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1040ez Form2012

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1040ez Form2012

1040ez form2012 17. 1040ez form2012   Individual Retirement Arrangements (IRAs) Table of Contents What's New Reminders Introduction Useful Items - You may want to see: Traditional IRAsWho Can Open a Traditional IRA? When and How Can a Traditional IRA Be Opened? How Much Can Be Contributed? When Can Contributions Be Made? How Much Can You Deduct? Nondeductible Contributions Inherited IRAs Can You Move Retirement Plan Assets? When Can You Withdraw or Use IRA Assets? When Must You Withdraw IRA Assets? (Required Minimum Distributions) Are Distributions Taxable? What Acts Result in Penalties or Additional Taxes? Roth IRAsWhat Is a Roth IRA? When Can a Roth IRA Be Opened? Can You Contribute to a Roth IRA? Can You Move Amounts Into a Roth IRA? Are Distributions Taxable? What's New Traditional IRA contribution and deduction limit. 1040ez form2012  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. 1040ez form2012 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. 1040ez form2012 For more information, see How Much Can Be Contributed? later. 1040ez form2012 Roth IRA contribution limit. 1040ez form2012  If contributions on your behalf are made only to Roth IRAs, your contribution limit for 2013 will generally be the lesser of: $5,500, or Your taxable compensation for the year. 1040ez form2012 If you were age 50 or older before 2014 and contributions on your behalf were made only to Roth IRAs, your contribution limit for 2013 will generally be the lesser of: $6,500, or Your taxable compensation for the year. 1040ez form2012 However, if your modified adjusted gross income (AGI) is above a certain amount, your contribution limit may be reduced. 1040ez form2012 For more information, see How Much Can Be Contributed? under Can You Contribute to a Roth IRA? later. 1040ez form2012 Modified AGI limit for traditional IRA contributions increased. 1040ez form2012  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. 1040ez form2012 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. 1040ez form2012 If your modified AGI is $188,000 or more, you cannot take a deduction for contributions to a traditional IRA. 1040ez form2012 See How Much Can You Deduct , later. 1040ez form2012 Modified AGI limit for Roth IRA contributions increased. 1040ez form2012  For 2013, your Roth IRA contribution limit is reduced (phased out) in the following situations. 1040ez form2012 Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $178,000. 1040ez form2012 You cannot make a Roth IRA contribution if your modified AGI is $188,000 or more. 1040ez form2012 Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2013 and your modified AGI is at least $112,000. 1040ez form2012 You cannot make a Roth IRA contribution if your modified AGI is $127,000 or more. 1040ez form2012 Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. 1040ez form2012 You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more. 1040ez form2012 See Can You Contribute to a Roth IRA , later. 1040ez form2012 Net Investment Income Tax. 1040ez form2012   For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan including IRAs (for example; 401(a), 403(a), 403(b), 408, 408A, or 457(b) plans). 1040ez form2012 However, these distributions are taken into account when determining the modified adjusted gross income threshold. 1040ez form2012 Distributions from a nonqualified retirement plan are included in net investment income. 1040ez form2012 See Form 8960, Net Investment Income Tax - Individuals, Estates, and Trusts, and its instructions for more information. 1040ez form2012 Name change. 1040ez form2012  All spousal IRAs have been renamed Kay Bailey Hutchison Spousal IRAs. 1040ez form2012 There are no changes to the rules regarding these IRAs. 1040ez form2012 See Kay Bailey Hutchison Spousal IRA Limit , later, for more information. 1040ez form2012 Reminders 2014 limits. 1040ez form2012   You can find information about the 2014 contribution and AGI limits in Publication 590. 1040ez form2012 Contributions to both traditional and Roth IRAs. 1040ez form2012   For information on your combined contribution limit if you contribute to both traditional and Roth IRAs, see Roth IRAs and traditional IRAs under How Much Can Be Contributed? in Roth IRAs, later. 1040ez form2012 Statement of required minimum distribution. 1040ez form2012  If a minimum distribution from your IRA is required, the trustee, custodian, or issuer that held the IRA at the end of the preceding year must either report the amount of the required minimum distribution to you, or offer to calculate it for you. 1040ez form2012 The report or offer must include the date by which the amount must be distributed. 1040ez form2012 The report is due January 31 of the year in which the minimum distribution is required. 1040ez form2012 It can be provided with the year-end fair market value statement that you normally get each year. 1040ez form2012 No report is required for IRAs of owners who have died. 1040ez form2012 IRA interest. 1040ez form2012  Although interest earned from your IRA is generally not taxed in the year earned, it is not tax-exempt interest. 1040ez form2012 Tax on your traditional IRA is generally deferred until you take a distribution. 1040ez form2012 Do not report this interest on your tax return as tax-exempt interest. 1040ez form2012 Form 8606. 1040ez form2012   To designate contributions as nondeductible, you must file Form 8606, Nondeductible IRAs. 1040ez form2012 The term “50 or older” is used several times in this chapter. 1040ez form2012 It refers to an IRA owner who is age 50 or older by the end of the tax year. 1040ez form2012 Introduction An individual retirement arrangement (IRA) is a personal savings plan that gives you tax advantages for setting aside money for your retirement. 1040ez form2012 This chapter discusses the following topics. 1040ez form2012 The rules for a traditional IRA (any IRA that is not a Roth or SIMPLE IRA). 1040ez form2012 The Roth IRA, which features nondeductible contributions and tax-free distributions. 1040ez form2012 Simplified Employee Pensions (SEPs) and Savings Incentive Match Plans for Employees (SIMPLEs) are not discussed in this chapter. 1040ez form2012 For more information on these plans and employees' SEP IRAs and SIMPLE IRAs that are part of these plans, see Publications 560 and 590. 1040ez form2012 For information about contributions, deductions, withdrawals, transfers, rollovers, and other transactions, see Publication 590. 1040ez form2012 Useful Items - You may want to see: Publication 560 Retirement Plans for Small Business 590 Individual Retirement Arrangements (IRAs) Form (and Instructions) 5329 Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts 8606 Nondeductible IRAs Traditional IRAs In this chapter, the original IRA (sometimes called an ordinary or regular IRA) is referred to as a “traditional IRA. 1040ez form2012 ” A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA. 1040ez form2012 Two advantages of a traditional IRA are: You may be able to deduct some or all of your contributions to it, depending on your circumstances, and Generally, amounts in your IRA, including earnings and gains, are not taxed until they are distributed. 1040ez form2012 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. 1040ez form2012 What is compensation?   Generally, compensation is what you earn from working. 1040ez form2012 Compensation includes wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services. 1040ez form2012 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). 1040ez form2012   Scholarship and fellowship payments are compensation for this purpose only if shown in box 1 of Form W-2. 1040ez form2012   Compensation also includes commissions and taxable alimony and separate maintenance payments. 1040ez form2012 Self-employment income. 1040ez form2012   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 deductible part of your self-employment tax. 1040ez form2012   Compensation includes earnings from self-employment even if they are not subject to self-employment tax because of your religious beliefs. 1040ez form2012 Nontaxable combat pay. 1040ez form2012   For IRA purposes, if you were a member of the U. 1040ez form2012 S. 1040ez form2012 Armed Forces, your compensation includes any nontaxable combat pay you receive. 1040ez form2012 What is not compensation?   Compensation does not include any of the following items. 1040ez form2012 Earnings and profits from property, such as rental income, interest income, and dividend income. 1040ez form2012 Pension or annuity income. 1040ez form2012 Deferred compensation received (compensation payments postponed from a past year). 1040ez form2012 Income from a partnership for which you do not provide services that are a material income-producing factor. 1040ez form2012 Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b. 1040ez form2012 Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs. 1040ez form2012 When and How Can a Traditional IRA Be Opened? You can open a traditional IRA at any time. 1040ez form2012 However, the time for making contributions for any year is limited. 1040ez form2012 See When Can Contributions Be Made , later. 1040ez form2012 You can open different kinds of IRAs with a variety of organizations. 1040ez form2012 You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. 1040ez form2012 You can also open an IRA through your stockbroker. 1040ez form2012 Any IRA must meet Internal Revenue Code requirements. 1040ez form2012 Kinds of traditional IRAs. 1040ez form2012   Your traditional IRA can be an individual retirement account or annuity. 1040ez form2012 It can be part of either a simplified employee pension (SEP) or an employer or employee association trust account. 1040ez form2012 How Much Can Be Contributed? There are limits and other rules that affect the amount that can be contributed to a traditional IRA. 1040ez form2012 These limits and other rules are explained below. 1040ez form2012 Community property laws. 1040ez form2012   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. 1040ez form2012 This is the rule even in states with community property laws. 1040ez form2012 Brokers' commissions. 1040ez form2012   Brokers' commissions paid in connection with your traditional IRA are subject to the contribution limit. 1040ez form2012 Trustees' fees. 1040ez form2012   Trustees' administrative fees are not subject to the contribution limit. 1040ez form2012 Qualified reservist repayments. 1040ez form2012   If you are (or 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 you received. 1040ez form2012 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. 1040ez form2012 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 similar arrangement. 1040ez form2012   For more information, see Qualified reservist repayments under How Much Can Be Contributed? in chapter 1 of Publication 590. 1040ez form2012 Contributions on your behalf to a traditional IRA reduce your limit for contributions to a Roth IRA. 1040ez form2012 (See Roth IRAs, later. 1040ez form2012 ) General limit. 1040ez form2012   For 2013, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts. 1040ez form2012 $5,500 ($6,500 if you are 50 or older). 1040ez form2012 Your taxable compensation (defined earlier) for the year. 1040ez form2012 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. 1040ez form2012 (See Nondeductible Contributions , later. 1040ez form2012 ) Qualified reservist repayments do not affect this limit. 1040ez form2012 Example 1. 1040ez form2012 Betty, who is 34 years old and single, earned $24,000 in 2013. 1040ez form2012 Her IRA contributions for 2013 are limited to $5,500. 1040ez form2012 Example 2. 1040ez form2012 John, an unmarried college student working part time, earned $3,500 in 2013. 1040ez form2012 His IRA contributions for 2013 are limited to $3,500, the amount of his compensation. 1040ez form2012 Kay Bailey Hutchison Spousal IRA limit. 1040ez form2012   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 amounts. 1040ez form2012 $5,500 ($6,500 if you are 50 or older). 1040ez form2012 The total compensation includible in the gross income of both you and your spouse for the year, reduced by the following two amounts. 1040ez form2012 Your spouse's IRA contribution for the year to a traditional IRA. 1040ez form2012 Any contribution for the year to a Roth IRA on behalf of your spouse. 1040ez form2012 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 50 or older, or $13,000 if both of you are 50 or older). 1040ez form2012 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). 1040ez form2012 Contributions must be in the form of money (cash, check, or money order). 1040ez form2012 Property cannot be contributed. 1040ez form2012 Contributions must be made by due date. 1040ez form2012   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. 1040ez form2012 Age 70½ rule. 1040ez form2012   Contributions cannot be made to your traditional IRA for the year in which you reach age 70½ or for any later year. 1040ez form2012   You attain age 70½ on the date that is 6 calendar months after the 70th anniversary of your birth. 1040ez form2012 If you were born on or before June 30, 1943, you cannot contribute for 2013 or any later year. 1040ez form2012 Designating year for which contribution is made. 1040ez form2012   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. 1040ez form2012 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). 1040ez form2012 Filing before a contribution is made. 1040ez form2012   You can file your return claiming a traditional IRA contribution before the contribution is actually made. 1040ez form2012 Generally, the contribution must be made by the due date of your return, not including extensions. 1040ez form2012 Contributions not required. 1040ez form2012   You do not have to contribute to your traditional IRA for every tax year, even if you can. 1040ez form2012 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 it applies). 1040ez form2012 However, if you or your spouse was covered by an employer retirement plan, you may not be able to deduct this amount. 1040ez form2012 See Limit If Covered by Employer Plan , later. 1040ez form2012 You may be able to claim a credit for contributions to your traditional IRA. 1040ez form2012 For more information, see chapter 37. 1040ez form2012 Trustees' fees. 1040ez form2012   Trustees' administrative fees that are billed separately and paid in connection with your traditional IRA are not deductible as IRA contributions. 1040ez form2012 However, they may be deductible as a miscellaneous itemized deduction on Schedule A (Form 1040). 1040ez form2012 See chapter 28. 1040ez form2012 Brokers' commissions. 1040ez form2012   Brokers' commissions are part of your IRA contribution and, as such, are deductible subject to the limits. 1040ez form2012 Full deduction. 1040ez form2012   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 traditional IRAs of up to the lesser of: $5,500 ($6,500 if you are age 50 or older in 2013). 1040ez form2012 100% of your compensation. 1040ez form2012 This limit is reduced by any contributions made to a 501(c)(18) plan on your behalf. 1040ez form2012 Kay Bailey Hutchison Spousal IRA. 1040ez form2012   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 the following amounts. 1040ez form2012 $5,500 ($6,500 if the spouse with the lower compensation is age 50 or older in 2013). 1040ez form2012 The total compensation includible in the gross income of both spouses for the year reduced by the following three amounts. 1040ez form2012 The IRA deduction for the year of the spouse with the greater compensation. 1040ez form2012 Any designated nondeductible contribution for the year made on behalf of the spouse with the greater compensation. 1040ez form2012 Any contributions for the year to a Roth IRA on behalf of the spouse with the greater compensation. 1040ez form2012 This limit is reduced by any contributions to a 501(c)(18) plan on behalf of the spouse with the lesser compensation. 1040ez form2012 Note. 1040ez form2012 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. 1040ez form2012 After a divorce or legal separation, you can deduct only contributions to your own IRA. 1040ez form2012 Your deductions are subject to the rules for single individuals. 1040ez form2012 Covered by an employer retirement plan. 1040ez form2012   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. 1040ez form2012 This is discussed later under Limit If Covered by Employer Plan . 1040ez form2012 Limits on the amount you can deduct do not affect the amount that can be contributed. 1040ez form2012 See Nondeductible Contributions , later. 1040ez form2012 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. 1040ez form2012 The “Retirement plan” box should be checked if you were covered. 1040ez form2012 Reservists and volunteer firefighters should also see Situations in Which You Are Not Covered by an Employer Plan , later. 1040ez form2012 If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer. 1040ez form2012 Federal judges. 1040ez form2012   For purposes of the IRA deduction, federal judges are covered by an employer retirement plan. 1040ez form2012 For Which Year(s) Are You Covered by an Employer Plan? Special rules apply to determine the tax years for which you are covered by an employer plan. 1040ez form2012 These rules differ depending on whether the plan is a defined contribution plan or a defined benefit plan. 1040ez form2012 Tax year. 1040ez form2012   Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. 1040ez form2012 For almost all people, the tax year is the calendar year. 1040ez form2012 Defined contribution plan. 1040ez form2012   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. 