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Irs Amendments

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Irs Amendments

Irs amendments 15. Irs amendments   Estimated Tax Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Special Estimated Tax Rules for Qualified FarmersQualified Farmer Special Rules for Qualified Farmers Estimated Tax Penalty for 2013 What's New Net Investment Income Tax. Irs amendments . Irs amendments  For tax years beginning in 2013, you may be subject to Net Investment Income Tax (NIIT). Irs amendments NIIT is a 3. Irs amendments 8% tax on the lesser of net investment income or the excess of your modified adjusted gross income (MAGI) over the threshold amount. Irs amendments NIIT may need to be included when calculating your estimated tax. Irs amendments For more information, see Publication 505,Tax Withholding and Estimated Tax. Irs amendments Additional Medicare Tax. Irs amendments  For tax years beginning in 2013, a 0. Irs amendments 9% Additional Medicare Tax applies to Medicare wages, Railroad Retirement Tax Act (RRTA) compensation, and self-employment income over a threshold amount based on your filing status. Irs amendments You may need to include this amount when figuring your estimated tax. Irs amendments For more information, see Publication 505. Irs amendments Introduction Estimated tax is the method used to pay tax on income that is not subject to withholding. Irs amendments See Publication 505 for the general rules and requirements for paying estimated tax. Irs amendments If you are a qualified farmer, defined below, you are subject to the special rules covered in this chapter for paying estimated tax. Irs amendments Topics - This chapter discusses: Special estimated tax rules for qualified farmers Estimated tax penalty Useful Items - You may want to see: Publication 505 Tax Withholding and Estimated Tax Form (and Instructions) 1040 U. Irs amendments S. Irs amendments Individual Income Tax Return 1040-ES Estimated Tax for Individuals 2210-F Underpayment of Estimated Tax by Farmers and Fishermen See chapter 16 for information about getting publications and forms. Irs amendments Special Estimated Tax Rules for Qualified Farmers Special rules apply to the payment of estimated tax by individuals who are qualified farmers. Irs amendments If you are not a qualified farmer as defined next, see Publication 505 for the estimated tax rules that apply. Irs amendments Qualified Farmer An individual is a qualified farmer for 2013 if at least two-thirds of his or her gross income from all sources for 2012 or 2013 was from farming. Irs amendments See Gross Income , next, for information on how to figure your gross income from all sources and see Gross Income From Farming , later, for information on how to figure your gross income from farming. Irs amendments See also Percentage From Farming , later, for information on how to determine the percentage of your gross income from farming. Irs amendments Gross Income Gross income is all income you receive in the form of money, goods, property, and services that is not exempt from income tax. Irs amendments On a joint return, you must add your spouse's gross income to your gross income. Irs amendments To decide whether two-thirds of your gross income was from farming, use as your gross income the total of the following income (not loss) amounts from your tax return. Irs amendments Wages, salaries, tips, etc. Irs amendments Taxable interest. Irs amendments Ordinary dividends. Irs amendments Taxable refunds, credits, or offsets of state and local income taxes. Irs amendments Alimony. Irs amendments Gross business income from Schedule C (Form 1040). Irs amendments Gross business receipts from Schedule C-EZ (Form 1040). Irs amendments Capital gains from Schedule D (Form 1040). Irs amendments Losses are not netted against gains. Irs amendments Gains on sales of business property. Irs amendments Taxable IRA distributions, pensions, annuities, and social security benefits. Irs amendments Gross rental income from Schedule E (Form 1040). Irs amendments Gross royalty income from Schedule E (Form 1040). Irs amendments Taxable net income from an estate or trust reported on Schedule E (Form 1040). Irs amendments Income from a Real Estate Mortgage Investment Conduit reported on Schedule E (Form 1040). Irs amendments Gross farm rental income from Form 4835. Irs amendments Gross farm income from Schedule F (Form 1040). Irs amendments Your distributive share of gross income from a partnership, or limited liability company treated as a partnership, from Schedule K-1 (Form 1065). Irs amendments Your pro rata share of gross income from an S corporation, from Schedule K-1 (Form 1120S). Irs amendments Unemployment compensation. Irs amendments Other income not included with any of the items listed above. Irs amendments Gross Income From Farming Gross income from farming is income from cultivating the soil or raising agricultural commodities. Irs amendments It includes the following amounts. Irs amendments Income from operating a stock, dairy, poultry, bee, fruit, or truck farm. Irs amendments Income from a plantation, ranch, nursery, range, orchard, or oyster bed. Irs amendments Crop shares for the use of your land. Irs amendments Gains from sales of draft, breeding, dairy, or sporting livestock. Irs amendments Gross income from farming is the total of the following amounts from your tax return. Irs amendments Gross farm income from Schedule F (Form 1040). Irs amendments Gross farm rental income from Form 4835. Irs