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How To File Just State Taxes

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How To File Just State Taxes

How to file just state taxes Publication 971 - Main Content Table of Contents How To Request ReliefException for agreements relating to TEFRA partnership proceedings. How to file just state taxes The IRS Must Contact Your Spouse or Former Spouse Tax Court Review of Request Community Property LawsRelief for Married Persons Who Did Not File Joint Returns Innocent Spouse ReliefUnderstated Tax Erroneous Items Actual Knowledge or Reason To Know Indications of Unfairness for Innocent Spouse Relief Separation of Liability ReliefLimitations on Relief Equitable ReliefConditions for Getting Equitable Relief Factors for Determining Whether To Grant Equitable Relief RefundsProof Required Refunds Under Equitable Relief Limit on Amount of Refund Filled-in Form 8857 Flowcharts How To Request Relief File Form 8857 to ask the IRS for the types of relief discussed in this publication. How to file just state taxes If you are requesting relief for more than three tax years, you must file an additional Form 8857. How to file just state taxes The IRS will review your Form 8857 and let you know if you qualify. How to file just state taxes A completed Form 8857 is shown later. How to file just state taxes When to file Form 8857. How to file just state taxes   You should file Form 8857 as soon as you become aware of a tax liability for which you believe only your spouse or former spouse should be held responsible. How to file just state taxes The following are some of the ways you may become aware of such a liability. How to file just state taxes The IRS is examining your tax return and proposing to increase your tax liability. How to file just state taxes The IRS sends you a notice. How to file just state taxes   You must file Form 8857 no later than two years after the date on which the IRS first attempted to collect the tax from you that occurs after July 22, 1998. How to file just state taxes (But see the exceptions below for different filing deadlines that apply. How to file just state taxes ) For this reason, do not delay filing because you do not have all the documentation. How to file just state taxes   Collection activities that may start the 2-year period are: The IRS offset your income tax refund against an amount you owed on a joint return for another year and the IRS informed you about your right to file Form 8857. How to file just state taxes The filing of a claim by the IRS in a court proceeding in which you were a party or the filing of a claim in a proceeding that involves your property. How to file just state taxes This includes the filing of a proof of claim in a bankruptcy proceeding. How to file just state taxes The filing of a suit by the United States against you to collect the joint liability. How to file just state taxes The issuance of a section 6330 notice, which notifies you of the IRS' intent to levy and your right to a collection due process (CDP) hearing. How to file just state taxes The collection-related notices include, but are not limited to, Letter 11 and Letter 1058. How to file just state taxes Exception for equitable relief. How to file just state taxes   On July 25, 2011, the IRS issued Notice 2011-70 (available at www. How to file just state taxes irs. How to file just state taxes gov/irb/2011-32_IRB/ar11. How to file just state taxes html) expanding the amount of time to request equitable relief. How to file just state taxes The amount of time to request equitable relief depends on whether you are seeking relief from a balance due, seeking a credit or refund, or both: Balance Due – Generally, you must file your request within the time period the IRS has to collect the tax. How to file just state taxes Generally, the IRS has 10 years from the date the tax liability was assessed to collect the tax. How to file just state taxes In certain cases, the 10-year period is suspended. How to file just state taxes The amount of time the suspension is in effect will extend the time the IRS has to collect the tax. How to file just state taxes See Pub. How to file just state taxes 594, The IRS Collection Process, for details. How to file just state taxes Credit or Refund – Generally, you must file your request within 3 years after the date the original return was filed or within 2 years after the date the tax was paid, whichever is later. How to file just state taxes But you may have more time to file if you live in a federally declared disaster area or you are physically or mentally unable to manage your financial affairs. How to file just state taxes See Pub. How to file just state taxes 556, Examination of Returns, Appeal Rights, and Claims for Refund, for details. How to file just state taxes Both a Balance Due and a Credit or Refund – If you are seeking a refund of amounts you paid and relief from a balance due over and above what you have paid, the time period for credit or refund will apply to any payments you have made, and the time period for collection of a balance due amount will apply to any unpaid liability. How to file just state taxes Exception for relief based on community property laws. How to file just state taxes   If you are requesting relief based on community property laws, a different filing deadline applies. How to file just state taxes See Relief from liability arising from community property law discussed later under Community Property Laws . How to file just state taxes Form 8857 filed by or on behalf of a decedent. How to file just state taxes   An executor (including any other duly appointed representative) may pursue a Form 8857 filed during the decedent's lifetime. How to file just state taxes An executor (including any other duly appointed representative) may also file Form 8857 as long as the decedent satisfied the eligibility requirements while alive. How to file just state taxes For purposes of separation of liability relief (discussed later), the decedent's marital status is determined on the earlier of the date relief was requested or the date of death. How to file just state taxes Situations in which you are not entitled to relief. How to file just state taxes   You are not entitled to innocent spouse relief for any tax year to which the following situations apply. How to file just state taxes In a final decision dated after July 22, 1998, a court considered whether to grant you relief from joint liability and decided not to do so. How to file just state taxes In a final decision dated after July 22, 1998, a court did not consider whether to grant you relief from joint liability, but you meaningfully participated in the proceeding and could have asked for relief. How to file just state taxes You entered into an offer in compromise with the IRS. How to file just state taxes You entered into a closing agreement with the IRS that disposed of the same liability for which you want to seek relief. How to file just state taxes Exception for agreements relating to TEFRA partnership proceedings. How to file just state taxes   You may be entitled to relief, discussed in (4) earlier, if you entered into a closing agreement for both partnership items and nonpartnership items, while you were a party to a pending TEFRA partnership proceeding. How to file just state taxes (TEFRA is an acronym that refers to the “Tax Equity and Fiscal Responsibility Act of 1982” that prescribed the tax treatment of partnership items. How to file just state taxes ) You are not entitled to relief for the nonpartnership items, but you will be entitled to relief for the partnership items (if you otherwise qualify). How to file just state taxes Transferee liability not affected by innocent spouse relief provisions. How to file just state taxes   The innocent spouse relief provisions do not affect tax liabilities that arise under federal or state transferee liability or property laws. How to file just state taxes Therefore, even if you are relieved of the tax liability under the innocent spouse relief provisions, you may remain liable for the unpaid tax, interest, and penalties to the extent provided by these laws. How to file just state taxes Example. How to file just state taxes Herb and Wanda timely filed their 2008 joint income tax return on April 15, 2009. How to file just state taxes Herb died in March 2010, and the executor of Herb's will transferred all of the estate's assets to Wanda. How to file just state taxes In August 2010, the IRS assessed a deficiency for the 2008 return. How to file just state taxes The items causing the deficiency belong to Herb. How to file just state taxes Wanda is relieved of the deficiency under the innocent spouse relief provisions, and Herb's estate remains solely liable for it. How to file just state taxes However, the IRS may collect the deficiency from Wanda to the extent permitted under federal or state transferee liability or property laws. How to file just state taxes The IRS Must Contact Your Spouse or Former Spouse By law, the IRS must contact your spouse or former spouse. How to file just state taxes There are no exceptions, even for victims of spousal abuse or domestic violence. How to file just state taxes We will inform your spouse or former spouse that you filed Form 8857 and will allow him or her to participate in the process. How to file just state taxes If you are requesting relief from joint and several liability on a joint return, the IRS must also inform him or her of its preliminary and final determinations regarding your request for relief. How to file just state taxes However, to protect your privacy, the IRS will not disclose your personal information (for example, your current name, address, phone number(s), information about your employer, your income or assets) or any other information that does not relate to making a determination about your request for relief from liability. How to file just state taxes If you petition the Tax Court (explained below), your spouse or former spouse may see your personal information. How to file just state taxes Tax Court Review of Request After you file Form 8857, you may be able to petition (ask) the United States Tax Court to review your request for relief in the following two situations. How to file just state taxes The IRS sends you a final determination letter regarding your request for relief. How to file just state taxes You do not receive a final determination letter from the IRS within six months from the date you filed Form 8857. How to file just state taxes If you seek equitable relief for an underpaid tax, you will be able to get a Tax Court review of your request only if the tax arose or remained unpaid on or after December 20, 2006. How to file just state taxes The United States Tax Court is an independent judicial body and is not part of the IRS. How to file just state taxes You must file a petition with the United States Tax Court in order for it to review your request for relief. How to file just state taxes You must file the petition no later than the 90th day after the date the IRS mails its final determination notice to you. How to file just state taxes If you do not file a petition, or you file it late, the Tax Court cannot review your request for relief. How to file just state taxes You can get a copy of the rules for filing a petition by writing to the Tax Court at the following address:    United States Tax Court 400 Second Street, NW Washington, DC 20217 Or you can visit the Tax Court's website at www. How to file just state taxes ustaxcourt. How to file just state taxes gov Community Property Laws You must generally follow community property laws when filing a tax return if you are married and live in a community property state. How to file just state taxes Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. How to file just state taxes Generally, community property laws require you to allocate community income and expenses equally between both spouses. How to file just state taxes However, community property laws are not taken into account in determining whether an item belongs to you or to your spouse (or former spouse) for purposes of requesting any relief from liability. How to file just state taxes Relief for Married Persons Who Did Not File Joint Returns Married persons who live in community property states, but who did not file joint returns, have two ways to get relief. How to file just state taxes Relief From Liability Arising From Community Property Law You are not responsible for the tax relating to an item of community income if all the following conditions exist. How to file just state taxes You did not file a joint return for the tax year. How to file just state taxes You did not include the item of community income in gross income. How to file just state taxes The item of community income you did not include is one of the following: Wages, salaries, and other compensation your spouse (or former spouse) received for services he or she performed as an employee. How to file just state taxes Income your spouse (or former spouse) derived from a trade or business he or she operated as a sole proprietor. How to file just state taxes Your spouse's (or former spouse's) distributive share of partnership income. How to file just state taxes Income from your spouse's (or former spouse's) separate property (other than income described in (a), (b), or (c)). How to file just state taxes Use the appropriate community property law to determine what is separate property. How to file just state taxes Any other income that belongs to your spouse (or former spouse) under community property law. How to file just state taxes You establish that you did not know of, and had no reason to know of, that community income. How to file just state taxes See  Actual Knowledge or Reason To Know , below. How to file just state taxes Under all facts and circumstances, it would not be fair to include the item of community income in your gross income. How to file just state taxes See Indications of unfairness for liability arising from community property law, later. How to file just state taxes Actual knowledge or reason to know. How to file just state taxes   You knew or had reason to know of an item of community income if: You actually knew of the item of community income, or A reasonable person in similar circumstances would have known of the item of community income. How to file just state taxes Amount of community income unknown. How to file just state taxes   If you are aware of the source of the item of community income or the income-producing activity, but are unaware of the specific amount, you are considered to know or have reason to know of the item of community income. How to file just state taxes Not knowing the specific amount is not a basis for relief. How to file just state taxes Reason to know. How to file just state taxes   The IRS will consider all facts and circumstances in determining whether you had reason to know of an item of community income. How to file just state taxes The facts and circumstances include: The nature of the item of community income and the amount of the item relative to other income items. How to file just state taxes The financial situation of you and your spouse (or former spouse). How to file just state taxes Your educational background and business experience. How to file just state taxes Whether the item of community income represented a departure from a recurring pattern reflected in prior years' returns (for example, omitted income from an investment regularly reported on prior years' returns). How to file just state taxes Indications of unfairness for liability arising from community property law. How to file just state taxes   The IRS will consider all of the facts and circumstances of the case in order to determine whether it is unfair to hold you responsible for the understated tax due to the item of community income. How to file just state taxes   The following are examples of factors the IRS will consider. How to file just state taxes Whether you received a benefit, either directly or indirectly, from the omitted item of community income (defined below). How to file just state taxes Whether your spouse (or former spouse) deserted you. How to file just state taxes Whether you and your spouse have been divorced or separated. How to file just state taxes  For other factors see Factors for Determining Whether To Grant Equitable Relief later. How to file just state taxes Benefit from omitted item of community income. How to file just state taxes   A benefit includes normal support, but does not include de minimis (small) amounts. How to file just state taxes Evidence of a direct or indirect benefit may consist of transfers of property or rights to property, including transfers received several years after the filing of the return. How to file just state taxes   For example, if you receive property, including life insurance proceeds, from your spouse (or former spouse) and the property is traceable to omitted items of community income attributable to your spouse (or former spouse), you are considered to have benefitted from those omitted items of community income. How to file just state taxes Equitable Relief If you do not qualify for the relief described above and are now liable for an underpaid or understated tax you believe should be paid only by your spouse (or former spouse), you may request equitable relief (discussed later). How to file just state taxes How and When To Request Relief You request relief by filing Form 8857, as discussed earlier. How to file just state taxes Fill in Form 8857 according to the instructions. How to file just state taxes