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Hrblock 9. Hrblock Education Exception to Additional Tax on Early IRA Distributions Table of Contents Introduction Who Is Eligible Figuring the Amount Not Subject to the 10% Tax Reporting Early Distributions Introduction Generally, if you take a distribution from your IRA before you reach age 59½, you must pay a 10% additional tax on the early distribution. Hrblock This applies to any IRA you own, whether it is a traditional IRA (including a SEP-IRA), a Roth IRA, or a SIMPLE IRA. Hrblock The additional tax on an early distribution from a SIMPLE IRA may be as high as 25%. Hrblock See Publication 560, Retirement Plans for Small Business, for information on SEP-IRAs, and Publication 590, for information about all other IRAs. Hrblock However, you can take distributions from your IRAs for qualified higher education expenses without having to pay the 10% additional tax. Hrblock You may owe income tax on at least part of the amount distributed, but you may not have to pay the 10% additional tax. Hrblock Generally, if the taxable part of the distribution is less than or equal to the adjusted qualified education expenses (AQEE), none of the distribution is subject to the additional tax. Hrblock If the taxable part of the distribution is more than the AQEE, only the excess is subject to the additional tax. Hrblock Who Is Eligible You can take a distribution from your IRA before you reach age 59½ and not have to pay the 10% additional tax if, for the year of the distribution, you pay qualified education expenses for: yourself, your spouse, or your or your spouse's child, foster child, adopted child, or descendant of any of them. Hrblock Qualified education expenses. Hrblock For purposes of the 10% additional tax, these expenses are tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. Hrblock They also include expenses for special needs services incurred by or for special needs students in connection with their enrollment or attendance. Hrblock In addition, if the student is at least a half-time student, room and board are qualified education expenses. Hrblock The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. Hrblock The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. Hrblock The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Hrblock You will need to contact the eligible educational institution for qualified room and board costs. Hrblock Eligible educational institution. Hrblock An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Hrblock S. Hrblock Department of Education. Hrblock It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Hrblock The educational institution should be able to tell you if it is an eligible educational institution. Hrblock Certain educational institutions located outside the United States also participate in the U. Hrblock S. Hrblock Department of Education's Federal Student Aid (FSA) programs. Hrblock Half-time student. Hrblock A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic work load for the course of study the student is pursuing as determined under the standards of the school where the student is enrolled. Hrblock Figuring the Amount Not Subject to the 10% Tax To determine the amount of your distribution that is not subject to the 10% additional tax, first figure your adjusted qualified education expenses. Hrblock You do this by reducing your total qualified education expenses by any tax-free educational assistance, which includes: Expenses used to figure the tax-free portion of distributions from a Coverdell education savings account (ESA) (see Distributions in chapter 7, Coverdell Education Savings Account), The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Hrblock Do not reduce the qualified education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance given to either the student or the individual making the withdrawal, or A withdrawal from personal savings (including savings from a qualified tuition program (QTP)). Hrblock If your IRA distribution is equal to or less than your adjusted qualified education expenses, you are not subject to the 10% additional tax. Hrblock Example 1. Hrblock In 2013, Erin (age 32) took a year off from teaching to attend graduate school full-time. Hrblock She paid $5,800 of qualified education expenses from the following sources. Hrblock Employer-provided educational assistance (tax free) $5,000 Early distribution from IRA (includes $500 taxable earnings) 3,200 Before Erin can determine if she must pay the 10% additional tax on her IRA distribution, she must reduce her total qualified education expenses. Hrblock Total qualified education expenses $5,800 Minus: Tax-free educational assistance −5,000 Equals: Adjusted qualified education expenses (AQEE) $ 800 Because Erin's AQEE ($800) are more than the taxable portion of her IRA distribution ($500), she does not have to pay the 10% additional tax on any part of this distribution. Hrblock However, she must include the $500 taxable earnings in her gross income subject to income tax. Hrblock Example 2. Hrblock Assume the same facts as in Example 1 , except that Erin deducted some of the contributions to her IRA, so the taxable part of her early distribution is higher by $1,000. Hrblock This must be included in her income subject to income tax. Hrblock The taxable part of Erin's IRA distribution ($1,000) is larger than her $800 AQEE. Hrblock Therefore, she must pay the 10% additional tax on $200, the taxable part of her distribution ($1,000) that is more than her qualified education expenses ($800). Hrblock She does not have to pay the 10% additional tax on the remaining $800 of her taxable distribution. Hrblock Reporting Early Distributions By January 31, 2014, the payer of your IRA distribution should send you Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Hrblock The information on this form will help you determine how much of your distribution is taxable for income tax purposes and how much is subject to the 10% additional tax. Hrblock If you received an early distribution from your IRA, you must report the taxable earnings on Form 1040, line 15b (Form 1040NR, line 16b). Hrblock Then, if you qualify for an exception for qualified higher education expenses, you must file Form 5329 to show how much, if any, of your early distribution is subject to the 10% additional tax. Hrblock See the Instructions for Form 5329, Part I, for help in completing the form and entering the results on Form 1040 or 1040NR. Hrblock There are many other situations in which Form 5329 is required. Hrblock If, during 2013, you had other distributions from IRAs or qualified retirement plans, or have made excess contributions to certain tax-favored accounts, see the instructions for line 58 (Form 1040) or line 56 (Form 1040NR) to determine if you must file Form 5329. Hrblock Prev Up Next Home More Online Publications
Understanding your CP02H Notice
You owe a balance due as a result of amending your tax return to show receipt of a grant received as a result of Hurricane Katrina, Rita or Wilma.