1040ez form2012   A defined contribution plan is a plan that provides for a separate account for each person covered by the plan. 1040ez form2012 Types of defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans. 1040ez form2012 Defined benefit plan. 1040ez form2012   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. 1040ez form2012 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. 1040ez form2012   A defined benefit plan is any plan that is not a defined contribution plan. 1040ez form2012 Defined benefit plans include pension plans and annuity plans. 1040ez form2012 No vested interest. 1040ez form2012   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. 1040ez form2012 Situations in Which You Are Not Covered by an Employer Plan Unless you are covered under another employer plan, you are not covered by an employer plan if you are in one of the situations described below. 1040ez form2012 Social security or railroad retirement. 1040ez form2012   Coverage under social security or railroad retirement is not coverage under an employer retirement plan. 1040ez form2012 Benefits from a previous employer's plan. 1040ez form2012   If you receive retirement benefits from a previous employer's plan, you are not covered by that plan. 1040ez form2012 Reservists. 1040ez form2012   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. 1040ez form2012 You are not covered by the plan if both of the following conditions are met. 1040ez form2012 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. 1040ez form2012 You did not serve more than 90 days on active duty during the year (not counting duty for training). 1040ez form2012 Volunteer firefighters. 1040ez form2012   If the only reason you participate in a plan is because you are a volunteer firefighter, you may not be covered by the plan. 1040ez form2012 You are not covered by the plan if both of the following conditions are met. 1040ez form2012 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. 1040ez form2012 Your accrued retirement benefits at the beginning of the year will not provide more than $1,800 per year at retirement. 1040ez form2012 Limit If Covered by Employer Plan 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. 1040ez form2012 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. 1040ez form2012 These amounts vary depending on your filing status. 1040ez form2012 To determine if your deduction is subject to phaseout, you must determine your modified adjusted gross income (AGI) and your filing status. 1040ez form2012 See Filing status and Modified adjusted gross income (AGI) , later. 1040ez form2012 Then use Table 17-1 or 17-2 to determine if the phaseout applies. 1040ez form2012 Social security recipients. 1040ez form2012   Instead of using Table 17-1 or Table 17-2, use the worksheets in Appendix B of Publication 590 if, for the year, all of the following apply. 1040ez form2012 You received social security benefits. 1040ez form2012 You received taxable compensation. 1040ez form2012 Contributions were made to your traditional IRA. 1040ez form2012 You or your spouse was covered by an employer retirement plan. 1040ez form2012 Use those worksheets to figure your IRA deduction, your nondeductible contribution, and the taxable portion, if any, of your social security benefits. 1040ez form2012 Deduction phaseout. 1040ez form2012   If you were 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 17-1. 1040ez form2012 Table 17-1. 1040ez form2012 Effect of Modified AGI1 on Deduction if You Are Covered by 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. 1040ez form2012 IF your filing status is. 1040ez form2012 . 1040ez form2012 . 1040ez form2012   AND your modified AGI is. 1040ez form2012 . 1040ez form2012 . 1040ez form2012   THEN you can take. 1040ez form2012 . 1040ez form2012 . 1040ez form2012 single   or  head of household   $59,000 or less   a full deduction. 1040ez form2012   more than $59,000 but less than $69,000   a partial deduction. 1040ez form2012   $69,000 or more   no deduction. 1040ez form2012 married filing jointly   or  qualifying widow(er)   $95,000 or less   a full deduction. 1040ez form2012   more than $95,000 but less than $115,000   a partial deduction. 1040ez form2012   $115,000 or more   no deduction. 1040ez form2012 married filing separately2   less than $10,000   a partial deduction. 1040ez form2012   $10,000 or more   no deduction. 1040ez form2012 1Modified AGI (adjusted gross income). 1040ez form2012 See Modified adjusted gross income (AGI) . 1040ez form2012 2If 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” column). 1040ez form2012 If your spouse is covered. 1040ez form2012   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 17-2. 1040ez form2012 Filing status. 1040ez form2012   Your filing status depends primarily on your marital status. 1040ez form2012 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. 1040ez form2012 If you need more information on filing status, see chapter 2. 1040ez form2012 Lived apart from spouse. 1040ez form2012   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. 1040ez form2012 Table 17-2. 1040ez form2012 Effect of Modified AGI1 on Deduction if You Are NOT Covered by 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. 1040ez form2012 IF your filing status is. 1040ez form2012 . 1040ez form2012 . 1040ez form2012   AND your modified AGI is. 1040ez form2012 . 1040ez form2012 . 1040ez form2012   THEN you can take. 1040ez form2012 . 1040ez form2012 . 1040ez form2012 single, head of household, or qualifying widow(er)   any amount   a full deduction. 1040ez form2012 married filing jointly or separately with a spouse who is not covered by a plan at work   any amount   a full deduction. 1040ez form2012 married filing jointly with a spouse who is covered by a plan at work   $178,000 or less   a full deduction. 1040ez form2012   more than $178,000 but less than $188,000   a partial deduction. 1040ez form2012   $188,000 or more   no deduction. 1040ez form2012 married filing separately with a spouse who is covered by a plan at work2   less than $10,000   a partial deduction. 1040ez form2012   $10,000 or more   no deduction. 1040ez form2012 1Modified AGI (adjusted gross income). 1040ez form2012 See Modified adjusted gross income (AGI) . 1040ez form2012 2You are entitled to the full deduction if you did not live with your spouse at any time during the year. 1040ez form2012 Modified adjusted gross income (AGI). 1040ez form2012   How you figure your modified AGI depends on whether you are filing Form 1040 or Form 1040A. 1040ez form2012 If you made contributions to your IRA for 2013 and received a distribution from your IRA in 2013, see Publication 590. 1040ez form2012 You may be able to use Worksheet 17-1 to figure your modified AGI. 1040ez form2012    Do not assume that your modified AGI is the same as your compensation. 1040ez form2012 Your modified AGI may include income in addition to your compensation (discussed earlier), such as interest, dividends, and income from IRA distributions. 1040ez form2012 Form 1040. 1040ez form2012   If you file Form 1040, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following eight amounts. 1040ez form2012 IRA deduction. 1040ez form2012 Student loan interest deduction. 1040ez form2012 Tuition and fees deduction. 1040ez form2012 Domestic production activities deduction. 1040ez form2012 Foreign earned income exclusion. 1040ez form2012 Foreign housing exclusion or deduction. 1040ez form2012 Exclusion of qualified savings bond interest shown on Form 8815, Exclusion of Interest From Series EE and I U. 1040ez form2012 S. 1040ez form2012 Savings Bonds Issued After 1989. 1040ez form2012 Exclusion of employer-provided adoption benefits shown on Form 8839, Qualified Adoption Expenses. 1040ez form2012 This is your modified AGI. 1040ez form2012 Form 1040A. 1040ez form2012   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. 1040ez form2012 IRA deduction. 1040ez form2012 Student loan interest deduction. 1040ez form2012 Tuition and fees deduction. 1040ez form2012 Exclusion of qualified savings bond interest shown on Form 8815. 1040ez form2012 This is your modified AGI. 1040ez form2012 Both contributions for 2013 and distributions in 2013. 1040ez form2012   If all three of the following apply, any IRA distributions you received in 2013 may be partly tax free and partly taxable. 1040ez form2012 You received distributions in 2013 from one or more traditional IRAs. 1040ez form2012 You made contributions to a traditional IRA for 2013. 1040ez form2012 Some of those contributions may be nondeductible contributions. 1040ez form2012 If this is your situation, you must figure the taxable part of the traditional IRA distribution before you can figure your modified AGI. 1040ez form2012 To do this, you can use Worksheet 1-5, Figuring the Taxable Part of Your IRA Distribution, in Publication 590. 1040ez form2012   If at least one of the above does not apply, figure your modified AGI using Worksheet 17-1, later. 1040ez form2012    How to figure your reduced IRA deduction. 1040ez form2012   You can figure your reduced IRA deduction for either Form 1040 or Form 1040A by using the worksheets in chapter 1 of Publication 590. 1040ez form2012 Also, the instructions for Form 1040 and Form 1040A include similar worksheets that you may be able to use instead. 1040ez form2012 Worksheet 17-1. 1040ez form2012 Figuring Your Modified AGI Use this worksheet to figure your modified adjusted gross income for traditional IRA purposes. 1040ez form2012 1. 1040ez form2012 Enter your adjusted gross income (AGI) from Form 1040, line 38, or Form 1040A, line 22, figured without taking into account the amount from Form 1040, line 32, or Form 1040A, line 17 1. 1040ez form2012   2. 1040ez form2012 Enter any student loan interest deduction from Form 1040, line 33, or Form 1040A, line 18 2. 1040ez form2012   3. 1040ez form2012 Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 3. 1040ez form2012   4. 1040ez form2012 Enter any domestic production activities deduction from Form 1040, line 35 4. 1040ez form2012   5. 1040ez form2012 Enter any foreign earned income and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 5. 1040ez form2012   6. 1040ez form2012 Enter any foreign housing deduction from Form 2555, line 50 6. 1040ez form2012   7. 1040ez form2012 Enter any excludable savings bond interest from Form 8815, line 14 7. 1040ez form2012   8. 1040ez form2012 Enter any excluded employer-provided adoption benefits from Form 8839, line 28 8. 1040ez form2012   9. 1040ez form2012 Add lines 1 through 8. 1040ez form2012 This is your Modified AGI for traditional IRA purposes 9. 1040ez form2012   Reporting Deductible Contributions If you file Form 1040, enter your IRA deduction on line 32 of that form. 1040ez form2012 If you file Form 1040A, enter your IRA deduction on line 17. 1040ez form2012 You cannot deduct IRA contributions on Form 1040EZ. 1040ez form2012 Nondeductible Contributions Although your deduction for IRA contributions may be reduced or eliminated, contributions can be made to your IRA up to the general limit or, if it applies, the Kay Bailey Hutchison Spousal IRA limit. 1040ez form2012 The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. 1040ez form2012 Example. 1040ez form2012 Mike is 28 years old and single. 1040ez form2012 In 2013, he was covered by a retirement plan at work. 1040ez form2012 His salary was $57,312. 1040ez form2012 His modified AGI was $70,000. 1040ez form2012 Mike made a $5,500 IRA contribution for 2013. 1040ez form2012 Because he was covered by a retirement plan and his modified AGI was over $69,000, he cannot deduct his $5,500 IRA contribution. 1040ez form2012 He must designate this contribution as a nondeductible contribution by reporting it on Form 8606, as explained next. 1040ez form2012 Form 8606. 1040ez form2012   To designate contributions as nondeductible, you must file Form 8606. 1040ez form2012   You do not have to designate a contribution as nondeductible until you file your tax return. 1040ez form2012 When you file, you can even designate otherwise deductible contributions as nondeductible. 1040ez form2012   You must file Form 8606 to report nondeductible contributions even if you do not have to file a tax return for the year. 1040ez form2012 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. 1040ez form2012 In those situations, a Form 8606 is completed for the year you take a distribution from that IRA. 1040ez form2012 See Form 8606 under Distributions Fully or Partly Taxable, later. 1040ez form2012 Failure to report nondeductible contributions. 1040ez form2012   If you do not report nondeductible contributions, all of the contributions to your traditional IRA will be treated as deductible contributions when withdrawn. 1040ez form2012 All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. 1040ez form2012 Penalty for overstatement. 1040ez form2012   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. 1040ez form2012 Penalty for failure to file Form 8606. 1040ez form2012   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. 1040ez form2012    Tax on earnings on nondeductible contributions. 1040ez form2012   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. 1040ez form2012 See When Can You Withdraw or Use IRA Assets , later. 1040ez form2012 Cost basis. 1040ez form2012   You will have a cost basis in your traditional IRA if you made any nondeductible contributions. 1040ez form2012 Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions. 1040ez form2012 Inherited IRAs If you inherit a traditional IRA, you are called a beneficiary. 1040ez form2012 A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. 1040ez form2012 Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive. 1040ez form2012 Inherited from spouse. 1040ez form2012   If you inherit a traditional IRA from your spouse, you generally have the following three choices. 1040ez form2012 You can: Treat it as your own IRA by designating yourself as the account owner. 1040ez form2012 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 (section 403(b) plan), or Deferred compensation plan of a state or local government (section 457 plan). 1040ez form2012 Treat yourself as the beneficiary rather than treating the IRA as your own. 1040ez form2012 Treating it as your own. 1040ez form2012   You will be considered to have chosen to treat the IRA as your own if: Contributions (including rollover contributions) are made to the inherited IRA, or You do not take the required minimum distribution for a year as a beneficiary of the IRA. 1040ez form2012 You will only be considered to have chosen to treat the IRA as your own if: You are the sole beneficiary of the IRA, and You have an unlimited right to withdraw amounts from it. 1040ez form2012   However, if you receive a distribution from your deceased spouse's IRA, you can roll that distribution over into your own IRA within the 60-day time limit, as long as the distribution is not a required distribution, even if you are not the sole beneficiary of your deceased spouse's IRA. 1040ez form2012 Inherited from someone other than spouse. 1040ez form2012   If you inherit a traditional IRA from anyone other than your deceased spouse, you cannot treat the inherited IRA as your own. 1040ez form2012 This means that you cannot make any contributions to the IRA. 1040ez form2012 It also means you cannot roll over any amounts into or out of the inherited IRA. 1040ez form2012 However, you can make a trustee-to-trustee transfer as long as the IRA into which amounts are being moved is set up and maintained in the name of the deceased IRA owner for the benefit of you as beneficiary. 1040ez form2012 For more information, see the discussion of inherited IRAs under Rollover From One IRA Into Another, later. 1040ez form2012 Can You Move Retirement Plan Assets? You can transfer, tax free, assets (money or property) from other retirement plans (including traditional IRAs) to a traditional IRA. 1040ez form2012 You can make the following kinds of transfers. 1040ez form2012 Transfers from one trustee to another. 1040ez form2012 Rollovers. 1040ez form2012 Transfers incident to a divorce. 1040ez form2012 Transfers to Roth IRAs. 1040ez form2012   Under certain conditions, you can move assets from a traditional IRA or from a designated Roth account to a Roth IRA. 1040ez form2012 You can also move assets from a qualified retirement plan to a Roth IRA. 1040ez form2012 See Can You Move Amounts Into a Roth IRA? under Roth IRAs, later. 1040ez form2012 Trustee-to-Trustee Transfer A transfer of funds in your traditional IRA from one trustee directly to another, either at your request or at the trustee's request, is not a rollover. 1040ez form2012 Because there is no distribution to you, the transfer is tax free. 1040ez form2012 Because it is not a rollover, it is not affected by the 1-year waiting period required between rollovers, discussed later under Rollover From One IRA Into Another . 1040ez form2012 For information about direct transfers to IRAs from retirement plans other than IRAs, see Can You Move Retirement Plan Assets? in chapter 1 and Can You Move Amounts Into a Roth IRA? in chapter 2 of Publication 590. 1040ez form2012 Rollovers Generally, a rollover is a tax-free distribution to you of cash or other assets from one retirement plan that you contribute (roll over) to another retirement plan. 1040ez form2012 The contribution to the second retirement plan is called a “rollover contribution. 