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Free H And R Block

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Free H And R Block

Free h and r block Publication 3920 - Main Contents Table of Contents Tax ForgivenessYears Eligible for Tax Forgiveness Amount of Tax Forgiven Refund of Taxes Paid How To Claim Tax Forgiveness Payments to SurvivorsSeptember 11th Victim Compensation Fund of 2001 Qualified Disaster Relief Payments Disability Payments Death Benefits Canceled Debt Payments to Survivors of Public Safety Officers Postponed Tax DeadlinesCovered area. Free h and r block Disaster Area Losses Estate Tax Reduction Structured Settlement Factoring Transactions Illustrated Worksheets B and C Additional Worksheets How To Get Tax Help Tax Forgiveness The IRS will forgive the federal income tax liabilities of decedents who died as a result of the Oklahoma City attack, September 11 attacks, and anthrax attacks. Free h and r block Income tax is forgiven for these decedents whether they were killed in an attack or in rescue or recovery operations. Free h and r block Any forgiven tax liability owed to the IRS will not have to be paid. Free h and r block Any forgiven tax liability that has already been paid will be refunded. Free h and r block (See Refund of Taxes Paid, later. Free h and r block ) To determine the amount of tax to be forgiven, read Years Eligible for Tax Forgiveness first. Free h and r block Then read Amount of Tax Forgiven. Free h and r block Decedents whose total forgiven tax liability for all eligible years is less than $10,000 are entitled to $10,000 minimum relief. Free h and r block Even decedents who were not required to file tax returns for the eligible tax years are entitled to $10,000 minimum relief. Free h and r block See Minimum Amount of Relief later under Amount of Tax Forgiven. Free h and r block Years Eligible for Tax Forgiveness The following paragraphs explain which years are eligible for tax forgiveness. Free h and r block Oklahoma City attack. Free h and r block   For those who died from this attack, income tax is forgiven for 1994 and all later years up to and including the year of death. Free h and r block Example 1. Free h and r block A man was killed in the bombing of the federal building in Oklahoma City on April 19, 1995. Free h and r block His income tax is forgiven for 1994 and 1995. Free h and r block Example 2. Free h and r block A woman was wounded while walking outside the federal building in Oklahoma City on April 19, 1995. Free h and r block She subsequently died of her wounds in 1996. Free h and r block Her income tax is forgiven for 1994, 1995, and 1996. Free h and r block September 11 attacks and anthrax attacks. Free h and r block   For those who die from these attacks, income tax is forgiven for 2000 and all later years up to and including the year of death. Free h and r block Example 1. Free h and r block A Pentagon employee died in the September 11 attack. Free h and r block Her income tax is forgiven for 2000 and 2001. Free h and r block Example 2. Free h and r block A visitor to the World Trade Center died in 2002 of wounds he sustained in the September 11 attack. Free h and r block His income tax liability is forgiven for 2000, 2001, and 2002. Free h and r block Amount of Tax Forgiven The IRS will forgive the decedent's income tax liability for all years eligible for tax forgiveness. Free h and r block On a joint return, only the decedent's part of the joint income tax liability is eligible for forgiveness. Free h and r block To figure the tax to be forgiven, use the following worksheets. Free h and r block Use Worksheet A for any eligible year the decedent filed a return as single, married filing separately, head of household, or qualifying widow(er). Free h and r block Use Worksheet B for any eligible year the decedent filed a joint return. Free h and r block See the illustrated Worksheet B near the end of this publication. Free h and r block Do not complete Worksheet A or B if the decedent was not required to file tax returns for the eligible tax years. Free h and r block Instead, complete Worksheet C and file a return for the decedent's last tax year. Free h and r block See Minimum Amount of Relief, later. Free h and r block If you need assistance, call the IRS at 1–866–562–5227 Monday through Friday during the following times. Free h and r block In English–7 a. Free h and r block m. Free h and r block to 10 p. Free h and r block m. Free h and r block local time. Free h and r block In Spanish–8 a. Free h and r block m. Free h and r block to 9:30 p. Free h and r block m. Free h and r block local time. Free h and r block Both spouses died. Free h and r block   If both spouses died as a result of a terrorist attack and they filed a joint return for an eligible tax year, fill out Worksheet B for each spouse for that year. Free h and r block Do this to determine if each spouse qualifies for the minimum relief of $10,000 (discussed later under Minimum Amount of Relief). Free h and r block If you are certain that neither spouse's total forgiven tax liability for all eligible years is less than $10,000, skip Worksheet B. Free h and r block However, attach a computation of the forgiven tax liability to the final income tax return or amended tax return for each eligible year. Free h and r block The forgiven tax liability is the total tax shown on the joint return minus the taxes listed in the instructions for line 4 of Worksheet B. Free h and r block Residents of community property states. Free h and r block   If the decedent was domiciled in a community property state and the spouse reported half the community income on a separate return, the surviving spouse can get a refund of taxes paid on his or her share of the decedent's income for the eligible years. Free h and r block Also, all of the decedent's income taxes paid for the eligible years will be refunded to either the executor or administrator of the estate, or to the surviving spouse if there is no legal representative. Free h and r block Worksheet B. Free h and r block Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Free h and r block 1       2 Enter the decedent's taxable income. Free h and r block Figure taxable income as if a separate return had been filed. Free h and r block See the instructions. Free h and r block 2       3 Enter the decedent's total tax. Free h and r block See the instructions. Free h and r block 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Free h and r block See the instructions. Free h and r block 4       5 Subtract line 4 from line 3. Free h and r block 5       6 Enter the surviving spouse's taxable income. Free h and r block Figure taxable income as if a separate return had been filed. Free h and r block See the instructions. Free h and r block 6       7 Enter the surviving spouse's total tax. Free h and r block See the instructions. Free h and r block 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Free h and r block 8       9 Subtract line 8 from line 7. Free h and r block 9       10 Add lines 5 and 9. Free h and r block 10       11 Enter the total tax from the joint return. Free h and r block See Table 1 on page 5 for the line number for years before 2002. Free h and r block 11       12 Add lines 4 and 8. Free h and r block 12       13 Subtract line 12 from line 11. Free h and r block 13       14 Divide line 5 by line 10. Free h and r block Enter the result as a decimal. Free h and r block 14       15 Tax to be forgiven. Free h and r block Multiply line 13 by line 14 and enter the result. Free h and r block 15       Note. Free h and r block If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Free h and r block Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free h and r block If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Free h and r block The IRS will determine the amount to be refunded. Free h and r block Worksheet B. Free h and r block Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Free h and r block 1       2 Enter the decedent's taxable income. Free h and r block Figure taxable income as if a separate return had been filed. Free h and r block See the instructions. Free h and r block 2       3 Enter the decedent's total tax. Free h and r block See the instructions. Free h and r block 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Free h and r block See the instructions. Free h and r block 4       5 Subtract line 4 from line 3. Free h and r block 5       6 Enter the surviving spouse's taxable income. Free h and r block Figure taxable income as if a separate return had been filed. Free h and r block See the instructions. Free h and r block 6       7 Enter the surviving spouse's total tax. Free h and r block See the instructions. Free h and r block 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Free h and r block 8       9 Subtract line 8 from line 7. Free h and r block 9       10 Add lines 5 and 9. Free h and r block 10       11 Enter the total tax from the joint return. Free h and r block See Table 1 on page 5 for the line number for years before 2002. Free h and r block 11       12 Add lines 4 and 8. Free h and r block 12       13 Subtract line 12 from line 11. Free h and r block 13       14 Divide line 5 by line 10. Free h and r block Enter the result as a decimal. Free h and r block 14       15 Tax to be forgiven. Free h and r block Multiply line 13 by line 14 and enter the result. Free h and r block 15       Note. Free h and r block If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Free h and r block Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free h and r block If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Free h and r block The IRS will determine the amount to be refunded. Free h and r block Instructions for Worksheet B Table 1. Free h and r block Total Tax Line on Decedent's Return Note: Use this table to find the total tax line on the decedent's income tax return. Free h and r block * Form 1994 1995 1996 2000 2001 1040 Line 53 Line 54 Line 51 Line 57 Line 58 1040A Line 27 Line 28 Line 28 Line 35 File Form 1040 1040EZ Line 9 Line 10 Line 10 Line 10 TeleFile Tax Record ** Line E Line J Line K 1040NR Line 51 Line 52 Line 49 Line 54 Line 54 1040NR–EZ N/A Line 17 Line 17 Line 18 File Form 1040NR * Line numbers for the 2002 forms were not available when this publication went to print. Free h and r block ** File Form 4506 to get a transcript of the decedent's account. Free h and r block Table 1. Free h and r block Total Tax Line on Decedent's Return Note: Use this table to find the total tax line on the decedent's income tax return. Free h and r block * Form 1994 1995 1996 2000 2001 1040 Line 53 Line 54 Line 51 Line 57 Line 58 1040A Line 27 Line 28 Line 28 Line 35 File Form 1040 1040EZ Line 9 Line 10 Line 10 Line 10 TeleFile Tax Record ** Line E Line J Line K 1040NR Line 51 Line 52 Line 49 Line 54 Line 54 1040NR–EZ N/A Line 17 Line 17 Line 18 File Form 1040NR * Line numbers for the 2002 forms were not available when this publication went to print. Free h and r block ** File Form 4506 to get a transcript of the decedent's account. Free h and r block Lines 2 and 6. Free h and r block   Allocate income and deductions in the same manner they would have been allocated if the spouses had filed separate returns. Free h and r block   Allocate wages and salaries to the spouse who performed the services and received the Form W-2. Free h and r block Business and investment income (including capital gains) are generally allocated to the spouse who owned the business or investment that produced the income. Free h and r block Income from a jointly owned business or investment should be allocated equally between the spouses unless there is evidence that shows a different allocation is appropriate. Free h and r block   Allocate business deductions to the owner of the business. Free h and r block Allocate personal deductions (such as itemized deductions for mortgage interest and taxes) equally between the spouses unless there is evidence that shows a different allocation is appropriate. Free h and r block Lines 3 and 7. Free h and r block   Figure the total tax as if a separate return had been filed. Free h and r block The total tax is the tax that would have been entered on the tax return line shown in Table 1 if a separate return had been filed. Free h and r block When figuring the tax using the Tax Table or Tax Rate Schedule, use the “Married filing separately” column in the Tax Table or Tax Rate Schedule Y-2. Free h and r block   When figuring the total tax, allocate credits and other taxes, if any, in the same manner as they would have been allocated if the spouses had filed separate returns. Free h and r block If a credit would not have been allowed on a separate return, allocate the credit shown on the joint return between the spouses. Free h and r block Examples of credits generally not allowed on a separate return are the child and dependent care credit, credit for the elderly, adoption credit, education credits, and earned income credit. Free h and r block Line 4. Free h and r block   Enter the total, if any, of the following taxes. Free h and r block Self-employment tax. Free h and r block Social security and Medicare tax on tip income not reported to employer. Free h and r block Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). Free h and r block Tax on excess accumulation in qualified retirement plans. Free h and r block Household employment taxes. Free h and r block Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. Free h and r block Tax on golden parachute payments. Free h and r block Minimum Amount of Relief The minimum amount of relief is $10,000. Free h and r block If the decedent's total forgiven tax liability for all eligible years is less than $10,000, the difference between $10,000 and the total forgiven tax liability for those years will be treated as a tax payment for the decedent's last tax year. Free h and r block The IRS will refund the difference as explained under Refund of Taxes Paid. Free h and r block Use Worksheet C to figure the additional tax payment. Free h and r block But first complete Worksheet A or B, unless the decedent was not required to file tax returns for the eligible tax years. Free h and r block Example 1. Free h and r block An individual who died in the September 11 attacks had an income tax liability of $-0- for 2000 and $6,400 for 2001. Free h and r block The $6,400 is eligible for forgiveness. Free h and r block The IRS will forgive $6,400 and treat the difference between $10,000 and $6,400 ($3,600) as a tax payment for 2001. Free h and r block Example 2. Free h and r block A child who died in the September 11 attacks had no (-0-) income tax liability for 2000 or 2001. Free h and r block The IRS will treat $10,000 as a tax payment for 2001. Free h and r block Income received after date of death. Free h and r block   Generally, income of the decedent received after the date of death must be reported on Form 1041 if the estate has gross income for the tax year of $600 or more. Free h and r block Examples are the final paycheck or dividends on stock owned by the decedent. Free h and r block However, this income is exempt from income tax and is not included on Form 1041 if it is received: After the date of the decedent's death, and Before the end of the decedent's tax year (determined without regard to death). Free h and r block Nonqualifying income. Free h and r block   The following income is not exempt from tax. Free h and r block The tax on it is not eligible for forgiveness. Free h and r block Deferred compensation that would have been payable if the death had occurred because of an event other than these attacks. Free h and r block Amounts that would not have been payable but for an action taken after September 11, 2001. Free h and r block The following are examples of nonqualifying income. Free h and r block Amounts payable from a qualified retirement plan or IRA to the beneficiary or estate of the decedent. Free h and r block Amounts payable only as death or survivor's benefits from pre-existing arrangements that would have been paid if the death had occurred for another reason. Free h and r block Income received as a result of adjustments made by the decedent's employer to a plan or arrangement to accelerate the vesting of restricted property or the payment of nonqualified deferred compensation after the date of the attack. Free h and r block Interest on savings bonds cashed by the beneficiary of the decedent. Free h and r block If you are responsible for the estate of a decedent, see Publication 559. Free h and r block Publication 559 discusses how to complete and file federal income tax returns and explains your responsibility to pay any taxes due. Free h and r block Instructions for lines 2–9 of Worksheet C. Free h and r block   The tax that would have been payable on the exempt income (discussed earlier) must be considered when determining whether a decedent is entitled to the $10,000 minimum relief. Free h and r block To figure the tax that would have been payable, you can use lines 2 through 9 of Worksheet C. Free h and r block Or, if special requirements are met, you can use the alternative computation instead. Free h and r block See Alternative computation, later. Free h and r block   You have to use lines 2–9 (or the alternative computation) to figure the tax that would have been payable even if Form 1041 was not required to be filed. Free h and r block Use Form 1041 to figure what the taxable income would be without including the exempt income. Free h and r block Then enter that taxable income (even if a negative number) on line 2 of Worksheet C (or line 1 of Worksheet D, Alternative Computation of Tax on Exempt Income (Line 9 of Worksheet C)). Free h and r block Alternative computation. Free h and r block   