For relief from liability arising from community property law, you must file Form 8857 no later than 6 months before the expiration of the period of limitations on assessment (including extensions) against your spouse for the tax year for which you are requesting relief. How to file just state taxes However, if the IRS begins an examination of your return during that 6-month period, the latest time for requesting relief is 30 days after the date the IRS' initial contact letter to you. How to file just state taxes The period of limitation on assessment is the amount of time, generally three years, that the IRS has from the date you filed the return to assess taxes that you owe. How to file just state taxes Innocent Spouse Relief By requesting innocent spouse relief, you can be relieved of responsibility for paying tax, interest, and penalties if your spouse (or former spouse) improperly reported items or omitted items on your tax return. How to file just state taxes Generally, the tax, interest, and penalties that qualify for relief can only be collected from your spouse (or former spouse). How to file just state taxes However, you are jointly and individually responsible for any tax, interest, and penalties that do not qualify for relief. How to file just state taxes The IRS can collect these amounts from either you or your spouse (or former spouse). How to file just state taxes You must meet all of the following conditions to qualify for innocent spouse relief. How to file just state taxes You filed a joint return. How to file just state taxes There is an understated tax on the return that is due to erroneous items (defined later) of your spouse (or former spouse). How to file just state taxes You can show that when you signed the joint return you did not know, and had no reason to know, that the understated tax existed (or the extent to which the understated tax existed). How to file just state taxes See Actual Knowledge or Reason To Know, later. How to file just state taxes Taking into account all the facts and circumstances, it would be unfair to hold you liable for the understated tax. How to file just state taxes See Indications of Unfairness for Innocent Spouse Relief , later. How to file just state taxes Innocent spouse relief will not be granted if the IRS proves that you and your spouse (or former spouse) transferred property to one another as part of a fraudulent scheme. How to file just state taxes A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, former spouse, or business partner. How to file just state taxes Understated Tax You have an understated tax if the IRS determined that your total tax should be more than the amount that was actually shown on your return. How to file just state taxes Erroneous Items Erroneous items are either of the following. How to file just state taxes Unreported income. How to file just state taxes This is any gross income item received by your spouse (or former spouse) that is not reported. How to file just state taxes Incorrect deduction, credit, or basis. How to file just state taxes This is any improper deduction, credit, or property basis claimed by your spouse (or former spouse). How to file just state taxes The following are examples of erroneous items. How to file just state taxes The expense for which the deduction is taken was never paid or incurred. How to file just state taxes For example, your spouse, a cash-basis taxpayer, deducted $10,000 of advertising expenses on Schedule C of your joint Form 1040, but never paid for any advertising. How to file just state taxes The expense does not qualify as a deductible expense. How to file just state taxes For example, your spouse claimed a business fee deduction of $10,000 that was for the payment of state fines. How to file just state taxes Fines are not deductible. How to file just state taxes No factual argument can be made to support the deductibility of the expense. How to file just state taxes For example, your spouse claimed $4,000 for security costs related to a home office, which were actually veterinary and food costs for your family's two dogs. How to file just state taxes Actual Knowledge or Reason To Know You knew or had reason to know of an understated tax if: You actually knew of the understated tax, or A reasonable person in similar circumstances would have known of the understated tax. How to file just state taxes Actual knowledge. How to file just state taxes   If you actually knew about an erroneous item that belongs to your spouse (or former spouse), the relief discussed here does not apply to any part of the understated tax due to that item. How to file just state taxes You and your spouse (or former spouse) remain jointly liable for that part of the understated tax. How to file just state taxes For information about the criteria for determining whether you actually knew about an erroneous item, see Actual Knowledge later under Separation of Liability Relief. How to file just state taxes Reason to know. How to file just state taxes   If you had reason to know about an erroneous item that belongs to your spouse (or former spouse), the relief discussed here does not apply to any part of the understated tax due to that item. How to file just state taxes You and your spouse (or former spouse) remain jointly liable for that part of the understated tax. How to file just state taxes   The IRS will consider all facts and circumstances in determining whether you had reason to know of an understated tax due to an erroneous item. How to file just state taxes The facts and circumstances include: The nature of the erroneous item and the amount of the erroneous item relative to other items. How to file just state taxes The financial situation of you and your spouse (or former spouse). How to file just state taxes Your educational background and business experience. How to file just state taxes The extent of your participation in the activity that resulted in the erroneous item. How to file just state taxes Whether you failed to ask, at or before the time the return was signed, about items on the return or omitted from the return that a reasonable person would question. How to file just state taxes Whether the erroneous item represented a departure from a recurring pattern reflected in prior years' returns (for example, omitted income from an investment regularly reported on prior years' returns). How to file just state taxes Partial relief when a portion of erroneous item is unknown. How to file just state taxes   You may qualify for partial relief if, at the time you filed your return, you had no knowledge or reason to know of only a portion of an erroneous item. How to file just state taxes You will be relieved of the understated tax due to that portion of the item if all other requirements are met for that portion. How to file just state taxes Example. How to file just state taxes At the time you signed your joint return, you knew that your spouse did not report $5,000 of gambling winnings. How to file just state taxes The IRS examined your tax return several months after you filed it and determined that your spouse's unreported gambling winnings were actually $25,000. How to file just state taxes You established that you did not know about, and had no reason to know about, the additional $20,000 because of the way your spouse handled gambling winnings. How to file just state taxes The understated tax due to the $20,000 will qualify for innocent spouse relief if you meet the other requirements. How to file just state taxes The understated tax due to the $5,000 of gambling winnings you knew about will not qualify for relief. How to file just state taxes Indications of Unfairness for Innocent Spouse Relief The IRS will consider all of the facts and circumstances of the case in order to determine whether it is unfair to hold you responsible for the understated tax. How to file just state taxes The following are examples of factors the IRS will consider. How to file just state taxes Whether you received a significant benefit (defined below), either directly or indirectly, from the understated tax. How to file just state taxes Whether your spouse (or former spouse) deserted you. How to file just state taxes Whether you and your spouse have been divorced or separated. How to file just state taxes Whether you received a benefit on the return from the understated tax. How to file just state taxes For other factors, see Factors for Determining Whether To Grant Equitable Relief later under Equitable Relief. How to file just state taxes Significant benefit. How to file just state taxes   A significant benefit is any benefit in excess of normal support. How to file just state taxes Normal support depends on your particular circumstances. How to file just state taxes Evidence of a direct or indirect benefit may consist of transfers of property or rights to property, including transfers that may be received several years after the year of the understated tax. How to file just state taxes Example. How to file just state taxes You receive money from your spouse that is beyond normal support. How to file just state taxes The money can be traced to your spouse's lottery winnings that were not reported on your joint return. How to file just state taxes You will be considered to have received a significant benefit from that income. How to file just state taxes This is true even if your spouse gives you the money several years after he or she received it. How to file just state taxes Separation of Liability Relief Under this type of relief, the understated tax (plus interest and penalties) on your joint return is allocated between you and your spouse (or former spouse). How to file just state taxes The understated tax allocated to you is generally the amount you are responsible for. How to file just state taxes This type of relief is available only for unpaid liabilities resulting from the understated tax. How to file just state taxes Refunds are not allowed. How to file just state taxes To request separation of liability relief, you must have filed a joint return and meet either of the following requirements at the time you file Form 8857. How to file just state taxes You are no longer married to, or are legally separated from, the spouse with whom you filed the joint return for which you are requesting relief. How to file just state taxes (Under this rule, you are no longer married if you are widowed. How to file just state taxes ) You were not a member of the same household (explained below) as the spouse with whom you filed the joint return at any time during the 12-month per- iod ending on the date you file Form 8857. How to file just state taxes Members of the same household. How to file just state taxes   You and your spouse are not members of the same household if you are living apart and are estranged. How to file just state taxes However, you and your spouse are considered members of the same household if any of the following conditions are met. How to file just state taxes You and your spouse reside in the same dwelling. How to file just state taxes You and your spouse reside in separate dwellings but are not estranged, and one of you is temporarily absent from the other's household as explained in (3) below. How to file just state taxes Either spouse is temporarily absent from the household and it is reasonable to assume that the absent spouse will return to the household, and the household or a substantially equivalent household is maintained in anticipation of the absent spouse's return. How to file just state taxes Examples of temporary absences include absence due to imprisonment, illness, business, vacation, military service, or education. How to file just state taxes Burden of proof. How to file just state taxes   You must be able to prove that you meet all of the requirements for separation of liability relief (except actual knowledge) and that you did not transfer property to avoid tax (discussed later). How to file just state taxes You must also establish the basis for allocating the erroneous items. How to file just state taxes Limitations on Relief Even if you meet the requirements discussed previously, separation of liability relief will not be granted in the following situations. How to file just state taxes The IRS proves that you and your spouse (or former spouse) transferred assets to one another as part of a fraudulent scheme. How to file just state taxes A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, former spouse, or business partner. How to file just state taxes The IRS proves that at the time you signed your joint return, you had actual knowledge (explained below) of any erroneous items giving rise to the deficiency that were allocable to your spouse (or former spouse). How to file just state taxes For the definition of erroneous items, see Erroneous Items earlier under Innocent Spouse Relief. How to file just state taxes Your spouse (or former spouse) transferred property to you to avoid tax or the payment of tax. How to file just state taxes See Transfers of Property To Avoid Tax , later. How to file just state taxes Actual Knowledge The relief discussed here does not apply to any part of the understated tax due to your spouse's (or former spouse's) erroneous items of which you had actual knowledge. How to file just state taxes You and your spouse (or former spouse) remain jointly and severally liable for this part of the understated tax. How to file just state taxes If you had actual knowledge of only a portion of an erroneous item, the IRS will not grant relief for that portion of the item. How to file just state taxes You had actual knowledge of an erroneous item if: You knew that an item of unreported income was received. How to file just state taxes (This rule applies whether or not there was a receipt of cash. How to file just state taxes ) You knew of the facts that made an incorrect deduction or credit unallowable. How to file just state taxes For a false or inflated deduction, you knew that the expense was not incurred, or not incurred to the extent shown on the tax return. How to file just state taxes Knowledge of the source of an erroneous item is not sufficient to establish actual knowledge. How to file just state taxes Also, your actual knowledge may not be inferred when you merely had a reason to know of the erroneous item. How to file just state taxes Similarly, the IRS does not have to establish that you knew of the source of an erroneous item in order to establish that you had actual knowledge of the item itself. How to file just state taxes Your actual knowledge of the proper tax treatment of an erroneous item is not relevant for purposes of demonstrating that you had actual knowledge of that item. How to file just state taxes Neither is your actual knowledge of how the erroneous item was treated on the tax return. How to file just state taxes For example, if you knew that your spouse received dividend income, relief is not available for that income even if you did not know it was taxable. How to file just state taxes Example. How to file just state taxes Bill and Karen Green filed a joint return showing Karen's wages of $50,000 and Bill's self-employment income of $10,000. How to file just state taxes The IRS audited their return and found that Bill did not report $20,000 of self-employment income. How to file just state taxes The additional income resulted in a $6,000 understated tax, plus interest and penalties. How to file just state taxes After obtaining a legal separation from Bill, Karen filed Form 8857 to request separation of liability relief. How to file just state taxes The IRS proved that Karen actually knew about the $20,000 of additional income at the time she signed the joint return. How to file just state taxes Bill is liable for all of the understated tax, interest, and penalties because all of it was due to his unreported income. How to file just state taxes Karen is also liable for the understated tax, interest, and penalties due to the $20,000 of unreported income because she actually knew of the item. How to file just state taxes The IRS can collect the entire $6,000 plus interest and penalties from either Karen or Bill because they are jointly and individually liable for it. How to file just state taxes Factors supporting actual knowledge. How to file just state taxes   The IRS may rely on all facts and circumstances in determining whether you actually knew of an erroneous item at the time you signed the return. How to file just state taxes The following are examples of factors the IRS may use. How to file just state taxes Whether you made a deliberate effort to avoid learning about the item in order to be shielded from liability. How to file just state taxes Whether you and your spouse (or former spouse) jointly owned the property that resulted in the erroneous item. How to file just state taxes Exception for spousal abuse or domestic violence. How to file just state taxes   Even if you had actual knowledge, you may still qualify for relief if you establish that: You were the victim of spousal abuse or domestic violence before signing the return, and Because of that abuse, you did not challenge the treatment of any items on the return because you were afraid your spouse (or former spouse) would retaliate against you. How to file just state taxes   If you establish that you signed your joint return under duress (threat of harm or other form of coercion), then it is not a joint return, and you are not liable for any tax shown on that return or any tax deficiency for that return. How to file just state taxes However, you may be required to file a separate return for that tax year. How to file just