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Tax Return H&r Block

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Tax Return H&r Block

Tax return h&r block Publication 557 - Additional Material Table of Contents Appendix. Tax return h&r block Sample Articles of Organization, continued Organization Reference Chart Section of 1986 Code Description of organization General nature of activities Application  Form Annual return required to be  filed Contributions  allowable 501(c)(1) Corporations Organized under Act of Congress (including Federal Credit Unions) Instrumentalities of the  United States No Form None Yes, if made for exclusively public purposes 501(c)(2) Title Holding Corporation For Exempt Organization Holding title to property of an  exempt organization 1024 9901 or 990-EZ8 No2 501(c)(3) Religious, Educational, Charitable, Scientific, Literary, Testing for Public Safety, to Foster National or International Amateur Sports Competition, or Prevention of Cruelty to Children or Animals Organizations Activities of nature implied by description of class of organization 1023 9901 or 990-EZ8, or 990-PF Yes, generally 501(c)(4) Civic Leagues, Social Welfare Organizations, and Local Associations of Employees Promotion of community welfare; charitable, educational, or recreational 1024 9901 or 990-EZ8 No, generally 2, 3 501(c)(5) Labor, Agricultural, and Horticultural Organizations Educational or instructive, the  purpose being to improve conditions of work, and to improve products of efficiency 1024 9901 or 990-EZ8 No2 501(c)(6) Business Leagues, Chambers of Commerce, Real Estate Boards, etc. Tax return h&r block Improvement of business  conditions of one or more lines of business 1024 9901 or 990-EZ8 No2 501(c)(7) Social and Recreational Clubs Pleasure, recreation, social activities 1024 9901 or 990-EZ8 No2 501(c)(8) Fraternal Beneficiary Societies  and Associations Lodge providing for payment of life, sickness, accident or other benefits  to members 1024 9901 or 990-EZ8 Yes, if for certain Sec. Tax return h&r block 501(c)(3) purposes 501(c)(9) Voluntary Employees Beneficiary Associations Providing for payment of life, sickness, accident, or other benefits to members 1024 9901 or 990-EZ8 No2 501(c)(10) Domestic Fraternal Societies  and Associations Lodge devoting its net earnings to charitable, fraternal, and other  specified purposes. Tax return h&r block No life, sickness, or accident benefits to members 1024 9901 or 990-EZ8 Yes, if for certain Sec. Tax return h&r block 501(c)(3) purposes 501(c)(11) Teachers' Retirement Fund Associations Teachers' association for payment of retirement benefits Letter6 9901 or 990-EZ8 No2 501(c)(12) Benevolent Life Insurance Associations, Mutual Ditch or  Irrigation Companies, Mutual or Cooperative Telephone Companies, etc. Tax return h&r block Activities of a mutually beneficial  nature similar to those implied by the description of class of organization 1024 9901 or 990-EZ8 No2 501(c)(13) Cemetery Companies Burials and incidental activities 1024 9901 or 990-EZ8 Yes, generally 501(c)(14) State-Chartered Credit Unions,  Mutual Reserve Funds Loans to members Letter6 9901 or 990-EZ8 No2 501(c)(15) Mutual Insurance Companies or Associations Providing insurance to members substantially at cost 1024 9901 or 990-EZ8 No2 501(c)(16) Cooperative Organizations to  Finance Crop Operations Financing crop operations in  conjunction with activities of a marketing  or purchasing association Form 1120-C6 9901 or 990-EZ8 No2 501(c)(17) Supplemental Unemployment  Benefit Trusts Provides for payment of  supplemental unemployment compensation benefits 1024 9901 or 990-EZ8 No2 501(c)(18) Employee Funded Pension Trust (created before June 25, 1959) Payment of benefits under a  pension plan funded by employees Letter6 9901 or 990-EZ8 No2 501(c)(19) Post or Organization of Past or  Present Members of the Armed Forces Activities implied by nature of organization 1024 9901 or 990-EZ8 No, generally7 501(c)(21) Black Lung Benefit Trusts Funded by coal mine operators to satisfy their liability for disability or  death due to black lung diseases Letter6 990-BL No4 501(c)(22) Withdrawal Liability Payment Fund To provide funds to meet the  liability of employers withdrawing from  a multi-employer pension fund Letter6 9901 or 990-EZ8 No5 501(c)(23) Veterans' Organization (created before 1880) To provide insurance and other  benefits to veterans Letter6 9901 or 990-EZ8 No, generally7 501(c)(25) Title Holding Corporations or Trusts with Multiple Parent Corporations Holding title and paying over  income from property to 35 or fewer parents or beneficiaries 1024 9901 or 990-EZ8 No 501(c)(26) State-Sponsored Organization Providing Health Coverage for High-Risk Individuals Provides health care coverage to high-risk individuals Letter6 9901 or 990-EZ8 No 501(c)(27) State-Sponsored Workers' Compensation Reinsurance Organization Reimburses members for losses  under workers' compensation acts Letter6 9901 or 990-EZ8 No 501(c)(28) National Railroad Retirement Investment Trust Manages and invests the assets of the Railroad Retirement Account No Form 99011 No11 501(c)(29) CO-OP health insurance issuers A qualified health insurance issuer which has received a loan or grant under the CO-OP program Letter and Form 871814 9901 No13 501(d) Religious and Apostolic Associations Regular business activities;  Communal religious community No Form 10659 No2 