Instead of using lines 2–8 of Worksheet C to figure the tax on exempt income (line 9 of Worksheet C), you may be able to use Worksheet D. Free h and r block You can use Worksheet D to figure the tax on the exempt income payable by the estate and its beneficiaries only if both of the following requirements are met. Free h and r block The estate claimed an income distribution deduction on line 18 (Form 1041). Free h and r block Each beneficiary submits the information necessary to refigure the income tax payable on the exempt income received from the decedent's estate. Free h and r block If requirement (2) is met but requirement (1) is not, you can still use Worksheet D if: Form 1041 was not required because exempt income was received, and The estate would have claimed an income distribution deduction if the exempt income were taxable. Free h and r block If you use this alternative computation, skip lines 2–8 of Worksheet C and enter the amount from line 8 of Worksheet D on line 9 of Worksheet C. Free h and r block Complete the rest of Worksheet C to determine the additional payment allowed. Free h and r block Worksheet C. Free h and r block Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Free h and r block Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Free h and r block 1 Minimum relief amount. Free h and r block Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Free h and r block 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Free h and r block 3       4 Add lines 2 and 3. Free h and r block 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Free h and r block (See Income received after date of death on page 5. Free h and r block ) 5       6 Add lines 4 and 5. Free h and r block 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Free h and r block 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Free h and r block 8       9 Tax on exempt income. Free h and r block Subtract line 8 from line 7. Free h and r block 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Free h and r block If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Free h and r block 10       11 Add lines 9 and 10. Free h and r block 11   12 Additional payment allowed. Free h and r block If line 11 is $10,000 or more, enter -0- and stop here. Free h and r block No additional amount is allowed as a tax payment. Free h and r block Otherwise, subtract line 11 from line 1 and enter the result. Free h and r block 12   Note. Free h and r block The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Free h and r block Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Free h and r block If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Free h and r block Write "Sec. Free h and r block 692(d)(2) Payment" and the amount to the right of the entry space. Free h and r block Also indicate whether a Form 1041 is being filed for the decedent's estate. Free h and r block If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Free h and r block Write “Sec. Free h and r block 692(d)(2) Payment” on the dotted line to the left of the entry space. Free h and r block Worksheet C. Free h and r block Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Free h and r block Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Free h and r block 1 Minimum relief amount. Free h and r block Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Free h and r block 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Free h and r block 3       4 Add lines 2 and 3. Free h and r block 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Free h and r block (See Income received after date of death on page 5. Free h and r block ) 5       6 Add lines 4 and 5. Free h and r block 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Free h and r block 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Free h and r block 8       9 Tax on exempt income. Free h and r block Subtract line 8 from line 7. Free h and r block 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Free h and r block If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Free h and r block 10       11 Add lines 9 and 10. Free h and r block 11   12 Additional payment allowed. Free h and r block If line 11 is $10,000 or more, enter -0- and stop here. Free h and r block No additional amount is allowed as a tax payment. Free h and r block Otherwise, subtract line 11 from line 1 and enter the result. Free h and r block 12   Note. Free h and r block The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Free h and r block Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Free h and r block If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Free h and r block Write "Sec. Free h and r block 692(d)(2) Payment" and the amount to the right of the entry space. Free h and r block Also indicate whether a Form 1041 is being filed for the decedent's estate. Free h and r block If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Free h and r block Write “Sec. Free h and r block 692(d)(2) Payment” on the dotted line to the left of the entry space. Free h and r block Worksheet D. Free h and r block Alternative Computation of Tax on Exempt Income (Line 9 of Worksheet C) 1 Enter the taxable income from line 22 (Form 1041) 1   2 Enter exempt income received after death minus expenses allocable to exempt income. Free h and r block (See Income received after date of death on page 5. Free h and r block ) 2   3 Add lines 1 and 2 3   4 Figure the tax on line 3 using Schedule G (Form 1041). Free h and r block 4   5 Figure the tax on line 1 using Schedule G (Form 1041). Free h and r block 5   6 Estate's tax on exempt income. Free h and r block Subtract line 5 from line 4 6   7 Beneficiaries' tax on exempt income. Free h and r block Figure the total tax that would have been payable by all beneficiaries. Free h and r block Do this by including in each beneficiary's gross income the exempt income received from the decedent's estate and refiguring the income tax. Free h and r block Add the amounts by which each beneficiary's income tax is increased. Free h and r block 7   8 Add lines 6 and 7. Free h and r block Enter this amount on line 9 of Worksheet C. Free h and r block 8   Worksheet D. Free h and r block Alternative Computation of Tax on Exempt Income (Line 9 of Worksheet C) 1 Enter the taxable income from line 22 (Form 1041) 1   2 Enter exempt income received after death minus expenses allocable to exempt income. Free h and r block (See Income received after date of death on page 5. Free h and r block ) 2   3 Add lines 1 and 2 3   4 Figure the tax on line 3 using Schedule G (Form 1041). Free h and r block 4   5 Figure the tax on line 1 using Schedule G (Form 1041). Free h and r block 5   6 Estate's tax on exempt income. Free h and r block Subtract line 5 from line 4 6   7 Beneficiaries' tax on exempt income. Free h and r block Figure the total tax that would have been payable by all beneficiaries. Free h and r block Do this by including in each beneficiary's gross income the exempt income received from the decedent's estate and refiguring the income tax. Free h and r block Add the amounts by which each beneficiary's income tax is increased. Free h and r block 7   8 Add lines 6 and 7. Free h and r block Enter this amount on line 9 of Worksheet C. Free h and r block 8   Refund of Taxes Paid The IRS will refund the following forgiven income tax liabilities. Free h and r block Income tax liabilities that have been paid. Free h and r block Income tax liabilities treated as paid because the total tax liability for all years eligible for tax forgiveness is less than $10,000. Free h and r block See Minimum Amount of Relief, earlier. Free h and r block Example 1. Free h and r block A man who died in the September 11 attacks had an income tax liability of $7,500 for 2000 and $6,500 for 2001. Free h and r block The total, $14,000, is eligible for tax forgiveness. Free h and r block However, he paid only $13,000 of that amount. Free h and r block The IRS will refund the $13,000 paid. Free h and r block Example 2. Free h and r block A child who died in the September 11 attacks had no income tax liability for 2000 or 2001. Free h and r block The child qualifies for the minimum relief of $10,000. Free h and r block The $10,000 is treated as a tax payment for 2001 and will be refunded. Free h and r block Period for filing a claim for credit or refund. Free h and r block   To obtain a tax refund on a previously filed income tax return, file an amended return (Form 1040X or an amended Form 1041) within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever is later. Free h and r block For example, you have until April 15, 2004, to file an amended return on a 2000 Form 1040, 1040A, or 1040EZ that was filed by April 16, 2001, and for which the tax was paid when due. Free h and r block To obtain a refund on a return that has not been filed, file the return within 3 years of the original due date of the return. Free h and r block Extension of time for victims of Oklahoma City attack. Free h and r block   The period described above has been extended for victims of the Oklahoma City attack. Free h and r block Survivors and personal representatives of these victims have until January 22, 2003, to file an original or amended return. Free h and r block How To Claim Tax Forgiveness Use the following procedures to claim income tax forgiveness. Free h and r block Which Form To Use The form you use depends on whether an income tax return for the eligible year was already filed for the decedent. Free h and r block Return required but not yet filed. Free h and r block   File Form 1040 if the decedent was a U. Free h and r block S. Free h and r block citizen or resident. Free h and r block File Form 1040NR if the decedent was a nonresident alien. Free h and r block A nonresident alien is someone who is not a U. Free h and r block S. Free h and r block citizen or resident. Free h and r block Return required and already filed. Free h and r block   File a separate Form 1040X for each year you are claiming tax relief. Free h and r block Return not required and not filed. Free h and r block   File Form 1040 only for the year of death if the decedent was a U. Free h and r block S. Free h and r block citizen or resident. Free h and r block File Form 1040NR if the decedent was a nonresident alien. Free h and r block Return not required but already filed. Free h and r block   File Form 1040X only for the year of death. Free h and r block How to complete the returns. Free h and r block   Fill out Form 1040 or 1040NR according to its instructions but do not reduce the decedent's tax liability by any taxes that will be forgiven. Free h and r block Attach to each return a computation of the income tax to be forgiven or a copy of Worksheet A or B. Free h and r block If filing Form 1040 or Form 1040NR, also attach any Forms W–2. Free h and r block If the total forgiven tax liability for all eligible years is less than $10,000, attach to the decedent's final return a computation of the additional tax payment allowed or a copy of Worksheet C. Free h and r block Also, please write one of the following across the top of page 1 of each return. Free h and r block KITA—Oklahoma City KITA—9/11 KITA—Anthrax “KITA” means “killed in terrorist attack. Free h and r block ” Need a copy of a previously filed return?   You will find it easier to prepare Form 1040X if you have a copy of the decedent's previously filed tax return. Free h and r block If you need a copy, use Form 4506. Free h and r block The IRS will provide a free copy of the tax return if you write “DISASTER” in the top margin of Form 4506. Free h and r block Attach Letters Testamentary or other evidence to establish that you are authorized to act for the decedent's estate. Free h and r block Send Form 4506 to the address shown in the form instructions. Free h and r block Taxpayer identification number. Free h and r block   A taxpayer identification number must be furnished on the decedent's returns. Free h and r block This is usually the decedent's social security number (SSN). Free h and r block However, a nonresident alien who is not eligible to get an SSN should have an individual taxpayer identification number (ITIN). Free h and r block If the decedent was a nonresident alien, had neither an SSN nor an ITIN, and was not required to file a U. Free h and r block S. Free h and r block income tax return for any tax year, do not apply for an ITIN. Free h and r block You may claim a refund by filing Form 1040NR without an SSN or ITIN. Free h and r block Necessary Documents Please attach the following documents to the return or amended return. Free h and r block Proof of death. Free h and r block   Attach a copy of the death certificate. Free h and r block If the Department of Defense issued DD Form 1300, Report of Casualty, you can attach that form instead of the death certificate. Free h and r block Form 1310. Free h and r block   You must send Form 1310 with all returns and claims for refund, unless either of the following applies. Free h and r block You are a surviving spouse filing an original or amended joint return with the decedent. Free h and r block You are a personal representative filing an original Form 1040 or Form 1040NR for the decedent and a court certificate showing your appointment is attached to the return. Free h and r block A personal representative is an executor or administrator of a decedent's estate, as certified or appointed by the court. Free h and r block A copy of the decedent's will cannot be accepted as evidence that you are the personal representative. Free h and r block      If you have proof of death but do not have enough tax information to file a timely claim for a refund, file Form 1040X with Form 1310. Free h and r block Include a statement saying an amended return will be filed as soon as the necessary tax information is available. Free h and r block Where To File The IRS has set up a special office for processing returns and claims for tax forgiveness. Free h and r block Use one of the addresses shown below. Free h and r block Where you file the returns or claims depends on whether you use the U. Free h and r block S. Free h and r block Postal Service or a private delivery service. Free h and r block Please do not send these returns or claims to any of the addresses shown in the tax form instructions. Free h and r block U. Free h and r block S. Free h and r block Postal Service. Free h and r block   If you use the U. Free h and r block S. Free h and r block Postal Service, file these returns and claims at the following address. Free h and r block Internal Revenue Service P. Free h and r block O. Free h and r block Box 4053 Woburn, MA 01888 Private delivery service. Free h and r block   Private delivery services cannot deliver items to P. Free h and r block O. Free h and r block boxes. Free h and r block If you use a private delivery service, file these returns and claims at the following address. Free h and r block Internal Revenue Service Stop 661 310 Lowell St. Free h and r block Andover, MA 01810 Designated private delivery services. Free h and r block   You can use the following private delivery services to file these returns and claims. Free h and r block Airborne Express (Airborne): Overnight Air Express Service, Next Afternoon Service, and Second Day Service. Free h and r block DHL Worldwide Express (DHL): DHL “Same Day” Service, and DHL USA Overnight. Free h and r block Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, and FedEx 2Day. Free h and r block United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. Free h and r block M. Free h and r block , UPS Worldwide Express Plus, and UPS Worldwide Express. Free h and r block The private delivery service can tell you how to get written proof of the mailing date. Free h and r block Payments to Survivors The following section discusses the tax treatment of certain amounts received by survivors. Free h and r block September 11th Victim Compensation Fund of 2001 Payments from the September 11th Victim Compensation Fund of 2001 are not included in income. Free h and r block Qualified Disaster Relief Payments Qualified disaster relief payments are not included in income. Free h and r block These payments are not subject to income tax, self-employment tax, or employment taxes (social security, Medicare, and federal unemployment taxes). Free h and r block No withholding applies to these payments. Free h and r block Qualified disaster relief payments include payments you receive (regardless of the source) after September 10, 2001, for the following expenses. Free h and r block Reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a terrorist attack. Free h and r block Reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence due to a terrorist attack. Free h and r block (A personal residence can be a rented residence or one you own. Free h and r block ) Reasonable and necessary expenses incurred for the repair or replacement of the contents of a personal residence due to a terrorist attack. Free h and r block Qualified disaster relief payments also include the following. Free h and r block Payments made by common carriers (for example, American Airlines and United Airlines regarding the September 11 attacks) because of death or physical injury incurred as a result of a terrorist attack. Free h and r block Amounts paid by a federal, state, or local government in connection with a terrorist attack to those affected by the attack. Free h and r block Qualified disaster relief payments do not include: Insurance or other reimbursements for expenses, or Income replacement payments, such as payments of lost wages, lost business income, or unemployment compensation. Free h and r block Disability Payments For tax years ending after September 10, 2001, disability payments for injuries incurred