United States and their country of legal residency. Filing taxes for 2013 A tax treaty exemption may reduce or eliminate tax withholding from railroad retirement benefits. Filing taxes for 2013 See Tax withholding next for more information. Filing taxes for 2013   If you are a nonresident alien and your tax withholding rate changed or your country of legal residence changed during the year, you may receive more than one Form RRB-1042S or Form RRB-1099-R. Filing taxes for 2013 To determine your total benefits paid or repaid and total tax withheld for the year, you should add the amounts shown on all forms you received for that year. Filing taxes for 2013 For information on filing requirements for aliens, see Publication 519, U. Filing taxes for 2013 S. Filing taxes for 2013 Tax Guide for Aliens. Filing taxes for 2013 For information on tax treaties between the United States and other countries that may reduce or eliminate U. Filing taxes for 2013 S. Filing taxes for 2013 tax on your benefits, see Publication 901, U. Filing taxes for 2013 S. Filing taxes for 2013 Tax Treaties. Filing taxes for 2013 Tax withholding. Filing taxes for 2013   To request or change your income tax withholding from SSEB payments, U. Filing taxes for 2013 S. Filing taxes for 2013 citizens should contact the IRS for Form W-4V, Voluntary Withholding Request, and file it with the RRB. Filing taxes for 2013 To elect, revoke, or change your income tax withholding from NSSEB, tier 2, VDB, and supplemental annuity payments received, use Form RRB W-4P, Withholding Certificate for Railroad Retirement Payments. Filing taxes for 2013 If you are a nonresident alien or a U. Filing taxes for 2013 S. Filing taxes for 2013 citizen living abroad, you should provide Form RRB-1001, Nonresident Questionnaire, to the RRB to furnish citizenship and residency information and to claim any treaty exemption from U. Filing taxes for 2013 S. Filing taxes for 2013 tax withholding. Filing taxes for 2013 Nonresident U. Filing taxes for 2013 S. Filing taxes for 2013 citizens cannot elect to be exempt from withholding on payments delivered outside of the U. Filing taxes for 2013 S. Filing taxes for 2013 Help from the RRB. Filing taxes for 2013   To request an RRB form or to get help with questions about an RRB benefit, you should contact your nearest RRB field office if you reside in the United States (call 1-877-772-5772 for the nearest field office) or U. Filing taxes for 2013 S. Filing taxes for 2013 consulate/Embassy if you reside outside the United States. Filing taxes for 2013 You can visit the RRB on the Internet at www. Filing taxes for 2013 rrb. Filing taxes for 2013 gov. Filing taxes for 2013 Form RRB-1099-R. Filing taxes for 2013   The following discussion explains the items shown on Form RRB-1099-R. Filing taxes for 2013 The amounts shown on this form are before any deduction for: Federal income tax withholding, Medicare premiums, Legal process garnishment payments, Recovery of a prior year overpayment of an NSSEB, tier 2 benefit, VDB, or supplemental annuity benefit, or Recovery of Railroad Unemployment Insurance Act benefits received while awaiting payment of your railroad retirement annuity. Filing taxes for 2013   The amounts shown on this form are after any offset for: Social Security benefits, Age reduction, Public Service pensions or public disability benefits, Dual railroad retirement entitlement under another RRB claim number, Work deductions, Legal process partition deductions, Actuarial adjustment, Annuity waiver, or Recovery of a current-year overpayment of NSSEB, tier 2, VDB, or supplemental annuity benefits. Filing taxes for 2013   The amounts shown on Form RRB-1099-R do not reflect any special rules, such as capital gain treatment or the special 10-year tax option for lump-sum payments, or tax-free rollovers. Filing taxes for 2013 To determine if any of these rules apply to your benefits, see the discussions about them later. Filing taxes for 2013   Generally, amounts shown on your Form RRB-1099-R are considered a normal distribution. Filing taxes for 2013 Use distribution code “7” if you are asked for a distribution code. Filing taxes for 2013 Distribution codes are not shown on Form RRB-1099-R. Filing taxes for 2013   There are three copies of this form. Filing taxes for 2013 Copy B is to be included with your income tax return if federal income tax is withheld. Filing taxes for 2013 Copy C is for your own records. Filing taxes for 2013 Copy 2 is filed with your state, city, or local income tax return, when required. Filing taxes for 2013 See the illustrated Copy B (Form RRB-1099-R) above. Filing taxes for 2013       Each beneficiary will receive his or her own Form RRB-1099-R. Filing taxes for 2013 If you receive benefits on more than one railroad retirement record, you may get more than one Form RRB-1099-R. Filing taxes for 2013 So that you get your form timely, make sure the RRB always has your current mailing address. Filing taxes for 2013 Please click here for the text description of the image. Filing taxes for 2013 Form RRB-1099-R Box 1—Claim Number and Payee Code. Filing taxes for 2013   Your claim number is a six- or nine-digit number preceded by an alphabetical prefix. Filing taxes for 2013 This is the number under which the RRB paid your benefits. Filing taxes for 2013 Your payee code follows your claim number and is the last number in this box. Filing taxes for 2013 It is used by the RRB to identify you under your claim number. Filing taxes for 2013 In all your correspondence with the RRB, be sure to use the claim number and payee code shown in this box. Filing taxes for 2013 Box 2—Recipient's Identification Number. Filing taxes for 2013   This is the recipient's U. Filing taxes for 2013 S. Filing taxes for 2013 taxpayer identification number. Filing taxes for 2013 It is the social security number (SSN), individual taxpayer identification number (ITIN), or employer identification number (EIN), if known, for the person or estate listed as the recipient. Filing taxes for 2013 If you are a resident or nonresident alien who must furnish a taxpayer identification number to the IRS and are not eligible to obtain an SSN, use Form W-7, Application for IRS Individual Taxpayer Identification Number, to apply for an ITIN. Filing taxes for 2013 The Instructions for Form W-7 explain how and when to apply. Filing taxes for 2013 Box 3—Employee Contributions. Filing taxes for 2013   This is the amount of taxes withheld from the railroad employee's earnings that exceeds the amount of taxes that would have been withheld had the earnings been covered under the social security system. Filing taxes for 2013 This amount is the employee's cost that you use to figure the tax-free part of the NSSEB and tier 2 benefit you received (the amount shown in box 4). Filing taxes for 2013 (For information on how to figure the tax-free part, see Partly Taxable Payments under Taxation of Periodic Payments, later. Filing taxes for 2013 ) The amount shown is the total employee contribution amount, not reduced by any amounts that the RRB calculated as previously recovered. Filing taxes for 2013 It is the latest amount reported for 2013 and may have increased or decreased from a previous Form RRB-1099-R. Filing taxes for 2013 If this amount has changed, the change is retroactive. Filing taxes for 2013 You may need to refigure the tax-free part of your NSSEB/tier 2 benefit for 2013 and prior tax years. Filing taxes for 2013 If this box is blank, it means that the amount of your NSSEB and tier 2 payments shown in box 4 is fully taxable. Filing taxes for 2013    If you had a previous annuity entitlement that ended and you are figuring the tax-free part of your NSSEB/tier 2 benefit for your current annuity entitlement, you should contact the RRB for confirmation of your correct employee contribution amount. Filing taxes for 2013 Box 4—Contributory Amount Paid. Filing taxes for 2013   This is the gross amount of the NSSEB and tier 2 benefit you received in 2013, less any 2013 benefits you repaid in 2013. Filing taxes for 2013 (Any benefits you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. Filing taxes for 2013 ) This amount is the total contributory pension paid in 2013. Filing taxes for 2013 It may be partly taxable and partly tax free or fully taxable. Filing taxes for 2013 If you determine you are eligible to compute a tax-free part as explained later in Partly Taxable Payments under Taxation of Periodic Payments, use the latest reported employee contribution amount shown in box 3 as the cost. Filing taxes for 2013 Box 5—Vested Dual Benefit. Filing taxes for 2013   This is the gross amount of vested dual benefit (VDB) payments paid in 2013, less any 2013 VDB payments you repaid in 2013. Filing taxes for 2013 It is fully taxable. Filing taxes for 2013 VDB payments you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. Filing taxes for 2013 Note. Filing taxes for 2013 The amounts shown in boxes 4 and 5 may represent payments for 2013 and/or other years after 1983. Filing taxes for 2013 Box 6—Supplemental Annuity. Filing taxes for 2013   This is the gross amount of supplemental annuity benefits paid in 2013, less any 2013 supplemental annuity benefits you repaid in 2013. Filing taxes for 2013 It is fully taxable. Filing taxes for 2013 