What you need to do
- Submit the required payment by the date stated under "Billing Summary."
- If you can’t pay the amount in full, pay as much as you can now and make payment arrangements for the remainder. For more information such as installment payment plans check out this link or call us at 1-800-829-8374.
You may want to...
- Download copies of the following materials:
Answers to Common Questions
If I am unable to pay the full amount by the date shown on the notice, will I have to pay interest on the entire amount?
If you pay the balance due by the date on the notice you won’t be charged interest. If you don’t pay the full amount due by the date on the notice, interest will be charged on the unpaid portion.
If interest is charged, will it be computed from the original due date of the return?
No, interest starts from the balance due date shown under the "Billing Summary."
Will I be assessed a late payment penalty on the unpaid amount?
If you're unable to pay the amount shown in this specific notice due to circumstances beyond your control, please contact us at 1-800-829-0922. Depending on your situation, your penalty may be abated. It’s important that you contact us if you're unable to pay the full amount by the due date on the notice.
Page Last Reviewed or Updated: 19-Feb-2014
Hrblock Publication 519 - Introductory Material Table of Contents Future Developments IntroductionOrdering forms and publications. Hrblock Tax questions. Hrblock What's New Reminders Future Developments For the latest information about developments related to Publication 519, such as legislation enacted after it was published, go to www. Hrblock irs. Hrblock gov/pub519. Hrblock Introduction For tax purposes, an alien is an individual who is not a U. Hrblock S. Hrblock citizen. Hrblock Aliens are classified as nonresident aliens and resident aliens. Hrblock This publication will help you determine your status and give you information you will need to file your U. Hrblock S. Hrblock tax return. Hrblock Resident aliens generally are taxed on their worldwide income, the same as U. Hrblock S. Hrblock citizens. Hrblock Nonresident aliens are taxed only on their income from sources within the United States and on certain income connected with the conduct of a trade or business in the United States. Hrblock The information in this publication is not as comprehensive for resident aliens as it is for nonresident aliens. Hrblock Resident aliens are generally treated the same as U. Hrblock S. Hrblock citizens and can find more information in other IRS publications. Hrblock Table A, Where To Find What You Need To Know About U. Hrblock S. Hrblock Taxes, provides a list of questions and the chapter or chapters in this publication where you will find the related discussion. Hrblock Answers to frequently asked questions are presented in the back of the publication. Hrblock Table A. Hrblock Where To Find What You Need To Know About U. Hrblock S. Hrblock Taxes Commonly Asked Questions Where To Find The Answer Am I a nonresident alien or resident alien? See chapter 1. Hrblock Can I be a nonresident alien and a resident alien in the same year? See Dual-Status Aliens in chapter 1. Hrblock See chapter 6. Hrblock I am a resident alien and my spouse is a nonresident alien. Hrblock Are there special rules for us? See Nonresident Spouse Treated as a Resident in chapter 1. Hrblock See Community Income in chapter 2. Hrblock Is all my income subject to U. Hrblock S. Hrblock tax? See chapter 2. Hrblock See chapter 3. Hrblock Is my scholarship subject to U. Hrblock S. Hrblock tax? See Scholarship Grants, Prizes, and Awards in chapter 2. Hrblock See Scholarship and Fellowship Grants in chapter 3. Hrblock See chapter 9. Hrblock What is the tax rate on my income subject to U. Hrblock S. Hrblock tax? See chapter 4. Hrblock I moved to the United States this year. Hrblock Can I deduct my moving expenses on my U. Hrblock S. Hrblock return? See Deductions in chapter 5. Hrblock Can I claim exemptions for my spouse and children? See Exemptions in chapter 5. Hrblock I pay income taxes to my home country. Hrblock Can I get credit for these taxes on my U. Hrblock S. Hrblock tax return? See Tax Credits and Payments in chapter 5. Hrblock What forms must I file and when and where do I file them? See chapter 7. Hrblock How should I pay my U. Hrblock S. Hrblock income taxes? See chapter 8. Hrblock Am I eligible for any benefits under a tax treaty? See Income Entitled to Tax Treaty Benefits in chapter 8. Hrblock See chapter 9. Hrblock Are employees of foreign governments and international organizations exempt from U. Hrblock S. Hrblock tax? See chapter 10. Hrblock Is there anything special I have to do before leaving the United