as a direct result of a terrorist attack directed against the United States (or its allies), whether outside or within the United States, are not included in income. Free h and r block Death Benefits Payments received by an individual or the estate of a decedent from the employer of an employee who died as a result of the Oklahoma City or September 11 terrorist attacks, or as a result of the anthrax attacks, are not included in income. Free h and r block Only the amount that exceeds the benefits that would have been payable if the death had occurred for a reason other than a terrorist or anthrax attack is excludable. Free h and r block However, the exclusion does apply to incidental death benefits paid under a qualified retirement plan even if these amounts would have been payable if the death had occurred for a reason other than a terrorist or anthrax attack. Free h and r block If you included death benefits in income on a previously filed return and they are now excludable under the above rule, file Form 1040X to amend that return. Free h and r block For information on the period for filing Form 1040X, see Period for filing claim for credit or refund earlier under Refund of Taxes Paid. Free h and r block If that period has expired, you are granted an extension. Free h and r block You have until January 22, 2003, to file Form 1040X to exclude the death benefits. Free h and r block On top of page 1 of Form 1040X, write “Extension of Limitations Under PL 107–134, sec. Free h and r block 102(b)(2). Free h and r block ” Canceled Debt Canceled debt is not included in your income (or the income of the estate) if: You (or the estate) were liable, or became liable, for the debt of a decedent, and The debt was canceled after September 10, 2001, and before January 1, 2002, because the decedent died as a result of the September 11 attacks or anthrax attacks. Free h and r block The lender is not required to report the canceled debt on Form 1099–C, Cancellation of Debt. Free h and r block Payments to Survivors of Public Safety Officers If you are a survivor of a public safety officer who died in the line of duty, certain amounts you receive are not included in income. Free h and r block Bureau of Justice Assistance payments. Free h and r block   If you are a surviving dependent of a public safety officer (law enforcement officer or firefighter) who died in the line of duty, do not include in your income the death benefit paid to you by the Bureau of Justice Assistance. Free h and r block Government plan annuity. Free h and r block   If you receive a survivor annuity as the child or spouse (or former spouse) of a public safety officer who was killed in the line of duty, you generally do not have to include it in income. Free h and r block This exclusion applies to the amount of the annuity based on the officer's service as a public safety officer. Free h and r block For this purpose, the term public safety officer includes police and law enforcement officers, firefighters, and rescue squad and ambulance crews. Free h and r block More information. Free h and r block   For more information, see Publication 559. Free h and r block Postponed Tax Deadlines The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a terrorist attack. Free h and r block The tax deadlines the IRS may postpone include those for filing income and employment tax returns, paying income and employment taxes, and making contributions to a traditional IRA or Roth IRA. Free h and r block If any tax deadline is postponed, the IRS will publicize the postponement in the affected area and publish a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin (IRB). Free h and r block Affected taxpayers. Free h and r block   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. Free h and r block Any individual whose main home is located in a covered area (defined later). Free h and r block Any business entity or sole proprietor whose principal place of business is located in a covered area. Free h and r block Any individual, business entity, or sole proprietor whose records needed to meet a postponed deadline are maintained in a covered area. Free h and r block The main home or principal place of business does not have to be located in the covered area. Free h and r block Any estate or trust whose tax records necessary to meet a postponed tax deadline are maintained in a covered area. Free h and r block Any individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting in a covered area. Free h and r block The spouse on a joint return with a taxpayer who is eligible for postponements. Free h and r block Any other person determined by the IRS to be affected by a terrorist attack. Free h and r block Covered area. Free h and r block   This is an area in which a terrorist attack took place and in which the IRS has decided to postpone tax deadlines for up to 1 year. Free h and r block Abatement of interest. Free h and r block   The IRS may abate (forgive) the interest on any underpaid income tax for the length of any postponement. Free h and r block Disaster Area Losses If your property was damaged or destroyed as a result of the September 11 attacks, you can choose to deduct your disaster loss on your 2000 return (or amended return) rather than on your 2001 return. Free h and r block You must make this choice to deduct your loss on your 2000 return by the later of the following dates. Free h and r block The due date (without extensions) for filing your 2001 income tax return (April 15, 2002, if you are a calendar year taxpayer). Free h and r block The due date (with extensions) for the 2000 return. Free h and r block For more information about disaster area losses, see Publication 547. Free h and r block Estate Tax Reduction The federal estate tax is reduced for taxable estates of individuals who died as a result of the Oklahoma City attack, the September 11 attacks, and the anthrax attacks. Free h and r block The estate tax is computed using a new rate schedule on page 25 of the November 2001 revision of the instructions for Form 706. Free h and r block The estate tax is reduced by credits against the estate tax, including the unified credit and the state death tax credit. Free h and r block These credits may reduce or eliminate the estate tax due. Free h and r block A special rule extends until January 22, 2003, the period of time allowed to file a claim for a refund of estate taxes that have been paid. Free h and r block Recovery from the September 11th Victim Compensation Fund. Free h and r block   The value of claims for a decedent's pain and suffering is normally included in the gross estate. Free h and r block However, if the estate chooses to seek recovery from this fund, the IRS has determined that, in view of the unique circumstances of this situation and the high likelihood that such claims will be valued at a nominal or zero amount, the claims will be valued at zero for estate tax purposes. Free h and r block Thus, there are no federal estate tax consequences if an estate or beneficiary receives a recovery from this fund. Free h and r block Which estates must file a return. Free h and r block   For decedents dying in 2001, Form 706 must be filed by the executor for the estate of every U. Free h and r block S. Free h and r block citizen or resident whose gross estate, plus adjusted taxable gifts and specific exemption, is more than $675,000. Free h and r block Form 706 must be filed within 9 months after the date of decedent's death unless you receive an extension of time to file. Free h and r block Use Form 4768, Application for Extension of Time To File a Return and/or Pay U. Free h and r block S. Free h and r block Estate (and Generation-Skipping Transfer) Taxes, to apply for an extension. Free h and r block Where to file. Free h and r block   Returns on which the new rate schedule is used should be sent to the following address, which was not available when Form 706 went to print. Free h and r block Internal Revenue Service E & G Department/Stop 824T 201 W. Free h and r block Rivercenter Blvd. Free h and r block Covington, KY 41011 More information. Free h and r block   For more information on the federal estate tax, see the instructions for Form 706. Free h and r block Structured Settlement Factoring Transactions A person who acquires payment rights in a structured settlement arrangement after February 21, 2002, may be subject to a 40% excise tax unless the transfer of the payment rights was approved in advance in a qualified order. Free h and r block The excise tax is figured on the excess of the undiscounted amount of the payments being acquired over the total amount actually paid to acquire them. Free h and r block However, this tax will not apply to transactions entered into from February 22, 2002, to July 1, 2002, if certain requirements are met. Free h and r block For information about these requirements, see Internal Revenue Code section 5891. Free h and r block Worksheet B Illustrated. Free h and r block Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Free h and r block 1 2000 2001   2 Enter the decedent's taxable income. Free h and r block Figure taxable income as if a separate return had been filed. Free h and r block See the instructions. Free h and r block 2 $17,259 $14,295   3 Enter the decedent's total tax. Free h and r block See the instructions. Free h and r block 3 6,123 5,250   4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Free h and r block See the instructions. Free h and r block 4 3,532 3,109   5 Subtract line 4 from line 3. Free h and r block 5 2,591 2,141   6 Enter the surviving spouse's taxable income. Free h and r block Figure taxable income as if a separate return had been filed. Free h and r block See the instructions for line 2. Free h and r block 6 29,025 29,850   7 Enter the surviving spouse's total tax. Free h and r block See the instructions. Free h and r block 7 5,277 5,391   8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Free h and r block 8 0 0   9 Subtract line 8 from line 7. Free h and r block 9 5,277 5,391   10 Add lines 5 and 9. Free h and r block 10 7,868 7,532   11 Enter the total tax from the joint return. Free h and r block See Table 1 on page 5 for the line number for years before 2002. Free h and r block 11 10,789 9,728   12 Add lines 4 and 8. Free h and r block 12 3,532 3,109   13 Subtract line 12 from line 11. Free h and r block 13 7,257 6,619   14 Divide line 5 by line 10. Free h and r block Enter the result as a decimal. Free h and r block 14 . Free h and r block 329 . Free h and r block 284   15 Tax to be forgiven. Free h and r block Multiply line 13 by line 14 and enter the result. Free h and r block 15 $2,388 $1,880   Note. Free h and r block If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Free h and r block Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free h and r block If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Free h and r block The IRS will determine the amount to be refunded. Free h and r block Worksheet B Illustrated. Free h and r block Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Free h and r block 1 2000 2001   2 Enter the decedent's taxable income. Free h and r block Figure taxable income as if a separate return had been filed. Free h and r block See the instructions. Free h and r block 2 $17,259 $14,295   3 Enter the decedent's total tax. Free h and r block See the instructions. Free h and r block 3 6,123 5,250   4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Free h and r block See the instructions. Free h and r block 4 3,532 3,109   5 Subtract line 4 from line 3. Free h and r block 5 2,591 2,141   6 Enter the surviving spouse's taxable income. Free h and r block Figure taxable income as if a separate return had been filed. Free h and r block See the instructions for line 2. Free h and r block 6 29,025 29,850   7 Enter the surviving spouse's total tax. Free h and r block See the instructions. Free h and r block 7 5,277 5,391   8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Free h and r block 8 0 0   9 Subtract line 8 from line 7. Free h and r block 9 5,277 5,391   10 Add lines 5 and 9. Free h and r block 10 7,868 7,532   11 Enter the total tax from the joint return. Free h and r block See Table 1 on page 5 for the line number for years before 2002. Free h and r block 11 10,789 9,728   12 Add lines 4 and 8. Free h and r block 12 3,532 3,109   13 Subtract line 12 from line 11. Free h and r block 13 7,257 6,619   14 Divide line 5 by line 10. Free h and r block Enter the result as a decimal. Free h and r block 14 . Free h and r block 329 . Free h and r block 284   15 Tax to be forgiven. Free h and r block Multiply line 13 by line 14 and enter the result. Free h and r block 15 $2,388 $1,880   Note. Free h and r block If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Free h and r block Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free h and r block If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Free h and r block The IRS will determine the amount to be refunded. Free h and r block Illustrated Worksheets B and C A wife lost her husband in the September 11 attack on the World Trade Center. Free h and r block They filed a joint return for 2000 and the wife chose to file a joint return as a surviving spouse for 2001. Free h and r block The returns for 2000 and 2001 showed the following income, deductions, and tax liabilities. Free h and r block After the husband died, his estate received income of $4,000. Free h and r block Of that amount, $1,000 is net profit from Schedule C received before the end of 2001. Free h and r block This net profit is exempt from income tax as explained earlier under Income received after date of death. Free h and r block The wife files Form 1041 because the gross income of the estate for the tax year ($3,000) is $600 or more. Free h and r block To determine how much of the husband's tax liability for 2000 and 2001 is to be forgiven, the wife completes Worksheet B. Free h and r block She also completes Worksheet C because the forgiven tax liabilities for 2000 and 2001 (line 15 of Worksheet B) total less than $10,000. Free h and r block To claim tax relief for 2000, the wife files Form 1040X and attaches a copy of Worksheet B. Free h and r block To claim tax relief for 2001, she files Form 1040 and attaches copies of Worksheets B and C. Free h and r block   2000 2001 Wages (wife) $35,000 $36,000 Net profit from Schedule C, Profit or Loss From Business (husband) 25,000 22,000 Interest income (joint account) 1,000 1,100 Deduction for ½ of self-employment tax (husband) (1,766) (1,555) Standard deduction (7,350) (7,600) Personal exemptions (2) (5,600) (5,800) Taxable income $46,284 $44,145 Joint income tax liability $7,257 $6,619 Plus: Self-employment tax (husband) 3,532 3,109 Total tax liability $10,789 $9,728   2000 2001 Wages (wife) $35,000 $36,000 Net profit from Schedule C, Profit or Loss From Business (husband) 25,000 22,000 Interest income (joint account) 1,000 1,100 Deduction for ½ of self-employment tax (husband) (1,766) (1,555) Standard deduction (7,350) (7,600) Personal exemptions (2) (5,600) (5,800) Taxable income $46,284 $44,145 Joint income tax liability $7,257 $6,619 Plus: Self-employment tax (husband) 3,532 3,109 Total tax liability $10,789 $9,728 Worksheet C Illustrated. Free h and r block Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Free h and r block Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Free h and r block 1 Minimum relief amount. Free h and r block Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Free h and r block 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2 2,400     3 Enter the distribution deduction from line 18 (Form 1041) . Free h and r block 3 0     4 Add lines 2 and 3. Free h and r block 4 2,400     5 Enter exempt income received after death minus expenses allocable to exempt income. Free h and r block (See Income received after date of death on page 5. Free h and r block ) 5 1,000     6 Add lines 4 and 5. Free h and r block 6 3,400     7 Figure the tax on line 6 using Schedule G (Form 1041). Free h and r block 7 710     8 Figure the tax on line 4 using Schedule G (Form 1041). Free h and r block 8 435     9 Tax on exempt income. Free h and r block Subtract line 8 from line 7. Free h and r block 9 275     10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Free h and r block If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Free h and r block 10 4,268     11 Add lines 9 and 10. Free h and r block 11 $4,543 12 Additional payment allowed. Free h and r block If line 11 is $10,000 or more, enter -0- and stop here. Free h and r block No additional amount is allowed as a tax payment. Free h and r block Otherwise, subtract line 11 from line 1 and enter the result. Free h and r block 12 $5,457 Note. Free h and r block The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Free h and r block Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Free h and r block If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Free h and r block Write "Sec. Free h and r block 692(d)(2) Payment" and the amount to the right of the entry space. Free h and r block Also indicate whether a Form 1041 is being filed for the decedent's estate. Free h and r block If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Free h and r block Write “Sec. Free h and r block 692(d)(2) Payment” on the dotted line to the left of the entry space. Free h and r block Worksheet C Illustrated. Free h and r block Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Free h and r block Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Free h and r block 1 Minimum relief amount. Free h and r block Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Free h and r block 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2 2,400     3 Enter the distribution