state taxes For more information about duress, see the instructions for Form 8857. How to file just state taxes Transfers of Property To Avoid Tax If your spouse (or former spouse) transfers property (or the right to property) to you for the main purpose of avoiding tax or payment of tax, the tax liability allocated to you will be increased by the fair market value of the property on the date of the transfer. How to file just state taxes The increase may not be more than the entire amount of the liability. How to file just state taxes A transfer will be presumed to have as its main purpose the avoidance of tax or payment of tax if the transfer is made after the date that is 1 year before the date on which the IRS sent its first letter of proposed deficiency. How to file just state taxes This presumption will not apply if: The transfer was made under a divorce decree, separate maintenance agreement, or a written instrument incident to such an agreement, or You establish that the transfer did not have as its main purpose the avoidance of tax or payment of tax. How to file just state taxes If the presumption does not apply, but the IRS can establish that the purpose of the transfer was the avoidance of tax or payment of tax, the tax liability allocated to you will be increased as explained above. How to file just state taxes Equitable Relief If you do not qualify for innocent spouse relief, separation of liability relief, or relief from liability arising from community property law, you may still be relieved of responsibility for tax, interest, and penalties through equitable relief. How to file just state taxes Unlike innocent spouse relief or separation of liability relief, you can get equitable relief from an understated tax (defined earlier under Innocent Spouse Relief ) or an underpaid tax. How to file just state taxes An underpaid tax is an amount of tax you properly reported on your return but you have not paid. How to file just state taxes For example, your joint 2009 return shows that you and your spouse owed $5,000. How to file just state taxes You paid $2,000 with the return. How to file just state taxes You have an underpaid tax of $3,000. How to file just state taxes Conditions for Getting Equitable Relief You may qualify for equitable relief if you meet all of the following conditions. How to file just state taxes You are not eligible for innocent spouse relief, separation of liability relief, or relief from liability arising from community property law. How to file just state taxes You have an understated tax or an underpaid tax. How to file just state taxes You did not pay the tax. How to file just state taxes However, see Refunds , later, for situations in which you are entitled to a refund of payments you made. How to file just state taxes You establish that, taking into account all the facts and circumstances, it would be unfair to hold you liable for the understated or underpaid tax. How to file just state taxes See Factors for Determining Whether To Grant Equitable Relief, later. How to file just state taxes You and your spouse (or former spouse) did not transfer assets to one another as a part of a fraudulent scheme. How to file just state taxes A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, former spouse, or business partner. How to file just state taxes Your spouse (or former spouse) did not transfer property to you for the main purpose of avoiding tax or the payment of tax. How to file just state taxes See Transfers of Property To Avoid Tax, earlier, under Separation of Liability Relief. How to file just state taxes You did not file or fail to file your return with the intent to commit fraud. How to file just state taxes The income tax liability from which you seek relief must be attributable to an item of the spouse (or former spouse) with whom you filed the joint return, unless one of the following exceptions applies: The item is attributable or partially attributable to you solely due to the operation of community property law. How to file just state taxes If you meet this exception, that item will be considered attributable to your spouse (or former spouse) for purposes of equitable relief. How to file just state taxes If the item is titled in your name, the item is presumed to be attributable to you. How to file just state taxes However, you can rebut this presumption based on the facts and circumstances. How to file just state taxes You did not know, and had no reason to know, that funds intended for the payment of tax were misappropriated by your spouse (or former spouse) for his or her benefit. How to file just state taxes If you meet this exception, the IRS will consider granting equitable relief although the underpaid tax may be attributable in part or in full to your item, and only to the extent the funds intended for payment were taken by your spouse (or former spouse). How to file just state taxes You establish that you were the victim of spousal abuse or domestic violence before signing the return, and that, as a result of the prior abuse, you did not challenge the treatment of any items on the return for fear of your spouse's (or former spouse's) retaliation. How to file just state taxes If you meet this exception, relief will be considered although the understated tax or underpaid tax may be attributable in part or in full to your item. How to file just state taxes Factors for Determining Whether To Grant Equitable Relief The IRS will consider all of the facts and circumstances in order to determine whether it is unfair to hold you responsible for the understated or underpaid tax. How to file just state taxes The following are examples of factors that the IRS will consider to determine whether to grant equitable relief. How to file just state taxes The IRS will consider all factors and weigh them appropriately. How to file just state taxes Relevant Factors The following are examples of factors that may be relevant to whether the IRS will grant equitable relief. How to file just state taxes Whether you are separated (whether legally or not) or divorced from your spouse. How to file just state taxes A temporary absence, such as an absence due to imprisonment, illness, business, vacation, military service, or education, is not considered separation for this purpose. How to file just state taxes A temporary absence is one where it is reasonable to assume that the absent spouse will return to the household, and the household or a substantially equivalent household is maintained in anticipation of the absent spouse's return. How to file just state taxes Whether you would suffer a significant economic hardship if relief is not granted. How to file just state taxes (In other words, you would not be able to pay your reasonable basic living expenses. How to file just state taxes ) Whether you have a legal obligation under a divorce decree or agreement to pay the tax. How to file just state taxes This factor will not weigh in favor of relief if you knew or had reason to know, when entering into the divorce decree or agreement, that your former spouse would not pay the income tax liability. How to file just state taxes Whether you received a significant benefit (beyond normal support) from the underpaid tax or item causing the understated tax. How to file just state taxes (For a definition of significant benefit, see Indications of Unfairness for Innocent Spouse Relief earlier. How to file just state taxes ) Whether you have made a good faith effort to comply with federal income tax laws for the tax year for which you are requesting relief or the following years. How to file just state taxes Whether you knew or had reason to know about the items causing the understated tax or that the tax would not be paid, as explained next. How to file just state taxes Knowledge or reason to know. How to file just state taxes   In the case of an underpaid tax, the IRS will consider whether you did not know and had no reason to know that your spouse (or former spouse) would not pay the income tax liability. How to file just state taxes   In the case of an income tax liability that arose from an understated tax, the IRS will consider whether you did not know and had no reason to know of the item causing the understated tax. How to file just state taxes Reason to know of the item giving rise to the understated tax will not be weighed more heavily than other factors. How to file just state taxes Actual knowledge of the item giving rise to the understated tax, however, is a strong factor weighing against relief. How to file just state taxes This strong factor may be overcome if the factors in favor of equitable relief are particularly compelling. How to file just state taxes Reason to know. How to file just state taxes   In determining whether you had reason to know, the IRS will consider your level of education, any deceit or evasiveness of your spouse (or former spouse), your degree of involvement in the activity generating the income tax liability, your involvement in business and household financial matters, your business or financial expertise, and any lavish or unusual expenditures compared with past spending levels. How to file just state taxes Example. How to file just state taxes You and your spouse filed a joint 2009 return. How to file just state taxes That return showed you owed $10,000. How to file just state taxes You had $5,000 of your own money and you took out a loan to pay the other $5,000. How to file just state taxes You gave 2 checks for $5,000 each to your spouse to pay the $10,000 liability. How to file just state taxes Without telling you, your spouse took the $5,000 loan and spent it on himself. How to file just state taxes You and your spouse were divorced in 2010. How to file just state taxes In addition, you had no knowledge or reason to know at the time you signed the return that the tax would not be paid. How to file just state taxes These facts indicate to the IRS that it may be unfair to hold you liable for the $5,000 underpaid tax. How to file just state taxes The IRS will consider these facts, together with all of the other facts and circumstances, to determine whether to grant you equitable relief from the $5,000 underpaid tax. How to file just state taxes Factors Weighing in Favor of Equitable Relief The following are examples of factors that will weigh in favor of equitable relief, but will not weigh against equitable relief. How to file just state taxes Whether your spouse (or former spouse) abused you. How to file just state taxes Whether you were in poor mental or physical health on the date you signed the return or at the time you requested relief. How to file just state taxes Refunds If you are granted relief, refunds are: Permitted under innocent spouse relief as explained later under Limit on Amount of Refund . How to file just state taxes Not permitted under separation of liability relief. How to file just state taxes Permitted in limited circumstances under equitable relief, as explained under Refunds Under Equitable Relief. How to file just state taxes Proof Required The IRS will only refund payments you made with your own money. How to file just state taxes However, you must provide proof that you made the payments with your own money. How to file just state taxes Examples of proof are a copy of your bank statement or a canceled check. How to file just state taxes No proof is required if your individual refund was used by the IRS to pay a tax you owed on a joint tax return for another year. How to file just state taxes Refunds Under Equitable Relief In the following situations, you are eligible to receive a refund of certain payments you made. How to file just state taxes Underpaid tax. How to file just state taxes   If you are granted relief for an underpaid tax, you are eligible for a refund of separate payments that you made after July 22, 1998. How to file just state taxes However, you are not eligible for refunds of payments made with the joint return, joint payments, or payments that your spouse (or former spouse) made. How to file just state taxes For example, withholding tax and estimated tax payments cannot be refunded because they are considered made with the joint return. How to file just state taxes   The amount of the refund is subject to the limit discussed later under Limit on Amount of Refund. How to file just state taxes Understated tax. How to file just state taxes   If you are granted relief for an understated tax, you are eligible for a refund of certain payments made under an installment agreement that you entered into with the IRS, if you have not defaulted on the installment agreement. How to file just state taxes You are not in default if the IRS did not issue you a notice of default or take any action to end the installment agreement. How to file just state taxes Only installment payments made after the date you filed Form 8857 are eligible for a refund. How to file just state taxes   The amount of the refund is subject to the limit discussed next. How to file just state taxes Limit on Amount of Refund The amount of your refund is limited. How to file just state taxes Read the following chart to find out the limit. How to file just state taxes IF you file Form 8857. How to file just state taxes . How to file just state taxes . How to file just state taxes THEN the refund cannot be more than. How to file just state taxes . How to file just state taxes . How to file just state taxes Within 3 years after filing your return The part of the tax paid within 3 years (plus any extension of time for filing your return) before you filed Form 8857. How to file just state taxes After the 3-year period, but within 2 years from the time you paid the tax The tax you paid within 2 years immediately before you filed Form 8857. How to file just state taxes Filled-in Form 8857 This part explains how Janie Boulder fills out Form 8857 to request innocent spouse relief. How to file just state taxes Janie and Joe Boulder filed a joint tax return for 2007. How to file just state taxes They claimed one dependency exemption for their son Michael. How to file just state taxes Their return was adjusted by the IRS because Joe did not report a $5,000 award he won that year. How to file just state taxes Janie did not know about the award when the return was filed. How to file just state taxes They agreed to the adjustment but could not pay the additional amount due of $815 ($650 tax + $165 penalty and interest). How to file just state taxes Janie and Joe were divorced on May 13, 2009. How to file just state taxes In February 2010, Janie filed her 2009 federal income tax return as head of household. How to file just state taxes She expected a refund of $1,203. How to file just state taxes In May 2010, she received a notice informing her that the IRS had offset her refund against the $815 owed on her joint 2007 income tax return and that she had a right to file Form 8857. How to file just state taxes Janie applies the conditions listed earlier under Innocent Spouse Relief to see if she qualifies for relief. How to file just state taxes Janie meets the first and second conditions because the joint tax return they filed has an understated tax due to Joe's erroneous item. How to file just state taxes Janie believes she meets the third condition. How to file just state taxes She did not know about the award and had no reason to know about it because of the secretive way Joe conducted his financial affairs. How to file just state taxes Janie believes she meets the fourth condition. How to file just state taxes She believes it would be unfair to be held liable for the tax because she did not benefit from the award. How to file just state taxes Joe spent it on personal items for his use only. How to file just state taxes Because Janie believes she qualifies for innocent spouse relief, she first completes Part I of Form 8857 to determine if she should file the form. How to file just state taxes In Part I, she makes all entries under the Tax Year 1 column because she is requesting relief for only one year. How to file just state taxes Part I Line 1. How to file just state taxes   She enters “2007” on line 1 because this is the tax year for which she is requesting relief. How to file just state taxes Line 2. How to file just state taxes   She checks the box because she wants a refund. How to file just state taxes Note. How to file just state taxes Because the IRS used her individual refund to pay the tax owed on the joint tax return, she does not need to provide proof of payment. How to file just state taxes Line 3. How to file just state taxes   She checks the “No” box because the IRS did not use her share of a joint refund to pay Joe's past-due debts. How to file just state taxes Line 4. How to file just state taxes   She checks the “Yes” box because she filed a joint tax return for tax year 2007. How to file just state taxes Line 5. How to file just state taxes   She skips this line because she checked the “Yes” box on line 4. How to file just state taxes Part II Line 6. How to file just state taxes   She enters her name, address, social security number, county, and best daytime phone number. How to file just state taxes Part III Line 7. How to file just state taxes   She enters Joe's name, address, social security number, and best daytime phone number. How to file just state taxes Line 8. How to file just state taxes   She checks the “divorced since” box and enters the date she was divorced as “05/13/2009. How to file just state taxes ” She attaches a copy of her entire divorce decree (not Illustrated) to the form. How to file just state taxes Line 9. How to file just state taxes   She checks the box for “High school