501(e) Cooperative Hospital Service Organizations Performs cooperative services for hospitals 1023 9901 or 990-EZ8 Yes 501(f) Cooperative Service Organizations  of Operating Educational Organizations Performs collective investment  services for educational organizations 1023 9901 or 990-EZ8 Yes 501(k) Child Care Organizations Provides care for children 1023 9901 or 990-EZ8 Yes 501(n) Charitable Risk Pools Pools certain insurance risks of sec. Tax return h&r block 501(c)(3) organizations 1023 9901 or 990-EZ8 Yes 501(q) Credit Counseling Organization Credit counseling services 1023 102312 No 521(a) Farmers' Cooperative Associations Cooperative marketing and  purchasing for agricultural procedures 1028 1120-C No 527 Political organizations A party, committee, fund,  association, etc. Tax return h&r block , that directly or indirectly accepts contributions or makes expenditures for political campaigns 8871 1120-POL10 9901 or 990-EZ8 No 1For exceptions to the filing requirement, see chapter 2 and the form instructions. Tax return h&r block Note: For annual tax periods beginning after 2006, most tax-exempt organizations, other than churches, are required to file an annual Form 990, 990-EZ, or 990-PF with the IRS or to submit an annual electronic notice, Form 990-N (e-Postcard), to the IRS. Tax return h&r block Tax-exempt organizations failing to file an annual return or submit an annual notice as required for 3 consecutive years will automatically lose their tax-exempt status. Tax return h&r block    2An organization exempt under a subsection of section 501 other than 501(c)(3) can establish a charitable fund, contributions to which are deductible. Tax return h&r block Such a fund must itself meet the requirements of section 501(c)(3) and the related notice requirements of section 508(a). Tax return h&r block    3Contributions to volunteer fire companies and similar organizations are deductible, but only if made for exclusively public purposes. Tax return h&r block    4Deductible as a business expense to the extent allowed by section 192. Tax return h&r block    5Deductible as a business expense to the extent allowed by section 194A. Tax return h&r block 6Application is by letter to the address shown on Form 8718. Tax return h&r block A copy of the organizing document should be attached and the letter should be signed by an officer. Tax return h&r block    7Contributions to these organizations are deductible only if 90% or more of the organization's members are war veterans. Tax return h&r block    8For limits on the use of Form 990-EZ, see chapter 2 and the general instructions for Form 990-EZ (or Form 990). Tax return h&r block    9Although the organization files a partnership return, all distributions are deemed dividends. Tax return h&r block The members are not entitled to pass through treatment of the organization's income or expenses. Tax return h&r block    10Form 1120-POL is required only if the organization has taxable income as defined in section 527(c). Tax return h&r block    11Only required to annually file so much of the Form 990 that relates to the names and addresses of the officers, directors, trustees, and key employees, and their titles, compensation, and hours devoted to their positions (Part VII of Form 990), and to complete Item I in the Heading of Form 990 to confirm its tax-exempt status under section 501(c)(28). Tax return h&r block    12See section 501(q) if the organization provides credit counseling services and seeks recognition of exemption under section 501(c)(4). Tax return h&r block Use Form 1024 if applying for recognition under section 501(c)(4). Tax return h&r block    13See section 501(c)(29) for details. Tax return h&r block    14See Revenue Procedure 2012-11, sec. Tax return h&r block 4. Tax return h&r block 01, 2012-7 I. Tax return h&r block R. Tax return h&r block B. Tax return h&r block 368, for details. Tax return h&r block Appendix. Tax return h&r block Sample Articles of Organization The following are examples of Articles of Incorporation (Draft A) and a declaration of trust (Draft B) that contain the required information as to purposes and powers of an organization and disposition of its assets upon dissolution. Tax return h&r block You should bear in mind that requirements for these instruments may vary under applicable state law. Tax return h&r block See Private Foundations and Public Charities , earlier for the special provisions required in a private foundation's governing instrument in order for it to qualify for exemption. Tax return h&r block DRAFT A  Articles of Incorporation of the undersigned, a majority of whom are citizens of the United States, desiring to form a Non-Profit Corporation under the Non-Profit Corporation Law of , do hereby certify: First: The name of the Corporation shall be . Tax return h&r block Second: The place in this state where the principal office of the Corporation is to be located is the City of , County. Tax return h&r block Third: Said corporation is organized exclusively for charitable, religious, educational, and scientific purposes, including, for such purposes, the making of distributions to organizations that qualify as exempt organizations under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code. Tax return h&r block Fourth: The names and addresses of the persons who are the initial trustees of the corporation are as follows: Name , Address Fifth: No part of