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2011 Efile

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2011 Efile

2011 efile 1. 2011 efile   Traditional IRAs Table of Contents What's New for 2013 What's New for 2014 Introduction Who Can Open a Traditional IRA?What Is Compensation? When Can a Traditional IRA Be Opened? How Can a Traditional IRA Be Opened?Individual Retirement Account Individual Retirement Annuity Individual Retirement Bonds Simplified Employee Pension (SEP) Employer and Employee Association Trust Accounts Required Disclosures How Much Can Be Contributed?Limit. 2011 efile When repayment contributions can be made. 2011 efile No deduction. 2011 efile Reserve component. 2011 efile Figuring your IRA deduction. 2011 efile Reporting the repayment. 2011 efile Example. 2011 efile General Limit Kay Bailey Hutchison Spousal IRA Limit Filing Status Less Than Maximum Contributions More Than Maximum Contributions When Can Contributions Be Made? How Much Can You Deduct?Kay Bailey Hutchison Spousal IRA. 2011 efile Are You Covered by an Employer Plan? Limit if Covered by Employer Plan Reporting Deductible Contributions Nondeductible Contributions Examples — Worksheet for Reduced IRA Deduction for 2013 What if You Inherit an IRA?Treating it as your own. 2011 efile Can You Move Retirement Plan Assets?Transfers to Roth IRAs from other retirement plans. 2011 efile Trustee-to-Trustee Transfer Rollovers Transfers Incident To Divorce Converting From Any Traditional IRA Into a Roth IRA Recharacterizations When Can You Withdraw or Use Assets?Contributions Returned Before Due Date of Return When Must You Withdraw Assets? (Required Minimum Distributions)IRA Owners IRA Beneficiaries Which Table Do You Use To Determine Your Required Minimum Distribution? What Age(s) Do You Use With the Table(s)? Miscellaneous Rules for Required Minimum Distributions Are Distributions Taxable?January 2013 QCDs treated as made in 2012. 2011 efile 2013 Reporting. 2011 efile Additional reporting requirements if you made the election to treat a January 2013 QCD as made in 2012. 2011 efile One-time transfer. 2011 efile Testing period rules apply. 2011 efile More information. 2011 efile Distributions Fully or Partly Taxable Figuring the Nontaxable and Taxable Amounts Recognizing Losses on Traditional IRA Investments Other Special IRA Distribution Situations Reporting and Withholding Requirements for Taxable Amounts What Acts Result in Penalties or Additional Taxes?Prohibited Transactions Investment in Collectibles Excess Contributions Early Distributions Excess Accumulations (Insufficient Distributions) Reporting Additional Taxes What's New for 2013 Traditional IRA contribution and deduction limit. 2011 efile  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. 2011 efile 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. 2011 efile For more information, see How Much Can Be Contributed? in this chapter. 2011 efile Modified AGI limit for traditional IRA contributions increased. 2011 efile  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. 2011 efile 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. 2011 efile If your modified AGI is $188,000 or more, you cannot take a deduction for contributions to a traditional IRA. 2011 efile See How Much Can You Deduct? in this chapter. 2011 efile Net Investment Income Tax. 2011 efile  For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan (for example, 401(a), 403(a), 403(b), 457(b) plans, and IRAs). 2011 efile However, these distributions are taken into account when determining the modified adjusted gross income threshold. 2011 efile Distributions from a nonqualified retirement plan are included in net investment income. 2011 efile See Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions for more information. 2011 efile What's New for 2014 Modified AGI limit for traditional IRA contributions increased. 2011 efile  For 2014, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is: More than $96,000 but less than $116,000 for a married couple filing a joint return or a qualifying widow(er), More than $60,000 but less than $70,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. 2011 efile If you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work, but you are not, your deduction is phased out if your modified AGI is more than $181,000 but less than $191,000. 2011 efile If your modified AGI is $191,000 or more, you cannot take a deduction for contributions to a traditional IRA. 2011 efile Introduction This chapter discusses the original IRA. 2011 efile In this publication the original IRA (sometimes called an ordinary or regular IRA) is referred to as a “traditional IRA. 2011 efile ” A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA. 2011 efile The following are two advantages of a traditional IRA: You may be able to deduct some or all of your contributions to it, depending on your circumstances. 2011 efile Generally, amounts in your IRA, including earnings and gains, are not taxed until they are distributed. 2011 efile 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. 2011 efile You can have a traditional IRA whether or not you are covered by any other retirement plan. 2011 efile However, you may not be able to deduct all of your contributions if you or your spouse is covered by an employer retirement plan. 2011 efile See How Much Can You Deduct , later. 2011 efile Both spouses have compensation. 2011 efile   If both you and your spouse have compensation and are under age 70½, each of you can open an IRA. 2011 efile You cannot both participate in the same IRA. 2011 efile If you file a joint return, only one of you needs to have compensation. 2011 efile What Is Compensation? Generally, compensation is what you earn from working. 2011 efile For a summary of what compensation does and does not include, see Table 1-1. 2011 efile Compensation includes all of the items discussed next (even if you have more than one type). 2011 efile Wages, salaries, etc. 2011 efile   Wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services are compensation. 2011 efile 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). 2011 efile Scholarship and fellowship payments are compensation for IRA purposes only if shown in box 1 of Form W-2. 2011 efile Commissions. 2011 efile   An amount you receive that is a percentage of profits or sales price is compensation. 2011 efile Self-employment income. 2011 efile   If you are self-employed (a sole proprietor or a partner), compensation is the net earnings from your trade or business (provided your personal services are a material income-producing factor) reduced by the total of: The deduction for contributions made on your behalf to retirement plans, and The deduction allowed for the deductible part of your self-employment taxes. 2011 efile   Compensation includes earnings from self-employment even if they are not subject to self-employment tax because of your religious beliefs. 2011 efile Self-employment loss. 2011 efile   If you have a net loss from self-employment, do not subtract the loss from your salaries or wages when figuring your total compensation. 2011 efile Alimony and separate maintenance. 2011 efile   For IRA purposes, compensation includes any taxable alimony and separate maintenance payments you receive under a decree of divorce or separate maintenance. 2011 efile Nontaxable combat pay. 2011 efile   If you were a member of the U. 2011 efile S. 2011 efile Armed Forces, compensation includes any nontaxable combat pay you received. 2011 efile This amount should be reported in box 12 of your 2013 Form W-2 with code Q. 2011 efile Table 1-1. 2011 efile Compensation for Purposes of an IRA Includes . 2011 efile . 2011 efile . 2011 efile Does not include . 2011 efile . 2011 efile . 2011 efile   earnings and profits from property. 2011 efile wages, salaries, etc. 2011 efile     interest and dividend income. 2011 efile commissions. 2011 efile     pension or annuity income. 2011 efile self-employment income. 2011 efile     deferred compensation. 2011 efile alimony and separate maintenance. 2011 efile     income from certain  partnerships. 2011 efile nontaxable combat pay. 2011 efile     any amounts you exclude from income. 2011 efile     What Is Not Compensation? Compensation does not include any of the following items. 2011 efile Earnings and profits from property, such as rental income, interest income, and dividend income. 2011 efile Pension or annuity income. 2011 efile Deferred compensation received (compensation payments postponed from a past year). 2011 efile Income from a partnership for which you do not provide services that are a material income-producing factor. 2011 efile Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b. 2011 efile Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs. 2011 efile When Can a Traditional IRA Be Opened? You can open a traditional IRA at any time. 2011 efile However, the time for making contributions for any year is limited. 2011 efile See When Can Contributions Be Made , later. 2011 efile How Can a Traditional IRA Be Opened? You can open different kinds of IRAs with a variety of organizations. 2011 efile You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. 2011 efile You can also open an IRA through your stockbroker. 2011 efile Any IRA must meet Internal Revenue Code requirements. 2011 efile The requirements for the various arrangements are discussed below. 2011 efile Kinds of traditional IRAs. 2011 efile   Your traditional IRA can be an individual retirement account or annuity. 2011 efile It can be part of either a simplified employee pension (SEP) or an employer or employee association trust account. 2011 efile Individual Retirement Account An individual retirement account is a trust or custodial account set up in the United States for the exclusive benefit of you or your beneficiaries. 2011 efile The account is created by a written document. 2011 efile The document must show that the account meets all of the following requirements. 2011 efile The trustee or custodian must be a bank, a federally insured credit union, a savings and loan association, or an entity approved by the IRS to act as trustee or custodian. 2011 efile The trustee or custodian generally cannot accept contributions of more than the deductible amount for the year. 2011 efile However, rollover contributions and employer contributions to a simplified employee pension (SEP) can be more than this amount. 2011 efile Contributions, except for rollover contributions, must be in cash. 2011 efile See Rollovers , later. 2011 efile You must have a nonforfeitable right to the amount at all times. 2011 efile Money in your account cannot be used to buy a life insurance policy. 2011 efile Assets in your account cannot be combined with other property, except in a common trust fund or common investment fund. 2011 efile You must start receiving distributions by April 1 of the year following the year in which you reach age 70½. 2011 efile See When Must You Withdraw Assets? (Required Minimum Distributions) , later. 2011 efile Individual Retirement Annuity You can open an individual retirement annuity by purchasing an annuity contract or an endowment contract from a life insurance company. 2011 efile An individual retirement annuity must be issued in your name as the owner, and either you or your beneficiaries who survive you are the only ones who can receive the benefits or payments. 2011 efile An individual retirement annuity must meet all the following requirements. 2011 efile Your entire interest in the contract must be nonforfeitable. 2011 efile The contract must provide that you cannot transfer any portion of it to any person other than the issuer. 2011 efile There must be flexible premiums so that if your compensation changes, your payment can also change. 2011 efile This provision applies to contracts issued after November 6, 1978. 2011 efile The contract must provide that contributions cannot be more than the deductible amount for an IRA for the year, and that you must use any refunded premiums to pay for future premiums or to buy more benefits before the end of the calendar year after the year in which you receive the refund. 2011 efile Distributions must begin by April 1 of the year following the year in which you reach age 70½. 2011 efile See When Must You Withdraw Assets? (Required Minimum Distributions) , later. 2011 efile Individual Retirement Bonds The sale of individual retirement bonds issued by the federal government was suspended after April 30, 1982. 2011 efile The bonds have the following features. 2011 efile They stop earning interest when you reach age 70½. 2011 efile If you die, interest will stop 5 years after your death, or on the date you would have reached age 70½, whichever is earlier. 2011 efile You cannot transfer the bonds. 2011 efile If you cash (redeem) the bonds before the year in which you reach age 59½, you may be subject to a 10% additional tax. 2011 efile See Age 59½ Rule under Early Distributions, later. 2011 efile You can roll over redemption proceeds into IRAs. 2011 efile Simplified Employee Pension (SEP) A simplified employee pension (SEP) is a written arrangement that allows your employer to make deductible contributions to a traditional IRA (a SEP IRA) set up for you to receive such contributions. 2011 efile Generally, distributions from SEP IRAs are subject to the withdrawal and tax rules that apply to traditional IRAs. 2011 efile See Publication 560 for more information about SEPs. 2011 efile Employer and Employee Association Trust Accounts Your employer or your labor union or other employee association can set up a trust to provide individual retirement accounts for employees or members. 2011 efile The requirements for individual retirement accounts apply to these traditional IRAs. 2011 efile Required Disclosures The trustee or issuer (sometimes called the sponsor) of your traditional IRA generally must give you a disclosure statement at least 7 days before you open your IRA. 2011 efile However, the sponsor does not have to give you the statement until the date you open (or purchase, if earlier) your IRA, provided you are given at least 7 days from that date to revoke the IRA. 2011 efile The disclosure statement must explain certain items in plain language. 2011 efile For example, the statement should explain when and how you can revoke the IRA, and include the name, address, and telephone number of the person to receive the notice of cancellation. 2011 efile This explanation must appear at the beginning of the disclosure statement. 2011 efile If you revoke your IRA within the revocation period, the sponsor must return to you the entire amount you paid. 2011 efile The sponsor must report on the appropriate IRS forms both your contribution to the IRA (unless it was made by a trustee-to-trustee transfer) and the amount returned to you. 2011 efile These requirements apply to all sponsors. 2011 efile How Much Can Be Contributed? There are limits and other rules that affect the amount that can be contributed to a traditional IRA. 2011 efile These limits and rules are explained below. 2011 efile Community property laws. 2011 efile   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. 2011 efile This is the rule even in states with community property laws. 2011 efile Brokers' commissions. 2011 efile   Brokers' commissions paid in connection with your traditional IRA are subject to the contribution limit. 2011 efile For information about whether you can deduct brokers' commissions, see Brokers' commissions , later, under How Much Can You Deduct. 2011 efile Trustees' fees. 2011 efile   Trustees' administrative fees are not subject to the contribution limit. 