diploma, equivalent, or less,” because she had completed high school when her 2007 joint tax return was filed. How to file just state taxes Line 10. How to file just state taxes   She checks the “No” box because she was not a victim of spousal abuse or domestic violence. How to file just state taxes Line 11. How to file just state taxes   She checks the “No” box because neither she nor Joe incurred any large expenses during the year for which she wants relief. How to file just state taxes Line 12. How to file just state taxes   She checks the “Yes” box because she signed the 2007 joint tax return. How to file just state taxes Line 13. How to file just state taxes   She checks the “No” box because she did not have a mental or physical condition when the return was filed and does not have one now. How to file just state taxes Part IV Line 14. How to file just state taxes   Because she was not involved in preparing the return, she checks the box, “You were not involved in preparing the returns. How to file just state taxes ” Line 15. How to file just state taxes   She checks the box, “You did not know anything was incorrect or missing” because she did not know that Joe had received a $5,000 award. How to file just state taxes She explains this in the space provided. How to file just state taxes Line 16. How to file just state taxes   She checks the box, “You knew that person had income” because she knew Joe had income from wages. How to file just state taxes She also lists Joe's income. How to file just state taxes Under “Type of Income” she enters “wages. How to file just state taxes ” Under “Who paid it to that person,” she enters the name of Joe's employer, “Allied. How to file just state taxes ” Under “Tax Year 1” she enters the amount of Joe's wages, “$40,000. How to file just state taxes ” Because she is only requesting relief for one tax year, she leaves the entry spaces for “Tax Year 2” and “Tax Year 3” blank. How to file just state taxes Line 17. How to file just state taxes   She checks the “No” box because she did not know any amount was owed to the IRS when the 2007 return was signed. How to file just state taxes Line 18. How to file just state taxes   She checks the “No” box because, when the return was signed, she was not having financial problems. How to file just state taxes Line 19. How to file just state taxes   She checks the box, “You were not involved in handling money for the household” because Joe handled all the money for the household. How to file just state taxes She provides additional information in the space provided. How to file just state taxes Line 20. How to file just state taxes   She checks the “No” box because Joe has never transferred money or property to her. How to file just state taxes Part V Line 21. How to file just state taxes   She enters the number “1” on both the line for “Adults” and the line for “Children” because her current household consists of herself and her son. How to file just state taxes Line 22. How to file just state taxes   She enters her average monthly income for her entire household. How to file just state taxes Line 23. How to file just state taxes   She lists her assets, which are $500 for the fair market value of a car, $450 in her checking account, and $100 in her savings account. How to file just state taxes Signing and mailing Form 8857. How to file just state taxes    Janie signs and dates the form. How to file just state taxes She attaches the copy of her divorce decree (not illustrated) required by line 8. How to file just state taxes Finally, she sends the form to the IRS address or fax number shown in the instructions for Form 8857. How to file just state taxes This image is too large to be displayed in the current screen. How to file just state taxes Please click the link to view the image. How to file just state taxes Boulder's filled-in Form 8857 page 1 This image is too large to be displayed in the current screen. How to file just state taxes Please click the link to view the image. How to file just state taxes Boulder's filled-in Form 8857 page 2 This image is too large to be displayed in the current screen. How to file just state taxes Please click the link to view the image. How to file just state taxes Boulder's filled-in Form 8857 page 3 This image is too large to be displayed in the current screen. How to file just state taxes Please click the link to view the image. How to file just state taxes Boulder's filled-in Form 8857 page 4 Flowcharts The following flowcharts provide a quick way for determining whether you may qualify for relief. How to file just state taxes But do not rely on these flowcharts alone. How to file just state taxes Also read the earlier discussions. How to file just state taxes Figure A. How to file just state taxes Do You Qualify for Innocent Spouse Relief? Please click here for the text description of the image. How to file just state taxes "Do You Qualify for Innocent Spouse Relief?" Figure B. How to file just state taxes Do You Qualify for Separation of Liability Relief? Please click here for the text description of the image. How to file just state taxes "Do You Qualify for Separation of Liability Relief?" Figure C. How to file just state taxes Do You Qualify for Equitable Relief? This image is too large to be displayed in the current screen. How to file just state taxes Please click the link to view the image. How to file just state taxes "Do You Qualify for Equitable Relief?" Prev  Up  Next   Home   More Online Publications
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The How To File Just State Taxes

How to file just state taxes 4. How to file just state taxes   Qualified Plans Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Kinds of PlansDefined Contribution Plan Defined Benefit Plan Qualification RulesEarly retirement. How to file just state taxes Loan secured by benefits. How to file just state taxes Waiver of survivor benefits. How to file just state taxes Waiver of 30-day waiting period before annuity starting date. How to file just state taxes Involuntary cash-out of benefits not more than dollar limit. How to file just state taxes Exception for certain loans. How to file just state taxes Exception for QDRO. How to file just state taxes SIMPLE and safe harbor 401(k) plan exception. How to file just state taxes Setting Up a Qualified PlanAdopting a Written Plan Investing Plan Assets Minimum Funding RequirementDue dates. How to file just state taxes Installment percentage. How to file just state taxes Extended period for making contributions. How to file just state taxes ContributionsEmployer Contributions Employee Contributions When Contributions Are Considered Made Employer DeductionDeduction Limits Deduction Limit for Self-Employed Individuals Where To Deduct Contributions Carryover of Excess Contributions Excise Tax for Nondeductible (Excess) Contributions Elective Deferrals (401(k) Plans)Limit on Elective Deferrals Automatic Enrollment Treatment of Excess Deferrals Qualified Roth Contribution ProgramElective Deferrals Qualified Distributions Reporting Requirements DistributionsRequired Distributions Distributions From 401(k) Plans Tax Treatment of Distributions Tax on Early Distributions Tax on Excess Benefits Excise Tax on Reversion of Plan Assets Notification of Significant Benefit Accrual Reduction Prohibited TransactionsTax on Prohibited Transactions Reporting RequirementsOne-participant plan. How to file just state taxes Caution: Form 5500-EZ not required. How to file just state taxes Form 5500. How to file just state taxes Electronic filing of Forms 5500 and 5500-SF. How to file just state taxes Topics - This chapter discusses: Kinds of plans Qualification rules Setting up a qualified plan Minimum funding requirement Contributions Employer deduction Elective deferrals (401(k) plans) Qualified Roth contribution program Distributions Prohibited transactions Reporting requirements Useful Items - You may want to see: Publications 575 Pension and Annuity Income 590 Individual Retirement Arrangements (IRAs) 3066 Have you had your Check-up this year? for Retirement Plans 3998 Choosing A Retirement Solution for Your Small Business 4222 401(k) Plans for Small Businesses 4530 Designated Roth Accounts under a 401(k), 403(b), or governmental 457(b) plans 4531 401(k) Plan Checklist 4674 Automatic Enrollment 401(k) Plans for Small Businesses 4806 Profit Sharing Plans for Small Businesses Forms (and Instructions) www. How to file just state taxes dol. How to file just state taxes gov/ebsa/pdf/2013-5500. How to file just state taxes pdf www. How to file just state taxes dol. How to file just state taxes gov/ebsa/pdf/2013-5500-SF. How to file just state taxes pdf W-2 Wage and Tax Statement Schedule K-1 (Form 1065) Partner's Share of Income, Deductions, Credits, etc. How to file just state taxes 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. How to file just state taxes 1040 U. How to file just state taxes S. How to file just state taxes Individual Income Tax Return Schedule C (Form 1040) Profit or Loss From Business Schedule F (Form 1040) Profit or Loss From Farming 5300 Application for Determination for Employee Benefit Plan 5310 Application for Determination for Terminating Plan 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts 5330 Return of Excise Taxes Related to Employee Benefit Plans 5500 Annual Return/Report of Employee Benefit Plan. How to file just state taxes For copies of this form, go to: 5500-EZ Annual Return of One-Participant (Owners and Their Spouses) Retirement Plan 5500-SF Short Form Annual Return/Report of Small Employee Benefit Plan. How to file just state taxes For copies of this form, go to: 8717 User Fee for Employee Plan Determination Letter Request 8880 Credit for Qualified Retirement Savings Contributions 8881 Credit for Small Employer Pension Plan Startup Costs 8955-SSA Annual Registration Statement Identifying Separated Participants With Deferred Vested Benefits These qualified retirement plans set up by self-employed individuals are sometimes called Keogh or H. How to file just state taxes R. How to file just state taxes 10 plans. How to file just state taxes A sole proprietor or a partnership can set up one of these plans. How to file just state taxes A common-law employee or a partner cannot set up one of these plans. How to file just state taxes The plans described here can also be set up and maintained by employers that are corporations. How to file just state taxes All the rules discussed here apply to corporations except where specifically limited to the self-employed. How to file just state taxes The plan must be for the exclusive benefit of employees or their beneficiaries. How to file just state taxes These qualified plans can include coverage for a self-employed individual. How to file just state taxes As an employer, you can usually deduct, subject to limits, contributions you make to a qualified plan, including those made for your own retirement. How to file just state taxes The contributions (and earnings and gains on them) are generally tax free until distributed by the plan. How to file just state taxes Kinds of Plans There are two basic kinds of qualified plans—defined contribution plans and defined benefit plans—and different rules apply to each. How to file just state taxes You can have more than one qualified plan, but your contributions to all the plans must not total more than the overall limits discussed under Contributions and Employer Deduction, later. How to file just state taxes Defined Contribution Plan A defined contribution plan provides an individual account for each participant in the plan. How to file just state taxes It provides benefits to a participant largely based on the amount contributed to that participant's account. How to file just state taxes Benefits are also affected by any income, expenses, gains, losses, and forfeitures of other accounts that may be allocated to an account. How to file just state taxes A defined contribution plan can be either a profit-sharing plan or a money purchase pension plan. How to file just state taxes Profit-sharing plan. How to file just state taxes   Although it is called a “profit-sharing plan,” you do not actually have to make a business profit for the year in order to make a contribution (except for yourself if you are self-employed as discussed under Self-employed Individual, later). How to file just state taxes A profit-sharing plan can be set up to allow for discretionary employer contributions, meaning the amount contributed each year to the plan is not fixed. How to file just state taxes An employer may even make no contribution to the plan for a given year. How to file just state taxes   The plan must provide a definite formula for allocating the contribution among the participants and for distributing the accumulated funds to the employees after they reach a certain age, after a fixed number of years, or upon certain other occurrences. How to file just state taxes   In general, you can be more flexible in making contributions to a profit-sharing plan than to a money purchase pension plan (discussed next) or a defined benefit plan (discussed later). How to file just state taxes Money purchase pension plan. How to file just state taxes   Contributions to a money purchase pension plan are fixed and are not based on your business profits. How to file just state taxes For example, if the plan requires that contributions be 10% of the participants' compensation without regard to whether you have profits (or the self-employed person has earned income), the plan is a money purchase pension plan. How to file just state taxes This applies even though the compensation of a self-employed individual as a participant is based on earned income derived from business profits. How to file just state taxes Defined Benefit Plan A defined benefit plan is any plan that is not a defined contribution plan. How to file just state taxes Contributions to a defined benefit plan are based on what is needed to provide definitely determinable benefits to plan participants. How to file just state taxes Actuarial assumptions and computations are required to figure these contributions. How to file just state taxes Generally, you will need continuing professional help to have a defined benefit plan. How to file just state taxes Qualification Rules To qualify for the tax benefits available to qualified plans, a plan must meet certain requirements (qualification rules) of the tax law. How to file just state taxes Generally, unless you write your own plan, the financial institution that provided your plan will take the continuing responsibility for meeting qualification rules that are later changed. How to file just state taxes The following is a brief overview of important qualification rules that generally have not yet been discussed. How to file just state taxes It is not intended to be all-inclusive. How to file just state taxes See Setting Up a Qualified Plan , later. How to file just state taxes Generally, the following qualification rules also apply to a SIMPLE 401(k) retirement plan. How to file just state taxes A SIMPLE 401(k) plan is, however, not subject to the top-heavy plan rules and nondiscrimination rules if the plan satisfies the provisions discussed in chapter 3 under SIMPLE 401(k) Plan. How to file just state taxes Plan assets must not be diverted. How to file just state taxes   Your plan must make it impossible for its assets to be used for, or diverted to, purposes other than the benefit of employees and their beneficiaries. How to file just state taxes As a general rule, the assets cannot be diverted to the employer. How to file just state taxes Minimum coverage requirement must be met. How to file just state taxes   To be a qualified plan, a defined benefit plan must benefit at least the lesser of the following. How to file just state taxes 50 employees, or The greater of: 40% of all employees, or Two employees. How to file just state taxes If there is only one employee, the plan must benefit that employee. How to file just state taxes Contributions or benefits must not discriminate. How to file just state taxes   Under the plan, contributions or benefits to be provided must not discriminate in favor of highly compensated employees. How to file just state taxes Contributions and benefits must not be more than certain limits. How to file just state taxes   Your plan must not provide for contributions or benefits that are more than certain limits. How to file just state taxes The limits apply to the annual contributions and other additions to the account of a participant in a defined contribution plan and to the annual benefit payable to a participant in a defined benefit plan. How to file just state taxes These limits are discussed later in this chapter under Contributions. How to file just state taxes Minimum vesting standard must be met. How to file just state taxes   Your plan must satisfy certain requirements regarding when benefits vest. How to file just state taxes A benefit is vested (you have a fixed right to it) when it becomes nonforfeitable. How to file just state taxes A benefit is nonforfeitable if it cannot be lost upon the happening, or failure to happen, of any event. How to file just state taxes Special rules apply to forfeited benefit amounts. How to file just state taxes In defined contribution plans, forfeitures can be allocated to the accounts of remaining participants in a nondiscriminatory way, or they can be used to reduce your contributions. How to file just state taxes   Forfeitures under a defined benefit plan cannot be used to increase the benefits any employee would otherwise receive under the plan. How to file just