deduction from line 18 (Form 1041) . Free h and r block 3 0     4 Add lines 2 and 3. Free h and r block 4 2,400     5 Enter exempt income received after death minus expenses allocable to exempt income. Free h and r block (See Income received after date of death on page 5. Free h and r block ) 5 1,000     6 Add lines 4 and 5. Free h and r block 6 3,400     7 Figure the tax on line 6 using Schedule G (Form 1041). Free h and r block 7 710     8 Figure the tax on line 4 using Schedule G (Form 1041). Free h and r block 8 435     9 Tax on exempt income. Free h and r block Subtract line 8 from line 7. Free h and r block 9 275     10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Free h and r block If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Free h and r block 10 4,268     11 Add lines 9 and 10. Free h and r block 11 $4,543 12 Additional payment allowed. Free h and r block If line 11 is $10,000 or more, enter -0- and stop here. Free h and r block No additional amount is allowed as a tax payment. Free h and r block Otherwise, subtract line 11 from line 1 and enter the result. Free h and r block 12 $5,457 Note. Free h and r block The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Free h and r block Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Free h and r block If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Free h and r block Write "Sec. Free h and r block 692(d)(2) Payment" and the amount to the right of the entry space. Free h and r block Also indicate whether a Form 1041 is being filed for the decedent's estate. Free h and r block If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Free h and r block Write “Sec. Free h and r block 692(d)(2) Payment” on the dotted line to the left of the entry space. Free h and r block Additional Worksheets The following additional worksheets are provided for your convenience. Free h and r block Worksheet A. Free h and r block Figuring the Tax To Be Forgiven (For Decedents Who Filed a Return as Single, Married Filing Separately, Head of Household, or Qualifying Widow(er))         (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for tax forgiveness. Free h and r block 1       2 Enter the total tax from the decedent's income tax return. Free h and r block See Table 1 on page 5 for the line number for years before 2002. Free h and r block 2       3 Enter the following taxes, if any, shown on the decedent's income tax return. Free h and r block (These taxes are not eligible for forgiveness. Free h and r block )           a Self-employment tax. Free h and r block 3a         b Social security and Medicare tax on tip income not reported to employer. Free h and r block 3b         c Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). Free h and r block 3c         d Tax on excess accumulation in qualified retirement plans. Free h and r block 3d         e Household employment taxes. Free h and r block 3e         f Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. Free h and r block 3f         g Tax on golden parachute payments. Free h and r block 3g       4 Add lines 3a through 3g. Free h and r block 4       5 Tax to be forgiven. Free h and r block Subtract line 4 from line 2. Free h and r block 5       Note. Free h and r block If the total of columns (A), (B), and (C) of line 5 (including any amounts shown on line 15 of Worksheet B) is less than $10,000, also complete Worksheet C. Free h and r block Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free h and r block If filing Form 1040X for an eligible year, enter the amount from line 5 above on Form 1040X in column B of line 10 as a decrease in tax. Free h and r block The IRS will determine the amount to be refunded. Free h and r block Worksheet A. Free h and r block Figuring the Tax To Be Forgiven (For Decedents Who Filed a Return as Single, Married Filing Separately, Head of Household, or Qualifying Widow(er))         (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for tax forgiveness. Free h and r block 1       2 Enter the total tax from the decedent's income tax return. Free h and r block See Table 1 on page 5 for the line number for years before 2002. Free h and r block 2       3 Enter the following taxes, if any, shown on the decedent's income tax return. Free h and r block (These taxes are not eligible for forgiveness. Free h and r block )           a Self-employment tax. Free h and r block 3a         b Social security and Medicare tax on tip income not reported to employer. Free h and r block 3b         c Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). Free h and r block 3c         d Tax on excess accumulation in qualified retirement plans. Free h and r block 3d         e Household employment taxes. Free h and r block 3e         f Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. Free h and r block 3f         g Tax on golden parachute payments. Free h and r block 3g       4 Add lines 3a through 3g. Free h and r block 4       5 Tax to be forgiven. Free h and r block Subtract line 4 from line 2. Free h and r block 5       Note. Free h and r block If the total of columns (A), (B), and (C) of line 5 (including any amounts shown on line 15 of Worksheet B) is less than $10,000, also complete Worksheet C. Free h and r block Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free h and r block If filing Form 1040X for an eligible year, enter the amount from line 5 above on Form 1040X in column B of line 10 as a decrease in tax. Free h and r block The IRS will determine the amount to be refunded. Free h and r block Worksheet B. Free h and r block Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Free h and r block 1       2 Enter the decedent's taxable income. Free h and r block Figure taxable income as if a separate return had been filed. Free h and r block See the instructions. Free h and r block 2       3 Enter the decedent's total tax. Free h and r block See the instructions. Free h and r block 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Free h and r block See the instructions. Free h and r block 4       5 Subtract line 4 from line 3. Free h and r block 5       6 Enter the surviving spouse's taxable income. Free h and r block Figure taxable income as if a separate return had been filed. Free h and r block See the instructions. Free h and r block 6       7 Enter the surviving spouse's total tax. Free h and r block See the instructions. Free h and r block 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Free h and r block 8       9 Subtract line 8 from line 7. Free h and r block 9       10 Add lines 5 and 9. Free h and r block 10       11 Enter the total tax from the joint return. Free h and r block See Table 1 on page 5 for the line number for years before 2002. Free h and r block 11       12 Add lines 4 and 8. Free h and r block 12       13 Subtract line 12 from line 11. Free h and r block 13       14 Divide line 5 by line 10. Free h and r block Enter the result as a decimal. Free h and r block 14       15 Tax to be forgiven. Free h and r block Multiply line 13 by line 14 and enter the result. Free h and r block 15       Note. Free h and r block If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Free h and r block Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free h and r block If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Free h and r block The IRS will determine the amount to be refunded. Free h and r block Worksheet B. Free h and r block Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Free h and r block 1       2 Enter the decedent's taxable income. Free h and r block Figure taxable income as if a separate return had been filed. Free h and r block See the instructions. Free h and r block 2       3 Enter the decedent's total tax. Free h and r block See the instructions. Free h and r block 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Free h and r block See the instructions. Free h and r block 4       5 Subtract line 4 from line 3. Free h and r block 5       6 Enter the surviving spouse's taxable income. Free h and r block Figure taxable income as if a separate return had been filed. Free h and r block See the instructions. Free h and r block 6       7 Enter the surviving spouse's total tax. Free h and r block See the instructions. Free h and r block 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Free h and r block 8       9 Subtract line 8 from line 7. Free h and r block 9       10 Add lines 5 and 9. Free h and r block 10       11 Enter the total tax from the joint return. Free h and r block See Table 1 on page 5 for the line number for years before 2002. Free h and r block 11       12 Add lines 4 and 8. Free h and r block 12       13 Subtract line 12 from line 11. Free h and r block 13       14 Divide line 5 by line 10. Free h and r block Enter the result as a decimal. Free h and r block 14       15 Tax to be forgiven. Free h and r block Multiply line 13 by line 14 and enter the result. Free h and r block 15       Note. Free h and r block If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Free h and r block Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free h and r block If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Free h and r block The IRS will determine the amount to be refunded. Free h and r block Worksheet C. Free h and r block Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum tax forgiveness of $10,000. Free h and r block Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Free h and r block 1 Minimum tax forgiveness. Free h and r block Note. Free h and r block Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Free h and r block 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Free h and r block 3       4 Add lines 2 and 3. Free h and r block 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Free h and r block (See Income received after date of death on page 5. Free h and r block ) 5       6 Add lines 4 and 5. Free h and r block 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Free h and r block 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Free h and r block 8       9 Tax on exempt income. Free h and r block Subtract line 8 from line 7. Free h and r block 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Free h and r block If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Free h and r block 10       11 Add lines 9 and 10. Free h and r block 11   12 Additional payment allowed. Free h and r block If line 11 is $10,000 or more, enter -0- and stop here. Free h and r block No additional amount is allowed as a tax payment. Free h and r block Otherwise, subtract line 11 from line 1 and enter the result. Free h and r block 12   Note. Free h and r block The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Free h and r block Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Free h and r block If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Free h and r block Write "Sec. Free h and r block 692(d)(2) Payment" and the amount to the right of the entry space. Free h and r block Also indicate whether a Form 1041 is being filed for the decedent's estate. Free h and r block If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Free h and r block Write “Sec. Free h and r block 692(d)(2) Payment” on the dotted line to the left of the entry space. Free h and r block Worksheet C. Free h and r block Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum tax forgiveness of $10,000. Free h and r block Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Free h and r block 1 Minimum tax forgiveness. Free h and r block Note. Free h and r block Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Free h and r block 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Free h and r block 3       4 Add lines 2 and 3. Free h and r block 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Free h and r block (See Income received after date of death on page 5. Free h and r block ) 5       6 Add lines 4 and 5. Free h and r block 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Free h and r block 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Free h and r block 8       9 Tax on exempt income. Free h and r block Subtract line 8 from line 7. Free h and r block 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Free h and r block If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Free h and r block 10       11 Add lines 9 and 10. Free h and r block 11   12 Additional payment allowed. Free h and r block If line 11 is $10,000 or more, enter -0- and stop here. Free h and r block No additional amount is allowed as a tax payment. Free h and r block Otherwise, subtract line 11 from line 1 and enter the result. Free h and r block 12   Note. Free h and r block The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Free h and r block Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Free h and r block If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Free h and r block Write "Sec. Free h and r block 692(d)(2) Payment" and the amount to the right of the entry space. Free h and r block Also indicate whether a Form 1041 is being filed for the decedent's estate. Free h and r block If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Free h and r block Write “Sec. Free h and r block 692(d)(2) Payment” on the dotted line to the left of the entry space. Free h and r block How To Get Tax Help Special IRS assistance. Free h and r block   The IRS is providing special help for those affected by the terrorist attacks, as well as survivors and personal representatives of the victims. Free h and r block We have set up a special toll-free number for people who may have trouble filing or paying their taxes because they were affected by the terrorist attacks, or who have other tax issues related to the attacks. Free h and r block Call 1–866–562–5227 Monday through Friday In English–7 a. Free h and r block m. Free h and r block to 10 p. Free h and r block m. Free h and r block local time In Spanish–8 a. Free h and r block m. Free h and r block to 9:30 p. Free h and r block m. Free h and r block local time   The IRS web site at www. Free h and r block irs. Free h and r block gov has notices and other tax relief information. Free h and r block Check it periodically for any new guidance or to see if Congress has enacted new legislation. Free h and r block   Business taxpayers affected by the attacks can e-mail their questions to corp. Free h and r block disaster. Free h and r block relief@irs. Free h and r block gov. Free h and r block   For current information on Presidentially declared disaster areas, check the Federal Emergency Management Agency Web site at www. Free h and r block fema. Free h and r block gov. Free h and r block Other help from the IRS. Free h and r block   You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. Free h and r block By selecting the method that is best for you, you will have quick and easy access to tax help. Free h and r block Contacting your Taxpayer Advocate. Free h and r block   If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate. Free h and r block   The Taxpayer Advocate represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. Free h and r block While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review. Free h and r block   To contact your Taxpayer Advocate: Call the Taxpayer Advocate at 1–877–777–4778. Free h and r block Call the IRS at 1–800–829–1040. Free h and r block Call, write, or fax the Taxpayer Advocate office in your area. Free h and r block Call 1–800–829–4059 if you are a TTY/TDD user. Free h and r block   For more information, see Publication 1546, The Taxpayer Advocate Service of the IRS. Free h and r block Free tax services. Free h and r block   To find out what services are available, get Publication 910, Guide to Free Tax Services. Free h and r block It contains a list of free tax publications and an index of tax topics. Free h and r block It also describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics. Free h and r block Personal computer. Free h and r block With your personal computer and modem, you can access the IRS on the Internet at www. Free h and r block irs. Free h and r block gov. Free h and r block While visiting our web site, you can: Find answers to questions you may have. Free h and r block Download forms and publications or search for forms and pub
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The Free H And R Block