Supplemental annuity benefits you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. Filing taxes for 2013 Box 7—Total Gross Paid. Filing taxes for 2013   This is the sum of boxes 4, 5, and 6. Filing taxes for 2013 The amount represents the total pension paid in 2013. Filing taxes for 2013 Include this amount on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. Filing taxes for 2013 Box 8—Repayments. Filing taxes for 2013   This amount represents any NSSEB, tier 2 benefit, VDB, and supplemental annuity benefit you repaid to the RRB in 2013 for years before 2013 or for unknown years. Filing taxes for 2013 The amount shown in this box has not been deducted from the amounts shown in boxes 4, 5, and 6. Filing taxes for 2013 It only includes repayments of benefits that were taxable to you. Filing taxes for 2013 This means it only includes repayments in 2013 of NSSEB benefits paid after 1985, tier 2 and VDB benefits paid after 1983, and supplemental annuity benefits paid in any year. Filing taxes for 2013 If you included the benefits in your income in the year you received them, you may be able to deduct the repaid amount. Filing taxes for 2013 For more information about repayments, see Repayment of benefits received in an earlier year , later. Filing taxes for 2013    You may have repaid an overpayment of benefits by returning a payment, by making a payment, or by having an amount withheld from your railroad retirement annuity payment. Filing taxes for 2013 Box 9—Federal Income Tax Withheld. Filing taxes for 2013   This is the total federal income tax withheld from your NSSEB, tier 2 benefit, VDB, and supplemental annuity benefit. Filing taxes for 2013 Include this on your income tax return as tax withheld. Filing taxes for 2013 If you are a nonresident alien and your tax withholding rate and/or country of legal residence changed during 2013, you will receive more than one Form RRB-1099-R for 2013. Filing taxes for 2013 Determine the total amount of U. Filing taxes for 2013 S. Filing taxes for 2013 federal income tax withheld from your 2013 RRB NSSEB, tier 2, VDB, and supplemental annuity payments by adding the amounts in box 9 of all original 2013 Forms RRB-1099-R, or the latest corrected or duplicate Forms RRB-1099-R you receive. Filing taxes for 2013 Box 10—Rate of Tax. Filing taxes for 2013   If you are taxed as a U. Filing taxes for 2013 S. Filing taxes for 2013 citizen or resident alien, this box does not apply to you. Filing taxes for 2013 If you are a nonresident alien, an entry in this box indicates the rate at which tax was withheld on the NSSEB, tier 2, VDB, and supplemental annuity payments that were paid to you in 2013. Filing taxes for 2013 If you are a nonresident alien whose tax was withheld at more than one rate during 2013, you will receive a separate Form RRB-1099-R for each rate change during 2013. Filing taxes for 2013 Box 11—Country. Filing taxes for 2013   If you are taxed as a U. Filing taxes for 2013 S. Filing taxes for 2013 citizen or resident alien, this box does not apply to you. Filing taxes for 2013 If you are a nonresident alien, an entry in this box indicates the country of which you were a resident for tax purposes at the time you received railroad retirement payments in 2013. Filing taxes for 2013 If you are a nonresident alien who was a resident of more than one country during 2013, you will receive a separate Form RRB-1099-R for each country of residence during 2013. Filing taxes for 2013 Box 12—Medicare Premium Total. Filing taxes for 2013   This is for information purposes only. Filing taxes for 2013 The amount shown in this box represents the total amount of Part B Medicare premiums deducted from your railroad retirement annuity payments in 2013. Filing taxes for 2013 Medicare premium refunds are not included in the Medicare total. Filing taxes for 2013 The Medicare total is normally shown on Form RRB-1099 (if you are a citizen or resident alien of the United States) or Form RRB-1042S (if you are a nonresident alien). Filing taxes for 2013 However, if Form RRB-1099 or Form RRB-1042S is not required for 2013, then this total will be shown on Form RRB-1099-R. Filing taxes for 2013 If your Medicare premiums were deducted from your social security benefits, paid by a third party, refunded to you, and/or you paid the premiums by direct billing, your Medicare total will not be shown in this box. Filing taxes for 2013 Repayment of benefits received in an earlier year. Filing taxes for 2013   If you had to repay any railroad retirement benefits that you had included in your income in an earlier year because at that time you thought you had an unrestricted right to it, you can deduct the amount you repaid in the year in which you repaid it. Filing taxes for 2013   If you repaid $3,000 or less in 2013, deduct it on Schedule A (Form 1040), line 23. Filing taxes for 2013 The 2%-of-adjusted-gross-income limit applies to this deduction. Filing taxes for 2013 You cannot take this deduction if you file Form 1040A. Filing taxes for 2013    If you repaid more than $3,000 in 2013, you can either take a deduction for the amount repaid on Schedule A (Form 1040), line 28 or you can take a credit against your tax. Filing taxes for 2013 For more information, see Repayments in Publication 525. Filing taxes for 2013 Withholding Tax and Estimated Tax Your retirement plan distributions are subject to federal income tax withholding. Filing taxes for 2013 However, you can choose not to have tax withheld on payments you receive unless they are eligible rollover distributions. Filing taxes for 2013 (These are distributions, described later under Rollovers, that are eligible for rollover treatment but are not paid directly to another qualified retirement plan or to a traditional IRA. Filing taxes for 2013 ) If you choose not to have tax withheld or if you do not have enough tax withheld, you may have to make estimated tax payments. Filing taxes for 2013 See Estimated tax , later. Filing taxes for 2013 The withholding rules apply to the taxable part of payments you receive from: An employer pension, annuity, profit-sharing, or stock bonus plan, Any other deferred compensation plan, A traditional individual retirement arrangement (IRA), or A commercial annuity. Filing taxes for 2013 For this purpose, a commercial annuity means an annuity, endowment, or life insurance contract issued by an insurance company. Filing taxes for 2013 There will be no withholding on any part of a distribution where it is reasonable to believe that it will not be includible in gross income. Filing taxes for 2013 Choosing no withholding. Filing taxes for 2013   You can choose not to have income tax withheld from retirement plan payments unless they are eligible rollover distributions. Filing taxes for 2013 You can make this choice on Form W-4P for periodic and nonperiodic payments. Filing taxes for 2013 This choice generally remains in effect until you revoke it. Filing taxes for 2013   The payer will ignore your choice not to have tax withheld if: You do not give the payer your social security number (in the required manner), or The IRS notifies the payer, before the payment is made, that you gave an incorrect social security number. Filing taxes for 2013   To choose not to have tax withheld, a U. Filing taxes for 2013 S. Filing taxes for 2013 citizen or resident alien must give the payer a home address in the United States or its possessions. Filing taxes for 2013 Without that address, the payer must withhold tax. Filing taxes for 2013 For example, the payer has to withhold tax if the recipient has provided a U. Filing taxes for 2013 S. Filing taxes for 2013 address for a nominee, trustee, or agent to whom the benefits are delivered, but has not provided his or her own U. Filing taxes for 2013 S. Filing taxes for 2013 home address. Filing taxes for 2013   If you do not give the payer a home address in the United States or its possessions, you can choose not to have tax withheld only if you certify to the payer that you are not a U. Filing taxes for 2013 S. Filing taxes for 2013 citizen, a U. Filing taxes for 2013 S. Filing taxes for 2013 resident alien, or someone who left the country to avoid tax. Filing taxes for 2013 But if you so certify, you may be subject to the 30% flat rate withholding that applies to nonresident aliens. Filing taxes for 2013 This 30% rate will not apply if you are exempt or subject to a reduced rate by treaty. Filing taxes for 2013 For details, get Publication 519. Filing taxes for 2013 Periodic payments. Filing taxes for 2013   Unless you choose no withholding, your annuity or similar periodic payments (other than eligible rollover distributions) will be treated like wages for withholding purposes. Filing taxes for 2013 Periodic payments are amounts paid at regular intervals (such as weekly, monthly, or yearly) for a period of time greater than one year (such as for 15 years or for life). Filing taxes for 2013 You should give the payer a completed withholding certificate (Form W-4P or a similar form provided by the payer). Filing taxes for 2013 If you do not, tax will be withheld as if you were married and claiming three withholding allowances. Filing taxes for 2013   Tax will be withheld as if you were single and were claiming no withholding allowances if: You do not give the payer