state taxes Forfeitures must be used instead to reduce employer contributions. How to file just state taxes Participation. How to file just state taxes   In general, an employee must be allowed to participate in your plan if he or she meets both the following requirements. How to file just state taxes Has reached age 21. How to file just state taxes Has at least 1 year of service (2 years if the plan is not a 401(k) plan and provides that after not more than 2 years of service the employee has a nonforfeitable right to all his or her accrued benefit). How to file just state taxes A plan cannot exclude an employee because he or she has reached a specified age. How to file just state taxes Leased employee. How to file just state taxes   A leased employee, defined in chapter 1, who performs services for you (recipient of the services) is treated as your employee for certain plan qualification rules. How to file just state taxes These rules include those in all the following areas. How to file just state taxes Nondiscrimination in coverage, contributions, and benefits. How to file just state taxes Minimum age and service requirements. How to file just state taxes Vesting. How to file just state taxes Limits on contributions and benefits. How to file just state taxes Top-heavy plan requirements. How to file just state taxes Contributions or benefits provided by the leasing organization for services performed for you are treated as provided by you. How to file just state taxes Benefit payment must begin when required. How to file just state taxes   Your plan must provide that, unless the participant chooses otherwise, the payment of benefits to the participant must begin within 60 days after the close of the latest of the following periods. How to file just state taxes The plan year in which the participant reaches the earlier of age 65 or the normal retirement age specified in the plan. How to file just state taxes The plan year in which the 10th anniversary of the year in which the participant began participating in the plan occurs. How to file just state taxes The plan year in which the participant separates from service. How to file just state taxes Early retirement. How to file just state taxes   Your plan can provide for payment of retirement benefits before the normal retirement age. How to file just state taxes If your plan offers an early retirement benefit, a participant who separates from service before satisfying the early retirement age requirement is entitled to that benefit if he or she meets both the following requirements. How to file just state taxes Satisfies the service requirement for the early retirement benefit. How to file just state taxes Separates from service with a nonforfeitable right to an accrued benefit. How to file just state taxes The benefit, which may be actuarially reduced, is payable when the early retirement age requirement is met. How to file just state taxes Required minimum distributions. How to file just state taxes   Special rules require minimum annual distributions from qualified plans, generally beginning after age  70½. How to file just state taxes See Required Distributions , under Distributions, later. How to file just state taxes Survivor benefits. How to file just state taxes   Defined benefit and money purchase pension plans must provide automatic survivor benefits in both the following forms. How to file just state taxes A qualified joint and survivor annuity for a vested participant who does not die before the annuity starting date. How to file just state taxes A qualified pre-retirement survivor annuity for a vested participant who dies before the annuity starting date and who has a surviving spouse. How to file just state taxes   The automatic survivor benefit also applies to any participant under a profit-sharing plan unless all the following conditions are met. How to file just state taxes The participant does not choose benefits in the form of a life annuity. How to file just state taxes The plan pays the full vested account balance to the participant's surviving spouse (or other beneficiary if the surviving spouse consents or if there is no surviving spouse) if the participant dies. How to file just state taxes The plan is not a direct or indirect transferee of a plan that must provide automatic survivor benefits. How to file just state taxes Loan secured by benefits. How to file just state taxes   If automatic survivor benefits are required for a spouse under a plan, he or she must consent to a loan that uses as security the accrued benefits in the plan. How to file just state taxes Waiver of survivor benefits. How to file just state taxes   Each plan participant may be permitted to waive the joint and survivor annuity or the pre-retirement survivor annuity (or both), but only if the participant has the written consent of the spouse. How to file just state taxes The plan also must allow the participant to withdraw the waiver. How to file just state taxes The spouse's consent must be witnessed by a plan representative or notary public. How to file just state taxes Waiver of 30-day waiting period before annuity starting date. How to file just state taxes    A plan may permit a participant to waive (with spousal consent) the 30-day minimum waiting period after a written explanation of the terms and conditions of a joint and survivor annuity is provided to each participant. How to file just state taxes   The waiver is allowed only if the distribution begins more than 7 days after the written explanation is provided. How to file just state taxes Involuntary cash-out of benefits not more than dollar limit. How to file just state taxes   A plan may provide for the immediate distribution of the participant's benefit under the plan if the present value of the benefit is not greater than $5,000. How to file just state taxes   However, the distribution cannot be made after the annuity starting date unless the participant and the spouse or surviving spouse of a participant who died (if automatic survivor benefits are required for a spouse under the plan) consents in writing to the distribution. How to file just state taxes If the present value is greater than $5,000, the plan must have the written consent of the participant and the spouse or surviving spouse (if automatic survivor benefits are required for a spouse under the plan) for any immediate distribution of the benefit. How to file just state taxes   Benefits attributable to rollover contributions and earnings on them can be ignored in determining the present value of these benefits. How to file just state taxes   A plan must provide for the automatic rollover of any cash-out distribution of more than $1,000 to an individual retirement account or annuity, unless the participant chooses otherwise. How to file just state taxes A section 402(f) notice must be sent prior to an involuntary cash-out of an eligible rollover distribution. How to file just state taxes See Section 402(f) Notice under Distributions, later, for more details. How to file just state taxes Consolidation, merger, or transfer of assets or liabilities. How to file just state taxes   Your plan must provide that, in the case of any merger or consolidation with, or transfer of assets or liabilities to, any other plan, each participant would (if the plan then terminated) receive a benefit equal to or more than the benefit he or she would have been entitled to just before the merger, etc. How to file just state taxes (if the plan had then terminated). How to file just state taxes Benefits must not be assigned or alienated. How to file just state taxes   Your plan must provide that a participant's or beneficiary's benefits under the plan cannot be taken away by any legal or equitable proceeding except as provided below or pursuant to certain judgements or settlements against the participant for violations of plan rules. How to file just state taxes Exception for certain loans. How to file just state taxes   A loan from the plan (not from a third party) to a participant or beneficiary is not treated as an assignment or alienation if the loan is secured by the participant's accrued nonforfeitable benefit and is exempt from the tax on prohibited transactions under section 4975(d)(1) or would be exempt if the participant were a disqualified person. How to file just state taxes A disqualified person is defined later in this chapter under Prohibited Transactions. How to file just state taxes Exception for QDRO. How to file just state taxes   Compliance with a QDRO (qualified domestic relations order) does not result in a prohibited assignment or alienation of benefits. How to file just state taxes   Payments to an alternate payee under a QDRO before the participant attains age 59½ are not subject to the 10% additional tax that would otherwise apply under certain circumstances. How to file just state taxes Benefits distributed to an alternate payee under a QDRO can be rolled over tax free to an individual retirement account or to an individual retirement annuity. How to file just state taxes No benefit reduction for social security increases. How to file just state taxes   Your plan must not permit a benefit reduction for a post-separation increase in the social security benefit level or wage base for any participant or beneficiary who is receiving benefits under your plan, or who is separated from service and has nonforfeitable rights to benefits. How to file just state taxes This rule also applies to plans supplementing the benefits provided by other federal or state laws. How to file just state taxes Elective deferrals must be limited. How to file just state taxes   If your plan provides for elective deferrals, it must limit those deferrals to the amount in effect for that particular year. How to file just state taxes See Limit on Elective Deferrals later in this chapter. How to file just state taxes Top-heavy plan requirements. How to file just state taxes   A top-heavy plan is one that mainly favors partners, sole proprietors, and other key employees. How to file just state taxes   A plan is top-heavy for a plan year if, for the preceding plan year, the total value of accrued benefits or account balances of key employees is more than 60% of the total value of accrued benefits or account balances of all employees. How to file just state taxes Additional requirements apply to a top-heavy plan primarily to provide minimum benefits or contributions for non-key employees covered by the plan. How to file just state taxes   Most qualified plans, whether or not top-heavy, must contain provisions that meet the top-heavy requirements and will take effect in plan years in which the plans are top-heavy. How to file just state taxes These qualification requirements for top-heavy plans are explained in section 416 and its regulations. How to file just state taxes SIMPLE and safe harbor 401(k) plan exception. How to file just state taxes   The top-heavy plan requirements do not apply to SIMPLE 401(k) plans, discussed earlier in chapter 3, or to safe harbor 401(k) plans that consist solely of safe harbor contributions, discussed later in this chapter. How to file just state taxes QACAs (discussed later) also are not subject to top-heavy requirements. How to file just state taxes Setting Up a Qualified Plan There are two basic steps in setting up a qualified plan. How to file just state taxes First you adopt a written plan. How to file just state taxes Then you invest the plan assets. How to file just state taxes You, the employer, are responsible for setting up and maintaining the plan. How to file just state taxes If you are self-employed, it is not necessary to have employees besides yourself to sponsor and set up a qualified plan. How to file just state taxes If you have employees, see Participation, under Qualification Rules, earlier. How to file just state taxes Set-up deadline. How to file just state taxes   To take a deduction for contributions for a tax year, your plan must be set up (adopted) by the last day of that year (December 31 for calendar-year employers). How to file just state taxes Credit for startup costs. How to file just state taxes   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a qualified plan that first became effective in 2013. How to file just state taxes For more information, see Credit for startup costs under Reminders, earlier. How to file just state taxes Adopting a Written Plan You must adopt a written plan. How to file just state taxes The plan can be an IRS-approved master or prototype plan offered by a sponsoring organization. How to file just state taxes Or it can be an individually designed plan. How to file just state taxes Written plan requirement. How to file just state taxes   To qualify, the plan you set up must be in writing and must be communicated to your employees. How to file just state taxes The plan's provisions must be stated in the plan. How to file just state taxes It is not sufficient for the plan to merely refer to a requirement of the Internal Revenue Code. How to file just state taxes Master or prototype plans. How to file just state taxes   Most qualified plans follow a standard form of plan (a master or prototype plan) approved by the IRS. How to file just state taxes Master and prototype plans are plans made available by plan providers for adoption by employers (including self-employed individuals). How to file just state taxes Under a master plan, a single trust or custodial account is established, as part of the plan, for the joint use of all adopting employers. How to file just state taxes Under a prototype plan, a separate trust or custodial account is established for each employer. How to file just state taxes Plan providers. How to file just state taxes   The following organizations generally can provide IRS-approved master or prototype plans. How to file just state taxes Banks (including some savings and loan associations and federally insured credit unions). How to file just state taxes Trade or professional organizations. How to file just state taxes Insurance companies. How to file just state taxes Mutual funds. How to file just state taxes Individually designed plan. How to file just state taxes   If you prefer, you can set up an individually designed plan to meet specific needs. How to file just state taxes Although advance IRS approval is not required, you can apply for approval by paying a fee and requesting a determination letter. How to file just state taxes You may need professional help for this. How to file just state taxes See Rev. How to file just state taxes Proc. How to file just state taxes 2014-6, 2014-1 I. How to file just state taxes R. How to file just state taxes B. How to file just state taxes 198, available at www. How to file just state taxes irs. How to file just state taxes gov/irb/2014-1_IRB/ar10. How to file just state taxes html, as annually updated, that may help you decide whether to apply for approval. How to file just state taxes Internal Revenue Bulletins are available on the IRS website at IRS. How to file just state taxes gov They are also available at most IRS offices and at certain libraries. How to file just state taxes User fee. How to file just state taxes   The fee mentioned earlier for requesting a determination letter does not apply to employers who have 100 or fewer employees who received at least $5,000 of compensation from the employer for the preceding year. How to file just state taxes At least one of them must be a non-highly compensated employee participating in the plan. How to file just state taxes The fee does not apply to requests made by the later of the following dates. How to file just state taxes The end of the 5th plan year the plan is in effect. How to file just state taxes The end of any remedial amendment period for the plan that begins within the first 5 plan years. How to file just state taxes The request cannot be made by the sponsor of a prototype or similar plan the sponsor intends to market to participating employers. How to file just state taxes   For more information about whether the user fee applies, see Rev. How to file just state taxes Proc. How to file just state taxes 2014-8, 2014-1 I. How to file just state taxes R. How to file just state taxes B. How to file just state taxes 242, available at www. How to file just state taxes irs. How to file just state taxes gov/irb/2014-1_IRB/ar12. How to file just state taxes html, as may be annually updated; Notice 2003-49, 2003-32 I. How to file just state taxes R. How to file just state taxes B. How to file just state taxes 294, available at www. How to file just state taxes irs. How to file just state taxes gov/irb/2003-32_IRB/ar13. How to file just state taxes html; and Notice 2011-86, 2011-45 I. How to file just state taxes R. How to file just state taxes B. How to file just state taxes 698, available at www. How to file just state taxes irs. How to file just state taxes gov/irb/2011-45_IRB/ar11. How to file just state taxes html. How to file just state taxes Investing Plan Assets In setting up a qualified plan, you arrange how the plan's funds will be used to build its assets. How to file just state taxes You can establish a trust or custodial account to invest the funds. How to file just state taxes You, the trust, or the custodial account can buy an annuity contract from an insurance company. How to file just state taxes Life insurance can be included only if it is incidental to the retirement benefits. How to file just state taxes You set up a trust by a legal instrument (written document). How to file just state taxes You may need professional help to do this. How to file just state taxes You can set up a custodial account with a