Free h and r block 1. Free h and r block   Traditional IRAs Table of Contents What's New for 2013 What's New for 2014 Introduction Who Can Open a Traditional IRA?What Is Compensation? When Can a Traditional IRA Be Opened? How Can a Traditional IRA Be Opened?Individual Retirement Account Individual Retirement Annuity Individual Retirement Bonds Simplified Employee Pension (SEP) Employer and Employee Association Trust Accounts Required Disclosures How Much Can Be Contributed?Limit. Free h and r block When repayment contributions can be made. Free h and r block No deduction. Free h and r block Reserve component. Free h and r block Figuring your IRA deduction. Free h and r block Reporting the repayment. Free h and r block Example. Free h and r block General Limit Kay Bailey Hutchison Spousal IRA Limit Filing Status Less Than Maximum Contributions More Than Maximum Contributions When Can Contributions Be Made? How Much Can You Deduct?Kay Bailey Hutchison Spousal IRA. Free h and r block Are You Covered by an Employer Plan? Limit if Covered by Employer Plan Reporting Deductible Contributions Nondeductible Contributions Examples — Worksheet for Reduced IRA Deduction for 2013 What if You Inherit an IRA?Treating it as your own. Free h and r block Can You Move Retirement Plan Assets?Transfers to Roth IRAs from other retirement plans. Free h and r block Trustee-to-Trustee Transfer Rollovers Transfers Incident To Divorce Converting From Any Traditional IRA Into a Roth IRA Recharacterizations When Can You Withdraw or Use Assets?Contributions Returned Before Due Date of Return When Must You Withdraw Assets? (Required Minimum Distributions)IRA Owners IRA Beneficiaries Which Table Do You Use To Determine Your Required Minimum Distribution? What Age(s) Do You Use With the Table(s)? Miscellaneous Rules for Required Minimum Distributions Are Distributions Taxable?January 2013 QCDs treated as made in 2012. Free h and r block 2013 Reporting. Free h and r block Additional reporting requirements if you made the election to treat a January 2013 QCD as made in 2012. Free h and r block One-time transfer. Free h and r block Testing period rules apply. Free h and r block More information. Free h and r block Distributions Fully or Partly Taxable Figuring the Nontaxable and Taxable Amounts Recognizing Losses on Traditional IRA Investments Other Special IRA Distribution Situations Reporting and Withholding Requirements for Taxable Amounts What Acts Result in Penalties or Additional Taxes?Prohibited Transactions Investment in Collectibles Excess Contributions Early Distributions Excess Accumulations (Insufficient Distributions) Reporting Additional Taxes What's New for 2013 Traditional IRA contribution and deduction limit. Free h and r block  The contribution limit to your traditional IRA for 2013 will be increased to the smaller of the following amounts: $5,500, or Your taxable compensation for the year. Free h and r block If you were age 50 or older before 2014, the most that can be contributed to your traditional IRA for 2013 will be the smaller of the following amounts: $6,500, or Your taxable compensation for the year. Free h and r block For more information, see How Much Can Be Contributed? in this chapter. Free h and r block Modified AGI limit for traditional IRA contributions increased. Free h and r block  For 2013, if you were covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is: More than $95,000 but less than $115,000 for a married couple filing a joint return or a qualifying widow(er), More than $59,000 but less than $69,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. Free h and r block If you either lived with your spouse or file a joint return, and your spouse was covered by a retirement plan at work, but you were not, your deduction is phased out if your modified AGI is more than $178,000 but less than $188,000. Free h and r block If your modified AGI is $188,000 or more, you cannot take a deduction for contributions to a traditional IRA. Free h and r block See How Much Can You Deduct? in this chapter. Free h and r block Net Investment Income Tax. Free h and r block  For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan (for example, 401(a), 403(a), 403(b), 457(b) plans, and IRAs). Free h and r block However, these distributions are taken into account when determining the modified adjusted gross income threshold. Free h and r block Distributions from a nonqualified retirement plan are included in net investment income. Free h and r block See Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions for more information. Free h and r block What's New for 2014 Modified AGI limit for traditional IRA contributions increased. Free h and r block  For 2014, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is: More than $96,000 but less than $116,000 for a married couple filing a joint return or a qualifying widow(er), More than $60,000 but less than $70,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. Free h and r block If you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work, but you are not, your deduction is phased out if your modified AGI is more than $181,000 but less than $191,000. Free h and r block If your modified AGI is $191,000 or more, you cannot take a deduction for contributions to a traditional IRA. Free h and r block Introduction This chapter discusses the original IRA. Free h and r block In this publication the original IRA (sometimes called an ordinary or regular IRA) is referred to as a “traditional IRA. Free h and r block ” A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA. Free h and r block The following are two advantages of a traditional IRA: You may be able to deduct some or all of your contributions to it, depending on your circumstances. Free h and r block Generally, amounts in your IRA, including earnings and gains, are not taxed until they are distributed. Free h and r block Who Can Open a Traditional IRA? You can open and make contributions to a traditional IRA if: You (or, if you file a joint return, your spouse) received taxable compensation during the year, and You were not age 70½ by the end of the year. Free h and r block You can have a traditional IRA whether or not you are covered by any other retirement plan. Free h and r block However, you may not be able to deduct all of your contributions if you or your spouse is covered by an employer retirement plan. Free h and r block See How Much Can You Deduct , later. Free h and r block Both spouses have compensation. Free h and r block   If both you and your spouse have compensation and are under age 70½, each of you can open an IRA. Free h and r block You cannot both participate in the same IRA. Free h and r block If you file a joint return, only one of you needs to have compensation. Free h and r block What Is Compensation? Generally, compensation is what you earn from working. Free h and r block For a summary of what compensation does and does not include, see Table 1-1. Free h and r block Compensation includes all of the items discussed next (even if you have more than one type). Free h and r block Wages, salaries, etc. Free h and r block   Wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services are compensation. Free h and r block The IRS treats as compensation any amount properly shown in box 1 (Wages, tips, other compensation) of Form W-2, Wage and Tax Statement, provided that amount is reduced by any amount properly shown in box 11 (Nonqualified plans). Free h and r block Scholarship and fellowship payments are compensation for IRA purposes only if shown in box 1 of Form W-2. Free h and r block Commissions. Free h and r block   An amount you receive that is a percentage of profits or sales price is compensation. Free h and r block Self-employment income. Free h and r block   If you are self-employed (a sole proprietor or a partner), compensation is the net earnings from your trade or business (provided your personal services are a material income-producing factor) reduced by the total of: The deduction for contributions made on your behalf to retirement plans, and The deduction allowed for the deductible part of your self-employment taxes. Free h and r block   Compensation includes earnings from self-employment even if they are not subject to self-employment tax because of your religious beliefs. Free h and r block Self-employment loss. Free h and r block   If you have a net loss from self-employment, do not subtract the loss from your salaries or wages when figuring your total compensation. Free h and r block Alimony and separate maintenance. Free h and r block   For IRA purposes, compensation includes any taxable alimony and separate maintenance payments you receive under a decree of divorce or separate maintenance. Free h and r block Nontaxable combat pay. Free h and r block   If you were a member of the U. Free h and r block S. Free h and r block Armed Forces, compensation includes any nontaxable combat pay you received. Free h and r block This amount should be reported in box 12 of your 2013 Form W-2 with code Q. Free h and r block Table 1-1. Free h and r block Compensation for Purposes of an IRA Includes . Free h and r block . Free h and r block . Free h and r block Does not include . Free h and r block . Free h and r block . Free h and r block   earnings and profits from property. Free h and r block wages, salaries, etc. Free h and r block     interest and dividend income. Free h and r block commissions. Free h and r block     pension or annuity income. Free h and r block self-employment income. Free h and r block     deferred compensation. Free h and r block alimony and separate maintenance. Free h and r block     income from certain  partnerships. Free h and r block nontaxable combat pay. Free h and r block     any amounts you exclude from income. Free h and r block     What Is Not Compensation? Compensation does not include any of the following items. Free h and r block Earnings and profits from property, such as rental income, interest income, and dividend income. Free h and r block Pension or annuity income. Free h and r block Deferred compensation received (compensation payments postponed from a past year). Free h and r block Income from a partnership for which you do not provide services that are a material income-producing factor. Free h and r block Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b. Free h and r block Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs. Free h and r block When Can a Traditional IRA Be Opened? You can open a traditional IRA at any time. Free h and r block However, the time for making contributions for any year is limited. Free h and r block See When Can Contributions Be Made , later. Free h and r block How Can a Traditional IRA Be Opened? You can open different kinds of IRAs with a variety of organizations. Free h and r block You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. Free h and r block You can also open an IRA through your stockbroker. Free h and r block Any IRA must meet Internal Revenue Code requirements. Free h and r block The requirements for the various arrangements are discussed below. Free h and r block Kinds of traditional IRAs. Free h and r block   Your traditional IRA can be an individual retirement account or annuity. Free h and r block It can be part of either a simplified employee pension (SEP) or an employer or employee association trust account. Free h and r block Individual Retirement Account An individual retirement account is a trust or custodial account set up in the United States for the exclusive benefit of you or your beneficiaries. Free h and r block The account is created by a written document. Free h and r block The document must show that the account meets all of the following requirements. Free h and r block The trustee or custodian must be a bank, a federally insured credit union, a savings and loan association, or an entity approved by the IRS to act as trustee or custodian. Free h and r block The trustee or custodian generally cannot accept contributions of more than the deductible amount for the year. Free h and r block However, rollover contributions and employer contributions to a simplified employee pension (SEP) can be more than this amount. Free h and r block Contributions, except for rollover contributions, must be in cash. Free h and r block See Rollovers , later. Free h and r block You must have a nonforfeitable right to the amount at all times. Free h and r block Money in your account cannot be used to buy a life insurance policy. Free h and r block Assets in your account cannot be combined with other property, except in a common trust fund or common investment fund. Free h and r block You must start receiving distributions by April 1 of the year following the year in which you reach age 70½. Free h and r block See When Must You Withdraw Assets? (Required Minimum Distributions) , later. Free h and r block Individual Retirement Annuity You can open an individual retirement annuity by purchasing an annuity contract or an endowment contract from a life insurance company. Free h and r block An individual retirement annuity must be issued in your name as the owner, and either you or your beneficiaries who survive you are the only ones who can receive the benefits or payments. Free h and r block An individual retirement annuity must meet all the following requirements. Free h and r block Your entire interest in the contract must be nonforfeitable. Free h and r block The contract must provide that you cannot transfer any portion of it to any person other than the issuer. Free h and r block There must be flexible premiums so that if your compensation changes, your payment can also change. Free h and r block This provision applies to contracts issued after November 6, 1978. Free h and r block The contract must provide that contributions cannot be more than the deductible amount for an IRA for the year, and that you must use any refunded premiums to pay for future premiums or to buy more benefits before the end of the calendar year after the year in which you receive the refund. Free h and r block Distributions must begin by April 1 of the year following the year in which you reach age 70½. Free h and r block See When Must You Withdraw Assets? (Required Minimum Distributions) , later. Free h and r block Individual Retirement Bonds The sale of individual retirement bonds issued by the federal government was suspended after April 30, 1982. Free h and r block The bonds have the following features. Free h and r block They stop earning interest when you reach age 70½. Free h and r block If you die, interest will stop 5 years after your death, or on the date you would have reached age 70½, whichever is earlier. Free h and r block You cannot transfer the bonds. Free h and r block If you cash (redeem) the bonds before the year in which you reach age 59½, you may be subject to a 10% additional tax. Free h and r block See Age 59½ Rule under Early Distributions, later. Free h and r block You can roll over redemption proceeds into IRAs. Free h and r block Simplified Employee Pension (SEP) A simplified employee pension (SEP) is a written arrangement that allows your employer to make deductible contributions to a traditional IRA (a SEP IRA) set up for you to receive such contributions. Free h and r block Generally, distributions from SEP IRAs are subject to the withdrawal and tax rules that apply to traditional IRAs. Free h and r block See Publication 560 for more information about SEPs. Free h and r block Employer and Employee Association Trust Accounts Your employer or your labor union or other employee association can set up a trust to provide individual retirement accounts for employees or members. Free h and r block The requirements for individual retirement accounts apply to these traditional IRAs. Free h and r block Required Disclosures The trustee or issuer (sometimes called the sponsor) of your traditional IRA generally must give you a disclosure statement at least 7 days before you open your IRA. Free h and r block However, the sponsor does not have to give you the statement until the date you open (or purchase, if earlier) your IRA, provided you are given at least 7 days from that date to revoke the IRA. Free h and r block The disclosure statement must explain certain items in plain language. Free h and r block For example, the statement should explain when and how you can revoke the IRA, and include the name, address, and telephone number of the person to receive the notice of cancellation. Free h and r block This explanation must appear at the beginning of the disclosure statement. Free h and r block If you revoke your IRA within the revocation period, the sponsor must return to you the entire amount you paid. Free h and r block The sponsor must report on the appropriate IRS forms both your contribution to the IRA (unless it was made by a trustee-to-trustee transfer) and the amount returned to you. Free h and r block These requirements apply to all sponsors. Free h and r block How Much Can Be Contributed? There are limits and other rules that affect the amount that can be contributed to a traditional IRA. Free h and r block These limits and rules are explained below. Free h and r block Community property laws. Free h and r block   Except as discussed later under Kay Bailey Hutchison Spousal IRA Limit , each spouse figures his or her limit separately, using his or her own compensation. Free h and r block This is the rule even in states with community property laws. Free h and r block Brokers' commissions. Free h and r block   Brokers' commissions paid in connection with your traditional IRA are subject to the contribution limit. Free h and r block For information about whether you can deduct brokers' commissions, see Brokers' commissions , later, under How Much Can You Deduct. Free h and r block Trustees' fees. Free h and r block   Trustees' administrative fees are not subject to the contribution limit. Free h and r block For information about whether you can deduct trustees' fees, see Trustees' fees , later, under How Much Can You Deduct. Free h and r block Qualified reservist repayments. Free h and r block   If you were a member of a reserve component and you were ordered or called to active duty after September 11, 2001, you may be able to contribute (repay) to an IRA amounts equal to any qualified reservist distributions (defined later under Early Distributions) you received. Free h and r block You can make these repayment contributions even if they would cause your total contributions to the IRA to be more than the general limit on contributions. Free h and r block To be eligible to make these repayment contributions, you must have received a qualified reservist distribution from an IRA or from a section 401(k) or 403(b) plan or a similar arrangement. Free h and r block Limit. Free h and r block   Your qualified reservist repayments cannot be more than your qualified reservist distributions, explained under Early Distributions , later. Free h and r block When repayment contributions can be made. Free h and r block   You cannot make these repayment contributions later than the date that is 2 years after your active duty period ends. Free h and r block No deduction. Free h and r block   You cannot deduct qualified reservist