amendments Gross farm income from Schedule E (Form 1040), Parts II and III. Irs amendments Gains from the sale of livestock used for draft, breeding, sport, or dairy purposes reported on Form 4797. Irs amendments For more information about income from farming, see chapter 3. Irs amendments Farm income does not include any of the following: Wages you receive as a farm employee. Irs amendments Income you receive from contract grain harvesting and hauling with workers and machines you furnish. Irs amendments Gains you receive from the sale of farm land and depreciable farm equipment. Irs amendments Percentage From Farming Figure your gross income from all sources, discussed earlier. Irs amendments Then figure your gross income from farming, discussed earlier. Irs amendments Divide your farm gross income by your total gross income to determine the percentage of gross income from farming. Irs amendments Example 1. Irs amendments Jane Smith had the following total gross income and farm gross income amounts in 2013. Irs amendments Gross Income   Total Farm Taxable interest $3,000   Dividends 500   Rental income (Sch E) 41,500   Farm income (Sch F) 75,000 $75,000 Gain (Form 4797) 5,000 5,000 Total $125,000 $80,000 Schedule D showed gain from the sale of dairy cows carried over from Form 4797 ($5,000) in addition to a loss from the sale of corporate stock ($2,000). Irs amendments However, that loss is not netted against the gain to figure Ms. Irs amendments Smith's total gross income or her gross farm income. Irs amendments Her gross farm income is 64% of her total gross income ($80,000 ÷ $125,000 = 0. Irs amendments 64). Irs amendments Special Rules for Qualified Farmers The following special estimated tax rules apply if you are a qualified farmer for 2013. Irs amendments You do not have to pay estimated tax if you file your 2013 tax return and pay all the tax due by March 3, 2014. Irs amendments You do not have to pay estimated tax if your 2013 income tax withholding (including any amount applied to your 2013 estimated tax from your 2012 return) will be at least 662/3% (. Irs amendments 6667) of the total tax shown on your 2013 tax return or 100% of the total tax shown on your 2012 return. Irs amendments If you must pay estimated tax, you are required to make only one estimated tax payment (your required annual payment) by January 15, 2014, using special rules to figure the amount of the payment. Irs amendments See Required Annual Payment , next, for details. Irs amendments Figure 15-1 presents an overview of the special estimated tax rules that apply to qualified farmers. Irs amendments Example 2. Irs amendments Assume the same fact as in Example 1. Irs amendments Ms. Irs amendments Smith's gross farm income is only 64% of her total income. Irs amendments Therefore, based on her 2013 income, she does not qualify to use the special estimated tax rules for qualified farmers. Irs amendments However, she does qualify if at least two-thirds of her 2012 gross income was from farming. Irs amendments Example 3. Irs amendments Assume the same facts as in Example 1 except that Ms. Irs amendments Smith's farm income from Schedule F was $90,000 instead of $75,000. Irs amendments This made her total gross income $140,000 ($3,000 + $500 + $41,500 + $90,000 + $5,000) and her farm gross income $95,000 ($90,000 + $5,000). Irs amendments She qualifies to use the special estimated tax rules for qualified farmers, since 67. Irs amendments 9% (at least two-thirds) of her gross income is from farming ($95,000 ÷ $140,000 = . Irs amendments 679). Irs amendments Required Annual Payment If you are a qualified farmer and must pay estimated tax for 2013, use the worksheet on Form 1040-ES to figure the amount of your required annual payment. Irs amendments Apply the following special rules for qualified farmers to the worksheet. Irs amendments On line 14a, multiply line 13c by 662/3% (. Irs amendments 6667). Irs amendments On line 14b, enter 100% of the tax shown on your 2012 tax return regardless of the amount of your adjusted gross income. Irs amendments For this purpose, the “tax shown on your 2012 tax return” is the amount on line 61 of your 2012 return modified by certain adjustments. Irs amendments For more information, see chapter 4 of Publication 505. Irs amendments Estimated Tax Penalty for 2013 If you do not pay all your required estimated tax for 2013 by January 15, 2014, or file your 2013 return and pay any tax due by March 3, 2014, you may owe a penalty. Irs amendments Use Form 2210-F, Underpayment of Estimated Tax by Farmers and Fishermen, to determine if you owe a penalty. Irs amendments See the instructions for Form 2210-F. Irs amendments Figure 15-1. Irs amendments Estimated Tax for Farmers Please click here for the text description of the image. Irs amendments Figure 2–A If you receive a penalty notice, do not ignore it, even if you think it is in error. Irs amendments You may get a penalty notice even though you filed your return on time, attached Form 2210-F, and met the gross-income-from-farming requirement. Irs amendments If you receive a penalty notice for underpaying estimated tax and you think it is in error, write to the address on the notice and explain why you think the notice is in error. Irs amendments Include a computation similar to the one in Example 1 (earlier), showing that you met the gross income from farming requirement. Irs amendments Prev  Up  Next   Home   More Online Publications
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Understanding Your CP01A Notice