bank, savings and loan association, credit union, or other person who can act as the plan trustee. How to file just state taxes You do not need a trust or custodial account, although you can have one, to invest the plan's funds in annuity contracts or face-amount certificates. How to file just state taxes If anyone other than a trustee holds them, however, the contracts or certificates must state they are not transferable. How to file just state taxes Other plan requirements. How to file just state taxes   For information on other important plan requirements, see Qualification Rules , earlier in this chapter. How to file just state taxes Minimum Funding Requirement In general, if your plan is a money purchase pension plan or a defined benefit plan, you must actually pay enough into the plan to satisfy the minimum funding standard for each year. How to file just state taxes Determining the amount needed to satisfy the minimum funding standard for a defined benefit plan is complicated, and you should seek professional help in order to meet these contribution requirements. How to file just state taxes For information on this funding requirement, see section 412 and its regulations. How to file just state taxes Quarterly installments of required contributions. How to file just state taxes   If your plan is a defined benefit plan subject to the minimum funding requirements, you generally must make quarterly installment payments of the required contributions. How to file just state taxes If you do not pay the full installments timely, you may have to pay interest on any underpayment for the period of the underpayment. How to file just state taxes Due dates. How to file just state taxes   The due dates for the installments are 15 days after the end of each quarter. How to file just state taxes For a calendar-year plan, the installments are due April 15, July 15, October 15, and January 15 (of the following year). How to file just state taxes Installment percentage. How to file just state taxes   Each quarterly installment must be 25% of the required annual payment. How to file just state taxes Extended period for making contributions. How to file just state taxes   Additional contributions required to satisfy the minimum funding requirement for a plan year will be considered timely if made by 8½ months after the end of that year. How to file just state taxes Contributions A qualified plan is generally funded by your contributions. How to file just state taxes However, employees participating in the plan may be permitted to make contributions, and you may be permitted to make contributions on your own behalf. How to file just state taxes See Employee Contributions and Elective Deferrals later. How to file just state taxes Contributions deadline. How to file just state taxes   You can make deductible contributions for a tax year up to the due date of your return (plus extensions) for that year. How to file just state taxes Self-employed individual. How to file just state taxes   You can make contributions on behalf of yourself only if you have net earnings (compensation) from self-employment in the trade or business for which the plan was set up. How to file just state taxes Your net earnings must be from your personal services, not from your investments. How to file just state taxes If you have a net loss from self-employment, you cannot make contributions for yourself for the year, even if you can contribute for common-law employees based on their compensation. How to file just state taxes Employer Contributions There are certain limits on the contributions and other annual additions you can make each year for plan participants. How to file just state taxes There are also limits on the amount you can deduct. How to file just state taxes See Deduction Limits , later. How to file just state taxes Limits on Contributions and Benefits Your plan must provide that contributions or benefits cannot exceed certain limits. How to file just state taxes The limits differ depending on whether your plan is a defined contribution plan or a defined benefit plan. How to file just state taxes Defined benefit plan. How to file just state taxes   For 2013, the annual benefit for a participant under a defined benefit plan cannot exceed the lesser of the following amounts. How to file just state taxes 100% of the participant's average compensation for his or her highest 3 consecutive calendar years. How to file just state taxes $205,000 ($210,000 for 2014). How to file just state taxes Defined contribution plan. How to file just state taxes   For 2013, a defined contribution plan's annual contributions and other additions (excluding earnings) to the account of a participant cannot exceed the lesser of the following amounts. How to file just state taxes 100% of the participant's compensation. How to file just state taxes $51,000 ($52,000 for 2014). How to file just state taxes   Catch-up contributions (discussed later under Limit on Elective Deferrals) are not subject to the above limit. How to file just state taxes Employee Contributions Participants may be permitted to make nondeductible contributions to a plan in addition to your contributions. How to file just state taxes Even though these employee contributions are not deductible, the earnings on them are tax free until distributed in later years. How to file just state taxes Also, these contributions must satisfy the actual contribution percentage (ACP) test of section 401(m)(2), a nondiscrimination test that applies to employee contributions and matching contributions. How to file just state taxes See Regulations sections 1. How to file just state taxes 401(k)-2 and 1. How to file just state taxes 401(m)-2 for further guidance relating to the nondiscrimination rules under sections 401(k) and 401(m). How to file just state taxes When Contributions Are Considered Made You generally apply your plan contributions to the year in which you make them. How to file just state taxes But you can apply them to the previous year if all the following requirements are met. How to file just state taxes You make them by the due date of your tax return for the previous year (plus extensions). How to file just state taxes The plan was established by the end of the previous year. How to file just state taxes The plan treats the contributions as though it had received them on the last day of the previous year. How to file just state taxes You do either of the following. How to file just state taxes You specify in writing to the plan administrator or trustee that the contributions apply to the previous year. How to file just state taxes You deduct the contributions on your tax return for the previous year. How to file just state taxes A partnership shows contributions for partners on Form 1065. How to file just state taxes Employer's promissory note. How to file just state taxes   Your promissory note made out to the plan is not a payment that qualifies for the deduction. How to file just state taxes Also, issuing this note is a prohibited transaction subject to tax. How to file just state taxes See Prohibited Transactions , later. How to file just state taxes Employer Deduction You can usually deduct, subject to limits, contributions you make to a qualified plan, including those made for your own retirement. How to file just state taxes The contributions (and earnings and gains on them) are generally tax free until distributed by the plan. How to file just state taxes Deduction Limits The deduction limit for your contributions to a qualified plan depends on the kind of plan you have. How to file just state taxes Defined contribution plans. How to file just state taxes   The deduction for contributions to a defined contribution plan (profit-sharing plan or money purchase pension plan) cannot be more than 25% of the compensation paid (or accrued) during the year to your eligible employees participating in the plan. How to file just state taxes If you are self-employed, you must reduce this limit in figuring the deduction for contributions you make for your own account. How to file just state taxes See Deduction Limit for Self-Employed Individuals , later. How to file just state taxes   When figuring the deduction limit, the following rules apply. How to file just state taxes Elective deferrals (discussed later) are not subject to the limit. How to file just state taxes Compensation includes elective deferrals. How to file just state taxes The maximum compensation that can be taken into account for each employee in 2013 is $255,000 ($260,000 for 2014). How to file just state taxes Defined benefit plans. How to file just state taxes   The deduction for contributions to a defined benefit plan is based on actuarial assumptions and computations. How to file just state taxes Consequently, an actuary must figure your deduction limit. How to file just state taxes    In figuring the deduction for contributions, you cannot take into account any contributions or benefits that are more than the limits discussed earlier under Limits on Contributions and Benefits, earlier. How to file just state taxes Table 4–1. How to file just state taxes Carryover of Excess Contributions Illustrated—Profit-Sharing Plan (000's omitted) Year Participants' compensation Participants' share of required contribution (10% of annual profit) Deductible  limit for current year (25% of compensation) Contribution Excess contribution carryover used1 Total  deduction including carryovers Excess contribution carryover available at end of year 2010 $1,000 $100 $250 $100 $ 0 $100 $ 0 2011 400 165 100 165 0 100 65 2012 500 100 125 100 25 125 40 2013 600 100 150 100 40 140 0  1There were no carryovers from years before 2010. How to file just state taxes Deduction Limit for Self-Employed Individuals If you make contributions for yourself, you need to make a special computation to figure your maximum deduction for these contributions. How to file just state taxes Compensation is your net earnings from self-employment, defined in chapter 1. How to file just state taxes This definition takes into account both the following items. How to file just state taxes The deduction for the deductible part of your self-employment tax. How to file just state taxes The deduction for contributions on your behalf to the plan. How to file just state taxes The deduction for your own contributions and your net earnings depend on each other. How to file just state taxes For this reason, you determine the deduction for your own contributions indirectly by reducing the contribution rate called for in your plan. How to file just state taxes To do this, use either the Rate Table for Self-Employed or the Rate Worksheet for Self-Employed in chapter 5. How to file just state taxes Then figure your maximum deduction by using the Deduction Worksheet for Self-Employed in chapter 5. How to file just state taxes Where To Deduct Contributions Deduct the contributions you make for your common-law employees on your tax return. How to file just state taxes For example, sole proprietors deduct them on Schedule C (Form 1040) or Schedule F (Form 1040); partnerships deduct them on Form 1065; and corporations deduct them on Form 1120, or Form 1120S. How to file just state taxes Sole proprietors and partners deduct contributions for themselves on line 28 of Form 1040. How to file just state taxes (If you are a partner, contributions for yourself are shown on the Schedule K-1 (Form 1065) you get from the partnership. How to file just state taxes ) Carryover of Excess Contributions If you contribute more to the plans than you can deduct for the year, you can carry over and deduct the difference in later years, combined with your contributions for those years. How to file just state taxes Your combined deduction in a later year is limited to 25% of the participating employees' compensation for that year. How to file just state taxes For purposes of this limit, a SEP is treated as a profit-sharing (defined contribution) plan. How to file just state taxes However, this percentage limit must be reduced to figure your maximum deduction for contributions you make for yourself. How to file just state taxes See Deduction Limit for Self-Employed Individuals, earlier. How to file just state taxes The amount you carry over and deduct may be subject to the excise tax discussed next. How to file just state taxes Table 4-1, earlier, illustrates the carryover of excess contributions to a profit-sharing plan. How to file just state taxes Excise Tax for Nondeductible (Excess) Contributions If you contribute more than your deduction limit to a retirement plan, you have made nondeductible contributions and you may be liable for an excise tax. How to file just state taxes In general, a 10% excise tax applies to nondeductible contributions made to qualified pension and profit-sharing plans and to SEPs. How to file just state taxes Special rule for self-employed individuals. How to file just state taxes   The 10% excise tax does not apply to any contribution made to meet the minimum funding requirements in a money purchase pension plan or a defined benefit plan. How to file just state taxes Even if that contribution is more than your earned income from the trade or business for which the plan is set up, the difference is not subject to this excise tax. How to file just state taxes See Minimum Funding Requirement , earlier. How to file just state taxes Reporting the tax. How to file just state taxes   You must report the tax on your nondeductible contributions on Form 5330. How to file just state taxes Form 5330 includes a computation of the tax. How to file just state taxes See the separate instructions for completing the form. How to file just state taxes Elective Deferrals (401(k) Plans) Your qualified plan can include a cash or deferred arrangement under which participants can choose to have you contribute part of their before-tax compensation to the plan rather than receive the compensation in cash. How to file just state taxes A plan with this type of arrangement is popularly known as a “401(k) plan. How to file just state taxes ” (As a self-employed individual participating in the plan, you can contribute part of your before-tax net earnings from the business. How to file just state taxes ) This contribution is called an “elective deferral” because participants choose (elect) to defer receipt of the money. How to file just state taxes In general, a qualified plan can include a cash or deferred arrangement only if the qualified plan is one of the following plans. How to file just state taxes A profit-sharing plan. How to file just state taxes A money purchase pension plan in existence on June 27, 1974, that included a salary reduction arrangement on that date. How to file just state taxes Partnership. How to file just state taxes   A partnership can have a 401(k) plan. How to file just state taxes Restriction on conditions of participation. How to file just state taxes   The plan cannot require, as a condition of participation, that an employee complete more than 1 year of service. How to file just state taxes Matching contributions. How to file just state taxes   If your plan permits, you can make matching contributions for an employee who makes an elective deferral to your 401(k) plan. How to file just state taxes For example, the plan might provide that you will contribute 50 cents for each dollar your participating employees choose to defer under your 401(k) plan. How to file just state taxes Matching contributions are generally subject to the ACP test discussed earlier under Employee Contributions. How to file just state taxes Nonelective contributions. How to file just state taxes   You can also make contributions (other than matching contributions) for your participating employees without giving them the choice to take cash instead. How to file just state taxes These are called nonelective contributions. How to file just state taxes Employee compensation limit. How to file just state taxes   No more than $255,000 of the employee's compensation can be taken into account when figuring contributions other than elective deferrals in 2013. How to file just state taxes This limit is $260,000 in 2014. How to file just state taxes SIMPLE 401(k) plan. How to file just state taxes   If you had 100 or fewer employees who earned $5,000 or more in compensation during the preceding year, you may be able to set up a SIMPLE 401(k) plan. How to file just state taxes A SIMPLE 401(k) plan is not subject to the nondiscrimination and top-heavy plan requirements discussed earlier under Qualification Rules. How to file just state taxes For details about SIMPLE 401(k) plans, see SIMPLE 401(k) Plan in chapter 3. How to file just state taxes Distributions. How to file just state taxes   Certain rules apply to distributions from 401(k) plans. How to file just state taxes See Distributions From 401(k) Plans , later. How to file just state taxes Limit on Elective Deferrals There is a limit on the amount an employee can defer each year under these plans. How to file just state taxes This limit applies without regard to community property laws. How to file just state taxes Your plan must provide that your employees cannot defer more than the limit that applies for a particular year. How to file just state taxes For 2013 and 2014, the basic limit on elective deferrals is $17,500. How to file just state taxes This limit applies to all salary reduction contributions and elective deferrals. How to file just state taxes If, in conjunction with other plans, the deferral limit is exceeded, the difference is included in the employee's gross income. How to file just state taxes Catch-up contributions. How to file