your social security number (in the required manner), or The IRS notifies the payer (before any payment is made) that you gave an incorrect social security number. Filing taxes for 2013   You must file a new withholding certificate to change the amount of withholding. Filing taxes for 2013 Nonperiodic distributions. Filing taxes for 2013    Unless you choose no withholding, the withholding rate for a nonperiodic distribution (a payment other than a periodic payment) that is not an eligible rollover distribution is 10% of the distribution. Filing taxes for 2013 You can also ask the payer to withhold an additional amount using Form W-4P. Filing taxes for 2013 The part of any loan treated as a distribution (except an offset amount to repay the loan), explained later, is subject to withholding under this rule. Filing taxes for 2013 Eligible rollover distribution. Filing taxes for 2013    If you receive an eligible rollover distribution, 20% of it generally will be withheld for income tax. Filing taxes for 2013 You cannot choose not to have tax withheld from an eligible rollover distribution. Filing taxes for 2013 However, tax will not be withheld if you have the plan administrator pay the eligible rollover distribution directly to another qualified plan or an IRA in a direct rollover. Filing taxes for 2013 For more information about eligible rollover distributions, see Rollovers , later. Filing taxes for 2013 Estimated tax. Filing taxes for 2013   Your estimated tax is the total of your expected income tax, self-employment tax, and certain other taxes for the year, minus your expected credits and withheld tax. Filing taxes for 2013 Generally, you must make estimated tax payments for 2014 if you expect to owe at least $1,000 in tax (after subtracting your withholding and credits) and you expect your withholding and credits to be less than the smaller of: 90% of the tax to be shown on your 2014 return, or 100% of the tax shown on your 2013 return. Filing taxes for 2013 If your adjusted gross income for 2013 was more than $150,000 ($75,000 if your filing status for 2014 is married filing separately), substitute 110% for 100% in (2) above. Filing taxes for 2013 For more information, get Publication 505, Tax Withholding and Estimated Tax. Filing taxes for 2013 In figuring your withholding or estimated tax, remember that a part of your monthly social security or equivalent tier 1 railroad retirement benefits may be taxable. Filing taxes for 2013 See Publication 915. Filing taxes for 2013 You can choose to have income tax withheld from those benefits. Filing taxes for 2013 Use Form W-4V to make this choice. Filing taxes for 2013 Cost (Investment in the Contract) Distributions from your pension or annuity plan may include amounts treated as a recovery of your cost (investment in the contract). Filing taxes for 2013 If any part of a distribution is treated as a recovery of your cost under the rules explained in this publication, that part is tax free. Filing taxes for 2013 Therefore, the first step in figuring how much of a distribution is taxable is to determine the cost of your pension or annuity. Filing taxes for 2013 In general, your cost is your net investment in the contract as of the annuity starting date (or the date of the distribution, if earlier). Filing taxes for 2013 To find this amount, you must first figure the total premiums, contributions, or other amounts you paid. Filing taxes for 2013 This includes the amounts your employer contributed that were taxable to you when paid. Filing taxes for 2013 (However, see Foreign employment contributions , later. Filing taxes for 2013 ) It does not include amounts withheld from your pay on a tax-deferred basis (money that was taken out of your gross pay before taxes were deducted). Filing taxes for 2013 It also does not include amounts you contributed for health and accident benefits (including any additional premiums paid for double indemnity or disability benefits). Filing taxes for 2013 From this total cost you must subtract the following amounts. Filing taxes for 2013 Any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income and that you received by the later of the annuity starting date or the date on which you received your first payment. Filing taxes for 2013 Any other tax-free amounts you received under the contract or plan by the later of the dates in (1). Filing taxes for 2013 If you must use the Simplified Method for your annuity payments, the tax-free part of any single-sum payment received in connection with the start of the annuity payments, regardless of when you received it. Filing taxes for 2013 (See Simplified Method , later, for information on its required use. Filing taxes for 2013 ) If you use the General Rule for your annuity payments, the value of the refund feature in your annuity contract. Filing taxes for 2013 (See General Rule , later, for information on its use. Filing taxes for 2013 ) Your annuity contract has a refund feature if the annuity payments are for your life (or the lives of you and your survivor) and payments in the nature of a refund of the annuity's cost will be made to your beneficiary or estate if all annuitants die before a stated amount or a stated number of payments are made. Filing taxes for 2013 For more information, see Publication 939. Filing taxes for 2013 The tax treatment of the items described in (1) through (3) is discussed later under Taxation of Nonperiodic Payments . Filing taxes for 2013 Form 1099-R. Filing taxes for 2013 If you began receiving periodic payments of a life annuity in 2013, the payer should show your total contributions to the plan in box 9b of your 2013 Form 1099-R. Filing taxes for 2013 Annuity starting date defined. Filing taxes for 2013   Your annuity starting date is the later of the first day of the first period for which you received a payment or the date the plan's obligations became fixed. Filing taxes for 2013 Example. Filing taxes for 2013 On January 1, you completed all your payments required under an annuity contract providing for monthly payments starting on August 1 for the period beginning July 1. Filing taxes for 2013 The annuity starting date is July 1. Filing taxes for 2013 This is the date you use in figuring the cost of the contract and selecting the appropriate number from Table 1 for line 3 of the Simplified Method Worksheet. Filing taxes for 2013 Designated Roth accounts. Filing taxes for 2013   Your cost in these accounts is your designated Roth contributions that were included in your income as wages subject to applicable withholding requirements. Filing taxes for 2013 Your cost will also include any in-plan Roth rollovers you included in income. Filing taxes for 2013 Foreign employment contributions. Filing taxes for 2013   If you worked abroad, your cost may include contributions by your employer to the retirement plan, but only if those contributions would be excludible from your gross income had they been paid directly to you as compensation. Filing taxes for 2013 The contributions that apply are: Contributions before 1963 by your employer, Contributions after 1962 by your employer if the contributions would be excludible from your gross income (not including the foreign earned income exclusion) had they been paid directly to you, or Contributions after 1996 by your employer if you performed the services of a foreign missionary (a duly ordained, commissioned, or licensed minister of a church or a lay person) but only if the contributions would be excludible from your gross income had they been paid directly to you. Filing taxes for 2013 Foreign employment contributions while a nonresident alien. Filing taxes for 2013   In determining your cost, special rules apply if you are a U. Filing taxes for 2013 S. Filing taxes for 2013 citizen or resident alien who received distributions in 2013 from a plan to which contributions were made while you were a nonresident alien. Filing taxes for 2013 Your contributions and your employer's contributions are not included in your cost if the contribution: Was made based on compensation which was for services performed outside the United States while you were a nonresident alien, and Was not subject to income tax under the laws of the United States or any foreign country, but only if the contribution would have been subject to income tax if paid as cash compensation when the services were performed. Filing taxes for 2013 Taxation of Periodic Payments This section explains how the periodic payments you receive from a pension or annuity plan are taxed. Filing taxes for 2013 Periodic payments are amounts paid at regular intervals (such as weekly, monthly, or yearly) for a period of time greater than one year (such as for 15 years or for life). Filing taxes for 2013 These payments are also known as amounts received as an annuity. Filing taxes for 2013 If you receive an amount from your plan that is not a periodic payment, see Taxation of Nonperiodic Payments , later. Filing taxes for 2013 In general, you can recover the cost of your pension or annuity tax free over the period you are to receive the payments. Filing taxes for 2013 The amount of each payment that is more than the part that represents your cost is taxable (however, see Insurance Premiums for Retired Public Safety Officers , earlier). Filing taxes