This notice tells you about the Identity Protection Personal Identification Number (IP PIN) we sent you.


What you need to do

  • Forms 1040, 1040A, 1040EZ and 1040 PR/SS
    Be sure to enter your IP PIN in the correct place when you file your 2013 federal tax return:
    • Electronic Returns (Caution: see new joint filing rules below)
      • Your tax software or practitioner will tell you when and where to enter the IP PIN.
      • If you can’t find where to enter your IP PIN, search within your software on Identity Protection PIN or IP PIN or contact the software provider’s help desk. Due to software variations, the IRS doesn't know the location of the IP PIN within each package.
    • Paper Returns
      • Enter your IP PIN in the gray box marked “Identity Protection PIN” to the right of “Spouse’s signature and occupation”.
  • Amended Returns, Extensions and Installment Agreements
    An IP PIN is not required to file:
    • Form 1040X, Amended U.S. Individual Income Tax Return ,
    • Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, or
    • Form 433-D, Installment Agreement

If you are filing a joint return

  • Electronic Returns
    • Each taxpayer who receives an IP PIN must enter it on their tax return when filing as the primary (first SSN on the tax form) or secondary taxpayer.
      • If only one taxpayer receives an IP PIN, you must enter it with the taxpayer’s SSN to whom it belongs.
      • If both taxpayers receive an IP PIN, both taxpayers must enter the IP PIN that goes with their SSN.
  • Paper Returns
    • Only the primary taxpayer should enter their IP PIN on the tax return. The secondary taxpayer must not enter their IP PIN even if they received one
    • Note: The secondary taxpayer’s IP PIN still provides protection by preventing the fraudulent use of your SSN as the primary or secondary SSN on an e-filed return or as the primary SSN on a paper return

Important things to remember about your IP PIN

  • Store this letter with your tax records
  • A new IP PIN is assigned to you each year
  • The latest IP PIN assigned to you is your IP PIN of record and you should destroy all prior IP PINs securely
  • Do not reveal your IP PIN to anyone other than your tax preparer. Reveal it only when you are ready to sign and submit your federal income tax return
  • Use your IP PIN on your 2013 federal income tax return
    • Electronic Returns: We will reject your return if you fail to use your IP PIN.
    • Paper Returns: A significant delay processing your return and any refund you may be due will occur if you fail to use the primary taxpayer’s IP PIN.
  • Your IP PIN is not used on your state income tax return

Use on prior year returns

You must use your latest IP PIN on any delinquent 2012 or 2011 Forms 1040. 1040A, 1040EZ or 1040PR/SS returns you may file in calendar year 2014.


If you misplaced your IP PIN

Visit the Lost or Misplaced IP PINs page for instructions on how to recover your original IP PIN or request a replacement.