1040ez form2012 ” Note. 1040ez form2012 An amount rolled over tax free from one retirement plan to another is generally includible in income when it is distributed from the second plan. 1040ez form2012 Kinds of rollovers to a traditional IRA. 1040ez form2012   You can roll over amounts from the following plans into a traditional IRA: A traditional IRA, An employer's qualified retirement plan for its employees, A deferred compensation plan of a state or local government (section 457 plan), or A tax-sheltered annuity plan (section 403(b) plan). 1040ez form2012 Treatment of rollovers. 1040ez form2012   You cannot deduct a rollover contribution, but you must report the rollover distribution on your tax return as discussed later under Reporting rollovers from IRAs and under Reporting rollovers from employer plans . 1040ez form2012 Kinds of rollovers from a traditional IRA. 1040ez form2012   You may be able to roll over, tax free, a distribution from your traditional IRA into a qualified plan. 1040ez form2012 These plans include the federal Thrift Savings Fund (for federal employees), deferred compensation plans of state or local governments (section 457 plans), and tax-sheltered annuity plans (section 403(b) plans). 1040ez form2012 The part of the distribution that you can roll over is the part that would otherwise be taxable (includible in your income). 1040ez form2012 Qualified plans may, but are not required to, accept such rollovers. 1040ez form2012 Time limit for making a rollover contribution. 1040ez form2012   You generally must make the rollover contribution by the 60th day after the day you receive the distribution from your traditional IRA or your employer's plan. 1040ez form2012 The IRS may waive the 60-day requirement where the failure to do so would be against equity or good conscience, such as in the event of a casualty, disaster, or other event beyond your reasonable control. 1040ez form2012 For more information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. 1040ez form2012 Extension of rollover period. 1040ez form2012   If an amount distributed to you from a traditional IRA or a qualified employer retirement plan is a frozen deposit at any time during the 60-day period allowed for a rollover, special rules extend the rollover period. 1040ez form2012 For more information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. 1040ez form2012 More information. 1040ez form2012   For more information on rollovers, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. 1040ez form2012 Rollover From One IRA Into Another You can withdraw, tax free, all or part of the assets from one traditional IRA if you reinvest them within 60 days in the same or another traditional IRA. 1040ez form2012 Because this is a rollover, you cannot deduct the amount that you reinvest in an IRA. 1040ez form2012 Waiting period between rollovers. 1040ez form2012   Generally, if you make a tax-free rollover of any part of a distribution from a traditional IRA, you cannot, within a 1-year period, make a tax-free rollover of any later distribution from that same IRA. 1040ez form2012 You also cannot make a tax-free rollover of any amount distributed, within the same 1-year period, from the IRA into which you made the tax-free rollover. 1040ez form2012   The 1-year period begins on the date you receive the IRA distribution, not on the date you roll it over into an IRA. 1040ez form2012 Example. 1040ez form2012 You have two traditional IRAs, IRA-1 and IRA-2. 1040ez form2012 You make a tax-free rollover of a distribution from IRA-1 into a new traditional IRA (IRA-3). 1040ez form2012 You cannot, within 1 year of the distribution from IRA-1, make a tax-free rollover of any distribution from either IRA-1 or IRA-3 into another traditional IRA. 1040ez form2012 However, the rollover from IRA-1 into IRA-3 does not prevent you from making a tax-free rollover from IRA-2 into any other traditional IRA. 1040ez form2012 This is because you have not, within the last year, rolled over, tax free, any distribution from IRA-2 or made a tax-free rollover into IRA-2. 1040ez form2012 Exception. 1040ez form2012   For an exception for distributions from failed financial institutions, see Rollover From One IRA Into Another under Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. 1040ez form2012 Partial rollovers. 1040ez form2012   If you withdraw assets from a traditional IRA, you can roll over part of the withdrawal tax free and keep the rest of it. 1040ez form2012 The amount you keep will generally be taxable (except for the part that is a return of nondeductible contributions). 1040ez form2012 The amount you keep may be subject to the 10% additional tax on early distributions, discussed later under What Acts Result in Penalties or Additional Taxes? . 1040ez form2012 Required distributions. 1040ez form2012   Amounts that must be distributed during a particular year under the required distribution rules (discussed later) are not eligible for rollover treatment. 1040ez form2012 Inherited IRAs. 1040ez form2012   If you inherit a traditional IRA from your spouse, you generally can roll it over, or you can choose to make the inherited IRA your own. 1040ez form2012 See Treating it as your own , earlier. 1040ez form2012 Not inherited from spouse. 1040ez form2012   If you inherit a traditional IRA from someone other than your spouse, you cannot roll it over or allow it to receive a rollover contribution. 1040ez form2012 You must withdraw the IRA assets within a certain period. 1040ez form2012 For more information, see When Must You Withdraw Assets? in chapter 1 of Publication 590. 1040ez form2012 Reporting rollovers from IRAs. 1040ez form2012   Report any rollover from one traditional IRA to the same or another traditional IRA on lines 15a and 15b, Form 1040, or lines 11a and 11b, Form 1040A, as follows. 1040ez form2012   Enter the total amount of the distribution on Form 1040, line 15a, or Form 1040A, line 11a. 1040ez form2012 If the total amount on Form 1040, line 15a, or Form 1040A, line 11a, was rolled over, enter zero on Form 1040, line 15b, or Form 1040A, line 11b. 1040ez form2012 If the total distribution was not rolled over, enter the taxable portion of the part that was not rolled over on Form 1040, line 15b, or Form 1040A, line 11b. 1040ez form2012 Put “Rollover” next to Form 1040, line 15b, or Form 1040A, line 11b. 1040ez form2012 See your tax return instructions. 1040ez form2012   If you rolled over the distribution into a qualified plan (other than an IRA) or you make the rollover in 2014, attach a statement explaining what you did. 1040ez form2012 Rollover From Employer's Plan Into an IRA You can roll over into a traditional IRA all or part of an eligible rollover distribution you receive from your (or your deceased spouse's): Employer's qualified pension, profit-sharing, or stock bonus plan; Annuity plan; Tax-sheltered annuity plan (section 403(b) plan); or Governmental deferred compensation plan (section 457 plan). 1040ez form2012 A qualified plan is one that meets the requirements of the Internal Revenue Code. 1040ez form2012 Eligible rollover distribution. 1040ez form2012   Generally, an eligible rollover distribution is any distribution of all or part of the balance to your credit in a qualified retirement plan except the following. 1040ez form2012 A required minimum distribution (explained later under When Must You Withdraw IRA Assets? (Required Minimum Distributions) ). 1040ez form2012 A hardship distribution. 1040ez form2012 Any of a series of substantially equal periodic distributions paid at least once a year over: Your lifetime or life expectancy, The lifetimes or life expectancies of you and your beneficiary, or A period of 10 years or more. 1040ez form2012 Corrective distributions of excess contributions or excess deferrals, and any income allocable to the excess, or of excess annual additions and any allocable gains. 1040ez form2012 A loan treated as a distribution because it does not satisfy certain requirements either when made or later (such as upon default), unless the participant's accrued benefits are reduced (offset) to repay the loan. 1040ez form2012 Dividends on employer securities. 1040ez form2012 The cost of life insurance coverage. 1040ez form2012 Any nontaxable amounts that you roll over into your traditional IRA become part of your basis (cost) in your IRAs. 1040ez form2012 To recover your basis when you take distributions from your IRA, you must complete Form 8606 for the year of the distribution. 1040ez form2012 See Form 8606 under Distributions Fully or Partly Taxable, later. 1040ez form2012 Rollover by nonspouse beneficiary. 1040ez form2012   A direct transfer from a deceased employee's qualified pension, profit-sharing, or stock bonus plan; annuity plan; tax-sheltered annuity (section 403(b)) plan; or governmental deferred compensation (section 457) plan to an IRA set up to receive the distribution on your behalf can be treated as an eligible rollover distribution if you are the designated beneficiary of the plan and not the employee's spouse. 1040ez form2012 The IRA is treated as an inherited IRA. 1040ez form2012 For more information about inherited IRAs, see Inherited IRAs , earlier. 1040ez form2012 Reporting rollovers from employer plans. 1040ez form2012    Enter the total distribution (before income tax or other deductions were withheld) on Form 1040, line 16a, or Form 1040A, line 12a. 1040ez form2012 This amount should be shown in box 1 of Form 1099-R. 1040ez form2012 From this amount, subtract any contributions (usually shown in box 5 of Form 1099-R) that were taxable to you when made. 1040ez form2012 From that result, subtract the amount that was rolled over either directly or within 60 days of receiving the distribution. 1040ez form2012 Enter the remaining amount, even if zero, on Form 1040, line 16b, or Form 1040A, line 12b. 1040ez form2012 Also, enter "Rollover" next to Form 1040, line 16b, or Form 1040A, line 12b. 1040ez form2012 Transfers Incident to Divorce If an interest in a traditional IRA is transferred from your spouse or former spouse to you by a divorce or separate maintenance decree or a written document related to such a decree, the interest in the IRA, starting from the date of the transfer, is treated as your IRA. 1040ez form2012 The transfer is tax free. 1040ez form2012 For detailed information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. 1040ez form2012 Converting From Any Traditional IRA to a Roth IRA Allowable conversions. 1040ez form2012   You can withdraw all or part of the assets from a traditional IRA and reinvest them (within 60 days) in a Roth IRA. 1040ez form2012 The amount that you withdraw and timely contribute (convert) to the Roth IRA is called a conversion contribution. 1040ez form2012 If properly (and timely) rolled over, the 10% additional tax on early distributions will not apply. 1040ez form2012 However, a part or all of the conversion contribution from your traditional IRA is included in your gross income. 1040ez form2012 Required distributions. 1040ez form2012   You cannot convert amounts that must be distributed from your traditional IRA for a particular year (including the calendar year in which you reach age 70½) under the required distribution rules (discussed later). 1040ez form2012 Income. 1040ez form2012   You must include in your gross income distributions from a traditional IRA that you would have had to include in income if you had not converted them into a Roth IRA. 1040ez form2012 These amounts are normally included in income on your return for the year that you converted them from a traditional IRA to a Roth IRA. 1040ez form2012   You do not include in gross income any part of a distribution from a traditional IRA that is a return of your basis, as discussed later. 1040ez form2012   You must file Form 8606 to report 2013 conversions from traditional, SEP, or SIMPLE IRAs to a Roth IRA in 2013 (unless you recharacterized the entire amount) and to figure the amount to include in income. 1040ez form2012   If you must include any amount in your gross income, you may have to increase your withholding or make estimated tax payments. 1040ez form2012 See chapter 4. 1040ez form2012 Recharacterizations You may be able to treat a contribution made to one type of IRA as having been made to a different type of IRA. 1040ez form2012 This is called recharacterizing the contribution. 1040ez form2012 See Can You Move Retirement Plan Assets? in chapter 1 of Publication 590 for more detailed information. 1040ez form2012 How to recharacterize a contribution. 1040ez form2012   To recharacterize a contribution, you generally must have the contribution transferred from the first IRA (the one to which it was made) to the second IRA in a trustee-to-trustee transfer. 1040ez form2012 If the transfer is made by the due date (including extensions) for your tax return for the year during which the contribution was made, you can elect to treat the contribution as having been originally made to the second IRA instead of to the first IRA. 1040ez form2012 If you recharacterize your contribution, you must do all three of the following. 1040ez form2012 Include in the transfer any net income allocable to the contribution. 1040ez form2012 If there was a loss, the net income you must transfer may be a negative amount. 1040ez form2012 Report the recharacterization on your tax return for the year during which the contribution was made. 1040ez form2012 Treat the contribution as having been made to the second IRA on the date that it was actually made to the first IRA. 1040ez form2012 No deduction allowed. 1040ez form2012   You cannot deduct the contribution to the first IRA. 1040ez form2012 Any net income you transfer with the recharacterized contribution is treated as earned in the second IRA. 1040ez form2012 Required notifications. 1040ez form2012   To recharacterize a contribution, you must notify both the trustee of the first IRA (the one to which the contribution was actually made) and the trustee of the second IRA (the one to which the contribution is being moved) that you have elected to treat the contribution as having been made to the second IRA rather than the first. 1040ez form2012 You must make the notifications by the date of the transfer. 1040ez form2012 Only one notification is required if both IRAs are maintained by the same trustee. 1040ez form2012 The notification(s) must include all of the following information. 1040ez form2012 The type and amount of the contribution to the first IRA that is to be recharacterized. 1040ez form2012 The date on which the contribution was made to the first IRA and the year for which it was made. 1040ez form2012 A direction to the trustee of the first IRA to transfer in a trustee-to-trustee transfer the amount of the contribution and any net income (or loss) allocable to the contribution to the trustee of the second IRA. 1040ez form2012 The name of the trustee of the first IRA and the name of the trustee of the second IRA. 1040ez form2012 Any additional information needed to make the transfer. 1040ez form2012 Reporting a recharacterization. 1040ez form2012   If you elect to recharacterize a contribution to one IRA as a contribution to another IRA, you must report the recharacterization on your tax return as directed by Form 8606 and its instructions. 1040ez form2012 You must treat the contribution as having been made to the second IRA. 1040ez form2012 When Can You Withdraw or Use IRA Assets? There are rules limiting use of your IRA assets and distributions from it. 1040ez form2012 Violation of the rules generally results in additional taxes in the year of violation. 1040ez form2012 See What Acts Result in Penalties or Additional Taxes , later. 1040ez form2012 Contributions returned before the due date of return. 1040ez form2012   If you made IRA contributions in 2013, you can withdraw them tax free by the due date of your return. 1040ez form2012 If you have an extension of time to file your return, you can withdraw them tax free by the extended due date. 1040ez form2012 You can do this if, for each contribution you withdraw, both of the following conditions apply. 1040ez form2012 You did not take a deduction for the contribution. 1040ez form2012 You withdraw any interest or other income earned on the contribution. 1040ez form2012 You can take into account any loss on the contribution while it was in the IRA when calculating the amount that must be withdrawn. 1040ez form2012 If there was a loss, the net income earned on the contribution may be a negative amount. 1040ez form2012 Note. 1040ez form2012 To calculate the amount you must withdraw, see Worksheet 1-4 under When Can You Withdraw or Use Assets? in chapter 1 of Publication 590. 1040ez form2012 Earnings includible in income. 1040ez form2012   You must include in income any earnings on the contributions you withdraw. 1040ez form2012 Include the earnings in income for the year in which you made the contributions, not in the year in which you withdraw them. 1040ez form2012 Generally, except for any part of a withdrawal that is a return of nondeductible contributions (basis), any withdrawal of your contributions after the due date (or extended due date) of your return will be treated as a taxable distribution. 1040ez form2012 Excess contributions can also be recovered tax free as discussed under What Acts Result in Penalties or Additional Taxes?, later. 1040ez form2012    Early distributions tax. 1040ez form2012   The 10% additional tax on distributions made before you reach age 59½ does not apply to these tax-free withdrawals of your contributions. 1040ez form2012 However, the distribution of interest or other income must be reported on Form 5329 and, unless the distribution qualifies as an exception to the age 59½ rule, it will be subject to this tax. 1040ez form2012 When Must You Withdraw IRA Assets? (Required Minimum Distributions) You cannot keep funds in a traditional IRA indefinitely. 1040ez form2012 Eventually they must be distributed. 