for 2013 Designated Roth accounts. Filing taxes for 2013   If you receive a qualified distribution from a designated Roth account, the distribution is not included in your gross income. Filing taxes for 2013 This applies to both your cost in the account and income earned on that account. Filing taxes for 2013 A qualified distribution is generally a distribution that is: Made after a 5-tax-year period of participation, and Made on or after the date you reach age 59½, made to a beneficiary or your estate on or after your death, or attributable to your being disabled. Filing taxes for 2013   If the distribution is not a qualified distribution, the rules discussed in this section apply. Filing taxes for 2013 The designated Roth account is treated as a separate contract. Filing taxes for 2013 Period of participation. Filing taxes for 2013   The 5-tax-year period of participation is the 5-tax-year period beginning with the first tax year for which the participant made a designated Roth contribution to the plan. Filing taxes for 2013 Therefore, for designated Roth contributions made for 2013, the first year for which a qualified distribution can be made is 2018. Filing taxes for 2013   However, if a direct rollover is made to the plan from a designated Roth account under another plan, the 5-tax-year period for the recipient plan begins with the first tax year for which the participant first had designated Roth contributions made to the other plan. Filing taxes for 2013   Your 401(k), 403(b), or 457(b) plan may permit you to roll over amounts from those plans to a designated Roth account within the same plan. Filing taxes for 2013 This is known as an in-plan Roth rollover. Filing taxes for 2013 For more details, see In-plan Roth rollovers , later. Filing taxes for 2013 Fully Taxable Payments The pension or annuity payments that you receive are fully taxable if you have no cost in the contract because any of the following situations applies to you (however, see Insurance Premiums for Retired Public Safety Officers , earlier). Filing taxes for 2013 You did not pay anything or are not considered to have paid anything for your pension or annuity. Filing taxes for 2013 Amounts withheld from your pay on a tax-deferred basis are not considered part of the cost of the pension or annuity payment. Filing taxes for 2013 Your employer did not withhold contributions from your salary. Filing taxes for 2013 You got back all of your contributions tax free in prior years (however, see Exclusion not limited to cost under Partly Taxable Payments, later). Filing taxes for 2013 Report the total amount you got on Form 1040, line 16b; Form 1040A, line 12b; or on Form 1040NR, line 17b. Filing taxes for 2013 You should make no entry on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. Filing taxes for 2013 Deductible voluntary employee contributions. Filing taxes for 2013   Distributions you receive that are based on your accumulated deductible voluntary employee contributions are generally fully taxable in the year distributed to you. Filing taxes for 2013 Accumulated deductible voluntary employee contributions include net earnings on the contributions. Filing taxes for 2013 If distributed as part of a lump sum, they do not qualify for the 10-year tax option or capital gain treatment, explained later. Filing taxes for 2013 Partly Taxable Payments If you have a cost to recover from your pension or annuity plan (see Cost (Investment in the Contract) , earlier), you can exclude part of each annuity payment from income as a recovery of your cost. Filing taxes for 2013 This tax-free part of the payment is figured when your annuity starts and remains the same each year, even if the amount of the payment changes. Filing taxes for 2013 The rest of each payment is taxable (however, see Insurance Premiums for Retired Public Safety Officers , earlier). Filing taxes for 2013 You figure the tax-free part of the payment using one of the following methods. Filing taxes for 2013 Simplified Method. Filing taxes for 2013 You generally must use this method if your annuity is paid under a qualified plan (a qualified employee plan, a qualified employee annuity, or a tax-sheltered annuity plan or contract). Filing taxes for 2013 You cannot use this method if your annuity is paid under a nonqualified plan. Filing taxes for 2013 General Rule. Filing taxes for 2013 You must use this method if your annuity is paid under a nonqualified plan. Filing taxes for 2013 You generally cannot use this method if your annuity is paid under a qualified plan. Filing taxes for 2013 You determine which method to use when you first begin receiving your annuity, and you continue using it each year that you recover part of your cost. Filing taxes for 2013 If you had more than one partly taxable pension or annuity, figure the tax-free part and the taxable part of each separately. Filing taxes for 2013 Qualified plan annuity starting before November 19, 1996. Filing taxes for 2013   If your annuity is paid under a qualified plan and your annuity starting date (defined earlier under Cost (Investment in the Contract) ) is after July 1, 1986, and before November 19, 1996, you could have chosen to use either the Simplified Method or the General Rule. Filing taxes for 2013 If your annuity starting date is before July 2, 1986, you use the General Rule unless your annuity qualified for the Three-Year Rule. Filing taxes for 2013 If you used the Three-Year Rule (which was repealed for annuities starting after July 1, 1986), your annuity payments are generally now fully taxable. Filing taxes for 2013 Exclusion limit. Filing taxes for 2013   Your annuity starting date determines the total amount of annuity payments that you can exclude from income over the years. Filing taxes for 2013 Once your annuity starting date is determined, it does not change. Filing taxes for 2013 If you calculate the taxable portion of your annuity payments using the simplified method worksheet, the annuity starting date determines the recovery period for your cost. Filing taxes for 2013 That recovery period begins on your annuity starting date and is not affected by the date you first complete the worksheet. Filing taxes for 2013 Exclusion limited to cost. Filing taxes for 2013   If your annuity starting date is after 1986, the total amount of annuity income that you can exclude over the years as a recovery of the cost cannot exceed your total cost. Filing taxes for 2013 Any unrecovered cost at your (or the last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. Filing taxes for 2013 This deduction is not subject to the 2%-of-adjusted-gross-income limit. Filing taxes for 2013 Example 1. Filing taxes for 2013 Your annuity starting date is after 1986, and you exclude $100 a month ($1,200 a year) under the Simplified Method. Filing taxes for 2013 The total cost of your annuity is $12,000. Filing taxes for 2013 Your exclusion ends when you have recovered your cost tax free, that is, after 10 years (120 months). Filing taxes for 2013 After that, your annuity payments are generally fully taxable. Filing taxes for 2013 Example 2. Filing taxes for 2013 The facts are the same as in Example 1, except you die (with no surviving annuitant) after the eighth year of retirement. Filing taxes for 2013 You have recovered tax free only $9,600 (8 × $1,200) of your cost. Filing taxes for 2013 An itemized deduction for your unrecovered cost of $2,400 ($12,000 – $9,600) can be taken on your final return. Filing taxes for 2013 Exclusion not limited to cost. Filing taxes for 2013   If your annuity starting date is before 1987, you can continue to take your monthly exclusion for as long as you receive your annuity. Filing taxes for 2013 If you chose a joint and survivor annuity, your survivor can continue to take the survivor's exclusion figured as of the annuity starting date. Filing taxes for 2013 The total exclusion may be more than your cost. Filing taxes for 2013 Simplified Method Under the Simplified Method, you figure the tax-free part of each annuity payment by dividing your cost by the total number of anticipated monthly payments. Filing taxes for 2013 For an annuity that is payable for the lives of the annuitants, this number is based on the annuitants' ages on the annuity starting date and is determined from a table. Filing taxes for 2013 For any other annuity, this number is the number of monthly annuity payments under the contract. Filing taxes for 2013 Who must use the Simplified Method. Filing taxes for 2013   You must use the Simplified Method if your annuity starting date is after November 18, 1996, and you meet both of the following conditions. Filing taxes for 2013 You receive your pension or annuity payments from any of the following plans. Filing taxes for 2013 A qualified employee plan. Filing taxes for 2013 A qualified employee annuity. Filing taxes for 2013 A tax-sheltered annuity plan (403(b) plan). Filing taxes for 2013 On your annuity starting date, at least one of the following conditions applies to you. Filing taxes for 2013 You are under age 75. Filing taxes for 2013 You are entitled to less than 5 years of guaranteed payments. Filing taxes for 2013 Guaranteed payments. Filing taxes for 2013   Your annuity contract provides guaranteed payments if a minimum number of payments or a minimum