Answers to Common Questions

We have complete answers to questions you might have about the IP PIN process on our Frequently Asked Questions about the IP PIN page.

Page Last Reviewed or Updated: 19-Feb-2014

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The Irs Amendments

Irs amendments 8. Irs amendments   Qualified Tuition Program (QTP) Table of Contents Introduction What Is a Qualified Tuition ProgramDesignated beneficiary. Irs amendments Half-time student. Irs amendments How Much Can You Contribute Are Distributions TaxableFiguring the Taxable Portion of a Distribution Additional Tax on Taxable Distributions Rollovers and Other TransfersRollovers Changing the Designated Beneficiary Introduction Qualified tuition programs (QTPs) are also called “529 plans. Irs amendments ” States may establish and maintain programs that allow you to either prepay or contribute to an account for paying a student's qualified education expenses at a postsecondary institution. Irs amendments Eligible educational institutions may establish and maintain programs that allow you to prepay a student's qualified education expenses. Irs amendments If you prepay tuition, the student (designated beneficiary) will be entitled to a waiver or a payment of qualified education expenses. Irs amendments You cannot deduct either payments or contributions to a QTP. Irs amendments For information on a specific QTP, you will need to contact the state agency or eligible educational institution that established and maintains it. Irs amendments What is the tax benefit of a QTP. Irs amendments   No tax is due on a distribution from a QTP unless the amount distributed is greater than the beneficiary's adjusted qualified education expenses. Irs amendments See Are Distributions Taxable , later, for more information. Irs amendments    Even if a QTP is used to finance a student's education, the student or the student's parents still may be eligible to claim the American opportunity credit or the lifetime learning credit. Irs amendments See Coordination With American Opportunity and Lifetime Learning Credits, later. Irs amendments What Is a Qualified Tuition Program A qualified tuition program is a program set up to allow you to either prepay, or contribute to an account established for paying, a student's qualified education expenses at an eligible educational institution. Irs amendments QTPs can be established and maintained by states (or agencies or instrumentalities of a state) and eligible educational institutions. Irs amendments The program must meet certain requirements. Irs amendments Your state government or the eligible educational institution in which you are interested can tell you whether or not they participate in a QTP. Irs amendments Qualified education expenses. Irs amendments   These are expenses related to enrollment or attendance at an Eligible educational institution (defined later). Irs amendments As shown in the following list, to be qualified, some of the expenses must be required by the institution and some must be incurred by students who are enrolled at least half-time. Irs amendments See Half-time student , later. Irs amendments The following expenses must be required for enrollment or attendance of a Designated beneficiary (defined later) at an eligible educational institution. Irs amendments Tuition and fees. Irs amendments Books, supplies, and equipment. Irs amendments Expenses for special needs services needed by a special needs beneficiary must be incurred in connection with enrollment or attendance at an eligible educational institution. Irs amendments Expenses for room and board must be incurred by students who are enrolled at least half-time. Irs amendments The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. Irs amendments 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. Irs amendments The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Irs amendments You will need to contact the eligible educational institution for qualified room and board costs. Irs amendments    For tax years after 2010, the purchase of computer technology or equipment is only a qualified education expense if the computer technology or equipment is required for enrollment or attendance at an eligible institution. Irs amendments Designated beneficiary. Irs amendments   The designated beneficiary is generally the student (or future student) for whom the QTP is intended to provide benefits. Irs amendments The designated beneficiary can be changed after participation in the QTP begins. Irs amendments If a state or local government or certain tax-exempt organizations purchase an interest in a QTP as part of a scholarship program, the designated beneficiary is the person who receives the interest as a scholarship. Irs amendments Half-time student. Irs amendments   A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic workload for the course of study the student is pursuing, as determined under the standards of the school where the student is enrolled. Irs amendments Eligible educational