1040ez form2012 If there are no distributions, or if the distributions are not large enough, you may have to pay a 50% excise tax on the amount not distributed as required. 1040ez form2012 See Excess Accumulations (Insufficient Distributions) , later. 1040ez form2012 The requirements for distributing IRA funds differ depending on whether you are the IRA owner or the beneficiary of a decedent's IRA. 1040ez form2012 Required minimum distribution. 1040ez form2012   The amount that must be distributed each year is referred to as the required minimum distribution. 1040ez form2012 Required distributions not eligible for rollover. 1040ez form2012   Amounts that must be distributed (required minimum distributions) during a particular year are not eligible for rollover treatment. 1040ez form2012 IRA owners. 1040ez form2012   If you are the owner of a traditional IRA, you must generally start receiving distributions from your IRA by April 1 of the year following the year in which you reach age 70½. 1040ez form2012 April 1 of the year following the year in which you reach age 70½ is referred to as the required beginning date. 1040ez form2012 Distributions by the required beginning date. 1040ez form2012   You must receive at least a minimum amount for each year starting with the year you reach age 70½ (your 70½ year). 1040ez form2012 If you do not (or did not) receive that minimum amount in your 70½ year, then you must receive distributions for your 70½ year by April 1 of the next year. 1040ez form2012   If an IRA owner dies after reaching age 70½, but before April 1 of the next year, no minimum distribution is required because death occurred before the required beginning date. 1040ez form2012 Even if you begin receiving distributions before you attain age 70½, you must begin calculating and receiving required minimum distributions by your required beginning date. 1040ez form2012 Distributions after the required beginning date. 1040ez form2012   The required minimum distribution for any year after the year you turn 70½ must be made by December 31 of that later year. 1040ez form2012    Beneficiaries. 1040ez form2012   If you are the beneficiary of a decedent's traditional IRA, the requirements for distributions from that IRA generally depend on whether the IRA owner died before or after the required beginning date for distributions. 1040ez form2012 More information. 1040ez form2012   For more information, including how to figure your minimum required distribution each year and how to figure your required distribution if you are a beneficiary of a decedent's IRA, see When Must You Withdraw Assets? in chapter 1 of Publication 590. 1040ez form2012 Are Distributions Taxable? In general, distributions from a traditional IRA are taxable in the year you receive them. 1040ez form2012 Exceptions. 1040ez form2012   Exceptions to distributions from traditional IRAs being taxable in the year you receive them are: Rollovers, Qualified charitable distributions (QCD), discussed later, Tax-free withdrawals of contributions, discussed earlier, and The return of nondeductible contributions, discussed later under Distributions Fully or Partly Taxable . 1040ez form2012    Although a conversion of a traditional IRA is considered a rollover for Roth IRA purposes, it is not an exception to the rule that distributions from a traditional IRA are taxable in the year you receive them. 1040ez form2012 Conversion distributions are includible in your gross income subject to this rule and the special rules for conversions explained in Converting From Any Traditional IRA Into a Roth IRA under Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. 1040ez form2012 Qualified charitable distributions (QCD). 1040ez form2012   A QCD is generally a nontaxable distribution made directly by the trustee of your IRA to an organization eligible to receive tax-deductible contributions. 1040ez form2012 Special rules apply if you made a qualified charitable distribution in January 2013 that you elected to treat as made in 2012. 1040ez form2012 See Qualified Charitable Distributions in Publication 590 for more information. 1040ez form2012 Ordinary income. 1040ez form2012   Distributions from traditional IRAs that you include in income are taxed as ordinary income. 1040ez form2012 No special treatment. 1040ez form2012   In figuring your tax, you cannot use the 10-year tax option or capital gain treatment that applies to lump-sum distributions from qualified retirement plans. 1040ez form2012 Distributions Fully or Partly Taxable Distributions from your traditional IRA may be fully or partly taxable, depending on whether your IRA includes any nondeductible contributions. 1040ez form2012 Fully taxable. 1040ez form2012   If only deductible contributions were made to your traditional IRA (or IRAs, if you have more than one), you have no basis in your IRA. 1040ez form2012 Because you have no basis in your IRA, any distributions are fully taxable when received. 1040ez form2012 See Reporting taxable distributions on your return , later. 1040ez form2012 Partly taxable. 1040ez form2012    If you made nondeductible contributions or rolled over any after-tax amounts to any of your traditional IRAs, you have a cost basis (investment in the contract) equal to the amount of those contributions. 1040ez form2012 These nondeductible contributions are not taxed when they are distributed to you. 1040ez form2012 They are a return of your investment in your IRA. 1040ez form2012   Only the part of the distribution that represents nondeductible contributions and rolled over after-tax amounts (your cost basis) is tax free. 1040ez form2012 If nondeductible contributions have been made or after-tax amounts have been rolled over to your IRA, distributions consist partly of nondeductible contributions (basis) and partly of deductible contributions, earnings, and gains (if there are any). 1040ez form2012 Until all of your basis has been distributed, each distribution is partly nontaxable and partly taxable. 1040ez form2012 Form 8606. 1040ez form2012   You must complete Form 8606 and attach it to your return if you receive a distribution from a traditional IRA and have ever made nondeductible contributions or rolled over after-tax amounts to any of your traditional IRAs. 1040ez form2012 Using the form, you will figure the nontaxable distributions for 2013 and your total IRA basis for 2013 and earlier years. 1040ez form2012 Note. 1040ez form2012 If you are required to file Form 8606, but you are not required to file an income tax return, you still must file Form 8606. 1040ez form2012 Send it to the IRS at the time and place you would otherwise file an income tax return. 1040ez form2012 Distributions reported on Form 1099-R. 1040ez form2012   If you receive a distribution from your traditional IRA, you will receive Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. 1040ez form2012 , or a similar statement. 1040ez form2012 IRA distributions are shown in boxes 1 and 2a of Form 1099-R. 1040ez form2012 A number or letter code in box 7 tells you what type of distribution you received from your IRA. 1040ez form2012 Withholding. 1040ez form2012   Federal income tax is withheld from distributions from traditional IRAs unless you choose not to have tax withheld. 1040ez form2012 See chapter 4. 1040ez form2012 IRA distributions delivered outside the United States. 1040ez form2012   In general, if you are a U. 1040ez form2012 S. 1040ez form2012 citizen or resident alien and your home address is outside the United States or its possessions, you cannot choose exemption from withholding on distributions from your traditional IRA. 1040ez form2012 Reporting taxable distributions on your return. 1040ez form2012    Report fully taxable distributions, including early distributions on Form 1040, line 15b, or Form 1040A, line 11b (no entry is required on Form 1040, line 15a, or Form 1040A, line 11a). 1040ez form2012 If only part of the distribution is taxable, enter the total amount on Form 1040, line 15a, or Form 1040A, line 11a, and the taxable part on Form 1040, line 15b, or Form 1040A, line 11b. 1040ez form2012 You cannot report distributions on Form 1040EZ. 1040ez form2012 What Acts Result in Penalties or Additional Taxes? The tax advantages of using traditional IRAs for retirement savings can be offset by additional taxes and penalties if you do not follow the rules. 1040ez form2012 There are additions to the regular tax for using your IRA funds in prohibited transactions. 1040ez form2012 There are also additional taxes for the following activities. 1040ez form2012 Investing in collectibles. 1040ez form2012 Making excess contributions. 1040ez form2012 Taking early distributions. 1040ez form2012 Allowing excess amounts to accumulate (failing to take required distributions). 1040ez form2012 There are penalties for overstating the amount of nondeductible contributions and for failure to file a Form 8606, if required. 1040ez form2012 Prohibited Transactions Generally, a prohibited transaction is any improper use of your traditional IRA by you, your beneficiary, or any disqualified person. 1040ez form2012 Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendent, and any spouse of a lineal descendent). 1040ez form2012 The following are examples of prohibited transactions with a traditional IRA. 1040ez form2012 Borrowing money from it. 1040ez form2012 Selling property to it. 1040ez form2012 Receiving unreasonable compensation for managing it. 1040ez form2012 Using it as security for a loan. 1040ez form2012 Buying property for personal use (present or future) with IRA funds. 1040ez form2012 Effect on an IRA account. 1040ez form2012   Generally, if you or your beneficiary engages in a prohibited transaction in connection with your traditional IRA account at any time during the year, the account stops being an IRA as of the first day of that year. 1040ez form2012 Effect on you or your beneficiary. 1040ez form2012   If your account stops being an IRA because you or your beneficiary engaged in a prohibited transaction, the account is treated as distributing all its assets to you at their fair market values on the first day of the year. 1040ez form2012 If the total of those values is more than your basis in the IRA, you will have a taxable gain that is includible in your income. 1040ez form2012 For information on figuring your gain and reporting it in income, see Are Distributions Taxable , earlier. 1040ez form2012 The distribution may be subject to additional taxes or penalties. 1040ez form2012 Taxes on prohibited transactions. 1040ez form2012   If someone other than the owner or beneficiary of a traditional IRA engages in a prohibited transaction, that person may be liable for certain taxes. 1040ez form2012 In general, there is a 15% tax on the amount of the prohibited transaction and a 100% additional tax if the transaction is not corrected. 1040ez form2012 More information. 1040ez form2012   For more information on prohibited transactions, see What Acts Result in Penalties or Additional Taxes? in chapter 1 of Publication 590. 1040ez form2012 Investment in Collectibles If your traditional IRA invests in collectibles, the amount invested is considered distributed to you in the year invested. 1040ez form2012 You may have to pay the 10% additional tax on early distributions, discussed later. 1040ez form2012 Collectibles. 1040ez form2012   These include: Artworks, Rugs, Antiques, Metals, Gems, Stamps, Coins, Alcoholic beverages, and Certain other tangible personal property. 1040ez form2012 Exception. 1040ez form2012    Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U. 1040ez form2012 S. 1040ez form2012 gold coins, or one-ounce silver coins minted by the Treasury Department. 1040ez form2012 It can also invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion. 1040ez form2012 Excess Contributions Generally, an excess contribution is the amount contributed to your traditional IRA(s) for the year that is more than the smaller of: The maximum deductible amount for the year. 1040ez form2012 For 2013, this is $5,500 ($6,500 if you are 50 or older), or Your taxable compensation for the year. 1040ez form2012 Tax on excess contributions. 1040ez form2012   In general, if the excess contributions for a year are not withdrawn by the date your return for the year is due (including extensions), you are subject to a 6% tax. 1040ez form2012 You must pay the 6% tax each year on excess amounts that remain in your traditional IRA at the end of your tax year. 1040ez form2012 The tax cannot be more than 6% of the combined value of all your IRAs as of the end of your tax year. 1040ez form2012 Excess contributions withdrawn by due date of return. 1040ez form2012   You will not have to pay the 6% tax if you withdraw an excess contribution made during a tax year and you also withdraw interest or other income earned on the excess contribution. 1040ez form2012 You must complete your withdrawal by the date your tax return for that year is due, including extensions. 1040ez form2012 How to treat withdrawn contributions. 1040ez form2012   Do not include in your gross income an excess contribution that you withdraw from your traditional IRA before your tax return is due if both the following conditions are met. 1040ez form2012 No deduction was allowed for the excess contribution. 1040ez form2012 You withdraw the interest or other income earned on the excess contribution. 1040ez form2012 You can take into account any loss on the contribution while it was in the IRA when calculating the amount that must be withdrawn. 1040ez form2012 If there was a loss, the net income you must withdraw may be a negative amount. 1040ez form2012 How to treat withdrawn interest or other income. 1040ez form2012   You must include in your gross income the interest or other income that was earned on the excess contribution. 1040ez form2012 Report it on your return for the year in which the excess contribution was made. 1040ez form2012 Your withdrawal of interest or other income may be subject to an additional 10% tax on early distributions, discus
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The 1040ez Form2012

1040ez form2012 4. 1040ez form2012   Foreign Earned Income and Housing: Exclusion – Deduction Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Who Qualifies for the Exclusions and the Deduction? RequirementsTax Home in Foreign Country Bona Fide Residence Test Physical Presence Test Waiver of Time Requirements U. 1040ez form2012 S. 1040ez form2012 Travel Restrictions Foreign Earned Income Foreign Earned Income ExclusionLimit on Excludable Amount Choosing the Exclusion Foreign Housing Exclusion and DeductionHousing Amount Foreign Housing Exclusion Foreign Housing Deduction Married Couples Form 2555 and Form 2555-EZForm 2555-EZ Form 2555 Topics - This chapter discusses: Who qualifies for the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, The requirements that must be met to claim either exclusion or the deduction, How to figure the foreign earned income exclusion, and How to figure the foreign housing exclusion and the foreign housing deduction. 1040ez form2012 Useful Items - You may want to see: Publication 519 U. 1040ez form2012 S. 1040ez form2012 Tax Guide for Aliens 570 Tax Guide for Individuals With Income from U. 1040ez form2012 S. 1040ez form2012 Possessions 596 Earned Income Credit (EIC) Form (and Instructions) 1040X Amended U. 1040ez form2012 S. 1040ez form2012 Individual Income Tax Return 2555 Foreign Earned Income 2555-EZ Foreign Earned Income Exclusion See chapter 7 for information about getting these publications and forms. 1040ez form2012 Who Qualifies for the Exclusions and the Deduction? If you meet certain requirements, you may qualify for the foreign earned income and foreign housing exclusions and the foreign housing deduction. 1040ez form2012 If you are a U. 1040ez form2012 S. 1040ez form2012 citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. 1040ez form2012 However, you may qualify to exclude from income up to $97,600 of your foreign earnings. 1040ez form2012 In addition, you can exclude or deduct certain foreign housing amounts. 1040ez form2012 See Foreign Earned Income Exclusion and Foreign Housing Exclusion and Deduction, later. 1040ez form2012 You also may be entitled to exclude from income the value of meals and lodging provided to you by your employer. 1040ez form2012 See Exclusion of Meals and Lodging, later. 1040ez form2012 Requirements To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must meet all three of the following requirements. 1040ez form2012 Your tax home must be in a foreign country. 1040ez form2012 You must have foreign earned income. 1040ez form2012 You must be one of the following. 1040ez form2012 A U. 1040ez form2012 S. 1040ez form2012 citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. 1040ez form2012 A U. 1040ez form2012 S. 1040ez form2012 resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. 1040ez form2012 A U. 1040ez form2012 S. 1040ez form2012 citizen or a U. 1040ez form2012 S. 1040ez form2012 resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months. 1040ez form2012 See Publication 519 to find out if you are a U. 1040ez form2012 S. 1040ez form2012 resident alien for tax purposes and whether you keep that alien status when you temporarily work abroad. 1040ez form2012 If you are a nonresident alien married to a U. 1040ez form2012 S. 1040ez form2012 citizen or resident alien, and both you and your spouse choose to treat you as a resident alien, you are a resident alien for tax purposes. 1040ez form2012 For information on making the choice, see the discussion in chapter 1 under Nonresident Alien Spouse Treated as a Resident . 1040ez form2012 Waiver of minimum time requirements. 