repayments. Free h and r block Reserve component. Free h and r block   The term “reserve component” means the: Army National Guard of the United States, Army Reserve, Naval Reserve, Marine Corps Reserve, Air National Guard of the United States, Air Force Reserve, Coast Guard Reserve, or Reserve Corps of the Public Health Service. Free h and r block Figuring your IRA deduction. Free h and r block   The repayment of qualified reservist distributions does not affect the amount you can deduct as an IRA contribution. Free h and r block Reporting the repayment. Free h and r block   If you repay a qualified reservist distribution, include the amount of the repayment with nondeductible contributions on line 1 of Form 8606. Free h and r block Example. Free h and r block   In 2013, your IRA contribution limit is $5,500. Free h and r block However, because of your filing status and AGI, the limit on the amount you can deduct is $3,500. Free h and r block You can make a nondeductible contribution of $2,000 ($5,500 - $3,500). Free h and r block In an earlier year you received a $3,000 qualified reservist distribution, which you would like to repay this year. Free h and r block   For 2013, you can contribute a total of $8,500 to your IRA. Free h and r block This is made up of the maximum deductible contribution of $3,500; a nondeductible contribution of $2,000; and a $3,000 qualified reservist repayment. Free h and r block You contribute the maximum allowable for the year. Free h and r block Since you are making a nondeductible contribution ($2,000) and a qualified reservist repayment ($3,000), you must file Form 8606 with your return and include $5,000 ($2,000 + $3,000) on line 1 of Form 8606. Free h and r block The qualified reservist repayment is not deductible. Free h and r block Contributions on your behalf to a traditional IRA reduce your limit for contributions to a Roth IRA. Free h and r block See chapter 2 for information about Roth IRAs. Free h and r block General Limit For 2013, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts: $5,500 ($6,500 if you are age 50 or older), or Your taxable compensation (defined earlier) for the year. Free h and r block Note. Free h and r block This limit is reduced by any contributions to a section 501(c)(18) plan (generally, a pension plan created before June 25, 1959, that is funded entirely by employee contributions). Free h and r block This is the most that can be contributed regardless of whether the contributions are to one or more traditional IRAs or whether all or part of the contributions are nondeductible. Free h and r block (See Nondeductible Contributions , later. Free h and r block ) Qualified reservist repayments do not affect this limit. Free h and r block Examples. Free h and r block George, who is 34 years old and single, earns $24,000 in 2013. Free h and r block His IRA contributions for 2013 are limited to $5,500. Free h and r block Danny, an unmarried college student working part time, earns $3,500 in 2013. Free h and r block His IRA contributions for 2013 are limited to $3,500, the amount of his compensation. Free h and r block More than one IRA. Free h and r block   If you have more than one IRA, the limit applies to the total contributions made on your behalf to all your traditional IRAs for the year. Free h and r block Annuity or endowment contracts. Free h and r block   If you invest in an annuity or endowment contract under an individual retirement annuity, no more than $5,500 ($6,500 if you are age 50 or older) can be contributed toward its cost for the tax year, including the cost of life insurance coverage. Free h and r block If more than this amount is contributed, the annuity or endowment contract is disqualified. Free h and r block Kay Bailey Hutchison Spousal IRA Limit For 2013, if you file a joint return and your taxable compensation is less than that of your spouse, the most that can be contributed for the year to your IRA is the smaller of the following two amounts: $5,500 ($6,500 if you are age 50 or older), or The total compensation includible in the gross income of both you and your spouse for the year, reduced by the following two amounts. Free h and r block Your spouse's IRA contribution for the year to a traditional IRA. Free h and r block Any contributions for the year to a Roth IRA on behalf of your spouse. Free h and r block This means that the total combined contributions that can be made for the year to your IRA and your spouse's IRA can be as much as $11,000 ($12,000 if only one of you is age 50 or older or $13,000 if both of you are age 50 or older). Free h and r block Note. Free h and r block This traditional IRA limit is reduced by any contributions to a section 501(c)(18) plan (generally, a pension plan created before June 25, 1959, that is funded entirely by employee contributions). Free h and r block Example. Free h and r block Kristin, a full-time student with no taxable compensation, marries Carl during the year. Free h and r block Neither of them was age 50 by the end of 2013. Free h and r block For the year, Carl has taxable compensation of $30,000. Free h and r block He plans to contribute (and deduct) $5,500 to a traditional IRA. Free h and r block If he and Kristin file a joint return, each can contribute $5,500 to a traditional IRA. Free h and r block This is because Kristin, who has no compensation, can add Carl's compensation, reduced by the amount of his IRA contribution ($30,000 − $5,500 = $24,500), to her own compensation (-0-) to figure her maximum contribution to a traditional IRA. Free h and r block In her case, $5,500 is her contribution limit, because $5,500 is less than $24,500 (her compensation for purposes of figuring her contribution limit). Free h and r block Filing Status Generally, except as discussed earlier under Kay Bailey Hutchison Spousal IRA Limit , your filing status has no effect on the amount of allowable contributions to your traditional IRA. Free h and r block However, if during the year either you or your spouse was covered by a retirement plan at work, your deduction may be reduced or eliminated, depending on your filing status and income. Free h and r block See How Much Can You Deduct , later. Free h and r block Example. Free h and r block Tom and Darcy are married and both are 53. Free h and r block They both work and each has a traditional IRA. Free h and r block Tom earned $3,800 and Darcy earned $48,000 in 2013. Free h and r block Because of the Kay Bailey Hutchison Spousal IRA limit rule, even though Tom earned less than $6,500, they can contribute up to $6,500 to his IRA for 2013 if they file a joint return. Free h and r block They can contribute up to $6,500 to Darcy's IRA. Free h and r block If they file separate returns, the amount that can be contributed to Tom's IRA is limited by his earned income, $3,800. Free h and r block Less Than Maximum Contributions If contributions to your traditional IRA for a year were less than the limit, you cannot contribute more after the due date of your return for that year to make up the difference. Free h and r block Example. Free h and r block Rafael, who is 40, earns $30,000 in 2013. Free h and r block Although he can contribute up to $5,500 for 2013, he contributes only $3,000. Free h and r block After April 15, 2014, Rafael cannot make up the difference between his actual contributions for 2013 ($3,000) and his 2013 limit ($5,500). Free h and r block He cannot contribute $2,500 more than the limit for any later year. Free h and r block More Than Maximum Contributions If contributions to your IRA for a year were more than the limit, you can apply the excess contribution in one year to a later year if the contributions for that later year are less than the maximum allowed for that year. Free h and r block However, a penalty or additional tax may apply. Free h and r block See Excess Contributions , later, under What Acts Result in Penalties or Additional Taxes. Free h and r block When Can Contributions Be Made? As soon as you open your traditional IRA, contributions can be made to it through your chosen sponsor (trustee or other administrator). Free h and r block Contributions must be in the form of money (cash, check, or money order). Free h and r block Property cannot be contributed. Free h and r block Although property cannot be contributed, your IRA may invest in certain property. Free h and r block For example, your IRA may purchase shares of stock. Free h and r block For other restrictions on the use of funds in your IRA, see Prohibited Transactions , later in this chapter. Free h and r block You may be able to transfer or roll over certain property from one retirement plan to another. Free h and r block See the discussion of rollovers and other transfers later in this chapter under Can You Move Retirement Plan Assets . Free h and r block You can make a contribution to your IRA by having your income tax refund (or a portion of your refund), if any, paid directly to your traditional IRA, Roth IRA, or SEP IRA. Free h and r block For details, see the instructions for your income tax return or Form 8888, Allocation of Refund (Including Savings Bond Purchases). Free h and r block Contributions can be made to your traditional IRA for each year that you receive compensation and have not reached age 70½. Free h and r block For any year in which you do not work, contributions cannot be made to your IRA unless you receive alimony, nontaxable combat pay, military differential pay, or file a joint return with a spouse who has compensation. Free h and r block See Who Can Open a Traditional IRA , earlier. Free h and r block Even if contributions cannot be made for the current year, the amounts contributed for years in which you did qualify can remain in your IRA. Free h and r block Contributions can resume for any years that you qualify. Free h and r block Contributions must be made by due date. Free h and r block   Contributions can be made to your traditional IRA for a year at any time during the year or by the due date for filing your return for that year, not including extensions. Free h and r block For most people, this means that contributions for 2013 must be made by April 15, 2014, and contributions for 2014 must be made by April 15, 2015. Free h and r block Age 70½ rule. Free h and r block   Contributions cannot be made to your traditional IRA for the year in which you reach age 70½ or for any later year. Free h and r block   You attain age 70½ on the date that is 6 calendar months after the 70th anniversary of your birth. Free h and r block If you were born on or before June 30, 1943, you cannot contribute for 2013 or any later year. Free h and r block Designating year for which contribution is made. Free h and r block   If an amount is contributed to your traditional IRA between January 1 and April 15, you should tell the sponsor which year (the current year or the previous year) the contribution is for. Free h and r block If you do not tell the sponsor which year it is for, the sponsor can assume, and report to the IRS, that the contribution is for the current year (the year the sponsor received it). Free h and r block Filing before a contribution is made. Free h and r block    You can file your return claiming a traditional IRA contribution before the contribution is actually made. Free h and r block Generally, the contribution must be made by the due date of your return, not including extensions. Free h and r block Contributions not required. Free h and r block   You do not have to contribute to your traditional IRA for every tax year, even if you can. Free h and r block How Much Can You Deduct? Generally, you can deduct the lesser of: The contributions to your traditional IRA for the year, or The general limit (or the Kay Bailey Hutchison Spousal IRA limit, if applicable) explained earlier under How Much Can Be Contributed . Free h and r block However, if you or your spouse was covered by an employer retirement plan, you may not be able to deduct this amount. Free h and r block See Limit if Covered by Employer Plan , later. Free h and r block You may be able to claim a credit for contributions to your traditional IRA. Free h and r block For more information, see chapter 4. Free h and r block Trustees' fees. Free h and r block   Trustees' administrative fees that are billed separately and paid in connection with your traditional IRA are not deductible as IRA contributions. Free h and r block However, they may be deductible as a miscellaneous itemized deduction on Schedule A (Form 1040). Free h and r block For information about miscellaneous itemized deductions, see Publication 529, Miscellaneous Deductions. Free h and r block Brokers' commissions. Free h and r block   These commissions are part of your IRA contribution and, as such, are deductible subject to the limits. Free h and r block Full deduction. Free h and r block   If neither you nor your spouse was covered for any part of the year by an employer retirement plan, you can take a deduction for total contributions to one or more of your traditional IRAs of up to the lesser of: $5,500 ($6,500 if you are age 50 or older), or 100% of your compensation. Free h and r block   This limit is reduced by any contributions made to a 501(c)(18) plan on your behalf. Free h and r block Kay Bailey Hutchison Spousal IRA. Free h and r block   In the case of a married couple with unequal compensation who file a joint return, the deduction for contributions to the traditional IRA of the spouse with less compensation is limited to the lesser of: $5,500 ($6,500 if the spouse with the lower compensation is age 50 or older), or The total compensation includible in the gross income of both spouses for the year reduced by the following three amounts. Free h and r block The IRA deduction for the year of the spouse with the greater compensation. Free h and r block Any designated nondeductible contribution for the year made on behalf of the spouse with the greater compensation. Free h and r block Any contributions for the year to a Roth IRA on behalf of the spouse with the greater compensation. Free h and r block   This limit is reduced by any contributions to a section 501(c)(18) plan on behalf of the spouse with the lesser compensation. Free h and r block Note. Free h and r block If you were divorced or legally separated (and did not remarry) before the end of the year, you cannot deduct any contributions to your spouse's IRA. Free h and r block After a divorce or legal separation, you can deduct only the contributions to your own IRA. Free h and r block Your deductions are subject to the rules for single individuals. Free h and r block Covered by an employer retirement plan. Free h and r block   If you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, your deduction may be further limited. Free h and r block This is discussed later under Limit if Covered by Employer Plan . Free h and r block Limits on the amount you can deduct do not affect the amount that can be contributed. Free h and r block Are You Covered by an Employer Plan? The Form W-2 you receive from your employer has a box used to indicate whether you were covered for the year. Free h and r block The “Retirement Plan” box should be checked if you were covered. Free h and r block Reservists and volunteer firefighters should also see Situations in Which You Are Not Covered , later. Free h and r block If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer. Free h and r block Federal judges. Free h and r block   For purposes of the IRA deduction, federal judges are covered by an employer plan. Free h and r block For Which Year(s) Are You Covered? Special rules apply to determine the tax years for which you are covered by an employer plan. Free h and r block These rules differ depending on whether the plan is a defined contribution plan or a defined benefit plan. Free h and r block Tax year. Free h and r block   Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. Free h and r block For almost all people, the tax year is the calendar year. Free h and r block Defined contribution plan. Free h and r block   Generally, you are covered by a defined contribution plan for a tax year if amounts are contributed or allocated to your account for the plan year that ends with or within that tax year. Free h and r block However, also see Situations in Which You Are Not Covered , later. Free h and r block   A defined contribution plan is a plan that provides for a separate account for each person covered by the plan. Free h and r block In a defined contribution plan, the amount to be contributed to each participant's account is spelled out in the plan. Free h and r block The level of benefits actually provided to a participant depends on the total amount contributed to that participant's account and any earnings and losses on those contributions. Free h and r block Types of defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans. Free h and r block Example. Free h and r block Company A has a money purchase pension plan. Free h and r block Its plan year is from July 1 to June 30. Free h and r block The plan provides that contributions must be allocated as of June 30. Free h and r block Bob, an employee, leaves Company A on December 31, 2012. Free h and r block The contribution for the plan year ending on June 30, 2013, is made February 15, 2014. Free h and r block Because an amount is contributed to Bob's account for the plan year, Bob is covered by the plan for his 2013 tax year. Free h and r block   A special rule applies to certain plans in which it is not possible to determine if an amount will be contributed to your account for a given plan year. Free h and r block If, for a plan year, no amounts have been allocated to your account that are attributable to employer contributions, employee contributions, or forfeitures, by