institution. Irs amendments   For purposes of a QTP, this is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Irs amendments S. Irs amendments Department of Education. Irs amendments It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Irs amendments The educational institution should be able to tell you if it is an eligible educational institution. Irs amendments   Certain educational institutions located outside the United States also participate in the U. Irs amendments S. Irs amendments Department of Education's Federal Student Aid (FSA) programs. Irs amendments   How Much Can You Contribute Contributions to a QTP on behalf of any beneficiary cannot be more than the amount necessary to provide for the qualified education expenses of the beneficiary. Irs amendments There are no income restrictions on the individual contributors. Irs amendments You can contribute to both a QTP and a Coverdell ESA in the same year for the same designated beneficiary. Irs amendments   Are Distributions Taxable The part of a distribution representing the amount paid or contributed to a QTP does not have to be included in income. Irs amendments This is a return of the investment in the plan. Irs amendments The designated beneficiary generally does not have to include in income any earnings distributed from a QTP if the total distribution is less than or equal to adjusted qualified education expenses (defined under Figuring the Taxable Portion of a Distribution , later). Irs amendments Earnings and return of investment. Irs amendments    You will receive a Form 1099-Q, from each of the programs from which you received a QTP distribution in 2013. Irs amendments The amount of your gross distribution (box 1) shown on each form will be divided between your earnings (box 2) and your basis, or return of investment (box 3). Irs amendments Form 1099-Q should be sent to you by January 31, 2014. Irs amendments Figuring the Taxable Portion of a Distribution To determine if total distributions for the year are more or less than the amount of qualified education expenses, you must compare the total of all QTP distributions for the tax year to the adjusted qualified education expenses. Irs amendments Adjusted qualified education expenses. Irs amendments   This amount is the total qualified education expenses reduced by any tax-free educational assistance. Irs amendments Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Irs amendments Taxable earnings. Irs amendments   Use the following steps to figure the taxable part. Irs amendments Multiply the total distributed earnings shown in box 2 of Form 1099-Q by a fraction. Irs amendments The numerator is the adjusted qualified education expenses paid during the year and the denominator is the total amount distributed during the year. Irs amendments Subtract the amount figured in (1) from the total distributed earnings. Irs amendments The result is the amount the beneficiary must include in income. Irs amendments Report it on Form 1040 or Form 1040NR, line 21. Irs amendments Example 1. Irs amendments In 2007, Sara Clarke's parents opened a savings account for her with a QTP maintained by their state government. Irs amendments Over the years they contributed $18,000 to the account. Irs amendments The total balance in the account was $27,000 on the date the distribution was made. Irs amendments In the summer of 2013, Sara enrolled in college and had $8,300 of qualified education expenses for the rest of the year. Irs amendments She paid her college expenses from the following sources. Irs amendments   Gift from parents $1,600     Partial tuition scholarship (tax-free) 3,100     QTP distribution 5,300           Before Sara can determine the taxable part of her QTP distribution, she must reduce her total qualified education expenses by any tax-free educational assistance. Irs amendments   Total qualified education expenses $8,300     Minus: Tax-free educational assistance −3,100     Equals: Adjusted qualified  education expenses (AQEE) $5,200   Since the remaining expenses ($5,200) are less than the QTP distribution, part of the earnings will be taxable. Irs amendments Sara's Form 1099-Q shows that $950 of the QTP distribution is earnings. Irs amendments Sara figures the taxable part of the distributed earnings as follows. Irs amendments   1. Irs amendments $950 (earnings) × $5,200 AQEE  $5,300 distribution           =$932 (tax-free earnings)     2. Irs amendments $950 (earnings)−$932 (tax-free earnings)     =$18 (taxable earnings)  Sara must include $18 in income (Form 1040, line 21) as distributed QTP earnings not used for adjusted qualified education expenses. Irs amendments Coordination With American Opportunity and Lifetime Learning Credits An American opportunity or lifetime learning credit (education credit) can be claimed in the same year the beneficiary takes a tax-free distribution from a QTP, as long as the same expenses are not used for both benefits. Irs amendments This means that after the beneficiary reduces qualified education expenses by tax-free