1040ez form2012   The minimum time requirements for bona fide residence and physical presence can be waived if you must leave a foreign country because of war, civil unrest, or similar adverse conditions in that country. 1040ez form2012 This is fully explained under Waiver of Time Requirements , later. 1040ez form2012   See Figure 4-A and information in this chapter to determine if you are eligible to claim either exclusion or the deduction. 1040ez form2012 Tax Home in Foreign Country To qualify for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, your tax home must be in a foreign country throughout your period of bona fide residence or physical presence abroad. 1040ez form2012 Bona fide residence and physical presence are explained later. 1040ez form2012 Tax Home Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. 1040ez form2012 Your tax home is the place where you are permanently or indefinitely engaged to work as an employee or self-employed individual. 1040ez form2012 Having a “tax home” in a given location does not necessarily mean that the given location is your residence or domicile for tax purposes. 1040ez form2012 If you do not have a regular or main place of business because of the nature of your work, your tax home may be the place where you regularly live. 1040ez form2012 If you have neither a regular or main place of business nor a place where you regularly live, you are considered an itinerant and your tax home is wherever you work. 1040ez form2012 You are not considered to have a tax home in a foreign country for any period in which your abode is in the United States. 1040ez form2012 However, your abode is not necessarily in the United States while you are temporarily in the United States. 1040ez form2012 Your abode is also not necessarily in the United States merely because you maintain a dwelling in the United States, whether or not your spouse or dependents use the dwelling. 1040ez form2012 “Abode” has been variously defined as one's home, habitation, residence, domicile, or place of dwelling. 1040ez form2012 It does not mean your principal place of business. 1040ez form2012 “Abode” has a domestic rather than a vocational meaning and does not mean the same as “tax home. 1040ez form2012 ” The location of your abode often will depend on where you maintain your economic, family, and personal ties. 1040ez form2012 Example 1. 1040ez form2012 You are employed on an offshore oil rig in the territorial waters of a foreign country and work a 28-day on/28-day off schedule. 1040ez form2012 You return to your family residence in the United States during your off periods. 1040ez form2012 You are considered to have an abode in the United States and do not satisfy the tax home test in the foreign country. 1040ez form2012 You cannot claim either of the exclusions or the housing deduction. 1040ez form2012 Example 2. 1040ez form2012 For several years, you were a marketing executive with a producer of machine tools in Toledo, Ohio. 1040ez form2012 In November of last year, your employer transferred you to London, England, for a minimum of 18 months to set up a sales operation for Europe. 1040ez form2012 Before you left, you distributed business cards showing your business and home addresses in London. 1040ez form2012 You kept ownership of your home in Toledo but rented it to another family. 1040ez form2012 You placed your car in storage. 1040ez form2012 In November of last year, you moved your spouse, children, furniture, and family pets to a home your employer rented for you in London. 1040ez form2012 Shortly after moving, you leased a car and you and your spouse got British driving licenses. 1040ez form2012 Your entire family got library cards for the local public library. 1040ez form2012 You and your spouse opened bank accounts with a London bank and secured consumer credit. 1040ez form2012 You joined a local business league and both you and your spouse became active in the neighborhood civic association and worked with a local charity. 1040ez form2012 Your abode is in London for the time you live there. 1040ez form2012 You satisfy the tax home test in the foreign country. 1040ez form2012 Please click here for the text description of the image. 1040ez form2012 Figure 4–A Can I Claim the Exclusion or Deduction? Temporary or Indefinite Assignment The location of your tax home often depends on whether your assignment is temporary or indefinite. 1040ez form2012 If you are temporarily absent from your tax home in the United States on business, you may be able to deduct your away-from-home expenses (for travel, meals, and lodging), but you would not qualify for the foreign earned income exclusion. 1040ez form2012 If your new work assignment is for an indefinite period, your new place of employment becomes your tax home and you would not be able to deduct any of the related expenses that you have in the general area of this new work assignment. 1040ez form2012 If your new tax home is in a foreign country and you meet the other requirements, your earnings may qualify for the foreign earned income exclusion. 1040ez form2012 If you expect your employment away from home in a single location to last, and it does last, for 1 year or less, it is temporary unless facts and circumstances indicate otherwise. 1040ez form2012 If you expect it to last for more than 1 year, it is indefinite. 1040ez form2012 If you expect it to last for 1 year or less, but at some later date you expect it to last longer than 1 year, it is temporary (in the absence of facts and circumstances indicating otherwise) until your expectation changes. 1040ez form2012 Once your expectation changes, it is indefinite. 1040ez form2012 Foreign Country To meet the bona fide residence test or the physical presence test, you must live in or be present in a foreign country. 1040ez form2012 A foreign country includes any territory under the sovereignty of a government other than that of the United States. 1040ez form2012 The term “foreign country” includes the country's airspace and territorial waters, but not international waters and the airspace above them. 1040ez form2012 It also includes the seabed and subsoil of those submarine areas adjacent to the country's territorial waters over which it has exclusive rights under international law to explore and exploit the natural resources. 1040ez form2012 The term “foreign country” does not include Antarctica or U. 1040ez form2012 S. 1040ez form2012 possessions such as Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, the U. 1040ez form2012 S. 1040ez form2012 Virgin Islands, and Johnston Island. 1040ez form2012 For purposes of the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, the terms “foreign,” “abroad,” and “overseas” refer to areas outside the United States and those areas listed or described in the previous sentence. 1040ez form2012 American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands Residence or presence in a U. 1040ez form2012 S. 1040ez form2012 possession does not qualify you for the foreign earned income exclusion. 1040ez form2012 You may, however, qualify for an exclusion of your possession income on your U. 1040ez form2012 S. 1040ez form2012 return. 1040ez form2012 American Samoa. 1040ez form2012   There is a possession exclusion available to individuals who are bona fide residents of American Samoa for the entire tax year. 1040ez form2012 Gross income from sources within American Samoa may be eligible for this exclusion. 1040ez form2012 Income that is effectively connected with the conduct of a trade or business within American Samoa also may be eligible for this exclusion. 1040ez form2012 Use Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa, to figure the exclusion. 1040ez form2012 Guam and the Commonwealth of the Northern Mariana Islands. 1040ez form2012   An exclusion will be available to residents of Guam and the Commonwealth of the Northern Mariana Islands if, and when, new implementation agreements take effect between the United States and those possessions. 1040ez form2012   For more information, see Publication 570. 1040ez form2012 Puerto Rico and U. 1040ez form2012 S. 1040ez form2012 Virgin Islands Residents of Puerto Rico and the U. 1040ez form2012 S. 1040ez form2012 Virgin Islands cannot claim the foreign earned income exclusion or the foreign housing exclusion. 1040ez form2012 Puerto Rico. 1040ez form2012   Generally, if you are a U. 1040ez form2012 S. 1040ez form2012 citizen who is a bona fide resident of Puerto Rico for the entire tax year, you are not subject to U. 1040ez form2012 S. 1040ez form2012 tax on income from Puerto Rican sources. 1040ez form2012 This does not include amounts paid for services performed as an employee of the United States. 1040ez form2012 However, you are subject to U. 1040ez form2012 S. 1040ez form2012 tax on your income from sources outside Puerto Rico. 1040ez form2012 In figuring your U. 1040ez form2012 S. 1040ez form2012 tax, you cannot deduct expenses allocable to income not subject to tax. 1040ez form2012 Bona Fide Residence Test You meet the bona fide residence test if you are a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. 1040ez form2012 You can use the bona fide residence test to qualify for the exclusions and the deduction only if you are either: A U. 1040ez form2012 S. 1040ez form2012 citizen, or A U. 1040ez form2012 S. 1040ez form2012 resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect. 1040ez form2012 You do not automatically acquire bona fide resident status merely by living in a foreign country or countries for 1 year. 1040ez form2012 If you go to a foreign country to work on a particular job for a specified period of time, you ordinarily will not be regarded as a bona fide resident of that country even though you work there for 1 tax year or longer. 1040ez form2012 The length of your stay and the nature of your job are only two of the factors to be considered in determining whether you meet the bona fide residence test. 1040ez form2012 Bona fide residence. 1040ez form2012   To meet the bona fide residence test, you must have established a bona fide residence in a foreign country. 1040ez form2012   Your bona fide residence is not necessarily the same as your domicile. 1040ez form2012 Your domicile is your permanent home, the place to which you always return or intend to return. 1040ez form2012 Example. 1040ez form2012 You could have your domicile in Cleveland, Ohio, and a bona fide residence in Edinburgh, Scotland, if you intend to return eventually to Cleveland. 1040ez form2012 The fact that you go to Scotland does not automatically make Scotland your bona fide residence. 1040ez form2012 If you go there as a tourist, or on a short business trip, and return to the United States, you have not established bona fide residence in Scotland. 1040ez form2012 But if you go to Scotland to work for an indefinite or extended period and you set up permanent quarters there for yourself and your family, you probably have established a bona fide residence in a foreign country, even though you intend to return eventually to the United States. 1040ez form2012 You are clearly not a resident of Scotland in the first instance. 1040ez form2012 However, in the second, you are a resident because your stay in Scotland appears to be permanent. 1040ez form2012 If your residency is not as clearly defined as either of these illustrations, it may be more difficult to decide whether you have established a bona fide residence. 1040ez form2012 Determination. 1040ez form2012   Questions of bona fide residence are determined according to each individual case, taking into account factors such as your intention, the purpose of your trip, and the nature and length of your stay abroad. 1040ez form2012   To meet the bona fide residence test, you must show the Internal Revenue Service (IRS) that you have been a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. 1040ez form2012 The IRS decides whether you are a bona fide resident of a foreign country largely on the basis of facts you report on Form 2555. 1040ez form2012 IRS cannot make this determination until you file Form 2555. 1040ez form2012 Statement to foreign authorities. 1040ez form2012   You are not considered a bona fide resident of a foreign country if you make a statement to the authorities of that country that you are not a resident of that country, and the authorities: Hold that you are not subject to their income tax laws as a resident, or Have not made a final decision on your status. 1040ez form2012 Special agreements and treaties. 1040ez form2012   An income tax exemption provided in a treaty or other international agreement will not in itself prevent you from being a bona fide resident of a foreign country. 1040ez form2012 Whether a treaty prevents you from becoming a bona fide resident of a foreign country is determined under all provisions of the treaty, including specific provisions relating to residence or privileges and immunities. 1040ez form2012 Example 1. 1040ez form2012 You are a U. 1040ez form2012 S. 1040ez form2012 citizen employed in the United Kingdom by a U. 1040ez form2012 S. 1040ez form2012 employer under contract with the U. 1040ez form2012 S. 1040ez form2012 Armed Forces. 1040ez form2012 You are not subject to the North Atlantic Treaty Status of Forces Agreement. 1040ez form2012 You may be a bona fide resident of the United Kingdom. 1040ez form2012 Example 2. 1040ez form2012 You are a U. 1040ez form2012 S. 1040ez form2012 citizen in the United Kingdom who qualifies as an “employee” of an armed service or as a member of a “civilian component” under the North Atlantic Treaty Status of Forces Agreement. 1040ez form2012 You are not a bona fide resident of the United Kingdom. 1040ez form2012 Example 3. 1040ez form2012 You are a U. 1040ez form2012 S. 1040ez form2012 citizen employed in Japan by a U. 1040ez form2012 S. 1040ez form2012 employer under contract with the U. 1040ez form2012 S. 1040ez form2012 Armed Forces. 1040ez form2012 You are subject to the agreement of the Treaty of Mutual Cooperation and Security between the United States and Japan. 1040ez form2012 Being subject to the agreement does not make you a bona fide resident of Japan. 1040ez form2012 Example 4. 1040ez form2012 You are a U. 1040ez form2012 S. 1040ez form2012 citizen employed as an “official” by the United Nations in Switzerland. 1040ez form2012 You are exempt from Swiss taxation on the salary or wages paid to you by the United Nations. 1040ez form2012 This does not prevent you from being a bona fide resident of Switzerland. 1040ez form2012 Effect of voting by absentee ballot. 1040ez form2012   If you are a U. 1040ez form2012 S. 1040ez form2012 citizen living abroad, you can vote by absentee ballot in any election held in the United States without risking your status as a bona fide resident of a foreign country. 1040ez form2012   However, if you give information to the local election officials about the nature and length of your stay abroad that does not match the information you give for the bona fide residence test, the information given in connection with absentee voting will be considered in determining your status, but will not necessarily be conclusive. 1040ez form2012 Uninterrupted period including entire tax year. 1040ez form2012   To meet the bona fide residence test, you must reside in a foreign country or countries for an uninterrupted period that includes an entire tax year. 1040ez form2012 An entire tax year is from January 1 through December 31 for taxpayers who file their income tax returns on a calendar year basis. 1040ez form2012   During the period of bona fide residence in a foreign country, you can leave the country for brief or temporary trips back to the United States or elsewhere for vacation or business. 1040ez form2012 To keep your status as a bona fide resident of a foreign country, you must have a clear intention of returning from such trips, without unreasonable delay, to your foreign residence or to a new bona fide residence in another foreign country. 1040ez form2012 Example 1. 1040ez form2012 You arrived with your family in Lisbon, Portugal, on November 1, 2011. 1040ez form2012 Your assignment is indefinite, and you intend to live there with your family until your company sends you to a new post. 1040ez form2012 You immediately established residence there. 1040ez form2012 You spent April of 2012 at a business conference in the United States. 1040ez form2012 Your family stayed in Lisbon. 1040ez form2012 Immediately following the conference, you returned to Lisbon and continued living there. 1040ez form2012 On January 1, 2013, you completed an uninterrupted period of residence for a full tax year (2012), and you meet the bona fide residence test. 1040ez form2012 Example 2. 1040ez form2012 Assume the same facts as in Example 1, except that you transferred back to the United States on December 13, 2012. 1040ez form2012 You would not meet the bona fide residence test because your bona fide residence in the foreign country, although it lasted more than a year, did not include a full tax year. 1040ez form2012 You may, however, qualify for the foreign earned income exclusion or the housing exclusion or deduction under the physical presence test (discussed later). 1040ez form2012 Bona fide resident for part of a year. 1040ez form2012   Once you have established bona fide residence in a foreign country for an uninterrupted period that includes an entire tax year, you are a bona fide resident of that country for the period starting with the date you actually began the residence and ending with the date you abandon the foreign residence. 1040ez form2012 Your period of bona fide residence can include an entire tax year plus parts of 2 other tax years. 1040ez form2012 Example. 1040ez form2012 You were a bona fide resident of Singapore from March 1, 2011, through September 14, 2013. 