amount (for example, the amount of your investment) is payable even if you and any survivor annuitant do not live to receive the minimum. Filing taxes for 2013 If the minimum amount is less than the total amount of the payments you are to receive, barring death, during the first 5 years after payments begin (figured by ignoring any payment increases), you are entitled to less than 5 years of guaranteed payments. Filing taxes for 2013 Annuity starting before November 19, 1996. Filing taxes for 2013   If your annuity starting date is after July 1, 1986, and before November 19, 1996, and you chose to use the Simplified Method, you must continue to use it each year that you recover part of your cost. Filing taxes for 2013 You could have chosen to use the Simplified Method if your annuity is payable for your life (or the lives of you and your survivor annuitant) and you met both of the conditions listed earlier under Who must use the Simplified Method . Filing taxes for 2013 Who cannot use the Simplified Method. Filing taxes for 2013   You cannot use the Simplified Method if you receive your pension or annuity from a nonqualified plan or otherwise do not meet the conditions described in the preceding discussion. Filing taxes for 2013 See General Rule , later. Filing taxes for 2013 How to use the Simplified Method. Filing taxes for 2013    Complete Worksheet A in the back of this publication to figure your taxable annuity for 2013. Filing taxes for 2013 Be sure to keep the completed worksheet; it will help you figure your taxable annuity next year. Filing taxes for 2013   To complete line 3 of the worksheet, you must determine the total number of expected monthly payments for your annuity. Filing taxes for 2013 How you do this depends on whether the annuity is for a single life, multiple lives, or a fixed period. Filing taxes for 2013 For this purpose, treat an annuity that is payable over the life of an annuitant as payable for that annuitant's life even if the annuity has a fixed-period feature or also provides a temporary annuity payable to the annuitant's child under age 25. Filing taxes for 2013    You do not need to complete line 3 of the worksheet or make the computation on line 4 if you received annuity payments last year and used last year's worksheet to figure your taxable annuity. Filing taxes for 2013 Instead, enter the amount from line 4 of last year's worksheet on line 4 of this year's worksheet. Filing taxes for 2013 Single-life annuity. Filing taxes for 2013   If your annuity is payable for your life alone, use Table 1 at the bottom of the worksheet to determine the total number of expected monthly payments. Filing taxes for 2013 Enter on line 3 the number shown for your age on your annuity starting date. Filing taxes for 2013 This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. Filing taxes for 2013 Multiple-lives annuity. Filing taxes for 2013   If your annuity is payable for the lives of more than one annuitant, use Table 2 at the bottom of the worksheet to determine the total number of expected monthly payments. Filing taxes for 2013 Enter on line 3 the number shown for the annuitants' combined ages on the annuity starting date. Filing taxes for 2013 For an annuity payable to you as the primary annuitant and to more than one survivor annuitant, combine your age and the age of the youngest survivor annuitant. Filing taxes for 2013 For an annuity that has no primary annuitant and is payable to you and others as survivor annuitants, combine the ages of the oldest and youngest annuitants. Filing taxes for 2013 Do not treat as a survivor annuitant anyone whose entitlement to payments depends on an event other than the primary annuitant's death. Filing taxes for 2013   However, if your annuity starting date is before 1998, do not use Table 2 and do not combine the annuitants' ages. Filing taxes for 2013 Instead, you must use Table 1 at the bottom of the worksheet and enter on line 3 the number shown for the primary annuitant's age on the annuity starting date. Filing taxes for 2013 This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. Filing taxes for 2013 Fixed-period annuity. Filing taxes for 2013   If your annuity does not depend in whole or in part on anyone's life expectancy, the total number of expected monthly payments to enter on line 3 of the worksheet is the number of monthly annuity payments under the contract. Filing taxes for 2013 Line 6. Filing taxes for 2013   The amount on line 6 should include all amounts that could have been recovered in prior years. Filing taxes for 2013 If you did not recover an amount in a prior year, you may be able to amend your returns for the affected years. Filing taxes for 2013 Example. Filing taxes for 2013 Bill Smith, age 65, began receiving retirement benefits in 2013 under a joint and survivor annuity. Filing taxes for 2013 Bill's annuity starting date is January 1, 2013. Filing taxes for 2013 The benefits are to be paid for the joint lives of Bill and his wife, Kathy, age 65. Filing taxes for 2013 Bill had contributed $31,000 to a qualified plan and had received no distributions before the annuity starting date. Filing taxes for 2013 Bill is to receive a retirement benefit of $1,200 a month, and Kathy is to receive a monthly survivor benefit of $600 upon Bill's death. Filing taxes for 2013 Bill must use the Simplified Method to figure his taxable annuity because his payments are from a qualified plan and he is under age 75. Filing taxes for 2013 Because his annuity is payable over the lives of more than one annuitant, he uses his and Kathy's combined ages and Table 2 at the bottom of Worksheet A in completing line 3 of the worksheet. Filing taxes for 2013 His completed worksheet is shown later. Filing taxes for 2013 Bill's tax-free monthly amount is $100 ($31,000 ÷ 310) as shown on line 4 of the worksheet. Filing taxes for 2013 Upon Bill's death, if Bill has not recovered the full $31,000 investment, Kathy will also exclude $100 from her $600 monthly payment. Filing taxes for 2013 The full amount of any annuity payments received after 310 payments are paid must be included in gross income. Filing taxes for 2013 If Bill and Kathy die before 310 payments are made, a miscellaneous itemized deduction will be allowed for the unrecovered cost on the final income tax return of the last to die. Filing taxes for 2013 This deduction is not subject to the 2%-of-adjusted-gross-income limit. Filing taxes for 2013 Worksheet A. Filing taxes for 2013 Simplified Method Worksheet for Bill Smith 1. Filing taxes for 2013 Enter the total pension or annuity payments received this year. Filing taxes for 2013 Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a 1. Filing taxes for 2013 $14,400 2. Filing taxes for 2013 Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion. Filing taxes for 2013 * See Cost (Investment in the Contract) , earlier 2. Filing taxes for 2013 31,000   Note. Filing taxes for 2013 If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year's worksheet on line 4 below (even if the amount of your pension or annuity has changed). Filing taxes for 2013 Otherwise, go to line 3. Filing taxes for 2013     3. Filing taxes for 2013 Enter the appropriate number from Table 1 below. Filing taxes for 2013 But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, enter the appropriate number from Table 2 below 3. Filing taxes for 2013 310 4. Filing taxes for 2013 Divide line 2 by the number on line 3 4. Filing taxes for 2013 100 5. Filing taxes for 2013 Multiply line 4 by the number of months for which this year's payments were made. Filing taxes for 2013 If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. Filing taxes for 2013 Otherwise, go to line 6 5. Filing taxes for 2013 1,200 6. Filing taxes for 2013 Enter any amount previously recovered tax free in years after 1986. Filing taxes for 2013 This is the amount shown on line 10 of your worksheet for last year 6. Filing taxes for 2013 -0- 7. Filing taxes for 2013 Subtract line 6 from line 2 7. Filing taxes for 2013 31,000 8. Filing taxes for 2013 Enter the smaller of line 5 or line 7 8. Filing taxes for 2013 1,200 9. Filing taxes for 2013 Taxable amount for year. Filing taxes for 2013 Subtract line 8 from line 1. Filing taxes for 2013 Enter the result, but not less than zero. Filing taxes for 2013 Also, add this amount to the total for Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Filing taxes for 2013 Note: If your Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. Filing taxes for 2013 If you are a retired public safety officer, see Insurance Premiums for Retired Public Safety Officers , earlier, before entering an amount on your tax return 9. Filing taxes for 2013 $13,200 10. Filing taxes for 2013 Was your annuity starting date before 1987? □ Yes. Filing taxes for 2013 STOP. Filing taxes for 2013 Do not complete the rest of this worksheet. Filing taxes for 2013  ☑ No. Filing taxes for 2013 Add lines 6 and 8. Filing taxes for 2013 This is the amount you have recovered tax free through 2013. Filing taxes for 2013 You will need this number if you need to fill out this worksheet next year 10. Filing taxes for 2013 1,200 11. Filing taxes for 2013 Balance of cost to be recovered. Filing taxes for 2013 Subtract line 10 from line 2. Filing taxes for 2013 If zero, you will