educational assistance, he or she must further reduce them by the expenses taken into account in determining the credit. Irs amendments Example 2. Irs amendments Assume the same facts as in Example 1 , except that Sara's parents claimed an American opportunity credit of $2,500 (based on $4,000 expenses). Irs amendments   Total qualified education expenses $8,300     Minus: Tax-free educational assistance −3,100     Minus: Expenses taken into account  in figuring American opportunity credit −4,000     Equals: Adjusted qualified  education expenses (AQEE) $1,200           The taxable part of the distribution is figured as follows. Irs amendments   1. Irs amendments $950 (earnings) × $1,200 AQEE  $5,300 distribution           =$215 (tax-free earnings)     2. Irs amendments $950 (earnings)−$215 (tax-free earnings)     =$735 (taxable earnings)       Sara must include $735 in income (Form 1040, line 21). Irs amendments This represents distributed earnings not used for adjusted qualified education expenses. Irs amendments Coordination With Coverdell ESA Distributions If a designated beneficiary receives distributions from both a QTP and a Coverdell ESA in the same year, and the total of these distributions is more than the beneficiary's adjusted qualified higher education expenses, the expenses must be allocated between the distributions. Irs amendments For purposes of this allocation, disregard any qualified elementary and secondary education expenses. Irs amendments Example 3. Irs amendments Assume the same facts as in Example 2 , except that instead of receiving a $5,300 distribution from her QTP, Sara received $4,600 from that account and $700 from her Coverdell ESA. Irs amendments In this case, Sara must allocate her $1,200 of adjusted qualified higher education expenses (AQHEE) between the two distributions. Irs amendments   $1,200 AQHEE × $700 ESA distribution  $5,300 total distribution = $158 AQHEE (ESA)     $1,200 AQHEE × $4,600 QTP distribution  $5,300 total distribution = $1,042 AQHEE (QTP)   Sara then figures the taxable portion of her Coverdell ESA distribution based on qualified higher education expenses of $158, and the taxable portion of her QTP distribution based on the other $1,042. Irs amendments Note. Irs amendments If you are required to allocate your expenses between Coverdell ESA and QTP distributions, and you have adjusted qualified elementary and secondary education expenses, see the examples in chapter 7, Coverdell Education Savings Account under Coordination With Qualified Tuition Program (QTP) Distributions . Irs amendments Coordination With Tuition and Fees Deduction. Irs amendments   A tuition and fees deduction can be claimed in the same year the beneficiary takes a tax-free distribution from a QTP, as long as the same expenses are not used for both benefits. Irs amendments Losses on QTP Investments If you have a loss on your investment in a QTP account, you may be able to take the loss on your income tax return. Irs amendments You can take the loss only when all amounts from that account have been distributed and the total distributions are less than your unrecovered basis. Irs amendments Your basis is the total amount of contributions to that QTP account. Irs amendments You claim the loss as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23 (Schedule A (Form 1040NR), line 9), subject to the 2%-of-adjusted-gross-income limit. Irs amendments If you have distributions from more than one QTP account during a year, you must combine the information (amount of distribution, basis, etc. Irs amendments ) from all such accounts in order to determine your taxable earnings for the year. Irs amendments By doing this, the loss from one QTP account reduces the distributed earnings (if any) from any other QTP accounts. Irs amendments Example 1. Irs amendments In 2013, Taylor received a final distribution of $1,000 from QTP #1. Irs amendments His unrecovered basis in that account before the distribution was $3,000. Irs amendments If Taylor itemizes his deductions, he can claim the $2,000 loss on Schedule A (Form 1040). Irs amendments Example 2. Irs amendments Assume the same facts as in Example 1 , except that Taylor also had a distribution of $9,000 from QTP #2, giving him total distributions for 2013 of $10,000. Irs amendments His total basis in these distributions was $4,500 ($3,000 for QTP #1 and $1,500 for QTP #2). Irs amendments Taylor's adjusted qualified education expenses for 2013 totaled $6,000. Irs amendments In order to figure his taxable earnings, Taylor combines the two accounts and determines his taxable earnings as follows. Irs amendments   1. Irs amendments $10,000 (total distribution)−$4,500 (basis portion of distribution)     = $5,500 (earnings included in distribution)   2. Irs amendments $5,500 (earnings) x $6,000 AQEE  $10,000 distribution           =$3,300 (tax-free earnings)     3. Irs amendments $5,500 (earnings)−$3,300 (tax-free earnings)     =$2,200 (taxable earnings)                 Taylor must include $2,200 in income on Form 1040, line 