1040ez form2012 On September 15, 2013, you returned to the United States. 1040ez form2012 Since you were a bona fide resident of a foreign country for all of 2012, you were also a bona fide resident of a foreign country from March 1, 2011, through the end of 2011 and from January 1, 2013, through September 14, 2013. 1040ez form2012 Reassignment. 1040ez form2012   If you are assigned from one foreign post to another, you may or may not have a break in foreign residence between your assignments, depending on the circumstances. 1040ez form2012 Example 1. 1040ez form2012 You were a resident of Pakistan from October 1, 2012, through November 30, 2013. 1040ez form2012 On December 1, 2013, you and your family returned to the United States to wait for an assignment to another foreign country. 1040ez form2012 Your household goods also were returned to the United States. 1040ez form2012 Your foreign residence ended on November 30, 2013, and did not begin again until after you were assigned to another foreign country and physically entered that country. 1040ez form2012 Since you were not a bona fide resident of a foreign country for the entire tax year of 2012 or 2013 you do not meet the bona fide residence test in either year. 1040ez form2012 You may, however, qualify for the foreign earned income exclusion or the housing exclusion or deduction under the physical presence test, discussed later. 1040ez form2012 Example 2. 1040ez form2012 Assume the same facts as in Example 1, except that upon completion of your assignment in Pakistan you were given a new assignment to Turkey. 1040ez form2012 On December 1, 2013, you and your family returned to the United States for a month's vacation. 1040ez form2012 On January 2, 2014, you arrived in Turkey for your new assignment. 1040ez form2012 Because you did not interrupt your bona fide residence abroad, you meet the bona fide residence test. 1040ez form2012 Physical Presence Test You meet the physical presence test if you are physically present in a foreign country or countries 330 full days during a period of 12 consecutive months. 1040ez form2012 The 330 days do not have to be consecutive. 1040ez form2012 Any U. 1040ez form2012 S. 1040ez form2012 citizen or resident alien can use the physical presence test to qualify for the exclusions and the deduction. 1040ez form2012 The physical presence test is based only on how long you stay in a foreign country or countries. 1040ez form2012 This test does not depend on the kind of residence you establish, your intentions about returning, or the nature and purpose of your stay abroad. 1040ez form2012 330 full days. 1040ez form2012   Generally, to meet the physical presence test, you must be physically present in a foreign country or countries for at least 330 full days during a 12-month period. 1040ez form2012 You can count days you spent abroad for any reason. 1040ez form2012 You do not have to be in a foreign country only for employment purposes. 1040ez form2012 You can be on vacation. 1040ez form2012   You do not meet the physical presence test if illness, family problems, a vacation, or your employer's orders cause you to be present for less than the required amount of time. 1040ez form2012 Exception. 1040ez form2012   You can be physically present in a foreign country or countries for less than 330 full days and still meet the physical presence test if you are required to leave a country because of war or civil unrest. 1040ez form2012 See Waiver of Time Requirements, later. 1040ez form2012 Full day. 1040ez form2012   A full day is a period of 24 consecutive hours, beginning at midnight. 1040ez form2012 Travel. 1040ez form2012    When you leave the United States to go directly to a foreign country or when you return directly to the United States from a foreign country, the time you spend on or over international waters does not count toward the 330-day total. 1040ez form2012 Example. 1040ez form2012 You leave the United States for France by air on June 10. 1040ez form2012 You arrive in France at 9:00 a. 1040ez form2012 m. 1040ez form2012 on June 11. 1040ez form2012 Your first full day of physical presence in France is June 12. 1040ez form2012 Passing over foreign country. 1040ez form2012   If, in traveling from the United States to a foreign country, you pass over a foreign country before midnight of the day you leave, the first day you can count toward the 330-day total is the day following the day you leave the United States. 1040ez form2012 Example. 1040ez form2012 You leave the United States by air at 9:30 a. 1040ez form2012 m. 1040ez form2012 on June 10 to travel to Kenya. 1040ez form2012 You pass over western Africa at 11:00 p. 1040ez form2012 m. 1040ez form2012 on June 10 and arrive in Kenya at 12:30 a. 1040ez form2012 m. 1040ez form2012 on June 11. 1040ez form2012 Your first full day in a foreign country is June 11. 1040ez form2012 Change of location. 1040ez form2012   You can move about from one place to another in a foreign country or to another foreign country without losing full days. 1040ez form2012 If any part of your travel is not within any foreign country and takes less than 24 hours, you are considered to be in a foreign country during that part of travel. 1040ez form2012 Example 1. 1040ez form2012 You leave Ireland by air at 11:00 p. 1040ez form2012 m. 1040ez form2012 on July 6 and arrive in Sweden at 5:00 a. 1040ez form2012 m. 1040ez form2012 on July 7. 1040ez form2012 Your trip takes less than 24 hours and you lose no full days. 1040ez form2012 Example 2. 1040ez form2012 You leave Norway by ship at 10:00 p. 1040ez form2012 m. 1040ez form2012 on July 6 and arrive in Portugal at 6:00 a. 1040ez form2012 m. 1040ez form2012 on July 8. 1040ez form2012 Since your travel is not within a foreign country or countries and the trip takes more than 24 hours, you lose as full days July 6, 7, and 8. 1040ez form2012 If you remain in Portugal, your next full day in a foreign country is July 9. 1040ez form2012 In United States while in transit. 1040ez form2012   If you are in transit between two points outside the United States and are physically present in the United States for less than 24 hours, you are not treated as present in the United States during the transit. 1040ez form2012 You are treated as traveling over areas not within any foreign country. 1040ez form2012    Please click here for the text description of the image. 1040ez form2012 Figure 4-B How to figure the 12-month period. 1040ez form2012   There are four rules you should know when figuring the 12-month period. 1040ez form2012 Your 12-month period can begin with any day of the month. 1040ez form2012 It ends the day before the same calendar day, 12 months later. 1040ez form2012 Your 12-month period must be made up of consecutive months. 1040ez form2012 Any 12-month period can be used if the 330 days in a foreign country fall within that period. 1040ez form2012 You do not have to begin your 12-month period with your first full day in a foreign country or end it with the day you leave. 1040ez form2012 You can choose the 12-month period that gives you the greatest exclusion. 1040ez form2012 In determining whether the 12-month period falls within a longer stay in the foreign country, 12-month periods can overlap one another. 1040ez form2012 Example 1. 1040ez form2012 You are a construction worker who works on and off in a foreign country over a 20-month period. 1040ez form2012 You might pick up the 330 full days in a 12-month period only during the middle months of the time you work in the foreign country because the first few and last few months of the 20-month period are broken up by long visits to the United States. 1040ez form2012 Example 2. 1040ez form2012 You work in New Zealand for a 20-month period from January 1, 2012, through August 31, 2013, except that you spend 28 days in February 2012 and 28 days in February 2013 on vacation in the United States. 1040ez form2012 You are present in New Zealand for at least 330 full days during each of the following two 12-month periods: January 1, 2012 – December 31, 2012 and September 1, 2012 – August 31, 2013. 1040ez form2012 By overlapping the 12-month periods in this way, you meet the physical presence test for the whole 20-month period. 1040ez form2012 See Figure 4-B, on the previous page. 1040ez form2012 Waiver of Time Requirements Both the bona fide residence test and the physical presence test contain minimum time requirements. 1040ez form2012 The minimum time requirements can be waived, however, if you must leave a foreign country because of war, civil unrest, or similar adverse conditions in that country. 1040ez form2012 You must be able to show that you reasonably could have expected to meet the minimum time requirements if not for the adverse conditions. 1040ez form2012 To qualify for the waiver, you must actually have your tax home in the foreign country and be a bona fide resident of, or be physically present in, the foreign country on or before the beginning date of the waiver. 1040ez form2012 Early in 2014, the IRS will publish in the Internal Revenue Bulletin a list of the only countries that qualify for the waiver for 2013 and the effective dates. 1040ez form2012 If you left one of the countries on or after the date listed for each country, you can meet the bona fide residence test or physical presence test for 2013 without meeting the minimum time requirement. 1040ez form2012 However, in figuring your exclusion, the number of your qualifying days of bona fide residence or physical presence includes only days of actual residence or presence within the country. 1040ez form2012 U. 1040ez form2012 S. 1040ez form2012 Travel Restrictions If you are present in a foreign country in violation of U. 1040ez form2012 S. 1040ez form2012 law, you will not be treated as a bona fide resident of a foreign country or as physically present in a foreign country while you are in violation of the law. 1040ez form2012 Income that you earn from sources within such a country for services performed during a period of violation does not qualify as foreign earned income. 1040ez form2012 Your housing expenses within that country (or outside that country for housing your spouse or dependents) while you are in violation of the law cannot be included in figuring your foreign housing amount. 1040ez form2012 For 2013, the only country to which travel restrictions applied was Cuba. 1040ez form2012 The restrictions applied for the entire year. 1040ez form2012 However, individuals working at the U. 1040ez form2012 S. 1040ez form2012 Naval Base at Guantanamo Bay in Cuba are not in violation of U. 1040ez form2012 S. 1040ez form2012 law. 1040ez form2012 Personal service income earned by individuals at the base is eligible for the foreign earned income exclusion provided the other requirements are met. 1040ez form2012 Foreign Earned Income To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must have foreign earned income. 1040ez form2012 Foreign earned income generally is income you receive for services you perform during a period in which you meet both of the following requirements. 1040ez form2012 Your tax home is in a foreign country. 1040ez form2012 You meet either the bona fide residence test or the physical presence test. 1040ez form2012 To determine whether your tax home is in a foreign country, see Tax Home in Foreign Country, earlier. 1040ez form2012 To determine whether you meet either the bona fide residence test or the physical presence test, see Bona Fide Residence Test and Physical Presence Test, earlier. 1040ez form2012 Foreign earned income does not include the following amounts. 1040ez form2012 The value of meals and lodging that you exclude from your income because the meals and lodging were furnished for the convenience of your employer. 1040ez form2012 Pension or annuity payments you receive, including social security benefits (see Pensions and annuities, later). 1040ez form2012 Pay you receive as an employee of the U. 1040ez form2012 S. 1040ez form2012 Government. 1040ez form2012 (See U. 1040ez form2012 S. 1040ez form2012 Government Employees, later. 1040ez form2012 ) Amounts you include in your income because of your employer's contributions to a nonexempt employee trust or to a nonqualified annuity contract. 1040ez form2012 Any unallowable moving expense deduction that you choose to recapture as explained under Moving Expense Attributable to Foreign Earnings in 2 Years in chapter 5. 1040ez form2012 Payments you receive after the end of the tax year following the tax year in which you performed the services that earned the income. 1040ez form2012 Earned income. 1040ez form2012   This is pay for personal services performed, such as wages, salaries, or professional fees. 1040ez form2012 The list that follows classifies many types of income into three categories. 1040ez form2012 The column headed Variable Income lists income that may fall into either the earned income category, the unearned income category, or partly into both. 1040ez form2012 For more information on earned and unearned income, see Earned and Unearned Income, later. 1040ez form2012 Earned Income Unearned Income Variable Income Salaries and wages Dividends Business profits Commissions Interest Royalties Bonuses Capital gains Rents Professional fees Gambling winnings Scholarships and fellowships Tips Alimony     Social security benefits     Pensions     Annuities     In addition to the types of earned income listed, certain noncash income and allowances or reimbursements are considered earned income. 1040ez form2012 Noncash income. 1040ez form2012   The fair market value of property or facilities provided to you by your employer in the form of lodging, meals, or use of a car is earned income. 1040ez form2012 Allowances or reimbursements. 1040ez form2012   Earned income includes allowances or reimbursements you receive, such as the following amounts. 1040ez form2012    Cost-of-living allowances. 1040ez form2012 Overseas differential. 1040ez form2012 Family allowance. 1040ez form2012 Reimbursement for education or education allowance. 1040ez form2012 Home leave allowance. 1040ez form2012 Quarters allowance. 1040ez form2012 Reimbursement for moving or moving allowance (unless excluded from income as discussed later in Reimbursement of employee expenses under Earned and Unearned Income). 1040ez form2012 Source of Earned Income The source of your earned income is the place where you perform the services for which you received the income. 1040ez form2012 Foreign earned income is income you receive for working in a foreign country. 1040ez form2012 Where or how you are paid has no effect on the source of the income. 1040ez form2012 For example, income you receive for work done in Austria is income from a foreign source even if the income is paid directly to your bank account in the United States and your employer is located in New York City. 1040ez form2012 Example. 1040ez form2012 You are a U. 1040ez form2012 S. 1040ez form2012 citizen, a bona fide resident of Canada, and working as a mining engineer. 1040ez form2012 Your salary is $76,800 per year. 1040ez form2012 You also receive a $6,000 cost-of-living allowance, and a $6,000 education allowance. 1040ez form2012 Your employment contract did not indicate that you were entitled to these allowances only while outside the United States. 1040ez form2012 Your total income is $88,800. 1040ez form2012 You work a 5-day week, Monday through Friday. 1040ez form2012 After subtracting your vacation, you have a total of 240 workdays in the year. 1040ez form2012 You worked in the United States during the year for 6 weeks (30 workdays). 1040ez form2012 The following shows how to figure the part of your income that is for work done in Canada during the year. 1040ez form2012   Number of days worked in Canada during the year (210) × Total income ($88,800) = $77,700     Number of days of work during the year for which payment was made (240)   Your foreign source earned income is $77,700. 1040ez form2012 Earned and Unearned Income Earned income was defined earlier as pay for personal services performed. 1040ez form2012 Some types of income are not easily identified as earned or unearned income. 1040ez form2012 Some of these types of income are further explained here. 1040ez form2012 Income from a sole proprietorship or partnership. 1040ez form2012   Income from a business in which capital investment is an important part of producing the income may be unearned income. 1040ez form2012 If you are a sole proprietor or partner and your personal services are also an important part of producing the income, the part of the income that represents the value of your personal services will be treated as earned income. 1040ez form2012 Capital a factor. 1040ez form2012   If capital investment is an important part of producing income, no more than 30% of your share of the net profits of the business is earned income. 1040ez form2012   If you have no net profits, the part of your gross profit that represents a reasonable allowance for personal services actually performed is considered earned income. 1040ez form2012 Because you do not have a net profit, the 30% limit does not apply. 1040ez form2012 Example 1. 1040ez form2012 You are a U. 1040ez form2012 S. 1040ez form2012 citizen and meet the bona fide residence test. 1040ez form2012 You invest in a partnership based in Cameroon that is engaged solely in selling merchandise outside the United States. 1040ez form2012 You perform no services for the partnership. 1040ez form2012 At the end of the tax year, your share of the net profits is $80,000. 1040ez form2012 The entire $80,000 is unearned income. 1040ez form2012 Example 2. 1040ez form2012 Assume that in Example 1 you spend time operating the business. 