2011 efile For information about whether you can deduct trustees' fees, see Trustees' fees , later, under How Much Can You Deduct. 2011 efile Qualified reservist repayments. 2011 efile   If you were a member of a reserve component and you were ordered or called to active duty after September 11, 2001, you may be able to contribute (repay) to an IRA amounts equal to any qualified reservist distributions (defined later under Early Distributions) you received. 2011 efile 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. 2011 efile To be eligible to make these repayment contributions, you must have received a qualified reservist distribution from an IRA or from a section 401(k) or 403(b) plan or a similar arrangement. 2011 efile Limit. 2011 efile   Your qualified reservist repayments cannot be more than your qualified reservist distributions, explained under Early Distributions , later. 2011 efile When repayment contributions can be made. 2011 efile   You cannot make these repayment contributions later than the date that is 2 years after your active duty period ends. 2011 efile No deduction. 2011 efile   You cannot deduct qualified reservist repayments. 2011 efile Reserve component. 2011 efile   The term “reserve component” means the: Army National Guard of the United States, Army Reserve, Naval Reserve, Marine Corps Reserve, Air National Guard of the United States, Air Force Reserve, Coast Guard Reserve, or Reserve Corps of the Public Health Service. 2011 efile Figuring your IRA deduction. 2011 efile   The repayment of qualified reservist distributions does not affect the amount you can deduct as an IRA contribution. 2011 efile Reporting the repayment. 2011 efile   If you repay a qualified reservist distribution, include the amount of the repayment with nondeductible contributions on line 1 of Form 8606. 2011 efile Example. 2011 efile   In 2013, your IRA contribution limit is $5,500. 2011 efile However, because of your filing status and AGI, the limit on the amount you can deduct is $3,500. 2011 efile You can make a nondeductible contribution of $2,000 ($5,500 - $3,500). 2011 efile In an earlier year you received a $3,000 qualified reservist distribution, which you would like to repay this year. 2011 efile   For 2013, you can contribute a total of $8,500 to your IRA. 2011 efile This is made up of the maximum deductible contribution of $3,500; a nondeductible contribution of $2,000; and a $3,000 qualified reservist repayment. 2011 efile You contribute the maximum allowable for the year. 2011 efile Since you are making a nondeductible contribution ($2,000) and a qualified reservist repayment ($3,000), you must file Form 8606 with your return and include $5,000 ($2,000 + $3,000) on line 1 of Form 8606. 2011 efile The qualified reservist repayment is not deductible. 2011 efile Contributions on your behalf to a traditional IRA reduce your limit for contributions to a Roth IRA. 2011 efile See chapter 2 for information about Roth IRAs. 2011 efile General Limit For 2013, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts: $5,500 ($6,500 if you are age 50 or older), or Your taxable compensation (defined earlier) for the year. 2011 efile Note. 2011 efile This limit is reduced by any contributions to a section 501(c)(18) plan (generally, a pension plan created before June 25, 1959, that is funded entirely by employee contributions). 2011 efile 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. 2011 efile (See Nondeductible Contributions , later. 2011 efile ) Qualified reservist repayments do not affect this limit. 2011 efile Examples. 2011 efile George, who is 34 years old and single, earns $24,000 in 2013. 2011 efile His IRA contributions for 2013 are limited to $5,500. 2011 efile Danny, an unmarried college student working part time, earns $3,500 in 2013. 2011 efile His IRA contributions for 2013 are limited to $3,500, the amount of his compensation. 2011 efile More than one IRA. 2011 efile   If you have more than one IRA, the limit applies to the total contributions made on your behalf to all your traditional IRAs for the year. 2011 efile Annuity or endowment contracts. 2011 efile   If you invest in an annuity or endowment contract under an individual retirement annuity, no more than $5,500 ($6,500 if you are age 50 or older) can be contributed toward its cost for the tax year, including the cost of life insurance coverage. 2011 efile If more than this amount is contributed, the annuity or endowment contract is disqualified. 2011 efile Kay Bailey Hutchison Spousal IRA Limit For 2013, if you file a joint return and your taxable compensation is less than that of your spouse, the most that can be contributed for the year to your IRA is the smaller of the following two amounts: $5,500 ($6,500 if you are age 50 or older), or The total compensation includible in the gross income of both you and your spouse for the year, reduced by the following two amounts. 2011 efile Your spouse's IRA contribution for the year to a traditional IRA. 2011 efile Any contributions for the year to a Roth IRA on behalf of your spouse. 2011 efile This means that the total combined contributions that can be made for the year to your IRA and your spouse's IRA can be as much as $11,000 ($12,000 if only one of you is age 50 or older or $13,000 if both of you are age 50 or older). 2011 efile Note. 2011 efile This traditional IRA limit is reduced by any contributions to a section 501(c)(18) plan (generally, a pension plan created before June 25, 1959, that is funded entirely by employee contributions). 2011 efile Example. 2011 efile Kristin, a full-time student with no taxable compensation, marries Carl during the year. 2011 efile Neither of them was age 50 by the end of 2013. 2011 efile For the year, Carl has taxable compensation of $30,000. 2011 efile He plans to contribute (and deduct) $5,500 to a traditional IRA. 2011 efile If he and Kristin file a joint return, each can contribute $5,500 to a traditional IRA. 2011 efile This is because Kristin, who has no compensation, can add Carl's compensation, reduced by the amount of his IRA contribution ($30,000 − $5,500 = $24,500), to her own compensation (-0-) to figure her maximum contribution to a traditional IRA. 2011 efile In her case, $5,500 is her contribution limit, because $5,500 is less than $24,500 (her compensation for purposes of figuring her contribution limit). 2011 efile Filing Status Generally, except as discussed earlier under Kay Bailey Hutchison Spousal IRA Limit , your filing status has no effect on the amount of allowable contributions to your traditional IRA. 2011 efile However, if during the year either you or your spouse was covered by a retirement plan at work, your deduction may be reduced or eliminated, depending on your filing status and income. 2011 efile See How Much Can You Deduct , later. 2011 efile Example. 2011 efile Tom and Darcy are married and both are 53. 2011 efile They both work and each has a traditional IRA. 2011 efile Tom earned $3,800 and Darcy earned $48,000 in 2013. 2011 efile Because of the Kay Bailey Hutchison Spousal IRA limit rule, even though Tom earned less than $6,500, they can contribute up to $6,500 to his IRA for 2013 if they file a joint return. 2011 efile They can contribute up to $6,500 to Darcy's IRA. 2011 efile If they file separate returns, the amount that can be contributed to Tom's IRA is limited by his earned income, $3,800. 2011 efile Less Than Maximum Contributions If contributions to your traditional IRA for a year were less than the limit, you cannot contribute more after the due date of your return for that year to make up the difference. 2011 efile Example. 2011 efile Rafael, who is 40, earns $30,000 in 2013. 2011 efile Although he can contribute up to $5,500 for 2013, he contributes only $3,000. 2011 efile After April 15, 2014, Rafael cannot make up the difference between his actual contributions for 2013 ($3,000) and his 2013 limit ($5,500). 2011 efile He cannot contribute $2,500 more than the limit for any later year. 2011 efile More Than Maximum Contributions If contributions to your IRA for a year were more than the limit, you can apply the excess contribution in one year to a later year if the contributions for that later year are less than the maximum allowed for that year. 2011 efile However, a penalty or additional tax may apply. 2011 efile See Excess Contributions , later, under What Acts Result in Penalties or Additional Taxes. 2011 efile 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). 2011 efile Contributions must be in the form of money (cash, check, or money order). 2011 efile Property cannot be contributed. 2011 efile Although property cannot be contributed, your IRA may invest in certain property. 2011 efile For example, your IRA may purchase shares of stock. 2011 efile For other restrictions on the use of funds in your IRA, see Prohibited Transactions , later in this chapter. 2011 efile You may be able to transfer or roll over certain property from one retirement plan to another. 2011 efile See the discussion of rollovers and other transfers later in this chapter under Can You Move Retirement Plan Assets . 2011 efile You can make a contribution to your IRA by having your income tax refund (or a portion of your refund), if any, paid directly to your traditional IRA, Roth IRA, or SEP IRA. 2011 efile For details, see the instructions for your income tax return or Form 8888, Allocation of Refund (Including Savings Bond Purchases). 2011 efile Contributions can be made to your traditional IRA for each year that you receive compensation and have not reached age 70½. 2011 efile For any year in which you do not work, contributions cannot be made to your IRA unless you receive alimony, nontaxable combat pay, military differential pay, or file a joint return with a spouse who has compensation. 2011 efile See Who Can Open a Traditional IRA , earlier. 2011 efile Even if contributions cannot be made for the current year, the amounts contributed for years in which you did qualify can remain in your IRA. 2011 efile Contributions can resume for any years that you qualify. 2011 efile Contributions must be made by due date. 2011 efile   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. 2011 efile For most people, this means that contributions for 2013 must be made by April 15, 2014, and contributions for 2014 must be made by April 15, 2015. 2011 efile Age 70½ rule. 2011 efile   Contributions cannot be made to your traditional IRA for the year in which you reach age 70½ or for any later year. 2011 efile   You attain age 70½ on the date that is 6 calendar months after the 70th anniversary of your birth. 2011 efile If you were born on or before June 30, 1943, you cannot contribute for 2013 or any later year. 2011 efile Designating year for which contribution is made. 2011 efile   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. 2011 efile 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). 2011 efile Filing before a contribution is made. 2011 efile    You can file your return claiming a traditional IRA contribution before the contribution is actually made. 2011 efile Generally, the contribution must be made by the due date of your return, not including extensions. 2011 efile Contributions not required. 2011 efile   You do not have to contribute to your traditional IRA for every tax year, even if you can. 2011 efile How Much Can You Deduct? Generally, you can deduct the lesser of: The contributions to your traditional IRA for the year, or The general limit (or the Kay Bailey Hutchison Spousal IRA limit, if applicable) explained earlier under How Much Can Be Contributed . 2011 efile However, if you or your spouse was covered by an employer retirement plan, you may not be able to deduct this amount. 2011 efile See Limit if Covered by Employer Plan , later. 2011 efile You may be able to claim a credit for contributions to your traditional IRA. 2011 efile For more information, see chapter 4. 2011 efile Trustees' fees. 2011 efile   Trustees' administrative fees that are billed separately and paid in connection with your traditional IRA are not deductible as IRA contributions. 2011 efile However, they may be deductible as a miscellaneous itemized deduction on Schedule A (Form 1040). 2011 efile For information about miscellaneous itemized deductions, see Publication 529, Miscellaneous Deductions. 2011 efile Brokers' commissions. 2011 efile   These commissions are part of your IRA contribution and, as such, are deductible subject to the limits. 2011 efile Full deduction. 2011 efile   If neither you nor your spouse was covered for any part of the year by an employer retirement plan, you can take a deduction for total contributions to one or more of your traditional IRAs of up to the lesser of: $5,500 ($6,500 if you are age 50 or older), or 100% of your compensation. 2011 efile   This limit is reduced by any contributions made to a 501(c)(18) plan on your behalf. 2011 efile Kay Bailey Hutchison Spousal IRA. 2011 efile   In the case of a married couple with unequal compensation who file a joint return, the deduction for contributions to the traditional IRA of the spouse with less compensation is limited to the lesser of: $5,500 ($6,500 if the spouse with the lower compensation is age 50 or older), or The total compensation includible in the gross income of both spouses for the year reduced by the following three amounts. 2011 efile The IRA deduction for the year of the spouse with the greater compensation. 2011 efile Any designated nondeductible contribution for the year made on behalf of the spouse with the greater compensation. 2011 efile Any contributions for the year to a Roth IRA on behalf of the spouse with the greater compensation. 2011 efile   This limit is reduced by any contributions to a section 501(c)(18) plan on behalf of the spouse with the lesser compensation. 2011 efile Note. 2011 efile 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. 2011 efile After a divorce or legal separation, you can deduct only the contributions to your own IRA. 2011 efile Your deductions are subject to the rules for single individuals. 2011 efile Covered by an employer retirement plan. 2011 efile   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. 2011 efile This is discussed later under Limit if Covered by Employer Plan . 2011 efile Limits on the amount you can deduct do not affect the amount that can be contributed. 2011 efile 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. 2011 efile The “Retirement Plan” box should be checked if you were covered. 2011 efile Reservists and volunteer firefighters should also see Situations in Which You Are Not Covered , later. 2011 efile If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer. 2011 efile Federal judges. 2011 efile   For purposes of the IRA deduction, federal judges are covered by an employer plan. 2011 efile For Which Year(s) Are You Covered? Special rules apply to determine the tax years for which you are covered by an employer plan. 2011 efile These rules differ depending on whether the plan is a defined contribution plan or a defined benefit plan. 2011 efile Tax year. 2011 efile   Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. 2011 efile For almost all people, the tax year is the calendar year. 2011 efile Defined contribution plan. 2011 efile   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. 2011 efile However, also see Situations in Which You Are Not Covered , later. 2011 efile   A defined contribution plan is a plan that provides for a separate account for each person covered by the plan. 2011 efile In a defined contribution plan, the amount to be contributed to each participant's account is spelled out in the plan. 2011 efile The level of benefits actually provided to a participant depends on the total amount contributed to that participant's account and any earnings and losses on those contributions. 