the net earnings of the corporation shall inure to the benefit of, or be distributable to its members, trustees, officers, or other private persons, except that the corporation shall be authorized and empowered to pay reasonable compensation for services rendered and to make payments and distributions in furtherance of the purposes set forth in Article Third hereof. Tax return h&r block No substantial part of the activities of the corporation shall be the carrying on of propaganda, or otherwise attempting to influence legislation, and the corporation shall not participate in, or intervene in (including the publishing or distribution of statements) any political campaign on behalf of or in opposition to any candidate for public office. Tax return h&r block Notwithstanding any other provision of these articles, the corporation shall not carry on any other activities not permitted to be carried on (a) by a corporation exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or (b) by a corporation, contributions to which are deductible under section 170(c)(2) of the Internal Revenue Code, or the corresponding section of any future federal tax code. Tax return h&r block   If reference to federal law in articles of incorporation imposes a limitation that is invalid in your state, you may wish to substitute the following for the last sentence of the preceding paragraph: “Notwithstanding any other provision of these articles, this corporation shall not, except to an insubstantial degree, engage in any activities or exercise any powers that are not in furtherance of the purposes of this corporation. Tax return h&r block ” Sixth: Upon the dissolution of the corporation, assets shall be distributed for one or more exempt purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose. Tax return h&r block Any such assets not so disposed of shall be disposed of by a Court of Competent Jurisdiction of the county in which the principal office of the corporation is then located, exclusively for such purposes or to such organization or organizations, as said Court shall determine, which are organized and operated exclusively for such purposes. Tax return h&r block   In witness whereof, we have hereunto subscribed our names this day of , 20. Tax return h&r block Appendix. Tax return h&r block Sample Articles of Organization, continued Draft B The Charitable Trust. Tax return h&r block Declaration of Trust made as of the day of , 20 , by , of , and , of , who hereby declare and agree that they have received this day from , as Donor, the sum of Ten Dollars ($10) and that they will hold and manage the same, and any additions to it, in trust, as follows: First: This trust shall be called “The Charitable Trust. Tax return h&r block ” Second: The trustees may receive and accept property, whether real, personal, or mixed, by way of gift, bequest, or devise, from any person, firm, trust, or corporation, to be held, administered, and disposed of in accordance with and pursuant to the provisions of this Declaration of Trust; but no gift, bequest, or devise of any such property shall be received and accepted if it is conditioned or limited in such manner as to require the disposition of the income or its principal to any person or organization other than a “charitable organization” or for other than “charitable purposes” within the meaning of such terms as defined in Article Third of this Declaration of Trust, or as shall, in the opinion of the trustees, jeopardize the federal income tax exemption of this trust pursuant to section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code. Tax return h&r block Third: a) The principal and income of all property received and accepted by the trustees to be administered under this Declaration of Trust shall be held in trust by them, and the trustees may make payments or distributions from income or principal, or both, to or for the use of such charitable organizations, within the meaning of that term as defined in paragraph C, in such amounts and for such charitable purposes of the trust as the trustees shall from time to time select and determine; and the trustees may make payments or distributions from income or principal, or both, directly for such charitable purposes, within the meaning of that term as defined in paragraph D, in such amounts as the trustees shall from time to time select and determine without making use of any other charitable organization. Tax return h&r block The trustees may also make payments or distributions of all or any part of the income or principal to states, territories, or possessions of the United States, any political subdivision of any of the foregoing, or to the United States or the District of Columbia but only for charitable purposes within the meaning of that term as defined in paragraph D. Tax return h&r block Income or principal derived from contributions by corporations shall be distributed by the trustees for use solely within the United States or its possessions. Tax return h&r block No part of the net earnings of this trust shall inure or be payable to or for the benefit of any private shareholder or individual, and no substantial part of the activities of this trust shall be the carrying on of propaganda, or otherwise attempting to influence legislation. Tax return h&r block No part of the activities of this trust shall be the participation in, or intervention in (including the publishing or