1040ez form2012 Your share of the net profits is $80,000; 30% of your share of the profits is $24,000. 1040ez form2012 If the value of your services for the year is $15,000, your earned income is limited to the value of your services, $15,000. 1040ez form2012 Capital not a factor. 1040ez form2012   If capital is not an income-producing factor and personal services produce the business income, the 30% rule does not apply. 1040ez form2012 The entire amount of business income is earned income. 1040ez form2012 Example. 1040ez form2012 You and Lou Green are management consultants and operate as equal partners in performing services outside the United States. 1040ez form2012 Because capital is not an income- producing factor, all the income from the partnership is considered earned income. 1040ez form2012 Income from a corporation. 1040ez form2012   The salary you receive from a corporation is earned income only if it represents a reasonable allowance as compensation for work you do for the corporation. 1040ez form2012 Any amount over what is considered a reasonable salary is unearned income. 1040ez form2012 Example 1. 1040ez form2012 You are a U. 1040ez form2012 S. 1040ez form2012 citizen and an officer and stockholder of a corporation in Honduras. 1040ez form2012 You perform no work or service of any kind for the corporation. 1040ez form2012 During the tax year you receive a $10,000 “salary” from the corporation. 1040ez form2012 The $10,000 clearly is not for personal services and is unearned income. 1040ez form2012 Example 2. 1040ez form2012 You are a U. 1040ez form2012 S. 1040ez form2012 citizen and work full time as secretary-treasurer of your corporation. 1040ez form2012 During the tax year you receive $100,000 as salary from the corporation. 1040ez form2012 If $80,000 is a reasonable allowance as pay for the work you did, then $80,000 is earned income. 1040ez form2012 Stock options. 1040ez form2012   You may have earned income if you disposed of stock that you got by exercising a stock option granted to you under an employee stock purchase plan. 1040ez form2012   If your gain on the disposition of stock you got by exercising an option is treated as capital gain, your gain is unearned income. 1040ez form2012   However, if you disposed of the stock less than 2 years after you were granted the option or less than 1 year after you got the stock, part of the gain on the disposition may be earned income. 1040ez form2012 It is considered received in the year you disposed of the stock and earned in the year you performed the services for which you were granted the option. 1040ez form2012 Any part of the earned income that is due to work you did outside the United States is foreign earned income. 1040ez form2012   See Publication 525, Taxable and Nontaxable Income, for a discussion of the treatment of stock options. 1040ez form2012 Pensions and annuities. 1040ez form2012    For purposes of the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, amounts received as pensions or annuities are unearned income. 1040ez form2012 Royalties. 1040ez form2012   Royalties from the leasing of oil and mineral lands and patents generally are a form of rent or dividends and are unearned income. 1040ez form2012   Royalties received by a writer are earned income if they are received: For the transfer of property rights of the writer in the writer's product, or Under a contract to write a book or series of articles. 1040ez form2012 Rental income. 1040ez form2012   Generally, rental income is unearned income. 1040ez form2012 If you perform personal services in connection with the production of rent, up to 30% of your net rental income can be considered earned income. 1040ez form2012 Example. 1040ez form2012 Larry Smith, a U. 1040ez form2012 S. 1040ez form2012 citizen living in Australia, owns and operates a rooming house in Sydney. 1040ez form2012 If he is operating the rooming house as a business that requires capital and personal services, he can consider up to 30% of net rental income as earned income. 1040ez form2012 On the other hand, if he just owns the rooming house and performs no personal services connected with its operation, except perhaps making minor repairs and collecting rents, none of his net income from the house is considered earned income. 1040ez form2012 It is all unearned income. 1040ez form2012 Professional fees. 1040ez form2012   If you are engaged in a professional occupation (such as a doctor or lawyer), all fees received in the performance of these services are earned income. 1040ez form2012 Income of an artist. 1040ez form2012   Income you receive from the sale of paintings you created is earned income. 1040ez form2012 Scholarships and fellowships. 1040ez form2012   Any portion of a scholarship or fellowship grant that is paid to you for teaching, research or other services is considered earned income if you must include it in your gross income. 1040ez form2012 If the payer of the grant is required to provide you with a Form W-2, Wage and Tax Statement, these amounts will be listed as wages. 1040ez form2012    Certain scholarship and fellowship income may be exempt under other provisions. 1040ez form2012 See Publication 970, Tax Benefits for Education, chapter 1. 1040ez form2012 Use of employer's property or facilities. 1040ez form2012   If you receive fringe benefits in the form of the right to use your employer's property or facilities, the fair market value of that right is earned income. 1040ez form2012 Fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being required to buy or sell, and both having reasonable knowledge of all the necessary facts. 1040ez form2012 Example. 1040ez form2012 You are privately employed and live in Japan all year. 1040ez form2012 You are paid a salary of $6,000 a month. 1040ez form2012 You live rent-free in a house provided by your employer that has a fair rental value of $3,000 a month. 1040ez form2012 The house is not provided for your employer's convenience. 1040ez form2012 You report on the calendar-year, cash basis. 1040ez form2012 You received $72,000 salary from foreign sources plus $36,000 fair rental value of the house, or a total of $108,000 of earned income. 1040ez form2012 Reimbursement of employee expenses. 1040ez form2012   If you are reimbursed under an accountable plan (defined below) for expenses you incur on your employer's behalf and you have adequately accounted to your employer for the expenses, do not include the reimbursement for those expenses in your earned income. 1040ez form2012   The expenses for which you are reimbursed are not considered allocable (related) to your earned income. 1040ez form2012 If expenses and reimbursement are equal, there is nothing to allocate to excluded income. 1040ez form2012 If expenses are more than the reimbursement, the unreimbursed expenses are considered to have been incurred in producing earned income and must be divided between your excluded and included income in determining the amount of unreimbursed expenses you can deduct. 1040ez form2012 (See chapter 5. 1040ez form2012 ) If the reimbursement is more than the expenses, no expenses remain to be divided between excluded and included income and the excess reimbursement must be included in earned income. 1040ez form2012   These rules do not apply to the following individuals. 1040ez form2012 Straight-commission salespersons. 1040ez form2012 Employees who have arrangements with their employers under which taxes are not withheld on a percentage of the commissions because the employers consider that percentage to be attributable to the employees' expenses. 1040ez form2012 Accountable plan. 1040ez form2012   An accountable plan is a reimbursement or allowance arrangement that includes all three of the following rules. 1040ez form2012 The expenses covered under the plan must have a business connection. 1040ez form2012 The employee must adequately account to the employer for these expenses within a reasonable period of time. 1040ez form2012 The employee must return any excess reimbursement or allowance within a reasonable period of time. 1040ez form2012 Reimbursement of moving expenses. 1040ez form2012   Reimbursement of moving expenses may be earned income. 1040ez form2012 You must include as earned income: Any reimbursements of, or payments for, nondeductible moving expenses, Reimbursements that are more than your deductible expenses and that you do not return to your employer, Any reimbursements made (or treated as made) under a nonaccountable plan (any plan that does not meet the rules listed above for an accountable plan), even if they are for deductible expenses, and Any reimbursement of moving expenses you deducted in an earlier year. 1040ez form2012 This section discusses reimbursements that must be included in earned income. 1040ez form2012 Publication 521, Moving Expenses, discusses additional rules that apply to moving expense deductions and reimbursements. 1040ez form2012   The rules for determining when the reimbursement is considered earned or where the reimbursement is considered earned may differ somewhat from the general rules previously discussed. 1040ez form2012   Although you receive the reimbursement in one tax year, it may be considered earned for services performed, or to be performed, in another tax year. 1040ez form2012 You must report the reimbursement as income on your return in the year you receive it, even if it is considered earned during a different year. 1040ez form2012 Move from U. 1040ez form2012 S. 1040ez form2012 to foreign country. 1040ez form2012   If you move from the United States to a foreign country, your moving expense reimbursement is generally considered pay for future services to be performed at the new location. 1040ez form2012 The reimbursement is considered earned solely in the year of the move if you qualify for the exclusion for a period that includes at least 120 days during that tax year. 1040ez form2012   If you are neither a bona fide resident of nor physically present in a foreign country or countries for a period that includes 120 days during the year of the move, a portion of the reimbursement is considered earned in the year of the move and a portion is considered earned in the year following the year of the move. 1040ez form2012 To figure the amount earned in the year of the move, multiply the reimbursement by a fraction. 1040ez form2012 The numerator (top number) is the number of days in your qualifying period that fall within the year of the move, and the denominator (bottom number) is the total number of days in the year of the move. 1040ez form2012   The difference between the total reimbursement and the amount considered earned in the year of the move is the amount considered earned in the year following the year of the move. 1040ez form2012 The part earned in each year is figured as shown in the following example. 1040ez form2012 Example. 1040ez form2012 You are a U. 1040ez form2012 S. 1040ez form2012 citizen working in the United States. 1040ez form2012 You were told in October 2012 that you were being transferred to a foreign country. 1040ez form2012 You arrived in the foreign country on December 15, 2012, and you are a bona fide resident for the remainder of 2012 and all of 2013. 1040ez form2012 Your employer reimbursed you $2,000 in January 2013 for the part of the moving expense that you were not allowed to deduct. 1040ez form2012 Because you did not qualify for the exclusion under the bona fide residence test for at least 120 days in 2012 (the year of the move), the reimbursement is considered pay for services performed in the foreign country for both 2012 and 2013. 1040ez form2012 You figure the part of the reimbursement for services performed in the foreign country in 2012 by multiplying the total reimbursement by a fraction. 1040ez form2012 The fraction is the number of days during which you were a bona fide resident in 2012 (the year of the move) divided by 366. 1040ez form2012 The remaining part of the reimbursement is for services performed in the foreign country in 2013. 1040ez form2012 This computation is used only to determine when the reimbursement is considered earned. 1040ez form2012 You would include the amount of the reimbursement in income in 2013, the year you received it. 1040ez form2012 Move between foreign countries. 1040ez form2012   If you move between foreign countries, any moving expense reimbursement that you must include in income will be considered earned in the year of the move if you qualify for the foreign earned income exclusion for a period that includes at least 120 days in the year of the move. 1040ez form2012 Move to U. 1040ez form2012 S. 1040ez form2012   If you move to the United States, the moving expense reimbursement that you must include in income is generally considered to be U. 1040ez form2012 S. 1040ez form2012 source income. 1040ez form2012   However, if under either an agreement between you and your employer or a statement of company policy that is reduced to writing before your move to the foreign country, your employer will reimburse you for your move back to the United States regardless of whether you continue to work for the employer, the includible reimbursement is considered compensation for past services performed in the foreign country. 1040ez form2012 The includible reimbursement is considered earned in the year of the move if you qualify for the foreign earned income exclusion for a period that includes at least 120 days during that year. 1040ez form2012 Otherwise, you treat the includible reimbursement as received for services performed in the foreign country in the year of the move and the year immediately before the year of the move. 1040ez form2012   See the discussion under Move from U. 1040ez form2012 S. 1040ez form2012 to foreign country , earlier, to figure the amount of the includible reimbursement considered earned in the year of the move. 1040ez form2012 The amount earned in the year before the year of the move is the difference between the total includible reimbursement and the amount earned in the year of the move. 1040ez form2012 Example. 1040ez form2012 You are a U. 1040ez form2012 S. 1040ez form2012 citizen employed in a foreign country. 1040ez form2012 You retired from employment with your employer on March 31, 2013, and returned to the United States after having been a bona fide resident of the foreign country for several years. 1040ez form2012 A written agreement with your employer entered into before you went abroad provided that you would be reimbursed for your move back to the United States. 1040ez form2012 In April 2013, your former employer reimbursed you $4,000 for the part of the cost of your move back to the United States that you were not allowed to deduct. 1040ez form2012 Because you were not a bona fide resident of a foreign country or countries for a period that included at least 120 days in 2013 (the year of the move), the includible reimbursement is considered pay for services performed in the foreign country for both 2013 and 2012. 1040ez form2012 You figure the part of the moving expense reimbursement for services performed in the foreign country for 2013 by multiplying the total includible reimbursement by a fraction. 1040ez form2012 The fraction is the number of days of foreign residence during the year (90) divided by the number of days in the year (365). 1040ez form2012 The remaining part of the includible reimbursement is for services performed in the foreign country in 2012. 1040ez form2012 You report the amount of the includible reimbursement in 2013, the year you received it. 1040ez form2012    In this example, if you met the physical presence test for a period that included at least 120 days in 2013, the moving expense reimbursement would be considered earned entirely in the year of the move. 1040ez form2012 Storage expense reimbursements. 1040ez form2012   If you are reimbursed for storage expenses, the reimbursement is for services you perform during the period of time for which the storage expenses are incurred. 1040ez form2012 U. 1040ez form2012 S. 1040ez form2012 Government Employees For purposes of the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, foreign earned income does not include any amounts paid by the United States or any of its agencies to its employees. 1040ez form2012 This includes amounts paid from both appropriated and nonappropriated funds. 1040ez form2012 The following organizations (and other organizations similarly organized and operated under United States Army, Navy, or Air Force regulations) are integral parts of the Armed Forces, agencies, or instrumentalities of the United States. 1040ez form2012 United States Armed Forces exchanges. 1040ez form2012 Commissioned and noncommissioned officers' messes. 1040ez form2012 Armed Forces motion picture services. 1040ez form2012 Kindergartens on foreign Armed Forces installations. 1040ez form2012 Amounts paid by the United States or its agencies to persons who are not their employees may qualify for exclusion or deduction. 1040ez form2012 If you are a U. 1040ez form2012 S. 1040ez form2012 Government employee paid by a U. 1040ez form2012 S. 1040ez form2012 agency that assigned you to a foreign government to perform specific services for which the agency is reimbursed by the foreign government, your pay is from the U. 1040ez form2012 S. 1040ez form2012 Government and does not qualify for exclusion or deduction. 1040ez form2012 If you have questions about whether you are an employee or an independent contractor, get Publication 15-A, Employer's Supplemental Tax Guide. 1040ez form2012 American Institute in Taiwan. 1040ez form2012   Amounts paid by the American Institute in Taiwan are not foreign earned income for purposes of the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction. 