2011 efile Types of defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans. 2011 efile Example. 2011 efile Company A has a money purchase pension plan. 2011 efile Its plan year is from July 1 to June 30. 2011 efile The plan provides that contributions must be allocated as of June 30. 2011 efile Bob, an employee, leaves Company A on December 31, 2012. 2011 efile The contribution for the plan year ending on June 30, 2013, is made February 15, 2014. 2011 efile Because an amount is contributed to Bob's account for the plan year, Bob is covered by the plan for his 2013 tax year. 2011 efile   A special rule applies to certain plans in which it is not possible to determine if an amount will be contributed to your account for a given plan year. 2011 efile If, for a plan year, no amounts have been allocated to your account that are attributable to employer contributions, employee contributions, or forfeitures, by the last day of the plan year, and contributions are discretionary for the plan year, you are not covered for the tax year in which the plan year ends. 2011 efile If, after the plan year ends, the employer makes a contribution for that plan year, you are covered for the tax year in which the contribution is made. 2011 efile Example. 2011 efile Mickey was covered by a profit-sharing plan and left the company on December 31, 2012. 2011 efile The plan year runs from July 1 to June 30. 2011 efile Under the terms of the plan, employer contributions do not have to be made, but if they are made, they are contributed to the plan before the due date for filing the company's tax return. 2011 efile Such contributions are allocated as of the last day of the plan year, and allocations are made to the accounts of individuals who have any service during the plan year. 2011 efile As of June 30, 2013, no contributions were made that were allocated to the June 30, 2013, plan year, and no forfeitures had been allocated within the plan year. 2011 efile In addition, as of that date, the company was not obligated to make a contribution for such plan year and it was impossible to determine whether or not a contribution would be made for the plan year. 2011 efile On December 31, 2013, the company decided to contribute to the plan for the plan year ending June 30, 2013. 2011 efile That contribution was made on February 15, 2014. 2011 efile Mickey is an active participant in the plan for his 2014 tax year but not for his 2013 tax year. 2011 efile No vested interest. 2011 efile   If an amount is allocated to your account for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the account. 2011 efile Defined benefit plan. 2011 efile   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. 2011 efile 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. 2011 efile   A defined benefit plan is any plan that is not a defined contribution plan. 2011 efile In a defined benefit plan, the level of benefits to be provided to each participant is spelled out in the plan. 2011 efile The plan administrator figures the amount needed to provide those benefits and those amounts are contributed to the plan. 2011 efile Defined benefit plans include pension plans and annuity plans. 2011 efile Example. 2011 efile Nick, an employee of Company B, is eligible to participate in Company B's defined benefit plan, which has a July 1 to June 30 plan year. 2011 efile Nick leaves Company B on December 31, 2012. 2011 efile Because Nick is eligible to participate in the plan for its year ending June 30, 2013, he is covered by the plan for his 2013 tax year. 2011 efile No vested interest. 2011 efile   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. 2011 efile Situations in Which You Are Not Covered Unless you are covered by another employer plan, you are not covered by an employer plan if you are in one of the situations described below. 2011 efile Social security or railroad retirement. 2011 efile   Coverage under social security or railroad retirement is not coverage under an employer retirement plan. 2011 efile Benefits from previous employer's plan. 2011 efile   If you receive retirement benefits from a previous employer's plan, you are not covered by that plan. 2011 efile Reservists. 2011 efile   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. 2011 efile You are not covered by the plan if both of the following conditions are met. 2011 efile 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. 2011 efile You did not serve more than 90 days on active duty during the year (not counting duty for training). 2011 efile Volunteer firefighters. 2011 efile   If the only reason you participate in a plan is because you are a volunteer firefighter, you may not be covered by the plan. 2011 efile You are not covered by the plan if both of the following conditions are met. 2011 efile 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. 2011 efile Your accrued retirement benefits at the beginning of the year will not provide more than $1,800 per year at retirement. 2011 efile Limit if Covered by Employer Plan As discussed earlier, the deduction you can take for contributions made to your traditional IRA depends on whether you or your spouse was covered for any part of the year by an employer retirement plan. 2011 efile Your deduction is also affected by how much income you had and by your filing status. 2011 efile Your deduction may also be affected by social security benefits you received. 2011 efile Reduced or no deduction. 2011 efile   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. 2011 efile   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. 2011 efile These amounts vary depending on your filing status. 2011 efile   To determine if your deduction is subject to the phaseout, you must determine your modified adjusted gross income (AGI) and your filing status, as explained later under Deduction Phaseout . 2011 efile Once you have determined your modified AGI and your filing status, you can use Table 1-2 or Table 1-3 to determine if the phaseout applies. 2011 efile Social Security Recipients Instead of using Table 1-2 or Table 1-3 and Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, later, complete the worksheets in Appendix B of this publication if, for the year, all of the following apply. 2011 efile You received social security benefits. 2011 efile You received taxable compensation. 2011 efile Contributions were made to your traditional IRA. 2011 efile You or your spouse was covered by an employer retirement plan. 2011 efile Use the worksheets in Appendix B to figure your IRA deduction, your nondeductible contribution, and the taxable portion, if any, of your social security benefits. 2011 efile Appendix B includes an example with filled-in worksheets to assist you. 2011 efile Table 1-2. 2011 efile Effect of Modified AGI1 on Deduction if You Are Covered by a Retirement Plan at Work If you are covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. 2011 efile IF your filing status is . 2011 efile . 2011 efile . 2011 efile AND your modified adjusted gross income (modified AGI) is . 2011 efile . 2011 efile . 2011 efile THEN you can take . 2011 efile . 2011 efile . 2011 efile single or head of household $59,000 or less a full deduction. 2011 efile more than $59,000 but less than $69,000 a partial deduction. 2011 efile $69,000 or more no deduction. 2011 efile married filing jointly or  qualifying widow(er) $95,000 or less a full deduction. 2011 efile more than $95,000 but less than $115,000 a partial deduction. 2011 efile $115,000 or more no deduction. 2011 efile married filing separately2 less than $10,000 a partial deduction. 2011 efile $10,000 or more no deduction. 2011 efile 1 Modified AGI (adjusted gross income). 2011 efile See Modified adjusted gross income (AGI) , later. 2011 efile  2 If you did not live with your spouse at any time during the year, your filing status is considered Single for this purpose (therefore, your IRA deduction is determined under the “Single” filing status). 2011 efile Table 1-3. 2011 efile Effect of Modified AGI1 on Deduction if You Are NOT Covered by a Retirement Plan at Work If you are not covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. 2011 efile IF your filing status is . 2011 efile . 2011 efile . 2011 efile AND your modified adjusted gross income (modified AGI) is . 2011 efile . 2011 efile . 2011 efile THEN you can take . 2011 efile . 2011 efile . 2011 efile single, head of household, or qualifying widow(er) any amount a full deduction. 2011 efile married filing jointly or separately with a spouse who is not covered by a plan at work any amount a full deduction. 2011 efile married filing jointly with a spouse who is covered by a plan at work $178,000 or less a full deduction. 2011 efile more than $178,000 but less than $188,000 a partial deduction. 2011 efile $188,000 or more no deduction. 2011 efile married filing separately with a spouse who is covered by a plan at work2 less than $10,000 a partial deduction. 2011 efile $10,000 or more no deduction. 2011 efile 1 Modified AGI (adjusted gross income). 2011 efile See Modified adjusted gross income (AGI) , later. 2011 efile  2 You are entitled to the full deduction if you did not live with your spouse at any time during the year. 2011 efile For 2014, if you are not covered by a retirement plan at work and you are married filing jointly with a spouse who is covered by a plan at work, your deduction is phased out if your modified AGI is more than $181,000 but less than $191,000. 2011 efile If your AGI is $191,000 or more, you cannot take a deduction for a contribution to a traditional IRA. 2011 efile Deduction Phaseout The amount of any reduction in the limit on your IRA deduction (phaseout) depends on whether you or your spouse was covered by an employer retirement plan. 2011 efile Covered by a retirement plan. 2011 efile   If you are covered by an employer retirement plan and you did not receive any social security retirement benefits, your IRA deduction may be reduced or eliminated depending on your filing status and modified AGI, as shown in Table 1-2. 2011 efile For 2014, if you are covered by a retirement plan at work, your IRA deduction will not be reduced (phased out) unless your modified AGI is: More than $60,000 but less than $70,000 for a single individual (or head of household), More than $96,000 but less than $116,000 for a married couple filing a joint return (or a qualifying widow(er)), or Less than $10,000 for a married individual filing a separate return. 2011 efile If your spouse is covered. 2011 efile   If you are not covered by an employer retirement plan, but your spouse is, and you did not receive any social security benefits, your IRA deduction may be reduced or eliminated entirely depending on your filing status and modified AGI as shown in Table 1-3. 2011 efile Filing status. 2011 efile   Your filing status depends primarily on your marital status. 2011 efile 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. 2011 efile If you need more information on filing status, see Publication 501, Exemptions, Standard Deduction, and Filing Information. 2011 efile Lived apart from spouse. 2011 efile   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. 2011 efile Modified adjusted gross income (AGI). 2011 efile   You can use Worksheet 1-1 to figure your modified AGI. 2011 efile If you made contributions to your IRA for 2013 and received a distribution from your IRA in 2013, see Both contributions for 2013 and distributions in 2013 , later. 2011 efile    Do not assume that your modified AGI is the same as your compensation. 2011 efile Your modified AGI may include income in addition to your compensation (discussed earlier) such as interest, dividends, and income from IRA distributions. 2011 efile Form 1040. 2011 efile   If you file Form 1040, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. 2011 efile IRA deduction. 2011 efile Student loan interest deduction. 2011 efile Tuition and fees deduction. 2011 efile Domestic production activities deduction. 2011 efile Foreign earned income exclusion. 2011 efile Foreign housing exclusion or deduction. 2011 efile Exclusion of qualified savings bond interest shown on Form 8815. 2011 efile Exclusion of employer-provided adoption benefits shown on Form 8839. 2011 efile This is your modified AGI. 2011 efile Form 1040A. 2011 efile   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. 2011 efile IRA deduction. 2011 efile Student loan interest deduction. 2011 efile Tuition and fees deduction. 2011 efile Exclusion of qualified savings bond interest shown on Form 8815. 2011 efile This is your modified AGI. 2011 efile Form 1040NR. 2011 efile   If you file Form 1040NR, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. 2011 efile IRA deduction. 2011 efile Student loan interest deduction. 2011 efile Domestic production activities deduction. 2011 efile Exclusion of qualified savings bond interest shown on Form 8815. 2011 efile Exclusion of employer-provided adoption benefits shown on Form 8839. 2011 efile This is your modified AGI. 2011 efile Income from IRA distributions. 2011 efile   If you received distributions in 2013 from one or more traditional IRAs and your traditional IRAs include only deductible contributions, the distributions are fully taxable and are included in your modified AGI. 2011 efile Both contributions for 2013 and distributions in 2013. 2011 efile   If all three of the following apply, any IRA distributions you received in 2013 may be partly tax free and partly taxable. 2011 efile You received distributions in 2013 from one or more traditional IRAs, You made contributions to a traditional IRA for 2013, and Some of those contributions may be nondeductible contributions. 2011 efile (See Nondeductible Contributions and Worksheet 1-2, later. 2011 efile ) If this is your situation, you must figure the taxable part of the traditional IRA distribution before you can figure your modified AGI. 2011 efile To do this, you can use Worksheet 1-5, later. 2011 efile   If at least one of the above does not apply, figure your modified AGI using Worksheet 1-1, later. 2011 efile How To Figure Your Reduced IRA Deduction If you or your spouse is covered by an employer retirement plan and you did not receive any social security benefits, you can figure your reduced IRA deduction by using Worksheet 1-2. 2011 efile Figuring Your Reduced IRA Deduction for 2013. 2011 efile The Instructions for Form 1040, Form 1040A, and Form 1040NR include similar worksheets that you can use instead of the worksheet in this publication. 2011 efile If you or your spouse is covered by an employer retirement plan, and you received any social security benefits, see Social Security Recipients , earlier. 2011 efile Note. 2011 efile If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. 2011 efile Worksheet 1-1. 2011 efile Figuring Your Modified AGI Use this worksheet to figure your modified AGI for traditional IRA purposes. 2011 efile 1. 2011 efile Enter your adjusted gross income (AGI) from Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37, figured without taking into account the amount from Form 1040, line 32; Form 1040A, line 17; or Form 1040NR, line 32 1. 2011 efile   2. 2011 efile Enter any student loan interest deduction from Form 1040, line 33; Form 1040A, line 18; or Form 1040NR, line 33 2. 2011 efile   3. 2011 efile Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 3. 2011 efile   4. 2011 efile Enter any domestic production activities deduction from Form 1040, line 35, or Form 1040NR, line 34 4. 