21. Irs amendments Because Taylor's accounts must be combined, he cannot deduct his $2,000 loss (QTP #1) on Schedule A (Form 1040). Irs amendments Instead, the $2,000 loss reduces the total earnings that were distributed, thereby reducing his taxable earnings. Irs amendments Additional Tax on Taxable Distributions Generally, if you receive a taxable distribution, you also must pay a 10% additional tax on the amount included in income. Irs amendments Exceptions. Irs amendments   The 10% additional tax does not apply to distributions: Paid to a beneficiary (or to the estate of the designated beneficiary) on or after the death of the designated beneficiary. Irs amendments Made because the designated beneficiary is disabled. Irs amendments A person is considered to be disabled if he or she shows proof that he or she cannot do any substantial gainful activity because of his or her physical or mental condition. Irs amendments A physician must determine that his or her condition can be expected to result in death or to be of long-continued and indefinite duration. Irs amendments Included in income because the designated beneficiary received: A tax-free scholarship or fellowship (see Tax-Free Scholarships and Fellowships 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 ), or Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Irs amendments Made on account of the attendance of the designated beneficiary at a U. Irs amendments S. Irs amendments military academy (such as the USNA at Annapolis). Irs amendments This exception applies only to the extent that the amount of the distribution does not exceed the costs of advanced education (as defined in section 2005(d)(3) of title 10 of the U. Irs amendments S. Irs amendments Code) attributable to such attendance. Irs amendments Included in income only because the qualified education expenses were taken into account in determining the American opportunity or lifetime learning credit (see Coordination With American Opportunity and Lifetime Learning Credits , earlier. Irs amendments ) Exception (3) applies only to the extent the distribution is not more than the scholarship, allowance, or payment. Irs amendments Figuring the additional tax. Irs amendments    Use Part II of Form 5329, to figure any additional tax. Irs amendments Report the amount on Form 1040, line 58, or Form 1040NR, line 56. Irs amendments Rollovers and Other Transfers Assets can be rolled over or transferred from one QTP to another. Irs amendments In addition, the designated beneficiary can be changed without transferring accounts. Irs amendments Rollovers Any amount distributed from a QTP is not taxable if it is rolled over to another QTP for the benefit of the same beneficiary or for the benefit of a member of the beneficiary's family (including the beneficiary's spouse). Irs amendments An amount is rolled over if it is paid to another QTP within 60 days after the date of the distribution. Irs amendments Do not report qualifying rollovers (those that meet the above criteria) anywhere on Form 1040 or 1040NR. Irs amendments These are not taxable distributions. Irs amendments Members of the beneficiary's family. Irs amendments   For these purposes, the beneficiary's family includes the beneficiary's spouse and the following other relatives of the beneficiary. Irs amendments Son, daughter, stepchild, foster child, adopted child, or a descendant of any of them. Irs amendments Brother, sister, stepbrother, or stepsister. Irs amendments Father or mother or ancestor of either. Irs amendments Stepfather or stepmother. Irs amendments Son or daughter of a brother or sister. Irs amendments Brother or sister of father or mother. Irs amendments Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. Irs amendments The spouse of any individual listed above. Irs amendments First cousin. Irs amendments Example. Irs amendments When Aaron graduated from college last year he had $5,000 left in his QTP. Irs amendments He wanted to give this money to his younger brother, who was in junior high school. Irs amendments In order to avoid paying tax on the distribution of the amount remaining in his account, Aaron contributed the same amount to his brother's QTP within 60 days of the distribution. Irs amendments If the rollover is to another QTP for the same beneficiary, only one rollover is allowed within 12 months of a previous transfer to any QTP for that designated beneficiary. Irs amendments Changing the Designated Beneficiary There are no income tax consequences if the designated beneficiary of an account is changed to a member of the beneficiary's family. Irs amendments See Members of the beneficiary's family , earlier. Irs amendments Example. Irs amendments Assume the same situation as in the last example. Irs amendments Instead of closing his QTP and paying the distribution into his brother's QTP, Aaron could have instructed the trustee of his account to simply change the name of the beneficiary on his account to that of his brother. 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