just state taxes   A 401(k) plan can permit participants who are age 50 or over at the end of the calendar year to also make catch-up contributions. How to file just state taxes The catch-up contribution limit for 2013 and 2014 is $5,500. How to file just state taxes Elective deferrals are not treated as catch-up contributions for 2013 until they exceed the $17,500 limit, the actual deferral percentage (ADP) test limit of section 401(k)(3), or the plan limit (if any). How to file just state taxes However, the catch-up contribution a participant can make for a year cannot exceed the lesser of the following amounts. How to file just state taxes The catch-up contribution limit. How to file just state taxes The excess of the participant's compensation over the elective deferrals that are not catch-up contributions. How to file just state taxes Treatment of contributions. How to file just state taxes   Your contributions to your own 401(k) plan are generally deductible by you for the year they are contributed to the plan. How to file just state taxes Matching or nonelective contributions made to the plan are also deductible by you in the year of contribution. How to file just state taxes Your employees' elective deferrals other than designated Roth contributions are tax free until distributed from the plan. How to file just state taxes Elective deferrals are included in wages for social security, Medicare, and federal unemployment (FUTA) tax. How to file just state taxes Forfeiture. How to file just state taxes   Employees have a nonforfeitable right at all times to their accrued benefit attributable to elective deferrals. How to file just state taxes Reporting on Form W-2. How to file just state taxes   Do not include elective deferrals in the “Wages, tips, other compensation” box of Form W-2. How to file just state taxes You must, however, include them in the “Social security wages” and “Medicare wages and tips” boxes. How to file just state taxes You must also include them in box 12. How to file just state taxes Mark the “Retirement plan” checkbox in box 13. How to file just state taxes For more information, see the Form W-2 instructions. How to file just state taxes Automatic Enrollment Your 401(k) plan can have an automatic enrollment feature. How to file just state taxes Under this feature, you can automatically reduce an employee's pay by a fixed percentage and contribute that amount to the 401(k) plan on his or her behalf unless the employee affirmatively chooses not to have his or her pay reduced or chooses to have it reduced by a different percentage. How to file just state taxes These contributions are elective deferrals. How to file just state taxes An automatic enrollment feature will encourage employees' saving for retirement and will help your plan pass nondiscrimination testing (if applicable). How to file just state taxes For more information, see Publication 4674, Automatic Enrollment 401(k) Plans for Small Businesses. How to file just state taxes Eligible automatic contribution arrangement. How to file just state taxes   Under an eligible automatic contribution arrangement (EACA), a participant is treated as having elected to have the employer make contributions in an amount equal to a uniform percentage of compensation. How to file just state taxes This automatic election will remain in place until the participant specifically elects not to have such deferral percentage made (or elects a different percentage). How to file just state taxes There is no required deferral percentage. How to file just state taxes Withdrawals. How to file just state taxes   Under an EACA, you may allow participants to withdraw their automatic contributions to the plan if certain conditions are met. How to file just state taxes The participant must elect the withdrawal no later than 90 days after the date of the first elective contributions under the EACA. How to file just state taxes The participant must withdraw the entire amount of EACA default contributions, including any earnings thereon. How to file just state taxes   If the plan allows withdrawals under the EACA, the amount of the withdrawal other than the amount of any designated Roth contributions must be included in the employee's gross income for the tax year in which the distribution is made. How to file just state taxes The additional 10% tax on early distributions will not apply to the distribution. How to file just state taxes Notice requirement. How to file just state taxes   Under an EACA, employees must be given written notice of the terms of the EACA within a reasonable period of time before each plan year. How to file just state taxes The notice must be written in a manner calculated to be understood by the average employee and be sufficiently accurate and comprehensive in order to apprise the employee of his or her rights and obligations under the EACA. How to file just state taxes The notice must include an explanation of the employee's right to elect not to have elective contributions made on his or her behalf, or to elect a different percentage, and the employee must be given a reasonable period of time after receipt of the notice before the first elective contribution is made. How to file just state taxes The notice also must explain how contributions will be invested in the absence of an investment election by the employee. How to file just state taxes Qualified automatic contribution arrangement. How to file just state taxes    A qualified automatic contribution arrangement (QACA) is a type of safe harbor plan. How to file just state taxes It contains an automatic enrollment feature, and mandatory employer contributions are required. How to file just state taxes If your plan includes a QACA, it will not be subject to the ADP test (discussed later) nor the top-heavy requirements (discussed earlier). How to file just state taxes Additionally, your plan will not be subject to the actual contribution percentage (ACP) test if certain additional requirements are met. How to file just state taxes Under a QACA, each employee who is eligible to participate in the plan will be treated as having elected to make elective deferral contributions equal to a certain default percentage of compensation. How to file just state taxes In order to not have default elective deferrals made, an employee must make an affirmative election specifying a deferral percentage (including zero, if desired). How to file just state taxes If an employee does not make an affirmative election, the default deferral percentage must meet the following conditions. How to file just state taxes It must be applied uniformly. How to file just state taxes It must not exceed 10%. How to file just state taxes It must be at least 3% in the first plan year it applies to an employee and through the end of the following year. How to file just state taxes It must increase to at least 4% in the following plan year. How to file just state taxes It must increase to at least 5% in the following plan year. How to file just state taxes It must increase to at least 6% in subsequent plan years. How to file just state taxes Matching or nonelective contributions. How to file just state taxes   Under the terms of the QACA, you must make either matching or nonelective contributions according to the following terms. How to file just state taxes Matching contributions. How to file just state taxes You must make matching contributions on behalf of each non-highly compensated employee in the following amounts. How to file just state taxes An amount equal to 100% of elective deferrals, up to 1% of compensation. How to file just state taxes An amount equal to 50% of elective deferrals, from 1% up to 6% of compensation. How to file just state taxes Other formulas may be used as long as they are at least as favorable to non-highly compensated employees. How to file just state taxes The rate of matching contributions for highly compensated employees, including yourself, must not exceed the rates for non-highly compensated employees. How to file just state taxes Nonelective contributions. How to file just state taxes You must make nonelective contributions on behalf of every non-highly compensated employee eligible to participate in the plan, regardless of whether they elected to participate, in an amount equal to at least 3% of their compensation. How to file just state taxes Vesting requirements. How to file just state taxes   All accrued benefits attributed to matching or nonelective contributions under the QACA must be 100% vested for all employees who complete 2 years of service. How to file just state taxes These contributions are subject to special withdrawal restrictions, discussed later. How to file just state taxes Notice requirements. How to file just state taxes   Each employee eligible to participate in the QACA must receive written notice of their rights and obligations under the QACA, within a reasonable period before each plan year. How to file just state taxes The notice must be written in a manner calculated to be understood by the average employee, and it must be accurate and comprehensive. How to file just state taxes The notice must explain their right to elect not to have elective contributions made on their behalf, or to have contributions made at a different percentage than the default percentage. How to file just state taxes Additionally, the notice must explain how contributions will be invested in the absence of any investment election by the employee. How to file just state taxes The employee must have a reasonable period of time after receiving the notice to make such contribution and investment elections prior to the first contributions under the QACA. How to file just state taxes Treatment of Excess Deferrals If the total of an employee's deferrals is more than the limit for 2013, the employee can have the difference (called an excess deferral) paid out of any of the plans that permit these distributions. How to file just state taxes He or she must notify the plan by April 15, 2014 (or an earlier date specified in the plan), of the amount to be paid from each plan. How to file just state taxes The plan must then pay the employee that amount, plus earnings on the amount through the end of 2013, by April 15, 2014. How to file just state taxes Excess withdrawn by April 15. How to file just state taxes   If the employee takes out the excess deferral by April 15, 2014, it is not reported again by including it in the employee's gross income for 2014. How to file just state taxes However, any income earned in 2013 on the excess deferral taken out is taxable in the tax year in which it is taken out. How to file just state taxes The distribution is not subject to the additional 10% tax on early distributions. How to file just state taxes   If the employee takes out part of the excess deferral and the income on it, the distribution is treated as made proportionately from the excess deferral and the income. How to file just state taxes   Even if the employee takes out the excess deferral by April 15, the amount will be considered for purposes of nondiscrimination testing requirements of the plan, unless the distributed amount is for a non-highly compensated employee who participates in only one employer's 401(k) plan or plans. How to file just state taxes Excess not withdrawn by April 15. How to file just state taxes   If the employee does not take out the excess deferral by April 15, 2014, the excess, though taxable in 2013, is not included in the employee's cost basis in figuring the taxable amount of any eventual distributions under the plan. How to file just state taxes In effect, an excess deferral left in the plan is taxed twice, once when contributed and again when distributed. How to file just state taxes Also, if the employee's excess deferral is allowed to stay in the plan and the employee participates in no other employer's plan, the plan can be disqualified. How to file just state taxes Reporting corrective distributions on Form 1099-R. How to file just state taxes   Report corrective distributions of excess deferrals (including any earnings) on Form 1099-R. How to file just state taxes For specific information about reporting corrective distributions, see the Instructions for Forms 1099-R and 5498. How to file just state taxes Tax on excess contributions of highly compensated employees. How to file just state taxes   The law provides tests to detect discrimination in a plan. How to file just state taxes If tests, such as the actual deferral percentage test (ADP test) (see section 401(k)(3)) and the actual contribution percentage test (ACP test) (see section 401(m)(2)), show that contributions for highly compensated employees are more than the test limits for these contributions, the employer may have to pay a 10% excise tax. How to file just state taxes Report the tax on Form 5330. How to file just state taxes The ADP test does not apply to a safe harbor 401(k) plan (discussed next) nor to a QACA. How to file just state taxes Also, the ACP test does not apply to these plans if certain additional requirements are met. How to file just state taxes   The tax for the year is 10% of the excess contributions for the plan year ending in your tax year. How to file just state taxes Excess contributions are elective deferrals, employee contributions, or employer matching or nonelective contributions that are more than the amount permitted under the ADP test or the ACP test. How to file just state taxes   See Regulations sections 1. How to file just state taxes 401(k)-2 and 1. How to file just state taxes 401(m)-2 for further guidance relating to the nondiscrimination rules under sections 401(k) and 401(m). How to file just state taxes    If the plan fails the ADP or ACP testing, and the failure is not corrected by the end of the next plan year, the plan can be disqualified. How to file just state taxes Safe harbor 401(k) plan. How to file just state taxes If you meet the requirements for a safe harbor 401(k) plan, you do not have to satisfy the ADP test, nor the ACP test, if certain additional requirements are met. How to file just state taxes For your plan to be a safe harbor plan, you must meet the following conditions. How to file just state taxes Matching or nonelective contributions. How to file just state taxes You must make matching or nonelective contributions according to one of the following formulas. How to file just state taxes Matching contributions. How to file just state taxes You must make matching contributions according to the following rules. How to file just state taxes You must contribute an amount equal to 100% of each non-highly compensated employee's elective deferrals, up to 3% of compensation. How to file just state taxes You must contribute an amount equal to 50% of each non-highly compensated employee's elective deferrals, from 3% up to 5% of compensation. How to file just state taxes The rate of matching contributions for highly compensated employees, including yourself, must not exceed the rates for non-highly compensated employees. How to file just state taxes Nonelective contributions. How to file just state taxes You must make nonelective contributions, without regard to whether the employee made elective deferrals, on behalf of all non-highly compensated employees eligible to participate in the plan, equal to at least 3% of the employee's compensation. How to file just state taxes These mandatory matching and nonelective contributions must be immediately 100% vested and are subject to special withdrawal restrictions. How to file just state taxes Notice requirement. How to file just state taxes You must give eligible employees written notice of their rights and obligations with regard to contributions under the plan, within a reasonable period before the plan year. How to file just state taxes The other requirements for a 401(k) plan, including withdrawal and vesting rules, must also be met for your plan to qualify as a safe harbor 401(k) plan. How to file just state taxes Qualified Roth Contribution Program Under this program an eligible employee can designate all or a portion of his or her elective deferrals as after-tax Roth contributions. How to file just state taxes Elective deferrals designated as Roth contributions must be maintained in a separate Roth account. How to file just state taxes However, unlike other elective deferrals, designated Roth contributions are not excluded from employees' gross income, but qualified distributions from a Roth account are excluded from employees' gross income. How to file just state taxes Elective Deferrals Under a qualified Roth contribution program, the amount of elective deferrals that an employee may designate as a Roth contribution is limited to the maximum amount of elective deferrals excludable from gross income for the year (for 2013 and 2014, $17,500 if under age 50 and $23,000 if age 50 or over) less the total amount of the employee's elective deferrals not designated as Roth contributions. How to file just state taxes Designated Roth deferrals are treated the same as pre-tax elective deferrals for most purposes, including: The annual individual elective deferral limit (total of all designated Roth contributions and traditional, pre-tax elective deferrals) of $17,500 for 2013 and 2014, with an additional $5,500 if age 50 or over for 2013 and 2014, Determining the maximum employee and employer annual contributions of the lesser of 100% of compensation or $51,000 for 2013 ($52,000 for 2014), Nondiscrimination testing, Required distributions, and Elective deferrals not taken into account for purposes of deduction limits. How to file just state taxes Qualified Distributions