2011 efile   5. 2011 efile Enter any foreign earned income exclusion and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 5. 2011 efile   6. 2011 efile Enter any foreign housing deduction from Form 2555, line 50 6. 2011 efile   7. 2011 efile Enter any excludable savings bond interest from Form 8815, line 14 7. 2011 efile   8. 2011 efile Enter any excluded employer-provided adoption benefits from Form 8839, line 28 8. 2011 efile   9. 2011 efile Add lines 1 through 8. 2011 efile This is your Modified AGI for traditional IRA purposes 9. 2011 efile   Reporting Deductible Contributions If you file Form 1040, enter your IRA deduction on line 32 of that form. 2011 efile If you file Form 1040A, enter your IRA deduction on line 17 of that form. 2011 efile If you file Form 1040NR, enter your IRA deduction on line 32 of that form. 2011 efile You cannot deduct IRA contributions on Form 1040EZ or Form 1040NR-EZ. 2011 efile Self-employed. 2011 efile   If you are self-employed (a sole proprietor or partner) and have a SIMPLE IRA, enter your deduction for allowable plan contributions on Form 1040, line 28. 2011 efile If you file Form 1040NR, enter your deduction on line 28 of that form. 2011 efile Nondeductible Contributions Although your deduction for IRA contributions may be reduced or eliminated, contributions can be made to your IRA of up to the general limit or, if it applies, the Kay Bailey Hutchison Spousal IRA limit. 2011 efile The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. 2011 efile Example. 2011 efile Tony is 29 years old and single. 2011 efile In 2013, he was covered by a retirement plan at work. 2011 efile His salary is $62,000. 2011 efile His modified AGI is $70,000. 2011 efile Tony makes a $5,500 IRA contribution for 2013. 2011 efile Because he was covered by a retirement plan and his modified AGI is above $69,000, he cannot deduct his $5,500 IRA contribution. 2011 efile He must designate this contribution as a nondeductible contribution by reporting it on Form 8606. 2011 efile Repayment of reservist distributions. 2011 efile   Nondeductible contributions may include repayments of qualified reservist distributions. 2011 efile For more information, see Qualified reservist repayments under How Much Can Be Contributed, earlier. 2011 efile Form 8606. 2011 efile   To designate contributions as nondeductible, you must file Form 8606. 2011 efile (See the filled-in Forms 8606 in this chapter. 2011 efile )   You do not have to designate a contribution as nondeductible until you file your tax return. 2011 efile When you file, you can even designate otherwise deductible contributions as nondeductible contributions. 2011 efile   You must file Form 8606 to report nondeductible contributions even if you do not have to file a tax return for the year. 2011 efile    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. 2011 efile In those situations, a Form 8606 is completed for the year you take a distribution from that IRA. 2011 efile See Form 8606 under Distributions Fully or Partly Taxable, later. 2011 efile Failure to report nondeductible contributions. 2011 efile   If you do not report nondeductible contributions, all of the contributions to your traditional IRA will be treated like deductible contributions when withdrawn. 2011 efile All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. 2011 efile Penalty for overstatement. 2011 efile   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. 2011 efile Penalty for failure to file Form 8606. 2011 efile   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. 2011 efile Tax on earnings on nondeductible contributions. 2011 efile   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. 2011 efile Cost basis. 2011 efile   You will have a cost basis in your traditional IRA if you made any nondeductible contributions. 2011 efile Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions. 2011 efile    Commonly, distributions from your traditional IRAs will include both taxable and nontaxable (cost basis) amounts. 2011 efile See Are Distributions Taxable, later, for more information. 2011 efile Recordkeeping. 2011 efile There is a recordkeeping worksheet, Appendix A. 2011 efile Summary Record of Traditional IRA(s) for 2013 , that you can use to keep a record of deductible and nondeductible IRA contributions. 2011 efile Examples — Worksheet for Reduced IRA Deduction for 2013 The following examples illustrate the use of Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013. 2011 efile Example 1. 2011 efile For 2013, Tom and Betty file a joint return on Form 1040. 2011 efile They are both 39 years old. 2011 efile They are both employed and Tom is covered by his employer's retirement plan. 2011 efile Tom's salary is $59,000 and Betty's is $32,555. 2011 efile They each have a traditional IRA and their combined modified AGI, which includes $5,000 interest and dividend income, is $96,555. 2011 efile Because their modified AGI is between $95,000 and $115,000 and Tom is covered by an employer plan, Tom is subject to the deduction phaseout discussed earlier under Limit if Covered by Employer Plan . 2011 efile For 2013, Tom contributed $5,500 to his IRA and Betty contributed $5,500 to hers. 2011 efile Even though they file a joint return, they must use separate worksheets to figure the IRA deduction for each of them. 2011 efile Tom can take a deduction of only $5,080. 2011 efile He can choose to treat the $5,080 as either deductible or nondeductible contributions. 2011 efile He can either leave the $420 ($5,500 − $5,080) of nondeductible contributions in his IRA or withdraw them by April 15, 2014. 2011 efile He decides to treat the $5,080 as deductible contributions and leave the $420 of nondeductible contributions in his IRA. 2011 efile Using Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, Tom figures his deductible and nondeductible amounts as shown on Worksheet 1-2. 2011 efile Figuring Your Reduced IRA Deduction for 2013—Example 1 Illustrated. 2011 efile Betty figures her IRA deduction as follows. 2011 efile Betty can treat all or part of her contributions as either deductible or nondeductible. 2011 efile This is because her $5,500 contribution for 2013 is not subject to the deduction phaseout discussed earlier under Limit if Covered by Employer Plan . 2011 efile She does not need to use Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, because their modified AGI is not within the phaseout range that applies. 2011 efile Betty decides to treat her $5,500 IRA contributions as deductible. 2011 efile The IRA deductions of $5,080 and $5,500 on the joint return for Tom and Betty total $10,580. 2011 efile Example 2. 2011 efile For 2013, Ed and Sue file a joint return on Form 1040. 2011 efile They are both 39 years old. 2011 efile Ed is covered by his employer's retirement plan. 2011 efile Ed's salary is $45,000. 2011 efile Sue had no compensation for the year and did not contribute to an IRA. 2011 efile Sue is not covered by an employer plan. 2011 efile Ed contributed $5,500 to his traditional IRA and $5,500 to a traditional IRA for Sue (a Kay Bailey Hutchison Spousal IRA). 2011 efile Their combined modified AGI, which includes $2,000 interest and dividend income and a large capital gain from the sale of stock, is $180,555. 2011 efile Because the combined modified AGI is $115,000 or more, Ed cannot deduct any of the contribution to his traditional IRA. 2011 efile He can either leave the $5,500 of nondeductible contributions in his IRA or withdraw them by April 15, 2014. 2011 efile Sue figures her IRA deduction as shown on Worksheet 1-2. 2011 efile Figuring Your Reduced IRA Deduction for 2013—Example 2 Illustrated. 2011 efile Worksheet 1-2. 2011 efile Figuring Your Reduced IRA Deduction for 2013 (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. 2011 efile ) Note. 2011 efile If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. 2011 efile IF you . 2011 efile . 2011 efile . 2011 efile AND your  filing status is . 2011 efile . 2011 efile . 2011 efile AND your modified AGI is over . 2011 efile . 2011 efile . 2011 efile THEN enter on  line 1 below . 2011 efile . 2011 efile . 2011 efile       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. 2011 efile Enter applicable amount from table above 1. 2011 efile   2. 2011 efile Enter your modified AGI (that of both spouses, if married filing jointly) 2. 2011 efile     Note. 2011 efile If line 2 is equal to or more than the amount on line 1, stop here. 2011 efile  Your IRA contributions are not deductible. 2011 efile See Nondeductible Contributions , earlier. 2011 efile     3. 2011 efile Subtract line 2 from line 1. 2011 efile If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. 2011 efile You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. 2011 efile   4. 2011 efile Multiply line 3 by the percentage below that applies to you. 2011 efile If the result is not a multiple of $10, round it to the next highest multiple of $10. 2011 efile (For example, $611. 2011 efile 40 is rounded to $620. 2011 efile ) However, if the result is less than $200, enter $200. 2011 efile         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. 2011 efile 5% (. 2011 efile 275) (by 32. 2011 efile 5% (. 2011 efile 325) if you are age 50 or older). 2011 efile All others, multiply line 3 by 55% (. 2011 efile 55) (by 65% (. 2011 efile 65) if you are age 50 or older). 2011 efile 4. 2011 efile   5. 2011 efile Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). 2011 efile If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. 2011 efile If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. 2011 efile   6. 2011 efile Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). 2011 efile If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. 2011 efile 6. 2011 efile   7. 2011 efile IRA deduction. 2011 efile Compare lines 4, 5, and 6. 2011 efile Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. 2011 efile If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. 2011 efile   8. 2011 efile Nondeductible contribution. 2011 efile Subtract line 7 from line 5 or 6, whichever is smaller. 2011 efile  Enter the result here and on line 1 of your Form 8606 8. 2011 efile   Worksheet 1-2. 2011 efile Figuring Your Reduced IRA Deduction for 2013—Example 1 Illustrated (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. 2011 efile ) Note. 2011 efile If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. 2011 efile IF you . 2011 efile . 2011 efile . 2011 efile AND your  filing status is . 2011 efile . 2011 efile . 2011 efile AND your modified AGI is over . 2011 efile . 2011 efile . 2011 efile THEN enter on  line 1 below . 2011 efile . 2011 efile . 2011 efile       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. 2011 efile Enter applicable amount from table above 1. 2011 efile 115,000 2. 2011 efile Enter your modified AGI (that of both spouses, if married filing jointly) 2. 2011 efile 96,555   Note. 2011 efile If line 2 is equal to or more than the amount on line 1, stop here. 2011 efile  Your IRA contributions are not deductible. 2011 efile See Nondeductible Contributions , earlier. 2011 efile     3. 2011 efile Subtract line 2 from line 1. 2011 efile If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. 2011 efile You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. 2011 efile 18,445 4. 2011 efile Multiply line 3 by the percentage below that applies to you. 2011 efile If the result is not a multiple of $10, round it to the next highest multiple of $10. 2011 efile (For example, $611. 2011 efile 40 is rounded to $620. 2011 efile ) However, if the result is less than $200, enter $200. 2011 efile         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. 2011 efile 5% (. 2011 efile 275) (by 32. 2011 efile 5% (. 2011 efile 325) if you are age 50 or older). 2011 efile All others, multiply line 3 by 55% (. 2011 efile 55) (by 65% (. 2011 efile 65) if you are age 50 or older). 2011 efile 4. 2011 efile 5,080 5. 2011 efile Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). 2011 efile If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. 2011 efile If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. 2011 efile 59,000 6. 2011 efile Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). 2011 efile If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. 2011 efile 6. 2011 efile 5,500 7. 2011 efile IRA deduction. 2011 efile Compare lines 4, 5, and 6. 2011 efile Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. 2011 efile If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. 2011 efile 5,080 8. 2011 efile Nondeductible contribution. 2011 efile Subtract line 7 from line 5 or 6, whichever is smaller. 2011 efile  Enter the result here and on line 1 of your Form 8606 8. 2011 efile 420 Worksheet 1-2. 2011 efile Figuring Your Reduced IRA Deduction for 2013—Example 2 Illustrated (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. 2011 efile ) Note. 2011 efile If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. 2011 efile IF you . 2011 efile . 2011 efile . 2011 efile AND your  filing status is . 2011 efile . 2011 efile . 2011 efile AND your modified AGI is over . 2011 efile . 2011 efile . 2011 efile THEN enter on  line 1 below . 2011 efile . 2011 efile . 2011 efile       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. 2011 efile Enter applicable amount from table above 1. 2011 efile 188,000 2. 2011 efile Enter your modified AGI (that of both spouses, if married filing jointly) 2. 2011 efile 180,555   Note. 2011 efile If line 2 is equal to or more than the amount on line 1, stop here. 2011 efile  Your IRA contributions are not deductible. 2011 efile See Nondeductible Contributions , earlier. 2011 efile     3. 2011 efile Subtract line 2 from line 1. 2011 efile If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. 2011 efile You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. 2011 efile 7,445 4. 2011 efile Multiply line 3 by the percentage below that applies to you. 2011 efile If the result is not a multiple of $10, round it to the next highest multiple of $10. 2011 efile (For example, $611. 2011 efile 40 is rounded to $620. 2011 efile ) However, if the result is less than $200, enter $200. 2011 efile         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. 2011 efile 5% (. 2011 efile 275) (by 32. 2011 efile 5% (. 2011 efile 325) if you are age 50 or older). 2011 efile All others, multiply line 3 by 55% (. 2011 efile 55) (by 65% (. 2011 efile 65) if you are age 50 or older). 2011 efile 4. 2011 efile 4,100 5. 2011 efile Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). 2011 efile If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. 2011 efile If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. 2011 efile 39,500 6. 2011 efile Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). 2011 efile If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. 2011 efile 6. 2011 efile 5,500 7. 2011 efile IRA deduction. 2011 efile Compare lines 4, 5, and 6. 2011 efile Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. 2011 efile If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. 2011 efile 4,100 8. 2011 efile Nondeductible contribution. 2011 efile Subtract line 7 from line 5 or 6, whichever is smaller. 2011 efile  Enter the result here and on line 1 of your Form 8606 8. 2011 efile 1,400 What if You Inherit an IRA? If you inherit a traditional IRA, you are called a beneficiary. 2011 efile A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. 2011 efile Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive. 2011 efile Inherited from spouse. 2011 efile   If you inherit a traditional IRA from your spouse, you generally have the following three choices. 2011 efile You can: Treat it as your own IRA by designating yourself as the account owner. 2011 efile Treat it as your own by rolling it over into your IRA, or to the extent it is taxable, into a: Qualified employer plan, Qualified employee annuity plan (section 403(a) plan), Tax-sheltered annuity plan (s