1040ez form2012 If you are an employee of the American Institute in Taiwan, allowances you receive are exempt from U. 1040ez form2012 S. 1040ez form2012 tax up to the amount that equals tax-exempt allowances received by civilian employees of the U. 1040ez form2012 S. 1040ez form2012 Government. 1040ez form2012 Allowances. 1040ez form2012   Cost-of-living and foreign-area allowances paid under certain acts of Congress to U. 1040ez form2012 S. 1040ez form2012 civilian officers and employees stationed in Alaska and Hawaii or elsewhere outside the 48 contiguous states and the District of Columbia can be excluded from gross income. 1040ez form2012 Post differentials are wages that must be included in gross income, regardless of the act of Congress under which they are paid. 1040ez form2012 More information. 1040ez form2012   Publication 516, U. 1040ez form2012 S. 1040ez form2012 Government Civilian Employees Stationed Abroad, has more information for U. 1040ez form2012 S. 1040ez form2012 Government employees abroad. 1040ez form2012 Exclusion of Meals and Lodging You do not include in your income the value of meals and lodging provided to you and your family by your employer at no charge if the following conditions are met. 1040ez form2012 The meals are furnished: On the business premises of your employer, and For the convenience of your employer. 1040ez form2012 The lodging is furnished: On the business premises of your employer, For the convenience of your employer, and As a condition of your employment. 1040ez form2012 If these conditions are met, do not include the value of the meals or lodging in your income, even if a law or your employment contract says that they are provided as compensation. 1040ez form2012 Amounts you do not include in income because of these rules are not foreign earned income. 1040ez form2012 If you receive a Form W-2, excludable amounts should not be included in the total reported in box 1 as wages. 1040ez form2012 Family. 1040ez form2012   Your family, for this purpose, includes only your spouse and your dependents. 1040ez form2012 Lodging. 1040ez form2012   The value of lodging includes the cost of heat, electricity, gas, water, sewer service, and similar items needed to make the lodging fit to live in. 1040ez form2012 Business premises of employer. 1040ez form2012   Generally, the business premises of your employer is wherever you work. 1040ez form2012 For example, if you work as a housekeeper, meals and lodging provided in your employer's home are provided on the business premises of your employer. 1040ez form2012 Similarly, meals provided to cowhands while herding cattle on land leased or owned by their employer are considered provided on the premises of their employer. 1040ez form2012 Convenience of employer. 1040ez form2012   Whether meals or lodging are provided for your employer's convenience must be determined from all the facts and circumstances. 1040ez form2012 Meals furnished at no charge are considered provided for your employer's convenience if there is a good business reason for providing them, other than to give you more pay. 1040ez form2012   On the other hand, if your employer provides meals to you or your family as a means of giving you more pay, and there is no other business reason for providing them, their value is extra income to you because they are not furnished for the convenience of your employer. 1040ez form2012 Condition of employment. 1040ez form2012   Lodging is provided as a condition of employment if you must accept the lodging to properly carry out the duties of your job. 1040ez form2012 You must accept lodging to properly carry out your duties if, for example, you must be available for duty at all times or you could not perform your duties if the lodging was not furnished. 1040ez form2012 Foreign camps. 1040ez form2012   If the lodging is in a camp located in a foreign country, the camp is considered part of your employer's business premises. 1040ez form2012 The camp must be: Provided for your employer's convenience because the place where you work is in a remote area where satisfactory housing is not available to you on the open market within a reasonable commuting distance, Located as close as reasonably possible in the area where you work, and Provided in a common area or enclave that is not available to the general public for lodging or accommodations and that normally houses at least ten employees. 1040ez form2012 Foreign Earned Income Exclusion If your tax home is in a foreign country and you meet the bona fide residence test or the physical presence test, you can choose to exclude from your income a limited amount of your foreign earned income. 1040ez form2012 Foreign earned income was defined earlier in this chapter. 1040ez form2012 You also can choose to exclude from your income a foreign housing amount. 1040ez form2012 This is explained later under Foreign Housing Exclusion. 1040ez form2012 If you choose to exclude a foreign housing amount, you must figure the foreign housing exclusion before you figure the foreign earned income exclusion. 1040ez form2012 Your foreign earned income exclusion is limited to your foreign earned income minus your foreign housing exclusion. 1040ez form2012 If you choose to exclude foreign earned income, you cannot deduct, exclude, or claim a credit for any item that can be allocated to or charged against the excluded amounts. 1040ez form2012 This includes any expenses, losses, and other normally deductible items allocable to the excluded income. 1040ez form2012 For more information about deductions and credits, see chapter 5 . 1040ez form2012 Limit on Excludable Amount You may be able to exclude up to $97,600 of your foreign earned income in 2013. 1040ez form2012 You cannot exclude more than the smaller of: $97,600, or Your foreign earned income (discussed earlier) for the tax year minus your foreign housing exclusion (discussed later). 1040ez form2012 If both you and your spouse work abroad and each of you meets either the bona fide residence test or the physical presence test, you can each choose the foreign earned income exclusion. 1040ez form2012 You do not both need to meet the same test. 1040ez form2012 Together, you and your spouse can exclude as much as $195,200. 1040ez form2012 Paid in year following work. 1040ez form2012   Generally, you are considered to have earned income in the year in which you do the work for which you receive the income, even if you work in one year but are not paid until the following year. 1040ez form2012 If you report your income on a cash basis, you report the income on your return for the year you receive it. 1040ez form2012 If you work one year, but are not paid for that work until the next year, the amount you can exclude in the year you are paid is the amount you could have excluded in the year you did the work if you had been paid in that year. 1040ez form2012 For an exception to this general rule, see Year-end payroll period, later. 1040ez form2012 Example. 1040ez form2012 You were a bona fide resident of Brazil for all of 2012 and 2013. 1040ez form2012 You report your income on the cash basis. 1040ez form2012 In 2012, you were paid $84,200 for work you did in Brazil during that year. 1040ez form2012 You excluded all of the $84,200 from your income in 2012. 1040ez form2012 In 2013, you were paid $117,300 for your work in Brazil. 1040ez form2012 $18,800 was for work you did in 2012 and $98,500 was for work you did in 2013. 1040ez form2012 You can exclude $10,900 of the $18,800 from your income in 2013. 1040ez form2012 This is the $95,100 maximum exclusion in 2012 minus the $84,200 actually excluded that year. 1040ez form2012 You must include the remaining $7,900 in income in 2013 because you could not have excluded that income in 2012 if you had received it that year. 1040ez form2012 You can exclude $97,600 of the $98,500 you were paid for work you did in 2013 from your 2013 income. 1040ez form2012 Your total foreign earned income exclusion for 2013 is $108,500 ($10,900 for work you did in 2012 and $97,600 for work you did in 2013). 1040ez form2012 You would include in your 2013 income $8,800 ($7,900 for the work you did in 2012 and $900 for the work you did in 2013). 1040ez form2012 Year-end payroll period. 1040ez form2012   There is an exception to the general rule that income is considered earned in the year you do the work for which you receive the income. 1040ez form2012 If you are a cash-basis taxpayer, any salary or wage payment you receive after the end of the year in which you do the work for which you receive the pay is considered earned entirely in the year you receive it if all four of the following apply. 1040ez form2012 The period for which the payment is made is a normal payroll period of your employer that regularly applies to you. 1040ez form2012 The payroll period includes the last day of your tax year (December 31 if you figure your taxes on a calendar-year basis). 1040ez form2012 The payroll period is not longer than 16 days. 1040ez form2012 The payday comes at the same time in relation to the payroll period that it would normally come and it comes before the end of the next payroll period. 1040ez form2012 Example. 1040ez form2012 You are paid twice a month. 1040ez form2012 For the normal payroll period that begins on the first of the month and ends on the fifteenth of the month, you are paid on the sixteenth day of the month. 1040ez form2012 For the normal payroll period that begins on the sixteenth of the month and ends on the last day of the month, you are paid on the first day of the following month. 1040ez form2012 Because all of the above conditions are met, the pay you received on January 1, 2013, is considered earned in 2013. 1040ez form2012 Income earned over more than 1 year. 1040ez form2012   Regardless of when you actually receive income, you must apply it to the year in which you earned it in figuring your excludable amount for that year. 1040ez form2012 For example, a bonus may be based on work you did over several years. 1040ez form2012 You determine the amount of the bonus that is considered earned in a particular year in two steps. 1040ez form2012 Divide the bonus by the number of calendar months in the period when you did the work that resulted in the bonus. 1040ez form2012 Multiply the result of (1) by the number of months you did the work during the year. 1040ez form2012 This is the amount that is subject to the exclusion limit for that tax year. 1040ez form2012 Income received more than 1 year after it was earned. 1040ez form2012   You cannot exclude income you receive after the end of the year following the year you do the work to earn it. 1040ez form2012 Example. 1040ez form2012   You were a bona fide resident of Sweden for 2011, 2012, and 2013. 1040ez form2012 You report your income on the cash basis. 1040ez form2012 In 2011, you were paid $69,000 for work you did in Sweden that year and in 2012 you were paid $74,000 for that year's work in Sweden. 1040ez form2012 You excluded all the income on your 2011 and 2012 returns. 1040ez form2012   In 2013, you were paid $92,000; $82,000 for your work in Sweden during 2013, and $10,000 for work you did in Sweden in 2011. 1040ez form2012 You cannot exclude any of the $10,000 for work done in 2011 because you received it after the end of the year following the year in which you earned it. 1040ez form2012 You must include the $10,000 in income. 1040ez form2012 You can exclude all of the $82,000 received for work you did in 2013. 1040ez form2012 Community income. 1040ez form2012   The maximum exclusion applies separately to the earnings of spouses. 1040ez form2012 Ignore any community property laws when you figure your limit on the foreign earned income exclusion. 1040ez form2012 Part-year exclusion. 1040ez form2012   If the period for which you qualify for the foreign earned income exclusion includes only part of the year, you must adjust the maximum limit based on the number of qualifying days in the year. 1040ez form2012 The number of qualifying days is the number of days in the year within the period on which you both: Have your tax home in a foreign country, and Meet either the bona fide residence test or the physical presence test. 1040ez form2012   For this purpose, you can count as qualifying days all days within a period of 12 consecutive months once you are physically present and have your tax home in a foreign country for 330 full days. 1040ez form2012 To figure your maximum exclusion, multiply the maximum excludable amount for the year by the number of your qualifying days in the year, and then divide the result by the number of days in the year. 1040ez form2012 Example. 1040ez form2012 You report your income on the calendar-year basis and you qualified for the foreign earned income exclusion under the bona fide residence test for 75 days in 2013. 1040ez form2012 You can exclude a maximum of 75/365 of $97,600, or $20,055, of your foreign earned income for 2013. 1040ez form2012 If you qualify under the bona fide residence test for all of 2014, you can exclude your foreign earned income up to the 2014 limit. 1040ez form2012 Physical presence test. 1040ez form2012   Under the physical presence test, a 12-month period can be any period of 12 consecutive months that includes 330 full days. 1040ez form2012 If you qualify for the foreign earned income exclusion under the physical presence test for part of a year, it is important to carefully choose the 12-month period that will allow the maximum exclusion for that year. 1040ez form2012 Example. 1040ez form2012 You are physically present and have your tax home in a foreign country for a 16-month period from June 1, 2012, through September 30, 2013, except for 16 days in December 2012 when you were on vacation in the United States. 1040ez form2012 You figure the maximum exclusion for 2012 as follows. 1040ez form2012 Beginning with June 1, 2012, count forward 330 full days. 1040ez form2012 Do not count the 16 days you spent in the United States. 1040ez form2012 The 330th day, May 12, 2013, is the last day of a 12-month period. 1040ez form2012 Count backward 12 months from May 11, 2013, to find the first day of this 12-month period, May 12, 2012. 1040ez form2012 This 12-month period runs from May 12, 2012, through May 11, 2013. 1040ez form2012 Count the total days during 2012 that fall within this 12-month period. 1040ez form2012 This is 234 days (May 12, 2012 – December 31, 2012). 1040ez form2012 Multiply $95,100 (the maximum exclusion for 2012) by the fraction 234/366 to find your maximum exclusion for 2012 ($60,802). 1040ez form2012 You figure the maximum exclusion for 2013 in the opposite manner. 1040ez form2012 Beginning with your last full day, September 30, 2013, count backward 330 full days. 1040ez form2012 Do not count the 16 days you spent in the United States. 1040ez form2012 That day, October 20, 2012, is the first day of a 12-month period. 1040ez form2012 Count forward 12 months from October 20, 2012, to find the last day of this 12-month period, October 19, 2013. 1040ez form2012 This 12-month period runs from October 20, 2012, through October 19, 2013. 1040ez form2012 Count the total days during 2013 that fall within this 12-month period. 1040ez form2012 This is 292 days (January 1, 2013 – October 19, 2013). 1040ez form2012 Multiply $97,600, the maximum limit, by the fraction 292/365 to find your maximum exclusion for 2013 ($78,080). 1040ez form2012 Choosing the Exclusion The foreign earned income exclusion is voluntary. 1040ez form2012 You can choose the exclusion by completing the appropriate parts of Form 2555. 1040ez form2012 When You Can Choose the Exclusion Your initial choice of the exclusion on Form 2555 or Form 2555-EZ generally must be made with one of the following returns. 1040ez form2012 A return filed by the due date (including any extensions). 1040ez form2012 A return amending a timely-filed return. 1040ez form2012 Amended returns generally must be filed by the later of 3 years after the filing date of the original return or 2 years after the tax is paid. 1040ez form2012 A return filed within 1 year from the original due date of the return (determined without regard to any extensions). 1040ez form2012 Filing after the above periods. 1040ez form2012   You can choose the exclusion on a return filed after the periods described above if you owe no federal income tax after taking into account the exclusion. 1040ez form2012 If you owe federal income tax after taking into account the exclusion, you can choose the exclusion on a return filed after the periods described earlier if you file before the IRS discovers that you failed to choose the exclusion. 1040ez form2012 Whether or not you owe federal income tax after taking the exclusion into account, if you file your return after the periods described earlier, you must type or legibly print at the top of the first page of the Form 1040 “Filed pursuant to section 1. 1040ez form2012 911-7(a)(2)(i)(D). 1040ez form2012 ” If you owe federal income tax after taking into account the foreign earned income exclusion and the IRS discovered that you failed to choose the exclusion, you may still be able to choose the exclusion. 1040ez form2012 You must request a private letter ruling under Income Tax Regulation 301. 1040ez form2012 9100-3 and Revenue Procedure 2013-1, 2013-1 I. 1040ez form2012 R. 1040ez form2012 B. 1040ez form2012 1, available at www. 1040ez form2012 irs. 1040ez form2012 gov/irb/2013-01_IRB/ar06. 1040ez form2012 html. 1040ez form2012 Effect of Choosing the Exclusion Once you choose to exclude your foreign earned income, that choice remains in effect for that year and all later years unless you revoke it. 1040ez form2012 Foreign tax credit or deduction. 1040ez form2012