not have to complete this worksheet next year. Filing taxes for 2013 The payments you receive next year will generally be fully taxable 11. Filing taxes for 2013 $29,800         * A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996. Filing taxes for 2013           Table 1 for Line 3 Above       AND your annuity starting date was—     IF the age at annuity starting date was. Filing taxes for 2013 . Filing taxes for 2013 . Filing taxes for 2013 BEFORE November 19, 1996, enter on line 3. Filing taxes for 2013 . Filing taxes for 2013 . Filing taxes for 2013 AFTER November 18, 1996, enter on line 3. Filing taxes for 2013 . Filing taxes for 2013 . Filing taxes for 2013     55 or under 300 360     56-60 260 310     61-65 240 260     66-70 170 210     71 or older 120 160     Table 2 for Line 3 Above     IF the combined ages at  annuity starting date were. Filing taxes for 2013 . Filing taxes for 2013 . Filing taxes for 2013 THEN enter on line 3. Filing taxes for 2013 . Filing taxes for 2013 . Filing taxes for 2013     110 or under   410     111-120   360     121-130   310     131-140   260     141 or older   210   Multiple annuitants. Filing taxes for 2013   If you and one or more other annuitants receive payments at the same time, you exclude from each annuity payment a pro rata share of the monthly tax-free amount. Filing taxes for 2013 Figure your share by taking the following steps. Filing taxes for 2013 Complete your worksheet through line 4 to figure the monthly tax-free amount. Filing taxes for 2013 Divide the amount of your monthly payment by the total amount of the monthly payments to all annuitants. Filing taxes for 2013 Multiply the amount on line 4 of your worksheet by the amount figured in (2) above. Filing taxes for 2013 The result is your share of the monthly tax-free amount. Filing taxes for 2013   Replace the amount on line 4 of the worksheet with the result in (3) above. Filing taxes for 2013 Enter that amount on line 4 of your worksheet each year. Filing taxes for 2013 General Rule Under the General Rule, you determine the tax-free part of each annuity payment based on the ratio of the cost of the contract to the total expected return. Filing taxes for 2013 Expected return is the total amount you and other eligible annuitants can expect to receive under the contract. Filing taxes for 2013 To figure it, you must use life expectancy (actuarial) tables prescribed by the IRS. Filing taxes for 2013 Who must use the General Rule. Filing taxes for 2013   You must use the General Rule if you receive pension or annuity payments from: A nonqualified plan (such as a private annuity, a purchased commercial annuity, or a nonqualified employee plan), or A qualified plan if you are age 75 or older on your annuity starting date and your annuity payments are guaranteed for at least 5 years. Filing taxes for 2013 Annuity starting before November 19, 1996. Filing taxes for 2013   If your annuity starting date is after July 1, 1986, and before November 19, 1996, you had to use the General Rule for either circumstance just described. Filing taxes for 2013 You also had to use it for any fixed-period annuity. Filing taxes for 2013 If you did not have to use the General Rule, you could have chosen to use it. Filing taxes for 2013 If your annuity starting date is before July 2, 1986, you had to use the General Rule unless you could use the Three-Year Rule. Filing taxes for 2013   If you had to use the General Rule (or chose to use it), you must continue to use it each year that you recover your cost. Filing taxes for 2013 Who cannot use the General Rule. Filing taxes for 2013   You cannot use the General Rule if you receive your pension or annuity from a qualified plan and none of the circumstances described in the preceding discussions apply to you. Filing taxes for 2013 See Simplified Method , earlier. Filing taxes for 2013 More information. Filing taxes for 2013   For complete information on using the General Rule, including the actuarial tables you need, see Publication 939. Filing taxes for 2013 Taxation of Nonperiodic Payments This section of the publication explains how any nonperiodic distributions you receive under a pension or annuity plan are taxed. Filing taxes for 2013 Nonperiodic distributions are also known as amounts not received as an annuity. Filing taxes for 2013 They include all payments other than periodic payments and corrective distributions. Filing taxes for 2013 For example, the following items are treated as nonperiodic distributions. Filing taxes for 2013 Cash withdrawals. Filing taxes for 2013 Distributions of current earnings (dividends) on your investment. Filing taxes for 2013 However, do not include these distributions in your income to the extent the insurer keeps them to pay premiums or other consideration for the contract. Filing taxes for 2013 Certain loans. Filing taxes for 2013 See Loans Treated as Distributions , later. Filing taxes for 2013 The value of annuity contracts transferred without full and adequate consideration. Filing taxes for 2013 See Transfers of Annuity Contracts , later. Filing taxes for 2013 Corrective distributions of excess plan contributions. Filing taxes for 2013   Generally, if the contributions made for you during the year to certain retirement plans exceed certain limits, the excess is taxable to you. Filing taxes for 2013 To correct an excess, your plan may distribute it to you (along with any income earned on the excess). Filing taxes for 2013 Although the plan reports the corrective distributions on Form 1099-R, the distribution is not treated as a nonperiodic distribution from the plan. Filing taxes for 2013 It is not subject to the allocation rules explained in the following discussion, it cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. Filing taxes for 2013    If your retirement plan made a corrective distribution of excess amounts (excess deferrals, excess contributions, or excess annual additions), your Form 1099-R should have the code “8,” “B,” “P,” or “E” in box 7. Filing taxes for 2013   For information on plan contribution limits and how to report corrective distributions of excess contributions, see Retirement Plan Contributions under Employee Compensation in Publication 525. Filing taxes for 2013 Figuring the Taxable Amount How you figure the taxable amount of a nonperiodic distribution depends on whether it is made before the annuity starting date, or on or after the annuity starting date. Filing taxes for 2013 If it is made before the annuity starting date, its tax treatment also depends on whether it is made under a qualified or nonqualified plan. Filing taxes for 2013 If it is made under a nonqualified plan, its tax treatment depends on whether it fully discharges the contract, is received under certain life insurance or endowment contracts, or is allocable to an investment you made before August 14, 1982. Filing taxes for 2013 You may be able to roll over the taxable amount of a nonperiodic distribution from a qualified retirement plan into another qualified retirement plan or a traditional IRA tax free. Filing taxes for 2013 See Rollovers, later. Filing taxes for 2013 If you do not make a tax-free rollover and the distribution qualifies as a lump-sum distribution, you may be able to elect an optional method of figuring the tax on the taxable amount. Filing taxes for 2013 See Lump-Sum Distributions, later. Filing taxes for 2013 Annuity starting date. Filing taxes for 2013   The annuity starting date is either the first day of the first period for which you receive an annuity payment under the contract or the date on which the obligation under the contract becomes fixed, whichever is later. Filing taxes for 2013 Distributions of employer securities. Filing taxes for 2013    If you receive a distribution of employer securities from a qualified retirement plan, you may be able to defer the tax on the net unrealized appreciation (NUA) in the securities. Filing taxes for 2013 The NUA is the net increase in the securities' value while they were in the trust. Filing taxes for 2013 This tax deferral applies to distributions of the employer corporation's stocks, bonds, registered debentures, and debentures with interest coupons attached. Filing taxes for 2013   If the distribution is a lump-sum distribution, tax is deferred on all of the NUA unless you choose to include it in your income for the year of the distribution. Filing taxes for 2013    A lump-sum distribution for this purpose is the distribution or payment of a plan participant's entire balance (within a single tax year) from all of the employer's qualified plans of one kind (pension, profit-sharing, or stock bonus plans), but only if paid: Because of the plan participant's death, After the participant reaches age 59½, Because the participant, if an employee, separates from service, or After the participant, if a self-employed individual, becomes totally and permanently disabled. Filing taxes for 2013    If you choose to include NUA in your income for the year of the distribution and the participant was born before January 2, 1936, you may be able to figure the tax on the NUA using the optional methods described und
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IRS Releases the “Dirty Dozen” Tax Scams for 2014; Identity Theft, Phone Scams Lead List