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The 2011 Efile

2011 efile 36. 2011 efile   Earned Income Credit (EIC) Table of Contents What's New Reminders Introduction Useful Items - You may want to see: Do You Qualify for the Credit?If Improper Claim Made in Prior Year Part A. 2011 efile Rules for EveryoneRule 1. 2011 efile Your AGI Must Be Less Than: Rule 2. 2011 efile You Must Have a Valid Social Security Number (SSN) Rule 3. 2011 efile Your Filing Status Cannot Be Married Filing Separately Rule 4. 2011 efile You Must Be a U. 2011 efile S. 2011 efile Citizen or Resident Alien All Year Rule 5. 2011 efile You Cannot File Form 2555 or Form 2555-EZ Rule 6. 2011 efile Your Investment Income Must Be $3,300 or Less Rule 7. 2011 efile You Must Have Earned Income Part B. 2011 efile Rules If You Have a Qualifying ChildRule 8. 2011 efile Your Child Must Meet the Relationship, Age, Residency, and Joint Return Tests Rule 9. 2011 efile Your Qualifying Child Cannot Be Used By More Than One Person To Claim the EIC Rule 10. 2011 efile You Cannot Be a Qualifying Child of Another Taxpayer Part C. 2011 efile Rules If You Do Not Have a Qualifying ChildRule 11. 2011 efile You Must Be at Least Age 25 but Under Age 65 Rule 12. 2011 efile You Cannot Be the Dependent of Another Person Rule 13. 2011 efile You Cannot Be a Qualifying Child of Another Taxpayer Rule 14. 2011 efile You Must Have Lived in the United States More Than Half of the Year Part D. 2011 efile Figuring and Claiming the EICRule 15. 2011 efile Your Earned Income Must Be Less Than: IRS Will Figure the EIC for You How To Figure the EIC Yourself ExamplesExample 1. 2011 efile John and Janet Smith (Form 1040A) Example 2. 2011 efile Kelly Green (Form 1040EZ) What's New Earned income amount is more. 2011 efile  The maximum amount of income you can earn and still get the credit has increased. 2011 efile You may be able to take the credit if: You have three or more qualifying children and you earned less than $46,227 ($51,567 if married filing jointly), You have two qualifying children and you earned less than $43,038 ($48,378 if married filing jointly), You have one qualifying child and you earned less than $37,870 ($43,210 if married filing jointly), or You do not have a qualifying child and you earned less than $14,340 ($19,680 if married filing jointly). 2011 efile Your adjusted gross income also must be less than the amount in the above list that applies to you. 2011 efile For details, see Rules 1 and 15. 2011 efile Investment income amount is more. 2011 efile  The maximum amount of investment income you can have and still get the credit has increased to $3,300. 2011 efile See Rule 6. 2011 efile Reminders Increased EIC on certain joint returns. 2011 efile  A married person filing a joint return may get more EIC than someone with the same income but a different filing status. 2011 efile As a result, the EIC table has different columns for married persons filing jointly than for everyone else. 2011 efile When you look up your EIC in the EIC Table, be sure to use the correct column for your filing status and the number of children you have. 2011 efile Online help. 2011 efile  You can use the EITC Assistant at www. 2011 efile irs. 2011 efile gov/eitc to find out if you are eligible for the credit. 2011 efile The EITC Assistant is available in English and Spanish. 2011 efile EIC questioned by IRS. 2011 efile  The IRS may ask you to provide documents to prove you are entitled to claim the EIC. 2011 efile We will tell you what documents to send us. 2011 efile These may include: birth certificates, school records, medical records, etc. 2011 efile The process of establishing your eligibility will delay your refund. 2011 efile Introduction The earned income credit (EIC) is a tax credit for certain people who work and have less than $51,567 of earned income. 2011 efile A tax credit usually means more money in your pocket. 2011 efile It reduces the amount of tax you owe. 2011 efile The EIC may also give you a refund. 2011 efile How do you get the earned income credit?   To claim the EIC, you must: Qualify by meeting certain rules, and File a tax return, even if you: Do not owe any tax, Did not earn enough money to file a return, or Did not have income taxes withheld from your pay. 2011 efile When you complete your return, you can figure your EIC by using a worksheet in the instructions for Form 1040, Form 1040A, or Form 1040EZ. 2011 efile Or, if you prefer, you can let the IRS figure the credit for you. 2011 efile How will this chapter help you?   This chapter will explain the following. 2011 efile The rules you must meet to qualify for the EIC. 2011 efile How to figure the EIC. 2011 efile Useful Items - You may want to see: Publication 596 Earned Income Credit (EIC) Form (and Instructions) Schedule EIC Earned Income Credit (Qualifying Child Information) 8862 Information To Claim Earned Income Credit After Disallowance Do You Qualify for the Credit? To qualify to claim the EIC, you must first meet all of the rules explained in Part A, Rules for Everyone . 2011 efile Then you must meet the rules in Part B, Rules If You Have a Qualifying Child , or Part C, Rules If You Do Not Have a Qualifying Child . 2011 efile There is one final rule you must meet in Part D, Figuring and Claiming the EIC . 2011 efile You qualify for the credit if you meet all the rules in each part that applies to you. 2011 efile If you have a qualifying child, the rules in Parts A, B, and D apply to you. 2011 efile If you do not have a qualifying child, the rules in Parts A, C, and D apply to you. 2011 efile Table 36-1, Earned Income Credit in a Nutshell. 2011 efile   Use Table 36–1 as a guide to Parts A, B, C, and D. 2011 efile The table is a summary of all the rules in each part. 2011 efile Do you have a qualifying child?   You have a qualifying child only if you have a child who meets the four tests described in Rule 8 and illustrated in Figure 36–1. 2011 efile If Improper Claim Made in Prior Year If your EIC for any year after 1996 was denied or reduced for any reason other than a math or clerical error, you must attach a completed Form 8862 to your next tax return to claim the EIC. 2011 efile You must also qualify to claim the EIC by meeting all the rules described in this chapter. 2011 efile However, if your EIC was denied or reduced as a result of a math or clerical error, do not attach Form 8862 to your next tax return. 2011 efile For example, if your arithmetic is incorrect, the IRS can correct it. 2011 efile If you do not provide a correct social security number, the IRS can deny the EIC. 2011 efile These kinds of errors are called math or clerical errors. 2011 efile If your EIC for any year after 1996 was denied and it was determined that your error was due to reckless or intentional disregard of the EIC rules, then you cannot claim the EIC for the next 2 years. 2011 efile If your error was due to fraud, then you cannot claim the EIC for the next 10 years. 2011 efile More information. 2011 efile   See chapter 5 in Publication 596 for more detailed information about the disallowance period and Form 8862. 2011 efile Part A. 2011 efile Rules for Everyone This part of the chapter discusses Rules 1 through 7. 2011 efile You must meet all seven rules to qualify for the earned income credit. 2011 efile If you do not meet all seven rules, you cannot get the credit and you do not need to read the rest of the chapter. 2011 efile If you meet all seven rules in this part, then read either Part B or Part C (whichever applies) for more rules you must meet. 2011 efile Rule 1. 2011 efile Your AGI Must Be Less Than: $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children, $43,038 ($48,378 for married filing jointly) if you have two qualifying children, $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. 2011 efile Adjusted gross income (AGI). 2011 efile   AGI is the amount on line 38 (Form 1040), line 22 (Form 1040A), or line 4 (Form 1040EZ). 2011 efile If your AGI is equal to or more than the applicable limit listed above, you cannot claim the EIC. 2011 efile Example. 2011 efile Your AGI is $38,550, you are single, and you have one qualifying child. 2011 efile You cannot claim the EIC because your AGI is not less than $37,870. 2011 efile However, if your filing status was married filing jointly, you might be able to claim the EIC because your AGI is less than $43,210. 2011 efile Community property. 2011 efile   If you are married, but qualify to file as head of household under special rules for married taxpayers living apart (see Rule 3 ), and live in a state that has community property laws, your AGI includes that portion of both your and your spouse's wages that you are required to include in gross income. 2011 efile This is different from the community property rules that apply under Rule 7 . 2011 efile Rule 2. 2011 efile You Must Have a Valid Social Security Number (SSN) To claim the EIC, you (and your spouse, if filing a joint return) must have a valid SSN issued by the Social Security Administration (SSA). 2011 efile Any qualifying child listed on Schedule EIC also must have a valid SSN. 2011 efile (See Rule 8 if you have a qualifying child. 2011 efile ) If your social security card (or your spouse's, if filing a joint return) says “Not valid for employment” and your SSN was issued so that you (or your spouse) could get a federally funded benefit, you cannot get the EIC. 2011 efile An example of a federally funded benefit is Medicaid. 2011 efile If you have a card with the legend “Not valid for employment” and your immigration status has changed so that you are now a U. 2011 efile S. 2011 efile citizen or permanent resident, ask the SSA for a new social security card without the legend. 2011 efile U. 2011 efile S. 2011 efile citizen. 2011 efile   If you were a U. 2011 efile S. 2011 efile citizen when you received your SSN, you have a valid SSN. 2011 efile Valid for work only with INS or DHS authorization. 2011 efile   If your social security card reads “Valid for work only with INS authorization” or “Valid for work only with DHS authorization,” you have a valid SSN, but only if that authorization is still valid. 2011 efile SSN missing or incorrect. 2011 efile   If an SSN for you or your spouse is missing from your tax return or is incorrect, you may not get the EIC. 2011 efile Other taxpayer identification number. 2011 efile   You cannot get the EIC if, instead of an SSN, you (or your spouse, if filing a joint return) have an individual taxpayer identification number (ITIN). 2011 efile ITINs are issued by the Internal Revenue Service to noncitizens who cannot get an SSN. 2011 efile No SSN. 2011 efile   If you do not have a valid SSN, put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). 2011 efile You cannot claim the EIC. 2011 efile Getting an SSN. 2011 efile   If you (or your spouse, if filing a joint return) do not have an SSN, you can apply for one by filing Form SS-5, Application for a Social Security Card, with the SSA. 2011 efile You can get Form SS-5 online at www. 2011 efile socialsecurity. 2011 efile gov, from your local SSA office, or by calling the SSA at 1-800-772-1213. 2011 efile Filing deadline approaching and still no SSN. 2011 efile   If the filing deadline is approaching and you still do not have an SSN, you have two choices. 2011 efile Request an automatic 6-month extension of time to file your return. 2011 efile You can get this extension by filing Form 4868, Application for Automatic Extension of Time to File U. 2011 efile S. 2011 efile Individual Income Tax Return. 2011 efile For more information, see chapter 1 . 2011 efile File the return on time without claiming the EIC. 2011 efile After receiving the SSN, file an amended return (Form 1040X, Amended U. 2011 efile S. 2011 efile Individual Income Tax Return) claiming the EIC. 2011 efile Attach a filled-in Schedule EIC if you have a qualifying child. 2011 efile Table 36-1. 2011 efile Earned Income Credit in a Nutshell First, you must meet all the rules in this column. 2011 efile Second, you must meet all the rules in one of these columns, whichever applies. 2011 efile Third, you must meet the rule in this column. 2011 efile Part A. 2011 efile  Rules for Everyone Part B. 2011 efile  Rules If You Have a Qualifying Child Part C. 2011 efile  Rules If You Do Not Have a Qualifying Child Part D. 2011 efile  Figuring and Claiming the EIC 1. 2011 efile Your adjusted gross income (AGI) must be less than: • $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children,  • $43,038 ($48,378 for married filing jointly) if you have two qualifying children,  • $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or   • $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. 2011 efile 2. 2011 efile You must have a valid social security number. 2011 efile  3. 2011 efile Your filing status cannot be “Married filing separately. 2011 efile ” 4. 2011 efile You must be a U. 2011 efile S. 2011 efile citizen or resident alien all year. 2011 efile  5. 2011 efile You cannot file Form 2555 or Form 2555-EZ (relating to foreign earned income). 2011 efile  6. 2011 efile Your investment income must be $3,300 or less. 2011 efile  7. 2011 efile You must have earned income. 2011 efile 8. 2011 efile Your child must meet the relationship, age, residency, and joint return tests. 2011 efile  9. 2011 efile Your qualifying child cannot be used by more than one person to claim the EIC. 2011 efile  10. 2011 efile You cannot be a qualifying child of another person. 2011 efile 11. 2011 efile You must be at least age 25 but under age 65. 2011 efile  12. 2011 efile You cannot be the dependent of another person. 2011 efile  13. 2011 efile You cannot be a qualifying child of another person. 2011 efile  14. 2011 efile You must have lived in the United States more than half of the year. 2011 efile 15. 2011 efile Your earned income must be less than: • $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children,  • $43,038 ($48,378 for married filing jointly) if you have two qualifying children,  • $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or   • $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. 2011 efile Rule 3. 2011 efile Your Filing Status Cannot Be Married Filing Separately If you are married, you usually must file a joint return to claim the EIC. 2011 efile Your filing status cannot be “Married filing separately. 2011 efile ” Spouse did not live with you. 2011 efile   If you are married and your spouse did not live in your home at any time during the last 6 months of the year, you may be able to file as head of household, instead of married filing separately. 2011 efile In that case, you may be able to claim the EIC. 2011 efile For detailed information about filing as head of household, see chapter 2 . 2011 efile Rule 4. 2011 efile You Must Be a U. 2011 efile S. 2011 efile Citizen or Resident Alien All Year If you (or your spouse, if married) were a nonresident alien for any part of the year, you cannot claim the earned income credit unless your filing status is married filing jointly. 2011 efile You can use that filing status only if one spouse is a U. 2011 efile S. 2011 efile citizen or resident alien and you choose to treat the nonresident spouse as a U. 2011 efile S. 2011 efile resident. 2011 efile If you make this choice, you and your spouse are taxed on your worldwide income. 