distributing of statements), any political campaign on behalf of or in opposition to any candidate for public office. Tax return h&r block b) The trust shall continue forever unless the trustees terminate it and distribute all of the principal and income, which action may be taken by the trustees in their discretion at any time. Tax return h&r block On such termination, assets shall be distributed for one or more exempt purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose. Tax return h&r block The donor authorizes and empowers the trustees to form and organize a nonprofit corporation limited to the uses and purposes provided for in this Declaration of Trust, such corporation to be organized under the laws of any state or under the laws of the United States as may be determined by the trustees; such corporation when organized to have power to administer and control the affairs and property and to carry out the uses, objects, and purposes of this trust. Tax return h&r block Upon the creation and organization of such corporation, the trustees are authorized and empowered to convey, transfer, and deliver to such corporation all the property and assets to which this trust may be or become entitled. Tax return h&r block The charter, bylaws, and other provisions for the organization and management of such corporation and its affairs and property shall be such as the trustees shall determine, consistent with the provisions of this paragraph. Tax return h&r block c) In this Declaration of Trust and in any amendments to it, references to “charitable organizations” or “charitable organization” mean corporations, trusts, funds, foundations, or community chests created or organized in the United States or in any of its possessions, whether under the laws of the United States, any state or territory, the District of Columbia, or any possession of the United States, organized and operated exclusively for charitable purposes, no part of the net earnings of which inures or is payable to or for the benefit of any private shareholder or individual, and no substantial part of the activities of which is carrying on propaganda, or otherwise attempting to influence legislation, and which do not participate in or intervene in (including the publishing or distributing of statements) any political campaign on behalf of or in opposition to any candidate for public office. Tax return h&r block It is intended that the organization described in this paragraph C shall be entitled to exemption from federal income tax under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code. Tax return h&r block d) In this Declaration of Trust and in any amendments to it, the term “charitable purposes” shall be limited to and shall include only religious, charitable, scientific, literary, or educational purposes within the meaning of those terms as used in section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, but only such purposes as also constitute public charitable purposes under the law of trusts of the State of. Tax return h&r block Fourth: This Declaration of Trust may be amended at any time or times by written instrument or instruments signed and sealed by the trustees, and acknowledged by any of the trustees, provided that no amendment shall authorize the trustees to conduct the affairs of this trust in any manner or for any purpose contrary to the provisions of section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code. Tax return h&r block An amendment of the provisions of this Article Fourth (or any amendment to it) shall be valid only if and to the extent that such amendment further restricts the trustees' amending power. Tax return h&r block All instruments amending this Declaration of Trust shall be noted upon or kept attached to the executed original of this Declaration of Trust held by the trustees. Tax return h&r block Fifth: Any trustee under this Declaration of Trust may, by written instrument, signed and acknowledged, resign his office. Tax return h&r block The number of trustees shall be at all times not less than two, and whenever for any reason the number is reduced to one, there shall be, and at any other time there may be, appointed one or more additional trustees. Tax return h&r block Appointments shall be made by the trustee or trustees for the time in office by written instruments signed and acknowledged. Tax return h&r block Any succeeding or additional trustee shall, upon his or her acceptance of the office by written instrument signed and acknowledged, have the same powers, rights, and duties, and the same title to the trust estate jointly with the surviving or remaining trustee or trustees as if originally appointed. Tax return h&r block  None of the trustees shall be required to furnish any bond or surety. Tax return h&r block None of them shall be responsible or liable for the acts or omissions of any other of the trustees or of any predecessor or of a custodian, agent, depositary, or counsel selected with reasonable care. Tax return h&r block  The one or more trustees, whether original or successor, for the time being in office, shall have full authority to act even though one or more vacancies may exist. Tax return h&r block A trustee may, by appropriate written instrument, delegate all or any part of his or her powers to another or others of the trustees for such periods and subject to such conditions as such delegating trustee may