the last day of the plan year, and contributions are discretionary for the plan year, you are not covered for the tax year in which the plan year ends. Free h and r block If, after the plan year ends, the employer makes a contribution for that plan year, you are covered for the tax year in which the contribution is made. Free h and r block Example. Free h and r block Mickey was covered by a profit-sharing plan and left the company on December 31, 2012. Free h and r block The plan year runs from July 1 to June 30. Free h and r block Under the terms of the plan, employer contributions do not have to be made, but if they are made, they are contributed to the plan before the due date for filing the company's tax return. Free h and r block Such contributions are allocated as of the last day of the plan year, and allocations are made to the accounts of individuals who have any service during the plan year. Free h and r block As of June 30, 2013, no contributions were made that were allocated to the June 30, 2013, plan year, and no forfeitures had been allocated within the plan year. Free h and r block In addition, as of that date, the company was not obligated to make a contribution for such plan year and it was impossible to determine whether or not a contribution would be made for the plan year. Free h and r block On December 31, 2013, the company decided to contribute to the plan for the plan year ending June 30, 2013. Free h and r block That contribution was made on February 15, 2014. Free h and r block Mickey is an active participant in the plan for his 2014 tax year but not for his 2013 tax year. Free h and r block No vested interest. Free h and r block   If an amount is allocated to your account for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the account. Free h and r block Defined benefit plan. Free h and r block   If you are eligible to participate in your employer's defined benefit plan for the plan year that ends within your tax year, you are covered by the plan. Free h and r block This rule applies even if you: Declined to participate in the plan, Did not make a required contribution, or Did not perform the minimum service required to accrue a benefit for the year. Free h and r block   A defined benefit plan is any plan that is not a defined contribution plan. Free h and r block In a defined benefit plan, the level of benefits to be provided to each participant is spelled out in the plan. Free h and r block The plan administrator figures the amount needed to provide those benefits and those amounts are contributed to the plan. Free h and r block Defined benefit plans include pension plans and annuity plans. Free h and r block Example. Free h and r block Nick, an employee of Company B, is eligible to participate in Company B's defined benefit plan, which has a July 1 to June 30 plan year. Free h and r block Nick leaves Company B on December 31, 2012. Free h and r block Because Nick is eligible to participate in the plan for its year ending June 30, 2013, he is covered by the plan for his 2013 tax year. Free h and r block No vested interest. Free h and r block   If you accrue a benefit for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the accrual. Free h and r block Situations in Which You Are Not Covered Unless you are covered by another employer plan, you are not covered by an employer plan if you are in one of the situations described below. Free h and r block Social security or railroad retirement. Free h and r block   Coverage under social security or railroad retirement is not coverage under an employer retirement plan. Free h and r block Benefits from previous employer's plan. Free h and r block   If you receive retirement benefits from a previous employer's plan, you are not covered by that plan. Free h and r block Reservists. Free h and r block   If the only reason you participate in a plan is because you are a member of a reserve unit of the Armed Forces, you may not be covered by the plan. Free h and r block You are not covered by the plan if both of the following conditions are met. Free h and r block The plan you participate in is established for its employees by: The United States, A state or political subdivision of a state, or An instrumentality of either (a) or (b) above. Free h and r block You did not serve more than 90 days on active duty during the year (not counting duty for training). Free h and r block Volunteer firefighters. Free h and r block   If the only reason you participate in a plan is because you are a volunteer firefighter, you may not be covered by the plan. Free h and r block You are not covered by the plan if both of the following conditions are met. Free h and r block The plan you participate in is established for its employees by: The United States, A state or political subdivision of a state, or An instrumentality of either (a) or (b) above. Free h and r block Your accrued retirement benefits at the beginning of the year will not provide more than $1,800 per year at retirement. Free h and r block Limit if Covered by Employer Plan As discussed earlier, the deduction you can take for contributions made to your traditional IRA depends on whether you or your spouse was covered for any part of the year by an employer retirement plan. Free h and r block Your deduction is also affected by how much income you had and by your filing status. Free h and r block Your deduction may also be affected by social security benefits you received. Free h and r block Reduced or no deduction. Free h and r block   If either you or your spouse was covered by an employer retirement plan, you may be entitled to only a partial (reduced) deduction or no deduction at all, depending on your income and your filing status. Free h and r block   Your deduction begins to decrease (phase out) when your income rises above a certain amount and is eliminated altogether when it reaches a higher amount. Free h and r block These amounts vary depending on your filing status. Free h and r block   To determine if your deduction is subject to the phaseout, you must determine your modified adjusted gross income (AGI) and your filing status, as explained later under Deduction Phaseout . Free h and r block Once you have determined your modified AGI and your filing status, you can use Table 1-2 or Table 1-3 to determine if the phaseout applies. Free h and r block Social Security Recipients Instead of using Table 1-2 or Table 1-3 and Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, later, complete the worksheets in Appendix B of this publication if, for the year, all of the following apply. Free h and r block You received social security benefits. Free h and r block You received taxable compensation. Free h and r block Contributions were made to your traditional IRA. Free h and r block You or your spouse was covered by an employer retirement plan. Free h and r block Use the worksheets in Appendix B to figure your IRA deduction, your nondeductible contribution, and the taxable portion, if any, of your social security benefits. Free h and r block Appendix B includes an example with filled-in worksheets to assist you. Free h and r block Table 1-2. Free h and r block Effect of Modified AGI1 on Deduction if You Are Covered by a Retirement Plan at Work If you are covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. Free h and r block IF your filing status is . Free h and r block . Free h and r block . Free h and r block AND your modified adjusted gross income (modified AGI) is . Free h and r block . Free h and r block . Free h and r block THEN you can take . Free h and r block . Free h and r block . Free h and r block single or head of household $59,000 or less a full deduction. Free h and r block more than $59,000 but less than $69,000 a partial deduction. Free h and r block $69,000 or more no deduction. Free h and r block married filing jointly or  qualifying widow(er) $95,000 or less a full deduction. Free h and r block more than $95,000 but less than $115,000 a partial deduction. Free h and r block $115,000 or more no deduction. Free h and r block married filing separately2 less than $10,000 a partial deduction. Free h and r block $10,000 or more no deduction. Free h and r block 1 Modified AGI (adjusted gross income). Free h and r block See Modified adjusted gross income (AGI) , later. Free h and r block  2 If you did not live with your spouse at any time during the year, your filing status is considered Single for this purpose (therefore, your IRA deduction is determined under the “Single” filing status). Free h and r block Table 1-3. Free h and r block Effect of Modified AGI1 on Deduction if You Are NOT Covered by a Retirement Plan at Work If you are not covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. Free h and r block IF your filing status is . Free h and r block . Free h and r block . Free h and r block AND your modified adjusted gross income (modified AGI) is . Free h and r block . Free h and r block . Free h and r block THEN you can take . Free h and r block . Free h and r block . Free h and r block single, head of household, or qualifying widow(er) any amount a full deduction. Free h and r block married filing jointly or separately with a spouse who is not covered by a plan at work any amount a full deduction. Free h and r block married filing jointly with a spouse who is covered by a plan at work $178,000 or less a full deduction. Free h and r block more than $178,000 but less than $188,000 a partial deduction. Free h and r block $188,000 or more no deduction. Free h and r block married filing separately with a spouse who is covered by a plan at work2 less than $10,000 a partial deduction. Free h and r block $10,000 or more no deduction. Free h and r block 1 Modified AGI (adjusted gross income). Free h and r block See Modified adjusted gross income (AGI) , later. Free h and r block  2 You are entitled to the full deduction if you did not live with your spouse at any time during the year. Free h and r block For 2014, if you are not covered by a retirement plan at work and you are married filing jointly with a spouse who is covered by a plan at work, your deduction is phased out if your modified AGI is more than $181,000 but less than $191,000. Free h and r block If your AGI is $191,000 or more, you cannot take a deduction for a contribution to a traditional IRA. Free h and r block Deduction Phaseout The amount of any reduction in the limit on your IRA deduction (phaseout) depends on whether you or your spouse was covered by an employer retirement plan. Free h and r block Covered by a retirement plan. Free h and r block   If you are covered by an employer retirement plan and you did not receive any social security retirement benefits, your IRA deduction may be reduced or eliminated depending on your filing status and modified AGI, as shown in Table 1-2. Free h and r block For 2014, if you are covered by a retirement plan at work, your IRA deduction will not be reduced (phased out) unless your modified AGI is: More than $60,000 but less than $70,000 for a single individual (or head of household), More than $96,000 but less than $116,000 for a married couple filing a joint return (or a qualifying widow(er)), or Less than $10,000 for a married individual filing a separate return. Free h and r block If your spouse is covered. Free h and r block   If you are not covered by an employer retirement plan, but your spouse is, and you did not receive any social security benefits, your IRA deduction may be reduced or eliminated entirely depending on your filing status and modified AGI as shown in Table 1-3. Free h and r block Filing status. Free h and r block   Your filing status depends primarily on your marital status. Free h and r block For this purpose, you need to know if your filing status is single or head of household, married filing jointly or qualifying widow(er), or married filing separately. Free h and r block If you need more information on filing status, see Publication 501, Exemptions, Standard Deduction, and Filing Information. Free h and r block Lived apart from spouse. Free h and r block   If you did not live with your spouse at any time during the year and you file a separate return, your filing status, for this purpose, is single. Free h and r block Modified adjusted gross income (AGI). Free h and r block   You can use Worksheet 1-1 to figure your modified AGI. Free h and r block If you made contributions to your IRA for 2013 and received a distribution from your IRA in 2013, see Both contributions for 2013 and distributions in 2013 , later. Free h and r block    Do not assume that your modified AGI is the same as your compensation. Free h and r block Your modified AGI may include income in addition to your compensation (discussed earlier) such as interest, dividends, and income from IRA distributions. Free h and r block Form 1040. Free h and r block   If you file Form 1040, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. Free h and r block IRA deduction. Free h and r block Student loan interest deduction. Free h and r block Tuition and fees deduction. Free h and r block Domestic production activities deduction. Free h and r block Foreign earned income exclusion. Free h and r block Foreign housing exclusion or deduction. Free h and r block Exclusion of qualified savings bond interest shown on Form 8815. Free h and r block Exclusion of employer-provided adoption benefits shown on Form 8839. Free h and r block This is your modified AGI. Free h and r block Form 1040A. Free h and r block   If you file Form 1040A, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. Free h and r block IRA deduction. Free h and r block Student loan interest deduction. Free h and r block Tuition and fees deduction. Free h and r block Exclusion of qualified savings bond interest shown on Form 8815. Free h and r block This is your modified AGI. Free h and r block Form 1040NR. Free h and r block   If you file Form 1040NR, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. Free h and r block IRA deduction. Free h and r block Student loan interest deduction. Free h and r block Domestic production activities deduction. Free h and r block Exclusion of qualified savings bond interest shown on Form 8815. Free h and r block Exclusion of employer-provided adoption benefits shown on Form 8839. Free h and r block This is your modified AGI. Free h and r block Income from IRA distributions. Free h and r block   If you received distributions in 2013 from one or more traditional IRAs and your traditional IRAs include only deductible contributions, the distributions are fully taxable and are included in your modified AGI. Free h and r block Both contributions for 2013 and distributions in 2013. Free h and r block   If all three of the following apply, any IRA distributions you received in 2013 may be partly tax free and partly taxable. Free h and r block You received distributions in 2013 from one or more traditional IRAs, You made contributions to a traditional IRA for 2013, and Some of those contributions may be nondeductible contributions. Free h and r block (See Nondeductible Contributions and Worksheet 1-2, later. Free h and r block ) If this is your situation, you must figure the taxable part of the traditional IRA distribution before you can figure your modified AGI. Free h and r block To do this, you can use Worksheet 1-5, later. Free h and r block   If at least one of the above does not apply, figure your modified AGI using Worksheet 1-1, later. Free h and r block How To Figure Your Reduced IRA Deduction If you or your spouse is covered by an employer retirement plan and you did not receive any social security benefits, you can figure your reduced IRA deduction by using Worksheet 1-2. Free h and r block Figuring Your Reduced IRA Deduction for 2013. Free h and r block The Instructions for Form 1040, Form 1040A, and Form 1040NR include similar worksheets that you can use instead of the worksheet in this publication. Free h and r block If you or your spouse is covered by an employer retirement plan, and you received any social security benefits, see Social Security Recipients , earlier. Free h and r block Note. Free h and r block If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Free h and r block Worksheet 1-1. Free h and r block Figuring Your Modified AGI Use this worksheet to figure your modified AGI for traditional IRA purposes. Free h and r block 1. Free h and r block Enter your adjusted gross income (AGI) from Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37, figured without taking into account the amount from Form 1040, line 32; Form 1040A, line 17; or Form 1040NR, line 32 1. Free h and r block   2. Free h and r block Enter any student loan interest deduction from Form 1040, line 33; Form 1040A, line 18; or Form 1040NR, line 33 2. Free h and r block   3. Free h and r block Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 3. Free h and r block   4. Free h and r block Enter any domestic production activities deduction from Form 1040, line 35, or Form 1040NR, line 34 4. Free h and r block   5. Free h and r block Enter any foreign earned income exclusion and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 5. Free h and r block   6. Free h and r block Enter any foreign housing deduction from Form 2555, line 50 6. Free h and r block   7. Free h and r block Enter any excludable savings bond interest from Form 8815, line 14 7. Free h and r block   8. Free h and r block Enter any excluded employer-provided adoption benefits from Form 8839, line 28 8. Free h and r block   9. Free h and r block Add lines 1 through 8. Free h and r block This is your Modified AGI for traditional IRA purposes 9. Free h and r block   Reporting Deductible Contributions If you file Form 1040, enter your IRA deduction on line 32 of that form. Free h and r block If you file Form 