2011 efile If you (or your spouse, if married) were a nonresident alien for any part of the year and your filing status is not married filing jointly, enter “No” on the dotted line next to line 64a (Form 1040) or in the space to the left of line 38a (Form 1040A). 2011 efile If you need more information on making this choice, get Publication 519, U. 2011 efile S. 2011 efile Tax Guide for Aliens. 2011 efile Rule 5. 2011 efile You Cannot File Form 2555 or Form 2555-EZ You cannot claim the earned income credit if you file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. 2011 efile You file these forms to exclude income earned in foreign countries from your gross income, or to deduct or exclude a foreign housing amount. 2011 efile U. 2011 efile S. 2011 efile possessions are not foreign countries. 2011 efile See Publication 54, Tax Guide for U. 2011 efile S. 2011 efile Citizens and Resident Aliens Abroad, for more detailed information. 2011 efile Rule 6. 2011 efile Your Investment Income Must Be $3,300 or Less You cannot claim the earned income credit unless your investment income is $3,300 or less. 2011 efile If your investment income is more than $3,300, you cannot claim the credit. 2011 efile For most people, investment income is the total of the following amounts. 2011 efile Taxable interest (line 8a of Form 1040 or 1040A). 2011 efile Tax-exempt interest (line 8b of Form 1040 or 1040A). 2011 efile Dividend income (line 9a of Form 1040 or 1040A). 2011 efile Capital gain net income (line 13 of Form 1040, if more than zero, or line 10 of Form 1040A). 2011 efile If you file Form 1040EZ, your investment income is the total of the amount of line 2 and the amount of any tax-exempt interest you wrote to the right of the words “Form 1040EZ” on line 2. 2011 efile However, see Rule 6 in chapter 1 of Publication 596 if: You are filing Schedule E (Form 1040), Form 4797, or Form 8814, or You are reporting income from the rental of personal property on Form 1040, line 21. 2011 efile Rule 7. 2011 efile You Must Have Earned Income This credit is called the “earned income” credit because, to qualify, you must work and have earned income. 2011 efile If you are married and file a joint return, you meet this rule if at least one spouse works and has earned income. 2011 efile If you are an employee, earned income includes all the taxable income you get from your employer. 2011 efile If you are self-employed or a statutory employee, you will figure your earned income on EIC Worksheet B in the instructions for Form 1040. 2011 efile Earned Income Earned income includes all of the following types of income. 2011 efile Wages, salaries, tips, and other taxable employee pay. 2011 efile Employee pay is earned income only if it is taxable. 2011 efile Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. 2011 efile But there is an exception for nontaxable combat pay, which you can choose to include in earned income, as explained below. 2011 efile Net earnings from self-employment. 2011 efile Gross income received as a statutory employee. 2011 efile Wages, salaries, and tips. 2011 efile   Wages, salaries, and tips you receive for working are reported to you on Form W-2, in box 1. 2011 efile You should report these on line 1 (Form 1040EZ) or line 7 (Forms 1040A and 1040). 2011 efile Nontaxable combat pay election. 2011 efile   You can elect to include your nontaxable combat pay in earned income for the earned income credit. 2011 efile Electing to include nontaxable combat pay in earned income may increase or decrease your EIC. 2011 efile Figure the credit with and without your nontaxable combat pay before making the election. 2011 efile   If you make the election, you must include in earned income all nontaxable combat pay you received. 2011 efile If you are filing a joint return and both you and your spouse received nontaxable combat pay, you can each make your own election. 2011 efile In other words, if one of you makes the election, the other one can also make it but does not have to. 2011 efile   The amount of your nontaxable combat pay should be shown in box 12 of your Form W-2 with code “Q. 2011 efile ” Self-employed persons and statutory employees. 2011 efile   If you are self-employed or received income as a statutory employee, you must use the Form 1040 instructions to see if you qualify to get the EIC. 2011 efile Approved Form 4361 or Form 4029 This section is for persons who have an approved: Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners, or Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits. 2011 efile Each approved form exempts certain income from social security taxes. 2011 efile Each form is discussed here in terms of what is or is not earned income for the EIC. 2011 efile Form 4361. 2011 efile   Whether or not you have an approved Form 4361, amounts you received for performing ministerial duties as an employee count as earned income. 2011 efile This includes wages, salaries, tips, and other taxable employee compensation. 2011 efile A nontaxable housing allowance or the nontaxable rental value of a home is not earned income. 2011 efile Also, amounts you received for performing ministerial duties, but not as an employee, do not count as earned income. 2011 efile Examples include fees for performing marriages and honoraria for delivering speeches. 2011 efile Form 4029. 2011 efile   Whether or not you have an approved Form 4029, all wages, salaries, tips, and other taxable employee compensation count as earned income. 2011 efile However, amounts you received as a self-employed individual do not count as earned income. 2011 efile Also, in figuring earned income, do not subtract losses on Schedule C, C-EZ, or F from wages on line 7 of Form 1040. 2011 efile Disability Benefits If you retired on disability, taxable benefits you receive under your employer's disability retirement plan are considered earned income until you reach minimum retirement age. 2011 efile Minimum retirement age generally is the earliest age at which you could have received a pension or annuity if you were not disabled. 2011 efile You must report your taxable disability payments on line 7 of either Form 1040 or Form 1040A until you reach minimum retirement age. 2011 efile Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension and are not considered earned income. 2011 efile Report taxable pension payments on Form 1040, lines 16a and 16b (or Form 1040A, lines 12a and 12b). 2011 efile Disability insurance payments. 2011 efile   Payments you received from a disability insurance policy that you paid the premiums for are not earned income. 2011 efile It does not matter whether you have reached minimum retirement age. 2011 efile If this policy is through your employer, the amount may be shown in box 12 of your Form W-2 with code “J. 2011 efile ” Income That Is Not Earned Income Examples of items that are not earned income include interest and dividends, pensions and annuities, social security and railroad retirement benefits (including disability benefits), alimony and child support, welfare benefits, workers' compensation benefits, unemployment compensation (insurance), nontaxable foster care payments, and veterans' benefits, including VA rehabilitation payments. 2011 efile Do not include any of these items in your earned income. 2011 efile Earnings while an inmate. 2011 efile   Amounts received for work performed while an inmate in a penal institution are not earned income when figuring the earned income credit. 2011 efile This includes amounts for work performed while in a work release program or while in a halfway house. 2011 efile Workfare payments. 2011 efile   Nontaxable workfare payments are not earned income for the EIC. 2011 efile These are cash payments certain people receive from a state or local agency that administers public assistance programs funded under the federal Temporary Assistance for Needy Families (TANF) program in return for certain work activities such as (1) work experience activities (including remodeling or repairing public housing) if private sector employment is not available, or (2) community service program activities. 2011 efile Community property. 2011 efile   If you are married, but qualify to file as head of household under special rules for married taxpayers living apart (see Rule 3 ), and live in a state that has community property laws, your earned income for the EIC does not include any amount earned by your spouse that is treated as belonging to you under those laws. 2011 efile That amount is not earned income for the EIC, even though you must include it in your gross income on your income tax return. 2011 efile Your earned income includes the entire amount you earned, even if part of it is treated as belonging to your spouse under your state's community property laws. 2011 efile Nevada, Washington, and California domestic partners. 2011 efile   If you are a registered domestic partner in Nevada, Washington, or California, the same rules apply. 2011 efile Your earned income for the EIC does not include any amount earned by your partner. 2011 efile Your earned income includes the entire amount you earned. 2011 efile For details, see Publication 555. 2011 efile Conservation Reserve Program (CRP) payments. 2011 efile   If you were receiving social security retirement benefits or social security disability benefits at the time you received any CRP payments, your CRP payments are not earned income for the EIC. 2011 efile Nontaxable military pay. 2011 efile   Nontaxable pay for members of the Armed Forces is not considered earned income for the EIC. 2011 efile Examples of nontaxable military pay are combat pay, the Basic Allowance for Housing (BAH), and the Basic Allowance for Subsistence (BAS). 2011 efile See Publication 3, Armed Forces' Tax Guide, for more information. 2011 efile    Combat pay. 2011 efile You can elect to include your nontaxable combat pay in earned income for the EIC. 2011 efile See Nontaxable combat pay election, earlier. 2011 efile Part B. 2011 efile Rules If You Have a Qualifying Child If you have met all of the rules in Part A , read Part B to see if you have a qualifying child. 2011 efile Part B discusses Rules 8 through 10. 2011 efile You must meet all three of these rules, in addition to the rules in Parts A and D , to qualify for the earned income credit with a qualifying child. 2011 efile You must file Form 1040 or Form 1040A to claim the EIC with a qualifying child. 2011 efile (You cannot file Form 1040EZ. 2011 efile ) You also must complete Schedule EIC and attach it to your return. 2011 efile If you meet all the rules in Part A and this part, read Part D to find out what to do next. 2011 efile If you do not meet Rule 8, you do not have a qualifying child. 2011 efile Read Part C to find out if you can get the earned income credit without a qualifying child. 2011 efile Rule 8. 2011 efile Your Child Must Meet the Relationship, Age, Residency, and Joint Return Tests Your child is a qualifying child if your child meets four tests. 2011 efile The four tests are: Relationship, Age, Residency, and Joint return. 2011 efile The four tests are illustrated in Figure 36–1. 2011 efile The paragraphs that follow contain more information about each test. 2011 efile Relationship Test To be your qualifying child, a child must be your: Son, daughter, stepchild, foster child, or a descendant of any of them (for example, your grandchild), or Brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them (for example, your niece or nephew). 2011 efile The following definitions clarify the relationship test. 2011 efile Adopted child. 2011 efile   An adopted child is always treated as your own child. 2011 efile The term “adopted child” includes a child who was lawfully placed with you for legal adoption. 2011 efile Foster child. 2011 efile   For the EIC, a person is your foster child if the child is placed with you by an authorized placement agency or by judgement, decree, or other order of any court of competent jurisdiction. 2011 efile An authorized placement agency includes a state or local government agency. 2011 efile It also includes a tax-exempt organization licensed by a state. 2011 efile In addition, it includes an Indian tribal government or an organization authorized by an Indian tribal government to place Indian children. 2011 efile Example. 2011 efile Debbie, who is 12 years old, was placed in your care 2 years ago by an authorized agency responsible for placing children in foster homes. 2011 efile Debbie is your foster child. 2011 efile Age Test Your child must be: Under age 19 at the end of 2013 and younger than you (or your spouse, if filing jointly), Under age 24 at the end of 2013, a student, and younger than you (or your spouse, if filing jointly), or Permanently and totally disabled at any time during 2013, regardless of age. 2011 efile    The following examples and definitions clarify the age test. 2011 efile Example 1—child not under age 19. 2011 efile Your son turned 19 on December 10. 2011 efile Unless he was permanently and totally disabled or a student, he is not a qualifying child because, at the end of the year, he was not under age 19. 2011 efile Example 2—child not younger than you or your spouse. 2011 efile Your 23-year-old brother, who is a full-time student and unmarried, lives with you and your spouse. 2011 efile He is not disabled. 2011 efile Both you and your spouse are 21 years old and you file a joint return. 2011 efile Your brother is not your qualifying child because he is not younger than you or your spouse. 2011 efile Example 3—child younger than your spouse but not younger than you. 2011 efile The facts are the same as in Example 2 except that your spouse is 25 years old. 2011 efile Because your brother is younger than your spouse, he is your qualifying child even though he is not younger than you. 2011 efile Student defined. 2011 efile   To qualify as a student, your child must be, during some part of each of any 5 calendar months during the calendar year: A full-time student at a school that has a regular teaching staff, course of study, and regular student body at the school, or A student taking a full-time, on-farm training course given by a school described in (1), or a state, county, or local government. 2011 efile The 5 calendar months need not be consecutive. 2011 efile   A full-time student is a student who is enrolled for the number of hours or courses the school considers to be full-time attendance. 2011 efile School defined. 2011 efile   A school can be an elementary school, junior or senior high school, college, university, or technical, trade, or mechanical school. 2011 efile However, on-the-job training courses, correspondence schools, and schools offering courses only through the Internet do not count as schools for the EIC. 2011 efile Vocational high school students. 2011 efile   Students who work in co-op jobs in private industry as a part of a school's regular course of classroom and practical training are considered full-time students. 2011 efile Permanently and totally disabled. 2011 efile   Your child is permanently and totally disabled if both of the following apply. 2011 efile He or she cannot engage in any substantial gainful activity because of a physical or mental condition. 2011 efile A doctor determines the condition has lasted or can be expected to last continuously for at least a year or can lead to death. 2011 efile Residency Test Your child must have lived with you in the United States for more than half of 2013. 2011 efile The following definitions clarify the residency test. 2011 efile United States. 2011 efile   This means the 50 states and the District of Columbia. 2011 efile It does not include Puerto Rico or U. 2011 efile S. 2011 efile possessions such as Guam. 2011 efile Homeless shelter. 