determine. Tax return h&r block  The trustees serving under this Declaration of Trust are authorized to pay to themselves amounts for reasonable expenses incurred and reasonable compensation for services rendered in the administration of this trust, but in no event shall any trustee who has made a contribution to this trust ever receive any compensation thereafter. Tax return h&r block Sixth: In extension and not in limitation of the common law and statutory powers of trustees and other powers granted in this Declaration of Trust, the trustees shall have the following discretionary powers. Tax return h&r block a) To invest and reinvest the principal and income of the trust in such property, real, personal, or mixed, and in such manner as they shall deem proper, and from time to time to change investments as they shall deem advisable; to invest in or retain any stocks, shares, bonds, notes, obligations, or personal or real property (including without limitation any interests in or obligations of any corporation, association, business trust, investment trust, common trust fund, or investment company) although some or all of the property so acquired or retained is of a kind or size which but for this express authority would not be considered proper and although all of the trust funds are invested in the securities of one company. Tax return h&r block No principal or income, however, shall be loaned, directly or indirectly, to any trustee or to anyone else, corporate or otherwise, who has at any time made a contribution to this trust, nor to anyone except on the basis of an adequate interest charge and with adequate security. Tax return h&r block b) To sell, lease, or exchange any personal, mixed, or real property, at public auction or by private contract, for such consideration and on such terms as to credit or otherwise, and to make such contracts and enter into such undertakings relating to the trust property, as they consider advisable, whether or not such leases or contracts may extend beyond the duration of the trust. Tax return h&r block c) To borrow money for such periods, at such rates of interest, and upon such terms as the trustees consider advisable, and as security for such loans to mortgage or pledge any real or personal property with or without power of sale; to acquire or hold any real or personal property, subject to any mortgage or pledge on or of property acquired or held by this trust. Tax return h&r block d) To execute and deliver deeds, assignments, transfers, mortgages, pledges, leases, covenants, contracts, promissory notes, releases, and other instruments, sealed or unsealed, incident to any transaction in which they engage. Tax return h&r block e) To vote, to give proxies, to participate in the reorganization, merger, or consolidation of any concern, or in the sale, lease, disposition, or distribution of its assets; to join with other security holders in acting through a committee, depositary, voting trustees, or otherwise, and in this connection to delegate authority to such committee, depositary, or trustees and to deposit securities with them or transfer securities to them; to pay assessments levied on securities or to exercise subscription rights in respect of securities. Tax return h&r block f) To employ a bank or trust company as custodian of any funds or securities and to delegate to it such powers as they deem appropriate; to hold trust property without indication of fiduciary capacity but only in the name of a registered nominee, provided the trust property is at all times identified as such on the books of the trust; to keep any or all of the trust property or funds in any place or places in the United States of America; to employ clerks, accountants, investment counsel, investment agents, and any special services, and to pay the reasonable compensation and expenses of all such services in addition to the compensation of the trustees. Tax return h&r block Seventh: The trustees' powers are exercisable solely in the fiduciary capacity consistent with and in furtherance of the charitable purposes of this trust as specified in Article Third and not otherwise. Tax return h&r block Eighth: In this Declaration of Trust and in any amendment to it, references to “trustees” mean the one or more trustees, whether original or successor, for the time being in office. Tax return h&r block Ninth: Any person may rely on a copy, certified by a notary public, of the executed original of this Declaration of Trust held by the trustees, and of any of the notations on it and writings attached to it, as fully as he might rely on the original documents themselves. Tax return h&r block Any such person may rely fully on any statements of fact certified by anyone who appears from such original documents or from such certified copy to be a trustee under this Declaration of Trust. Tax return h&r block No one dealing with the trustees need inquire concerning the validity of anything the trustees purport to do. Tax return h&r block No one dealing with the trustees need see to the application of anything paid or transferred to or upon the order of the trustees of the trust. Tax return h&r block Tenth: This Declaration of Trust is to be governed in all respects by the laws of the State of . Tax return h&r block Trustee Trustee Prev  Up  Next   Home   More Online Publications
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Resolve Banking Problems