A qualified distribution is a distribution that is made after the employee's nonexclusion period and: On or after the employee attains age   59½, On account of the employee's being disabled, or On or after the employee's death. How to file just state taxes An employee's nonexclusion period for a plan is the 5-tax-year period beginning with the earlier of the following tax years. How to file just state taxes The first tax year in which the employee made a contribution to his or her Roth account in the plan, or If a rollover contribution was made to the employee's designated Roth account from a designated Roth account previously established for the employee under another plan, then the first tax year the employee made a designated Roth contribution to the previously established account. How to file just state taxes Rollover. How to file just state taxes   Beginning September 28, 2010, a rollover from another account can be made to a designated Roth account in the same plan. How to file just state taxes For additional information on these in-plan Roth rollovers, see Notice 2010-84, 2010-51 I. How to file just state taxes R. How to file just state taxes B. How to file just state taxes 872, available at www. How to file just state taxes irs. How to file just state taxes gov/irb/2010-51_IRB/ar11. How to file just state taxes html, and Notice 2013-74. How to file just state taxes A distribution from a designated Roth account can only be rolled over to another designated Roth account or a Roth IRA. How to file just state taxes Rollover amounts do not apply toward the annual deferral limit. How to file just state taxes Reporting Requirements You must report a contribution to a Roth account on Form W-2 and a distribution from a Roth account on Form 1099-R. How to file just state taxes See the Form W-2 and 1099-R instructions for detailed information. How to file just state taxes Distributions Amounts paid to plan participants from a qualified plan are called distributions. How to file just state taxes Distributions may be nonperiodic, such as lump-sum distributions, or periodic, such as annuity payments. How to file just state taxes Also, certain loans may be treated as distributions. How to file just state taxes See Loans Treated as Distributions in Publication 575. How to file just state taxes Required Distributions A qualified plan must provide that each participant will either: Receive his or her entire interest (benefits) in the plan by the required beginning date (defined later), or Begin receiving regular periodic distributions by the required beginning date in annual amounts calculated to distribute the participant's entire interest (benefits) over his or her life expectancy or over the joint life expectancy of the participant and the designated beneficiary (or over a shorter period). How to file just state taxes These distribution rules apply individually to each qualified plan. How to file just state taxes You cannot satisfy the requirement for one plan by taking a distribution from another. How to file just state taxes The plan must provide that these rules override any inconsistent distribution options previously offered. How to file just state taxes Minimum distribution. How to file just state taxes   If the account balance of a qualified plan participant is to be distributed (other than as an annuity), the plan administrator must figure the minimum amount required to be distributed each distribution calendar year. How to file just state taxes This minimum is figured by dividing the account balance by the applicable life expectancy. How to file just state taxes The plan administrator can use the life expectancy tables in Appendix C of Publication 590 for this purpose. How to file just state taxes For more information on figuring the minimum distribution, see Tax on Excess Accumulation in Publication 575. How to file just state taxes Required beginning date. How to file just state taxes   Generally, each participant must receive his or her entire benefits in the plan or begin to receive periodic distributions of benefits from the plan by the required beginning date. How to file just state taxes   A participant must begin to receive distributions from his or her qualified retirement plan by April 1 of the first year after the later of the following years. How to file just state taxes Calendar year in which he or she reaches age 70½. How to file just state taxes Calendar year in which he or she retires from employment with the employer maintaining the plan. How to file just state taxes However, the plan may require the participant to begin receiving distributions by April 1 of the year after the participant reaches age 70½ even if the participant has not retired. How to file just state taxes   If the participant is a 5% owner of the employer maintaining the plan, the participant must begin receiving distributions by April 1 of the first year after the calendar year in which the participant reached age 70½. How to file just state taxes For more information, see Tax on Excess Accumulation in Publication 575. How to file just state taxes Distributions after the starting year. How to file just state taxes   The distribution required to be made by April 1 is treated as a distribution for the starting year. How to file just state taxes (The starting year is the year in which the participant meets (1) or (2) above, whichever applies. How to file just state taxes ) After the starting year, the participant must receive the required distribution for each year by December 31 of that year. How to file just state taxes If no distribution is made in the starting year, required distributions for 2 years must be made in the next year (one by April 1 and one by December 31). How to file just state taxes Distributions after participant's death. How to file just state taxes   See Publication 575 for the special rules covering distributions made after the death of a participant. How to file just state taxes Distributions From 401(k) Plans Generally, distributions cannot be made until one of the following occurs. How to file just state taxes The employee retires, dies, becomes disabled, or otherwise severs employment. How to file just state taxes The plan ends and no other defined contribution plan is established or continued. How to file just state taxes In the case of a 401(k) plan that is part of a profit-sharing plan, the employee reaches age 59½ or suffers financial hardship. How to file just state taxes For the rules on hardship distributions, including the limits on them, see Regulations section 1. How to file just state taxes 401(k)-1(d). How to file just state taxes The employee becomes eligible for a qualified reservist distribution (defined next). How to file just state taxes Certain distributions listed above may be subject to the tax on early distributions discussed later. How to file just state taxes Qualified reservist distributions. How to file just state taxes   A qualified reservist distribution is a distribution from an IRA or an elective deferral account made after September 11, 2001, to a military reservist or a member of the National Guard who has been called to active duty for at least 180 days or for an indefinite period. How to file just state taxes All or part of a qualified reservist distribution can be recontributed to an IRA. How to file just state taxes The additional 10% tax on early distributions does not apply to a qualified reservist distribution. How to file just state taxes Tax Treatment of Distributions Distributions from a qualified plan minus a prorated part of any cost basis are subject to income tax in the year they are distributed. How to file just state taxes Since most recipients have no cost basis, a distribution is generally fully taxable. How to file just state taxes An exception is a distribution that is properly rolled over as discussed under Rollover, next. How to file just state taxes The tax treatment of distributions depends on whether they are made periodically over several years or life (periodic distributions) or are nonperiodic distributions. How to file just state taxes See Taxation of Periodic Payments and Taxation of Nonperiodic Payments in Publication 575 for a detailed description of how distributions are taxed, including the 10-year tax option or capital gain treatment of a lump-sum distribution. How to file just state taxes Note. How to file just state taxes A recipient of a distribution from a designated Roth account will have a cost basis since designated Roth contributions are made on an after-tax basis. How to file just state taxes Also, a distribution from a designated Roth account is entirely tax-free if certain conditions are met. How to file just state taxes See Qualified distributions under Qualified Roth Contribution Program, earlier. How to file just state taxes Rollover. How to file just state taxes   The recipient of an eligible rollover distribution from a qualified plan can defer the tax on it by rolling it over into a traditional IRA or another eligible retirement plan. How to file just state taxes However, it may be subject to withholding as discussed under Withholding requirement, later. How to file just state taxes A rollover can also be made to a Roth IRA, in which case, any previously untaxed amounts are includible in gross income unless the rollover is from a designated Roth account. How to file just state taxes Eligible rollover distribution. How to file just state taxes   This is a distribution of all or any part of an employee's balance in a qualified retirement plan that is not any of the following. How to file just state taxes A required minimum distribution. How to file just state taxes See Required Distributions , earlier. How to file just state taxes Any of a series of substantially equal payments made at least once a year over any of the following periods. How to file just state taxes The employee's life or life expectancy. How to file just state taxes The joint lives or life expectancies of the employee and beneficiary. How to file just state taxes A period of 10 years or longer. How to file just state taxes A hardship distribution. How to file just state taxes The portion of a distribution that represents the return of an employee's nondeductible contributions to the plan. How to file just state taxes See Employee Contributions , earlier, and Rollover of nontaxable amounts, next. How to file just state taxes Loans treated as distributions. How to file just state taxes Dividends on employer securities. How to file just state taxes The cost of any life insurance coverage provided under a qualified retirement plan. How to file just state taxes Similar items designated by the IRS in published guidance. How to file just state taxes See, for example, the Instructions for Forms 1099-R and 5498. How to file just state taxes Rollover of nontaxable amounts. How to file just state taxes   You may be able to roll over the nontaxable part of a distribution to another qualified retirement plan or a section 403(b) plan, or to an IRA. How to file just state taxes If the rollover is to a qualified retirement plan or a section 403(b) plan that separately accounts for the taxable and nontaxable parts of the rollover, the transfer must be made through a direct (trustee-to-trustee) rollover. How to file just state taxes If the rollover is to an IRA, the transfer can be made by any rollover method. How to file just state taxes Note. How to file just state taxes A distribution from a designated Roth account can be rolled over to another designated Roth account or to a Roth IRA. How to file just state taxes If the rollover is to a Roth IRA, it can be rolled over by any rollover method, but if the rollover is to another designated Roth account, it must be rolled over directly (trustee-to-trustee). How to file just state taxes More information. How to file just state taxes   For more information about rollovers, see Rollovers in Pubs. How to file just state taxes 575 and 590. How to file just state taxes Withholding requirement. How to file just state taxes   If, during a year, a qualified plan pays to a participant one or more eligible rollover distributions (defined earlier) that are reasonably expected to total $200 or more, the payor must withhold 20% of the taxable portion of each distribution for federal income tax. How to file just state taxes Exceptions. How to file just state taxes   If, instead of having the distribution paid to him or her, the participant chooses to have the plan pay it directly to an IRA or another eligible retirement plan (a direct rollover), no withholding is required. How to file just state taxes   If the distribution is not an eligible rollover distribution, defined earlier, the 20% withholding requirement does not apply. How to file just state taxes Other withholding rules apply to distributions that are not eligible rollover distributions, such as long-term periodic distributions and required distributions (periodic or nonperiodic). How to file just state taxes However, the participant can choose not to have tax withheld from these distributions. How to file just state taxes If the participant does not make this choice, the following withholding rules apply. How to file just state taxes For periodic distributions, withholding is based on their treatment as wages. How to file just state taxes For nonperiodic distributions, 10% of the taxable part is withheld. How to file just state taxes Estimated tax payments. How to file just state taxes   If no income tax is withheld or not enough tax is withheld, the recipient of a distribution may have to make estimated tax payments. How to file just state taxes For more information, see Withholding Tax and Estimated Tax in Publication 575. How to file just state taxes Section 402(f) Notice. How to file just state taxes   If a distribution is an eligible rollover distribution, as defined earlier, you must provide a written notice to the recipient that explains the following rules regarding such distributions. How to file just state taxes That the distribution may be directly transferred to an eligible retirement plan and information about which distributions are eligible for this direct transfer. How to file just state taxes That tax will be withheld from the distribution if it is not directly transferred to an eligible retirement plan. How to file just state taxes That the distribution will not be subject to tax if transferred to an eligible retirement plan within 60 days after the date the recipient receives the distribution. How to file just state taxes Certain other rules that may be applicable. How to file just state taxes   Notice 2009-68, 2009-39 I. How to file just state taxes R. How to file just state taxes B. How to file just state taxes 423, available at www. How to file just state taxes irs. How to file just state taxes gov/irb/2009-39_IRB/ar14. How to file just state taxes html, contains two updated safe harbor section 402(f) notices that plan administrators may provide recipients of eligible rollover distributions. How to file just state taxes If the plan allows in-plan Roth rollovers, the 402(f) notice must be amended to reflect this. How to file just state taxes Notice 2010-84 contains guidance on how to modify a 402(f) notice for in-plan Roth rollovers. How to file just state taxes Timing of notice. How to file just state taxes   The notice generally must be provided no less than 30 days and no more than 180 days before the date of a distribution. How to file just state taxes Method of notice. How to file just state taxes   The written notice must be provided individually to each distributee of an eligible rollover distribution. How to file just state taxes Posting of the notice is not sufficient. How to file just state taxes However, the written requirement may be satisfied through the use of electronic media if certain additional conditions are met. How to file just state taxes See Regulations section 1. How to file just state taxes 401(a)-21. How to file just state taxes Tax on failure to give notice. How to file just state taxes   Failure to give a 402(f) notice will result in a tax of $100 for each failure, with a total not exceeding $50,000 per calendar year. How to file just state taxes The tax will not be imposed if it is shown that such failure is due to reasonable cause and not to willful neglect. How to file just state taxes Tax on Early Distributions If a distribution is made to an employee under the plan before he or she reaches age 59½, the employee may have to pay a 10% additional tax on the distribution. How to file just state taxes This tax applies to the amount received that the employee must include in income. How to file just state taxes Exceptions. How to file just state taxes   The 10% tax will not apply if distributions before age 59½ are made in any of the following circumstances. How to file just state taxes Made to a beneficiary (or to the estate of the employee) on or after the death of the employee. How to file just state taxes Made due to the employee having a qualifying disability. How to file just state taxes Made as part of a series of substantially equal periodic payments beginning after separation from service and made at least annually for the life or life expectancy of the employee or the joint lives or life expectancies of the employee and his or her designated beneficiary. How to file just state taxes (The payments under this exception, except in the case of death or disability, must continue for at least 5 years or until the employee reaches age 59½, whichever is the longer period. How to file just state taxes ) Made to an employee after separation from service if the separation occurred during o