2011 efile   Your home can be any location where you regularly live. 2011 efile You do not need a traditional home. 2011 efile For example, if your child lived with you for more than half the year in one or more homeless shelters, your child meets the residency test. 2011 efile Military personnel stationed outside the United States. 2011 efile    U. 2011 efile S. 2011 efile military personnel stationed outside the United States on extended active duty are considered to live in the United States during that duty period for purposes of the EIC. 2011 efile Figure 36-1. 2011 efile Tests for Qualifying Child Please click here for the text description of the image. 2011 efile Qualifying child Extended active duty. 2011 efile   Extended active duty means you are called or ordered to duty for an indefinite period or for a period of more than 90 days. 2011 efile Once you begin serving your extended active duty, you are still considered to have been on extended active duty even if you do not serve more than 90 days. 2011 efile Birth or death of a child. 2011 efile   A child who was born or died in 2013 is treated as having lived with you for more than half of 2013 if your home was the child's home for more than half the time he or she was alive in 2013. 2011 efile Temporary absences. 2011 efile   Count time that you or your child is away from home on a temporary absence due to a special circumstance as time the child lived with you. 2011 efile Examples of a special circumstance include illness, school attendance, business, vacation, military service, and detention in a juvenile facility. 2011 efile Kidnapped child. 2011 efile    A kidnapped child is treated as living with you for more than half of the year if the child lived with you for more than half the part of the year before the date of the kidnapping. 2011 efile The child must be presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or your child's family. 2011 efile This treatment applies for all years until the child is returned. 2011 efile However, the last year this treatment can apply is the earlier of: The year there is a determination that the child is dead, or The year the child would have reached age 18. 2011 efile   If your qualifying child has been kidnapped and meets these requirements, enter “KC,” instead of a number, on line 6 of Schedule EIC. 2011 efile Joint Return Test To meet this test, the child cannot file a joint return for the year. 2011 efile Exception. 2011 efile   An exception to the joint return test applies if your child and his or her spouse file a joint return only to claim a refund of income tax withheld or estimated tax paid. 2011 efile Example 1—child files joint return. 2011 efile You supported your 18-year-old daughter, and she lived with you all year while her husband was in the Armed Forces. 2011 efile He earned $25,000 for the year. 2011 efile The couple files a joint return. 2011 efile Because your daughter and her husband filed a joint return, she is not your qualifying child. 2011 efile Example 2—child files joint return only to claim a refund of withheld tax. 2011 efile Your 18-year-old son and his 17-year-old wife had $800 of wages from part-time jobs and no other income. 2011 efile They do not have a child. 2011 efile Neither is required to file a tax return. 2011 efile Taxes were taken out of their pay, so they filed a joint return only to get a refund of the withheld taxes. 2011 efile The exception to the joint return test applies, so your son may be your qualifying child if all the other tests are met. 2011 efile Example 3—child files joint return to claim American opportunity credit. 2011 efile The facts are the same as in Example 2 except no taxes were taken out of your son's pay. 2011 efile He and his wife are not required to file a tax return, but they file a joint return to claim an American opportunity credit of $124 and get a refund of that amount. 2011 efile Because claiming the American opportunity credit is their reason for filing the return, they are not filing it only to get a refund of income tax withheld or estimated tax paid. 2011 efile The exception to the joint return test does not apply, so your son is not your qualifying child. 2011 efile Married child. 2011 efile   Even if your child does not file a joint return, if your child was married at the end of the year, he or she cannot be your qualifying child unless: You can claim an exemption for the child, or The reason you cannot claim an exemption for the child is that you let the child's other parent claim the exemption under the Special rule for divorced or separated parents (or parents who live apart) , described later. 2011 efile Social security number. 2011 efile   The qualifying child must have a valid social security number (SSN) unless the child was born and died in 2013 and you attach to your return a copy of the child's birth certificate, death certificate, or hospital records showing a live birth. 2011 efile You cannot claim the EIC on the basis of a qualifying child if: The qualifying child's SSN is missing from your tax return or is incorrect, The qualifying child's social security card says “Not valid for employment” and was issued for use in getting a federally funded benefit, or Instead of an SSN, the qualifying child has: An individual taxpayer identification number (ITIN), which is issued to a noncitizen who cannot get an SSN, or An adoption taxpayer identification number (ATIN), which is issued to adopting parents who cannot get an SSN for the child being adopted until the adoption is final. 2011 efile   If you have more than one qualifying child and only one has a valid SSN, you can use only that child to claim the EIC. 2011 efile For more information about SSNs, see Rule 2 . 2011 efile Rule 9. 2011 efile Your Qualifying Child Cannot Be Used By More Than One Person To Claim the EIC Sometimes a child meets the tests to be a qualifying child of more than one person. 2011 efile However, only one of these persons can actually treat the child as a qualifying child. 2011 efile Only that person can use the child as a qualifying child to take all of the following tax benefits (provided the person is eligible for each benefit). 2011 efile The exemption for the child. 2011 efile The child tax credit. 2011 efile Head of household filing status. 2011 efile The credit for child and dependent care expenses. 2011 efile The exclusion for dependent care benefits. 2011 efile The EIC. 2011 efile The other person cannot take any of these benefits based on this qualifying child. 2011 efile In other words, you and the other person cannot agree to divide these tax benefits between you. 2011 efile The other person cannot take any of these tax benefits unless he or she has a different qualifying child. 2011 efile The tiebreaker rules explained next explain who, if anyone, can claim the EIC when more than one person has the same qualifying child. 2011 efile However, the tiebreaker rules do not apply if the other person is your spouse and you file a joint return. 2011 efile Tiebreaker rules. 2011 efile   To determine which person can treat the child as a qualifying child to claim the six tax benefits just listed, the following tiebreaker rules apply. 2011 efile If only one of the persons is the child's parent, the child is treated as the qualifying child of the parent. 2011 efile If the parents file a joint return together and can claim the child as a qualifying child, the child is treated as the qualifying child of the parents. 2011 efile If the parents do not file a joint return together but both parents claim the child as a qualifying child, the IRS will treat the child as the qualifying child of the parent with whom the child lived for the longer period of time during the year. 2011 efile If the child lived with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who had the higher adjusted gross income (AGI) for the year. 2011 efile If no parent can claim the child as a qualifying child, the child is treated as the qualifying child of the person who had the highest AGI for the year. 2011 efile If a parent can claim the child as a qualifying child but no parent does so claim the child, the child is treated as the qualifying child of the person who had the highest AGI for the year, but only if that person's AGI is higher than the highest AGI of any of the child's parents who can claim the child. 2011 efile If the child's parents file a joint return with each other, this rule can be applied by treating the parents' total AGI as divided evenly between them. 2011 efile See Example 8 . 2011 efile   Subject to these tiebreaker rules, you and the other person may be able to choose which of you claims the child as a qualifying child. 2011 efile See Examples 1 through 13 . 2011 efile   If you cannot claim the EIC because your qualifying child is treated under the tiebreaker rules as the qualifying child of another person for 2013, you may be able to take the EIC using a different qualifying child, but you cannot take the EIC using the rules in Part C for people who do not have a qualifying child. 2011 efile If the other person cannot claim the EIC. 2011 efile   If you and someone else have the same qualifying child but the other person cannot claim the EIC because he or she is not eligible or his or her earned income or AGI is too high, you may be able to treat the child as a qualifying child. 2011 efile See Examples 6 and 7 . 2011 efile But you cannot treat the child as a qualifying child to claim the EIC if the other person uses the child to claim any of the other six tax benefits listed earlier. 2011 efile Examples. 2011 efile The following examples may help you in determining whether you can claim the EIC when you and someone else have the same qualifying child. 2011 efile Example 1. 2011 efile You and your 2-year-old son Jimmy lived with your mother all year. 2011 efile You are 25 years old, unmarried, and your AGI is $9,000. 2011 efile Your only income was $9,000 from a part-time job. 2011 efile Your mother's only income was $20,000 from her job, and her AGI is $20,000. 2011 efile Jimmy's father did not live with you or Jimmy. 2011 efile The special rule explained later for divorced or separated parents (or parents who live apart) does not apply. 2011 efile Jimmy is a qualifying child of both you and your mother because he meets the relationship, age, residency, and joint return tests for both you and your mother. 2011 efile However, only one of you can treat him as a qualifying child to claim the EIC (and the other tax benefits listed earlier for which that person qualifies). 2011 efile He is not a qualifying child of anyone else, including his father. 2011 efile If you do not claim Jimmy as a qualifying child for the EIC or any of the other tax benefits listed earlier, your mother can treat him as a qualifying child to claim the EIC (and any of the other tax benefits listed earlier for which she qualifies). 2011 efile Example 2. 2011 efile The facts are the same as in Example 1 except your AGI is $25,000. 2011 efile Because your mother's AGI is not higher than yours, she cannot claim Jimmy as a qualifying child. 2011 efile Only you can claim him. 2011 efile Example 3. 2011 efile The facts are the same as in Example 1 except that you and your mother both claim Jimmy as a qualifying child. 2011 efile In this case, you as the child's parent will be the only one allowed to claim Jimmy as a qualifying child for the EIC and the other tax benefits listed earlier for which you qualify. 2011 efile The IRS will disallow your mother's claim to the EIC and any of the other tax benefits listed earlier unless she has another qualifying child. 2011 efile Example 4. 2011 efile The facts are the same as in Example 1 except that you also have two other young children who are qualifying children of both you and your mother. 2011 efile Only one of you can claim each child. 2011 efile However, if your mother's AGI is higher than yours, you can allow your mother to claim one or more of the children. 2011 efile For example, if you claim one child, your mother can claim the other two. 2011 efile Example 5. 2011 efile The facts are the same as in Example 1 except that you are only 18 years old. 2011 efile This means you are a qualifying child of your mother. 2011 efile Because of Rule 10 , discussed next, you cannot claim the EIC and cannot claim Jimmy as a qualifying child. 2011 efile Only your mother may be able to treat Jimmy as a qualifying child to claim the EIC. 2011 efile If your mother meets all the other requirements for claiming the EIC and you do not claim Jimmy as a qualifying child for any of the other tax benefits listed earlier, your mother can claim both you and Jimmy as qualifying children for the EIC. 2011 efile Example 6. 2011 efile The facts are the same as in Example 1 except that your mother earned $50,000 from her job. 2011 efile Because your mother's earned income is too high for her to claim the EIC, only you can claim the EIC using your son. 2011 efile Example 7. 2011 efile The facts are the same as in Example 1 except that you earned $50,000 from your job and your AGI is $50,500. 2011 efile Your earned income is too high for you to claim the EIC. 2011 efile But your mother cannot claim the EIC either, because her AGI is not higher than yours. 2011 efile Example 8. 2011 efile The facts are the same as in Example 1 except that you and Jimmy's father are married to each other, live with Jimmy and your mother, and have an AGI of $30,000 on a joint return. 2011 efile If you and your husband do not claim Jimmy as a qualifying child for the EIC or any of the other tax benefits listed earlier, your mother can claim him instead. 2011 efile Even though the AGI on your joint return, $30,000, is more than your mother's AGI of $20,000, for this purpose half of the joint AGI can be treated as yours and half as your husband's. 2011 efile In other words, each parent's AGI can be treated as $15,000. 2011 efile Example 9. 2011 efile You, your husband, and your 10-year-old son Joey lived together until August 1, 2013, when your husband moved out of the household. 2011 efile In August and September, Joey lived with you. 2011 efile For the rest of the year, Joey lived with your husband, who is Joey's father. 2011 efile Joey is a qualifying child of both you and your husband because he lived with each of you for more than half the year and because he met the relationship, age, and joint return tests for both of you. 2011 efile At the end of the year, you and your husband still were not divorced, legally separated, or separated under a written separation agreement, so the special rule for divorced or separated parents (or parents who live apart) does not apply. 2011 efile You and your husband will file separate returns. 2011 efile Your husband agrees to let you treat Joey as a qualifying child. 2011 efile This means, if your husband does not claim Joey as a qualifying child for any of the tax benefits listed earlier, you can claim him as a qualifying child for any tax benefit listed earlier for which you qualify. 2011 efile However, your filing status is married filing separately, so you cannot claim the EIC or the credit for child and dependent care expenses. 2011 efile See Rule 3 . 2011 efile Example 10. 2011 efile The facts are the same as in Example 9 except that you and your husband both claim Joey as a qualifying child. 2011 efile In this case, only your husband will be allowed to treat Joey as a qualifying child. 2011 efile This is because, during 2013, the boy lived with him longer than with you. 2011 efile You cannot claim the EIC (either with or without a qualifying child). 