Beware: Fake Check Scams

Fake checks, including cashiers checks, can look so real even bank tellers can be fooled. However, just because you can withdraw the money, doesn't mean the check is good. Forgeries can take weeks to discover. You are responsible for the checks you deposit. If a check bounces, you owe the bank any money you withdrew. If someone wants to send you a check, insist on a cashier's check for the exact amount, preferably from a local bank or one with a branch in your area. Never accept a check and then agree to send a portion of the money back to the sender. For information or to report a scam, visit Federal Trade Commission.

Unsolicited Checks And Credit Offers

If you cash an unsolicited check you've received in the mail, you could be agreeing to pay for products or services you don't want or need, such as Internet access or membership in a web directory. In addition, those "guarantees" for credit cards or loans, regardless of credit history, are probably a scam. Legitimate lenders never guarantee credit. For information on how to identify fraudulent solicitations, contact the Federal Trade Commission.

Legitimate offers of credit often come in the form of "convenience checks", which credit card companies enclose with your monthly statement. However, these convenience checks may carry higher fees, a higher interest rate, and other restrictions. If you don't want the checks, be sure to shred them to protect yourself from dumpster divers and identity thieves.

Watch out for checks from someone in a foreign country claiming that you won a lottery, for an investment, or to pay for an item you sold online. This could be a scam. Even if you deposit the check, the check may not be legal. Don't rely on money from a check, especially foreign or unsolicited, until your bank says the check has cleared or if you know and trust the person who sent it to you.

Contact these Agencies to Solve Your Banking Problems 

 

Type of Institution Regulatory Agency
State chartered banks and trust companies that are NOT member of the Federal Reserve System Federal Deposit Insurance Corporation
State chartered banks and trust companies that are members of the Federal Reserve System Federal Reserve System
State chartered banks State Banking Authorities
Banks with National in the name or N.A. after the name Comptroller of the Currency, U.S. Department of the Treasury
Federal savings and loans and federal savings banks Comptroller of the Currency, U.S. Department of the Treasury
Federally chartered credit unions National Credit Union Administration

The Tax Return H&r Block

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