States? See chapter 11. Hrblock See Expatriation Tax in chapter 4. Hrblock Comments and suggestions. Hrblock We welcome your comments about this publication and your suggestions for future editions. Hrblock You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Hrblock NW, IR-6526 Washington, DC 20224 We respond to many letters by telephone. Hrblock Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Hrblock You can send us comments from www. Hrblock irs. Hrblock gov/formspubs/. Hrblock Click on “More Information” and then on “Comment on Tax Forms and Publications. Hrblock ” Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Hrblock Ordering forms and publications. Hrblock Visit www. Hrblock irs. Hrblock gov/formspubs/ to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received. Hrblock Internal Revenue Service 1201 N. Hrblock Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Hrblock If you have a tax question, check the information available on IRS. Hrblock gov or call 1-800-829-1040. Hrblock We cannot answer tax questions sent to either of the above addresses. Hrblock What's New Personal exemption increased. Hrblock For tax years beginning in 2013, the personal exemption amount is increased to $3,900. Hrblock U. Hrblock S. Hrblock real property interest. Hrblock Generally, the treatment of a regulated investment company (RIC) as a qualified investment entity (QIE) was scheduled to expire at the end of 2011. Hrblock The provision has been extended through 2013. Hrblock The special rules that apply to distributions from a QIE attributable to the gain from the sale or exchange of a U. Hrblock S. Hrblock real property interest will continue to apply to any distribution from a RIC in 2013. Hrblock Beginning in 2014 (unless extended by legislation), a RIC will only be treated as a QIE for certain distributions from the RIC that are directly or indirectly attributable to distributions received by the RIC from a REIT. Hrblock See Qualified investment entities under U. Hrblock S. Hrblock Real Property Interest. Hrblock Interest-related dividends and short-term capital gain dividends received from mutual funds. Hrblock The exemption of tax on certain interest-related dividends and short-term capital gain dividends paid by a mutual fund or other regulated investment company was scheduled to expire at the end of 2011. Hrblock These provisions have been extended through 2013. Hrblock The exemption expires for amounts paid in tax years beginning after December 31, 2013 (unless extended by legislation). Hrblock Multi-level marketing. Hrblock Clarification regarding the characterization and source of income received from multi-level marketing companies by distributors (upper-tier distributors) that are based on the sales or purchases of persons whom they have recruited and sponsored (lower-tier distributors) is provided. Hrblock See Multi-level marketing under Personal Services in chapter 2. Hrblock Additional Medicare Tax. Hrblock For 2013, you may be required to pay Additional Medicare Tax. Hrblock Also, you may need to report Additional Medicare Tax withheld by your employer. Hrblock For more information, see Additional Medicare Tax under Social Security and Medicare Taxes and Self-Employment Tax in chapter 8. Hrblock For more information on Additional Medicare Tax, go to IRS. Hrblock gov and enter “Additional Medicare Tax” in the search box. Hrblock Reminders Refunds of certain withholding tax delayed. Hrblock Refund requests for tax withheld and reported on Form 1042-S, Form 8288-A, or Form 8805 may require additional time for processing. Hrblock Allow up to 6 months for these refunds to be issued. Hrblock Third party designee. Hrblock You can check the “Yes” box in the “Third Party Designee” area of your return to authorize the IRS to discuss your return with a friend, family member, or any other person you choose. Hrblock This allows the IRS to call the person you identified as your designee to answer any questions that may arise during the processing of your return. Hrblock It also allows your designee to perform certain actions such as asking the IRS for copies of notices or transcripts related to your return. Hrblock Also, the authorization can be revoked. Hrblock See your income tax return instructions for details. Hrblock Change of address. Hrblock . Hrblock If you change your mailing address, be sure to notify the Internal Revenue Service using Form 8822, Change of Address. Hrblock Photographs of missing children. Hrblock The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Hrblock Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Hrblock You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Hrblock Prev Up Next Home More Online Publications