IR-2014-16, Feb. 19, 2014

WASHINGTON — The Internal Revenue Service today issued its annual “Dirty Dozen” list of tax scams, reminding taxpayers to use caution during tax season to protect themselves against a wide range of schemes ranging from identity theft to return preparer fraud.

The Dirty Dozen listing, compiled by the IRS each year, lists a variety of common scams taxpayers can encounter at any point during the year. But many of these schemes peak during filing season as people prepare their tax returns.

"Taxpayers should be on the lookout for tax scams using the IRS name,” said IRS Commissioner John Koskinen. “These schemes jump every year at tax time. Scams can be sophisticated and take many different forms. We urge people to protect themselves and use caution when viewing e-mails, receiving telephone calls or getting advice on tax issues.”

Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shutdown scams and prosecute the criminals behind them.

The following are the Dirty Dozen tax scams for 2014:

Identity Theft

Tax fraud through the use of identity theft tops this year’s Dirty Dozen list. Identity theft occurs when someone uses your personal information, such as your name, Social Security number (SSN) or other identifying information, without your permission, to commit fraud or other crimes. In many cases, an identity thief uses a legitimate taxpayer’s identity to fraudulently file a tax return and claim a refund.

The agency’s work on identity theft and refund fraud continues to grow, touching nearly every part of the organization. For the 2014 filing season, the IRS has expanded these efforts to better protect taxpayers and help victims.

The IRS has a special section on IRS.gov dedicated to identity theft issues, including YouTube videos, tips for taxpayers and an assistance guide. For victims, the information includes how to contact the IRS Identity Protection Specialized Unit. For other taxpayers, there are tips on how taxpayers can protect themselves against identity theft.

Taxpayers who believe they are at risk of identity theft due to lost or stolen personal information should contact the IRS immediately so the agency can take action to secure their tax account. Taxpayers can call the IRS Identity Protection Specialized Unit at 800-908-4490. More information can be found on the special identity protection page.

Pervasive Telephone Scams

The IRS has seen a recent increase in local phone scams across the country, with callers pretending to be from the IRS in hopes of stealing money or identities from victims.

These phone scams include many variations, ranging from instances from where callers say the victims owe money or are entitled to a huge refund. Some calls can threaten arrest and threaten a driver’s license revocation. Sometimes these calls are paired with follow-up calls from people saying they are from the local police department or the state motor vehicle department.

Characteristics of these scams can include:

  • Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
  • Scammers may be able to recite the last four digits of a victim’s Social Security Number.
  • Scammers “spoof” or imitate the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.
  • Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
  • Victims hear background noise of other calls being conducted to mimic a call site.

After threatening victims with jail time or a driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.

In another variation, one sophisticated phone scam has targeted taxpayers, including recent immigrants, throughout the country. Victims are told they owe money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting.

If you get a phone call from someone claiming to be from the IRS, here’s what you should do: If you know you owe taxes or you think you might owe taxes, call the IRS at 800-829-1040. The IRS employees at that line can help you with a payment issue – if there really is such an issue.

If you know you don’t owe taxes or have no reason to think that you owe any taxes (for example, you’ve never received a bill or the caller made some bogus threats as described above), then call and report the incident to the Treasury Inspector General for Tax Administration at 800-366-4484.

If you’ve been targeted by these scams, you should also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov.  Please add "IRS Telephone Scam" to the comments of your complaint.

Phishing

Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft.

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.

It is important to keep in mind the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS has information online that can help you protect yourself from email scams.

False Promises of “Free Money” from Inflated Refunds

Scam artists routinely pose as tax preparers during tax time, luring victims in by promising large federal tax refunds or refunds that people never dreamed they were due in the first place.

Scam artists use flyers, advertisements, phony store fronts and even word of mouth to throw out a wide net for victims. They may even spread the word through community groups or churches where trust is high. Scammers prey on people who do not have a filing requirement, such as low-income individuals or the elderly. They also prey on non-English speakers, who may or may not have a filing requirement.

Scammers build false hope by duping people into making claims for fictitious rebates, benefits or tax credits. They charge good money for very bad advice. Or worse, they file a false return in a person's name and that person never knows that a refund was paid.

Scam artists also victimize people with a filing requirement and due a refund by promising inflated refunds based on fictitious Social Security benefits and false claims for education credits, the Earned Income Tax Credit (EITC), or the American Opportunity Tax Credit, among others.

The IRS sometimes hears about scams from victims complaining about losing their federal benefits, such as Social Security benefits, certain veteran’s benefits or low-income housing benefits. The loss of benefits was the result of false claims being filed with the IRS that provided false income amounts.

While honest tax preparers provide their customers a copy of the tax return they’ve prepared, victims of scam frequently are not given a copy of what was filed. Victims also report that the fraudulent refund is deposited into the scammer’s bank account. The scammers deduct a large “fee” before cutting a check to the victim, a practice not used by legitimate tax preparers.

The IRS reminds all taxpayers that they are legally responsible for what’s on their returns even if it was prepared by someone else. Taxpayers who buy into such schemes can end up being penalized for filing false claims or receiving fraudulent refunds.

Taxpayers should take care when choosing an individual or firm to prepare their taxes. Honest return preparers generally: ask for proof of income and eligibility for credits and deductions; sign returns as the preparer; enter their IRS Preparer Tax Identification Number (PTIN); provide the taxpayer a copy of the return.

Beware: Intentional mistakes of this kind can result in a $5,000 penalty.

Return Preparer Fraud

About 60 percent of taxpayers will use tax professionals this year to prepare their tax returns. Most return preparers provide honest service to their clients. But, some unscrupulous preparers prey on unsuspecting taxpayers, and the result can be refund fraud or identity theft.

It is important to choose carefully when hiring an individual or firm to prepare your return. This year, the IRS wants to remind all taxpayers that they should use only preparers who sign the returns they prepare and enter their IRS Preparer Tax Identification Numbers (PTINs).

The IRS also has a web page to assist taxpayers. For tips about choosing a preparer, details on preparer qualifications and information on how and when to make a complaint, view IRS Fact Sheet 2014-5, IRS Offers Advice on How to Choose a Tax Preparer.

Remember: Taxpayers are legally responsible for what’s on their tax return even if it is prepared by someone else. Make sure the preparer you hire is up to the task.

IRS.gov has general information on reporting tax fraud. More specifically, you report abusive tax preparers to the IRS on Form 14157, Complaint: Tax Return Preparer. Download Form 14157 and fill it out or order by mail at 800-TAX FORM (800-829-3676). The form includes a return address.

Hiding Income Offshore

Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities and then using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas. The IRS works closely with the Department of Justice (DOJ) to prosecute tax evasion cases.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution.

Since 2009, tens of thousands of individuals have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to comply with the U.S. tax system and resolve their tax obligations. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore is increasingly more difficult.

At the beginning of 2012, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The IRS works on a wide range of international tax issues with DOJ to pursue criminal prosecution of international tax evasion. This program will be open for an indefinite period until otherwise announced.

The IRS has collected billions of dollars in back taxes, interest and penalties so far from people who participated in offshore voluntary disclosure programs since 2009. It is in the best long-term interest of taxpayers to come forward, catch up on their filing requirements and pay their fair share.

Impersonation of Charitable Organizations

Another long-standing type of abuse or fraud is scams that occur in the wake of significant natural disasters.

Following major disasters, it’s common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers. Scam artists can use a variety of tactics. Some scammers operating bogus charities may contact people by telephone or email to solicit money or financial information. They may even directly contact disaster victims and claim to be working for or on behalf of the IRS to help the victims file casualty loss claims and get tax refunds.

They may attempt to get personal financial information or Social Security numbers that can be used to steal the victims’ identities or financial resources. Bogus websites may solicit funds for disaster victims. The IRS cautions both victims of natural disasters and people wishing to make charitable donations to avoid scam artists by following these tips:

  • To help disaster victims, donate to recognized charities.
  • Be wary of charities with names that are similar to familiar or nationally known organizations. Some phony charities use names or websites that sound or look like those of respected, legitimate organizations. IRS.gov has a search feature, Exempt Organizations Select Check, which allows people to find legitimate, qualified charities to which donations may be tax-deductible.
  • Don’t give out personal financial information, such as Social Security numbers or credit card and bank account numbers and passwords, to anyone who solicits a contribution from you. Scam artists may use this information to steal your identity and money.
  • Don’t give or send cash. For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the gift.