1040A, enter your IRA deduction on line 17 of that form. Free h and r block If you file Form 1040NR, enter your IRA deduction on line 32 of that form. Free h and r block You cannot deduct IRA contributions on Form 1040EZ or Form 1040NR-EZ. Free h and r block Self-employed. Free h and r block   If you are self-employed (a sole proprietor or partner) and have a SIMPLE IRA, enter your deduction for allowable plan contributions on Form 1040, line 28. Free h and r block If you file Form 1040NR, enter your deduction on line 28 of that form. Free h and r block Nondeductible Contributions Although your deduction for IRA contributions may be reduced or eliminated, contributions can be made to your IRA of up to the general limit or, if it applies, the Kay Bailey Hutchison Spousal IRA limit. Free h and r block The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. Free h and r block Example. Free h and r block Tony is 29 years old and single. Free h and r block In 2013, he was covered by a retirement plan at work. Free h and r block His salary is $62,000. Free h and r block His modified AGI is $70,000. Free h and r block Tony makes a $5,500 IRA contribution for 2013. Free h and r block Because he was covered by a retirement plan and his modified AGI is above $69,000, he cannot deduct his $5,500 IRA contribution. Free h and r block He must designate this contribution as a nondeductible contribution by reporting it on Form 8606. Free h and r block Repayment of reservist distributions. Free h and r block   Nondeductible contributions may include repayments of qualified reservist distributions. Free h and r block For more information, see Qualified reservist repayments under How Much Can Be Contributed, earlier. Free h and r block Form 8606. Free h and r block   To designate contributions as nondeductible, you must file Form 8606. Free h and r block (See the filled-in Forms 8606 in this chapter. Free h and r block )   You do not have to designate a contribution as nondeductible until you file your tax return. Free h and r block When you file, you can even designate otherwise deductible contributions as nondeductible contributions. Free h and r block   You must file Form 8606 to report nondeductible contributions even if you do not have to file a tax return for the year. Free h and r block    A Form 8606 is not used for the year that you make a rollover from a qualified retirement plan to a traditional IRA and the rollover includes nontaxable amounts. Free h and r block In those situations, a Form 8606 is completed for the year you take a distribution from that IRA. Free h and r block See Form 8606 under Distributions Fully or Partly Taxable, later. Free h and r block Failure to report nondeductible contributions. Free h and r block   If you do not report nondeductible contributions, all of the contributions to your traditional IRA will be treated like deductible contributions when withdrawn. Free h and r block All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. Free h and r block Penalty for overstatement. Free h and r block   If you overstate the amount of nondeductible contributions on your Form 8606 for any tax year, you must pay a penalty of $100 for each overstatement, unless it was due to reasonable cause. Free h and r block Penalty for failure to file Form 8606. Free h and r block   You will have to pay a $50 penalty if you do not file a required Form 8606, unless you can prove that the failure was due to reasonable cause. Free h and r block Tax on earnings on nondeductible contributions. Free h and r block   As long as contributions are within the contribution limits, none of the earnings or gains on contributions (deductible or nondeductible) will be taxed until they are distributed. Free h and r block Cost basis. Free h and r block   You will have a cost basis in your traditional IRA if you made any nondeductible contributions. Free h and r block Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions. Free h and r block    Commonly, distributions from your traditional IRAs will include both taxable and nontaxable (cost basis) amounts. Free h and r block See Are Distributions Taxable, later, for more information. Free h and r block Recordkeeping. Free h and r block There is a recordkeeping worksheet, Appendix A. Free h and r block Summary Record of Traditional IRA(s) for 2013 , that you can use to keep a record of deductible and nondeductible IRA contributions. Free h and r block Examples — Worksheet for Reduced IRA Deduction for 2013 The following examples illustrate the use of Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013. Free h and r block Example 1. Free h and r block For 2013, Tom and Betty file a joint return on Form 1040. Free h and r block They are both 39 years old. Free h and r block They are both employed and Tom is covered by his employer's retirement plan. Free h and r block Tom's salary is $59,000 and Betty's is $32,555. Free h and r block They each have a traditional IRA and their combined modified AGI, which includes $5,000 interest and dividend income, is $96,555. Free h and r block Because their modified AGI is between $95,000 and $115,000 and Tom is covered by an employer plan, Tom is subject to the deduction phaseout discussed earlier under Limit if Covered by Employer Plan . Free h and r block For 2013, Tom contributed $5,500 to his IRA and Betty contributed $5,500 to hers. Free h and r block Even though they file a joint return, they must use separate worksheets to figure the IRA deduction for each of them. Free h and r block Tom can take a deduction of only $5,080. Free h and r block He can choose to treat the $5,080 as either deductible or nondeductible contributions. Free h and r block He can either leave the $420 ($5,500 − $5,080) of nondeductible contributions in his IRA or withdraw them by April 15, 2014. Free h and r block He decides to treat the $5,080 as deductible contributions and leave the $420 of nondeductible contributions in his IRA. Free h and r block Using Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, Tom figures his deductible and nondeductible amounts as shown on Worksheet 1-2. Free h and r block Figuring Your Reduced IRA Deduction for 2013—Example 1 Illustrated. Free h and r block Betty figures her IRA deduction as follows. Free h and r block Betty can treat all or part of her contributions as either deductible or nondeductible. Free h and r block This is because her $5,500 contribution for 2013 is not subject to the deduction phaseout discussed earlier under Limit if Covered by Employer Plan . Free h and r block She does not need to use Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, because their modified AGI is not within the phaseout range that applies. Free h and r block Betty decides to treat her $5,500 IRA contributions as deductible. Free h and r block The IRA deductions of $5,080 and $5,500 on the joint return for Tom and Betty total $10,580. Free h and r block Example 2. Free h and r block For 2013, Ed and Sue file a joint return on Form 1040. Free h and r block They are both 39 years old. Free h and r block Ed is covered by his employer's retirement plan. Free h and r block Ed's salary is $45,000. Free h and r block Sue had no compensation for the year and did not contribute to an IRA. Free h and r block Sue is not covered by an employer plan. Free h and r block Ed contributed $5,500 to his traditional IRA and $5,500 to a traditional IRA for Sue (a Kay Bailey Hutchison Spousal IRA). Free h and r block Their combined modified AGI, which includes $2,000 interest and dividend income and a large capital gain from the sale of stock, is $180,555. Free h and r block Because the combined modified AGI is $115,000 or more, Ed cannot deduct any of the contribution to his traditional IRA. Free h and r block He can either leave the $5,500 of nondeductible contributions in his IRA or withdraw them by April 15, 2014. Free h and r block Sue figures her IRA deduction as shown on Worksheet 1-2. Free h and r block Figuring Your Reduced IRA Deduction for 2013—Example 2 Illustrated. Free h and r block Worksheet 1-2. Free h and r block Figuring Your Reduced IRA Deduction for 2013 (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. Free h and r block ) Note. Free h and r block If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Free h and r block IF you . Free h and r block . Free h and r block . Free h and r block AND your  filing status is . Free h and r block . Free h and r block . Free h and r block AND your modified AGI is over . Free h and r block . Free h and r block . Free h and r block THEN enter on  line 1 below . Free h and r block . Free h and r block . Free h and r block       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. Free h and r block Enter applicable amount from table above 1. Free h and r block   2. Free h and r block Enter your modified AGI (that of both spouses, if married filing jointly) 2. Free h and r block     Note. Free h and r block If line 2 is equal to or more than the amount on line 1, stop here. Free h and r block  Your IRA contributions are not deductible. Free h and r block See Nondeductible Contributions , earlier. Free h and r block     3. Free h and r block Subtract line 2 from line 1. Free h and r block If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. Free h and r block You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. Free h and r block   4. Free h and r block Multiply line 3 by the percentage below that applies to you. Free h and r block If the result is not a multiple of $10, round it to the next highest multiple of $10. Free h and r block (For example, $611. Free h and r block 40 is rounded to $620. Free h and r block ) However, if the result is less than $200, enter $200. Free h and r block         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Free h and r block 5% (. Free h and r block 275) (by 32. Free h and r block 5% (. Free h and r block 325) if you are age 50 or older). Free h and r block All others, multiply line 3 by 55% (. Free h and r block 55) (by 65% (. Free h and r block 65) if you are age 50 or older). Free h and r block 4. Free h and r block   5. Free h and r block Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). Free h and r block If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. Free h and r block If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Free h and r block   6. Free h and r block Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). Free h and r block If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Free h and r block 6. Free h and r block   7. Free h and r block IRA deduction. Free h and r block Compare lines 4, 5, and 6. Free h and r block Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. Free h and r block If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Free h and r block   8. Free h and r block Nondeductible contribution. Free h and r block Subtract line 7 from line 5 or 6, whichever is smaller. Free h and r block  Enter the result here and on line 1 of your Form 8606 8. Free h and r block   Worksheet 1-2. Free h and r block Figuring Your Reduced IRA Deduction for 2013—Example 1 Illustrated (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. Free h and r block ) Note. Free h and r block If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Free h and r block IF you . Free h and r block . Free h and r block . Free h and r block AND your  filing status is . Free h and r block . Free h and r block . Free h and r block AND your modified AGI is over . Free h and r block . Free h and r block . Free h and r block THEN enter on  line 1 below . Free h and r block . Free h and r block . Free h and r block       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. Free h and r block Enter applicable amount from table above 1. Free h and r block 115,000 2. Free h and r block Enter your modified AGI (that of both spouses, if married filing jointly) 2. Free h and r block 96,555   Note. Free h and r block If line 2 is equal to or more than the amount on line 1, stop here. Free h and r block  Your IRA contributions are not deductible. Free h and r block See Nondeductible Contributions , earlier. Free h and r block     3. Free h and r block Subtract line 2 from line 1. Free h and r block If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. Free h and r block You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. Free h and r block 18,445 4. Free h and r block Multiply line 3 by the percentage below that applies to you. Free h and r block If the result is not a multiple of $10, round it to the next highest multiple of $10. Free h and r block (For example, $611. Free h and r block 40 is rounded to $620. Free h and r block ) However, if the result is less than $200, enter $200. Free h and r block         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Free h and r block 5% (. Free h and r block 275) (by 32. Free h and r block 5% (. Free h and r block 325) if you are age 50 or older). Free h and r block All others, multiply line 3 by 55% (. Free h and r block 55) (by 65% (. Free h and r block 65) if you are age 50 or older). Free h and r block 4. Free h and r block 5,080 5. Free h and r block Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). Free h and r block If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. Free h and r block If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Free h and r block 59,000 6. Free h and r block Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). Free h and r block If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Free h and r block 6. Free h and r block 5,500 7. Free h and r block IRA deduction. Free h and r block Compare lines 4, 5, and 6. Free h and r block Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. Free h and r block If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Free h and r block 5,080 8. Free h and r block Nondeductible contribution. Free h and r block Subtract line 7 from line 5 or 6, whichever is smaller. Free h and r block  Enter the result here and on line 1 of your Form 8606 8. Free h and r block 420 Worksheet 1-2. Free h and r block Figuring Your Reduced IRA Deduction for 2013—Example 2 Illustrated (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. Free h and r block ) Note. Free h and r block If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Free h and r block IF you . Free h and r block . Free h and r block . Free h and r block AND your  filing status is . Free h and r block . Free h and r block . Free h and r block AND your modified AGI is over . Free h and r block . Free h and r block . Free h and r block THEN enter on  line 1 below . Free h and r block . Free h and r block . Free h and r block       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. Free h and r block Enter applicable amount from table above 1. Free h and r block 188,000 2. Free h and r block Enter your modified AGI (that of both spouses, if married filing jointly) 2. Free h and r block 180,555   Note. Free h and r block If line 2 is equal to or more than the amount on line 1, stop here. Free h and r block  Your IRA contributions are not deductible. Free h and r block See Nondeductible Contributions , earlier. Free h and r block     3. Free h and r block Subtract line 2 from line 1. Free h and r block If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. Free h and r block You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. Free h and r block 7,445 4. Free h and r block Multiply line 3 by the percentage below that applies to you. Free h and r block If the result is not a multiple of $10, round it to the next highest multiple of $10. Free h and r block (For example, $611. Free h and r block 40 is rounded to $620. Free h and r block ) However, if the result is less than $200, enter $200. Free h and r block         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Free h and r block 5% (. Free h and r block 275) (by 32. Free h and r block 5% (. Free h and r block 325) if you are age 50 or older). Free h and r block All others, multiply line 3 by 55% (. Free h and r block 55) (by 65% (. Free h and r block 65) if you are age 50 or older). Free h and r block 4. Free h and r block 4,100 5. Free h and r block Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). Free h and r block If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. Free h and r block If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Free h and r block 39,500 6. Free h and r block Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). Free h and r block If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Free h and r block 6. Free h and r block 5,500 7. Free h and r block IRA deduction. Free h and r block Compare lines 4, 5, and 6. Free h and r block Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. Free h and r block If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Free h and r block 4,100 8. Free h and r block Nondeductible contribution. Free h and r block Subtract line 7 from line 5 or 6, whichever is smaller. Free h and r block  Enter the result here and on line 1 of your Form 8606 8. Free h and r block 1,400 What if You Inherit an IRA? If you inherit a traditional IRA, you are called a beneficiary. Free h and r block A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. Free h and r block Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive. Free h and r block Inherited from spouse. Free h and r block   If you inherit a traditional IRA from your spouse, you generally have the following three choices. Free h and r block You can: Treat it as your own IRA by designating yourself as the account owner. Free h and r block Treat it as your own by rolling it over into your IRA, or to the extent it is taxable, into a: Qualified employer plan, Qualified employee annuity plan (section 403(a) plan), Tax-sheltered annuity plan (s