Call the IRS toll-free disaster assistance telephone number (866-562-5227) if you are a disaster victim with specific questions about tax relief or disaster related tax issues.

False Income, Expenses or Exemptions

Another scam involves inflating or including income on a tax return that was never earned, either as wages or as self-employment income in order to maximize refundable credits. Claiming income you did not earn or expenses you did not pay in order to secure larger refundable credits such as the Earned Income Tax Credit could have serious repercussions. This could result in repaying the erroneous refunds, including interest and penalties, and in some cases, even prosecution.

Additionally, some taxpayers are filing excessive claims for the fuel tax credit. Farmers and other taxpayers who use fuel for off-highway business purposes may be eligible for the fuel tax credit. But other individuals have claimed the tax credit although they were not eligible. Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000.

Frivolous Arguments

Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. The IRS has a list of frivolous tax arguments that taxpayers should avoid. These arguments are wrong and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or disregard their responsibility to pay taxes.

Those who promote or adopt frivolous positions risk a variety of penalties.  For example, taxpayers could be responsible for an accuracy-related penalty, a civil fraud penalty, an erroneous refund claim penalty, or a failure to file penalty.  The Tax Court may also impose a penalty against taxpayers who make frivolous arguments in court.   

Taxpayers who rely on frivolous arguments and schemes may also face criminal prosecution for attempting to evade or defeat tax. Similarly, taxpayers may be convicted of a felony for willfully making and signing under penalties of perjury any return, statement, or other document that the person does not believe to be true and correct as to every material matter.  Persons who promote frivolous arguments and those who assist taxpayers in claiming tax benefits based on frivolous arguments may be prosecuted for a criminal felony.

Falsely Claiming Zero Wages or Using False Form 1099

Filing a phony information return is an illegal way to lower the amount of taxes an individual owes. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer may also submit a statement rebutting wages and taxes reported by a payer to the IRS.

Sometimes, fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any variations of this scheme. Filing this type of return may result in a $5,000 penalty.

Some people also attempt fraud using false Form 1099 refund claims. In some cases, individuals have made refund claims based on the bogus theory that the federal government maintains secret accounts for U.S. citizens and that taxpayers can gain access to the accounts by issuing 1099-OID forms to the IRS. In this ongoing scam, the perpetrator files a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return.

Don’t fall prey to people who encourage you to claim deductions or credits to which you are not entitled or willingly allow others to use your information to file false returns. If you are a party to such schemes, you could be liable for financial penalties or even face criminal prosecution.

Abusive Tax Structures

Abusive tax schemes have evolved from simple structuring of abusive domestic and foreign trust arrangements into sophisticated strategies that take advantage of the financial secrecy laws of some foreign jurisdictions and the availability of credit/debit cards issued from offshore financial institutions.

IRS Criminal Investigation (CI) has developed a nationally coordinated program to combat these abusive tax schemes. CI's primary focus is on the identification and investigation of the tax scheme promoters as well as those who play a substantial or integral role in facilitating, aiding, assisting, or furthering the abusive tax scheme (e.g., accountants, lawyers).  Secondarily, but equally important, is the investigation of investors who knowingly participate in abusive tax schemes.

What is an abusive scheme? The Abusive Tax Schemes program encompasses violations of the Internal Revenue Code (IRC) and related statutes where multiple flow-through entities are used as an integral part of the taxpayer's scheme to evade taxes.  These schemes are characterized by the use of Limited Liability Companies (LLCs), Limited Liability Partnerships (LLPs), International Business Companies (IBCs), foreign financial accounts, offshore credit/debit cards and other similar instruments.  The schemes are usually complex involving multi-layer transactions for the purpose of concealing the true nature and ownership of the taxable income and/or assets.

Form over substance are the most important words to remember before buying into any arrangements that promise to "eliminate" or "substantially reduce" your tax liability.  The promoters of abusive tax schemes often employ financial instruments in their schemes.  However, the instruments are used for improper purposes including the facilitation of tax evasion.

The IRS encourages taxpayers to report unlawful tax evasion. Where Do You Report Suspected Tax Fraud Activity?

Misuse of Trusts

Trusts also commonly show up in abusive tax structures. They are highlighted here because unscrupulous promoters continue to urge taxpayers to transfer large amounts of assets into trusts. These assets include not only cash and investments, but also successful on-going businesses. There are legitimate uses of trusts in tax and estate planning, but the IRS commonly sees highly questionable transactions. These transactions promise reduced taxable income, inflated deductions for personal expenses, the reduction or elimination of self-employment taxes and reduced estate or gift transfer taxes. These transactions commonly arise when taxpayers are transferring wealth from one generation to another. Questionable trusts rarely deliver the tax benefits promised and are used primarily as a means of avoiding income tax liability and hiding assets from creditors, including the IRS.

IRS personnel continue to see an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses, as well as to avoid estate transfer taxes. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering a trust arrangement.

The IRS reminds taxpayers that tax scams can take many forms beyond the “Dirty Dozen,” and people should be on the lookout for many other schemes. More information on tax scams is available at IRS.gov.

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Page Last Reviewed or Updated: 21-Feb-2014

The Filing Taxes For 2013

Filing taxes for 2013 Index A Accounting method: Accrual method, Accounting Method Cash method, Accounting Method Assistance (see Tax help) B Business: Expenses, Business Expenses Start-up costs, Business Start-Up Costs Use of car, Car and Truck Expenses Use of home, Business Use of Your Home C Car and truck expenses, Car and Truck Expenses Corporation, Corporations. Filing taxes for 2013 D Depositing taxes, Depositing Taxes Depreciation, Depreciation E Employer identification number (EIN), Employer Identification Number (EIN) Employment taxes: Defined, Employment Taxes Records to keep, Employment taxes. Filing taxes for 2013 Estimated tax, Estimated tax. Filing taxes for 2013 Excise taxes, Excise Taxes F Form: 1099-MISC, Form 1099-MISC. Filing taxes for 2013 11-C, Form 11-C. Filing taxes for 2013 1128, Changing your tax year. Filing taxes for 2013 2290, Form 2290. Filing taxes for 2013 720, Form 720. Filing taxes for 2013 730, Form 730. Filing taxes for 2013 8300, Form 8300. Filing taxes for 2013 8829, Which form do I file? I-9, Form I-9. Filing taxes for 2013 SS-4, Applying for an EIN. Filing taxes for 2013 W-2, Form W-2 Wage Reporting, Form W-2. Filing taxes for 2013 W-4, Form W-4. Filing taxes for 2013 W-9, Other payee. Filing taxes for 2013 FUTA tax, Federal Unemployment (FUTA) Tax H Help (see Tax help) Help from Small Business Administration, Small Business Administration I Identification numbers, Identification Numbers Income tax, Income Tax, Federal Income, Social Security, and Medicare Taxes Information returns, Information Returns Inventories, Accounting Method L Limited liability company, Limited liability company. Filing taxes for 2013 M Medicare tax, Federal Income, Social Security, and Medicare Taxes More Information (see Tax help) More information (see Tax help) O Office in home, Business Use of Your Home P Partnership, Partnerships. Filing taxes for 2013 Penalties, Penalties Publications (see Tax help) R Recordkeeping, Recordkeeping Records, how long to keep, How Long To Keep Records S S corporation, S corporations. Filing taxes for 2013 Self-employment tax, Self-Employment Tax Small Business Administration, Small Business Administration Social security tax, Federal Income, Social Security, and Medicare Taxes Sole proprietorship, Sole proprietorships. Filing taxes for 2013 Start-up costs, Business Start-Up Costs T Tax help, How to Get More Information Tax year, Tax Year Taxes: Employment, Employment Taxes Estimated, Estimated tax. Filing taxes for 2013 Excise, Excise Taxes How to deposit, Depositing Taxes Income, Income Tax Self-employment, Self-Employment Tax Unemployment (FUTA), Federal Unemployment (FUTA) Tax Taxpayer Advocate, Taxpayer Advocate Service. Filing taxes for 2013 TTY/TDD information, How to Get More Information U Unemployment (FUTA) tax, Federal Unemployment (FUTA) Tax Prev  Up     Home   More Online Publications