2011 efile However, your husband's filing status is married filing separately, so he cannot claim the EIC or the credit for child and dependent care expenses. 2011 efile See Rule 3 . 2011 efile Example 11. 2011 efile You, your 5-year-old son and your son's father lived together all year. 2011 efile You and your son's father are not married. 2011 efile Your son is a qualifying child of both you and his father because he meets the relationship, age, residency, and joint return tests for both you and his father. 2011 efile Your earned income and AGI are $12,000, and your son's father's earned income and AGI are $14,000. 2011 efile Neither of you had any other income. 2011 efile Your son's father agrees to let you treat the child as a qualifying child. 2011 efile This means, if your son's father does not claim your son as a qualifying child for the EIC or any of the other tax benefits listed earlier, you can claim him as a qualifying child for the EIC and any of the other tax benefits listed earlier for which you qualify. 2011 efile Example 12. 2011 efile The facts are the same as in Example 11 except that you and your son's father both claim your son as a qualifying child. 2011 efile In this case, only your son's father will be allowed to treat your son as a qualifying child. 2011 efile This is because his AGI, $14,000, is more than your AGI, $12,000. 2011 efile You cannot claim the EIC (either with or without a qualifying child). 2011 efile Example 13. 2011 efile You and your 7-year-old niece, your sister's child, lived with your mother all year. 2011 efile You are 25 years old, and your AGI is $9,300. 2011 efile Your only income was from a part-time job. 2011 efile Your mother's AGI is $15,000. 2011 efile Her only income was from her job. 2011 efile Your niece's parents file jointly, have an AGI of less than $9,000, and do not live with you or their child. 2011 efile Your niece is a qualifying child of both you and your mother because she meets the relationship, age, residency, and joint return tests for both you and your mother. 2011 efile However, only your mother can treat her as a qualifying child. 2011 efile This is because your mother's AGI, $15,000, is more than your AGI, $9,300. 2011 efile Special rule for divorced or separated parents (or parents who live apart). 2011 efile   A child will be treated as the qualifying child of his or her noncustodial parent (for purposes of claiming an exemption and the child tax credit, but not for the EIC) if all of the following statements are true. 2011 efile The parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Lived apart at all times during the last 6 months of 2013, whether or not they are or were married. 2011 efile The child received over half of his or her support for the year from the parents. 2011 efile The child is in the custody of one or both parents for more than half of 2013. 2011 efile Either of the following statements is true. 2011 efile The custodial parent signs Form 8332 or a substantially similar statement that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches the form or statement to his or her return. 2011 efile If the divorce decree or separation agreement went into effect after 1984 and before 2009, the noncustodial parent may be able to attach certain pages from the decree or agreement instead of Form 8332. 2011 efile A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2013 provides that the noncustodial parent can claim the child as a dependent, and the noncustodial parent provides at least $600 for support of the child during 2013. 2011 efile  For details, see chapter 3. 2011 efile Also see Applying Rule 9 to divorced or separated parents (or parents who live apart) , next. 2011 efile Applying Rule 9 to divorced or separated parents (or parents who live apart). 2011 efile   If a child is treated as the qualifying child of the noncustodial parent under the special rule just described for children of divorced or separated parents (or parents who live apart), only the noncustodial parent can claim an exemption and the child tax credit for the child. 2011 efile However, the custodial parent, if eligible, or another eligible taxpayer can claim the child as a qualifying child for the EIC and other tax benefits listed earlier in this chapter. 2011 efile If the child is the qualifying child of more than one person for these benefits, then the tiebreaker rules determine which person can treat the child as a qualifying child. 2011 efile Example 1. 2011 efile You and your 5-year-old son lived all year with your mother, who paid the entire cost of keeping up the home. 2011 efile Your AGI is $10,000. 2011 efile Your mother’s AGI is $25,000. 2011 efile Your son's father did not live with you or your son. 2011 efile Under the special rule for children of divorced or separated parents (or parents who live apart), your son is treated as the qualifying child of his father, who can claim an exemption and the child tax credit for the child. 2011 efile However, your son's father cannot claim your son as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, or the EIC. 2011 efile You and your mother did not have any child care expenses or dependent care benefits. 2011 efile If you do not claim your son as a qualifying child, your mother can claim him as a qualifying child for the EIC and head of household filing status, if she qualifies for these tax benefits. 2011 efile Example 2. 2011 efile The facts are the same as in Example 1 except that your AGI is $25,000 and your mother's AGI is $21,000. 2011 efile Your mother cannot claim your son as a qualifying child for any purpose because her AGI is not higher than yours. 2011 efile Example 3. 2011 efile The facts are the same as in Example 1 except that you and your mother both claim your son as a qualifying child for the EIC. 2011 efile Your mother also claims him as a qualifying child for head of household filing status. 2011 efile You as the child's parent will be the only one allowed to claim your son as a qualifying child for the EIC. 2011 efile The IRS will disallow your mother's claim to the EIC and head of household filing status unless she has another qualifying child. 2011 efile Rule 10. 2011 efile You Cannot Be a Qualifying Child of Another Taxpayer You are a qualifying child of another taxpayer (your parent, guardian, foster parent, etc. 2011 efile ) if all of the following statements are true. 2011 efile You are that person's son, daughter, stepchild, foster child, or a descendant of any of them. 2011 efile Or, you are that person's brother, sister, half brother, half sister, stepbrother, or stepsister (or a descendant of any of them). 2011 efile You were: Under age 19 at the end of the year and younger than that person (or that person's spouse, if the person files jointly), Under age 24 at the end of the year, a student, and younger than that person (or that person's spouse, if the person files jointly), or Permanently and totally disabled, regardless of age. 2011 efile You lived with that person in the United States for more than half of the year. 2011 efile You are not filing a joint return for the year (or are filing a joint return only to claim a refund of withheld income tax or estimated tax paid). 2011 efile For more details about the tests to be a qualifying child, see Rule 8 . 2011 efile If you are a qualifying child of another taxpayer, you cannot claim the EIC. 2011 efile This is true even if the person for whom you are a qualifying child does not claim the EIC or meet all of the rules to claim the EIC. 2011 efile Put “No” beside line 64a (Form 1040) or line 38a (Form 1040A). 2011 efile Example. 2011 efile You and your daughter lived with your mother all year. 2011 efile You are 22 years old, unmarried, and attended a trade school full time. 2011 efile You had a part-time job and earned $5,700. 2011 efile You had no other income. 2011 efile Because you meet the relationship, age, residency, and joint return tests, you are a qualifying child of your mother. 2011 efile She can claim the EIC if she meets all the other requirements. 2011 efile Because you are your mother's qualifying child, you cannot claim the EIC. 2011 efile This is so even if your mother cannot or does not claim the EIC. 2011 efile Child of person not required to file a return. 2011 efile   You are not the qualifying child of another taxpayer (and so may qualify to claim the EIC) if the person for whom you meet the relationship, age, residency, and joint return tests is not required to file an income tax return and either: Does not file an income tax return, or Files a return only to get a refund of income tax withheld or estimated tax paid. 2011 efile Example. 2011 efile The facts are the same as in the last example except your mother had no gross income, is not required to file a 2013 tax return, and does not file a 2013 tax return. 2011 efile As a result, you are not your mother's qualifying child. 2011 efile You can claim the EIC if you meet all the other requirements to do so. 2011 efile   See Rule 10 in Publication 596 for additional examples. 2011 efile Part C. 2011 efile Rules If You Do Not Have a Qualifying Child Read this part if you: Do not have a qualifying child, and Have met all the rules in Part A . 2011 efile  Part C discusses Rules 11 through 14. 2011 efile You must meet all four of these rules, in addition to the rules in Parts A and D , to qualify for the earned income credit without a qualifying child. 2011 efile If you have a qualifying child, the rules in this part do not apply to you. 2011 efile You can claim the credit only if you meet all the rules in Parts A, B, and D. 2011 efile See Rule 8 to find out if you have a qualifying child. 2011 efile Rule 11. 2011 efile You Must Be at Least Age 25 but Under Age 65 You must be at least age 25 but under age 65 at the end of 2013. 2011 efile If you are married filing a joint return, either you or your spouse must be at least age 25 but under age 65 at the end of 2013. 2011 efile It does not matter which spouse meets the age test, as long as one of the spouses does. 2011 efile You meet the age test if you were born after December 31, 1948, and before January 2, 1989. 2011 efile If you are married filing a joint return, you meet the age test if either you or your spouse was born after December 31, 1948, and before January 2, 1989. 2011 efile If neither you nor your spouse meets the age test, you cannot claim the EIC. 2011 efile Put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). 2011 efile Death of spouse. 2011 efile   If you are filing a joint return with your spouse who died in 2013, you meet the age test if your spouse was at least age 25 but under age 65 at the time of death. 2011 efile Example 1. 2011 efile You are age 28 and unmarried. 2011 efile You meet the age test. 2011 efile Example 2—spouse meets age test. 2011 efile You are married and filing a joint return. 2011 efile You are age 23 and your spouse is age 27. 2011 efile You meet the age test because your spouse is at least age 25 but under age 65. 2011 efile Example 3—spouse dies in 2013. 2011 efile You are married and filing a joint return with your spouse who died in August 2013. 2011 efile You are age 67. 2011 efile Your spouse would have become age 65 in November 2013. 2011 efile Because your spouse was under age 65 when she died, you meet the age test. 2011 efile Rule 12. 2011 efile You Cannot Be the Dependent of Another Person If you are not filing a joint return, you meet this rule if: You checked box 6a on Form 1040 or 1040A, or You did not check the “You” box on line 5 of Form 1040EZ, and you entered $10,000 on that line. 2011 efile If you are filing a joint return, you meet this rule if: You checked both box 6a and box 6b on Form 1040 or 1040A, or You and your spouse did not check either the “You” box or the “Spouse” box on line 5 of Form 1040EZ, and you entered $20,000 on that line. 2011 efile If you are not sure whether someone else can claim you (or your spouse, if filing a joint return) as a dependent, read the rules for claiming a dependent in chapter 3. 2011 efile If someone else can claim you (or your spouse, if filing a joint return) as a dependent on his or her return, but does not, you still cannot claim the credit. 2011 efile Example 1. 2011 efile In 2013, you were age 25, single, and living at home with your parents. 2011 efile You worked and were not a student. 2011 efile You earned $7,500. 2011 efile Your parents cannot claim you as a dependent. 2011 efile When you file your return, you claim an exemption for yourself by not checking the “You” box on line 5 of your Form 1040EZ and by entering $10,000 on that line. 2011 efile You meet this rule. 2011 efile You can claim the EIC if you meet all the other requirements. 2011 efile Example 2. 2011 efile The facts are the same as in Example 1 , except that you earned $2,000. 2011 efile Your parents can claim you as a dependent but decide not to. 2011 efile You do not meet this rule. 2011 efile You cannot claim the credit because your parents could have claimed you as a dependent. 2011 efile Joint returns. 2011 efile   You generally cannot be claimed as a dependent by another person if you are married and file a joint return. 2011 efile   However, another person may be able to claim you as a dependent if you and your spouse file a joint return only to get a refund of income tax withheld or estimated tax paid. 2011 efile But neither you nor your spouse can be claimed as a dependent by another person if you claim the EIC on your joint return. 2011 efile Example 1. 2011 efile You are 26 years old. 2011 efile You and your wife live with your parents and had $800 of wages from part-time jobs and no other income. 2011 efile Neither you nor your wife is required to file a tax return. 2011 efile You do not have a child. 2011 efile Taxes were taken out of your pay, so you file a joint return only to get a refund of the withheld taxes. 2011 efile Your parents are not disqualified from claiming an exemption for you just because you filed a joint return. 2011 efile They can claim exemptions for you and your wife if all the other tests to do so are met. 2011 efile Example 2. 2011 efile The facts are the same as in Example 1 except no taxes were taken out of your pay. 2011 efile Also, you and your wife are not required to file a tax return, but you file a joint return to claim an EIC of $63 and get a refund of that amount. 2011 efile Because claiming the EIC is your reason for filing the return, you are not filing it only to get a refund of income tax withheld or estimated tax paid. 2011 efile Your parents cannot claim an exemption for either you or your wife. 2011 efile Rule 13. 2011 efile You Cannot Be a Qualifying Child of Another Taxpayer You are a qualifying child of another taxpayer (your parent, guardian, foster parent, etc. 2011 efile ) if all of the following statements are true. 2011 efile You are that person's son, daughter, stepchild, foster child, or a descendant of any of them. 2011 efile Or, you are that person's brother, sister, half brother, half sister, stepbrother, or stepsister (or a descendant of any of them). 2011 efile You were: Under age 19 at the end of the year and younger than that person (or that person's spouse, if the person files jointly), Under age 24 at the end of the year, a student (as defined in Rule 8 ), and younger than that person (or that person's spouse, if the person files jointly), or Permanently and totally disabled, regardless of age. 2011 efile You lived with that person in the United States for more than half of the year. 2011 efile You are not filing a joint return for the year (or are filing a joint return only to claim a refund of withheld income tax or estimated tax paid). 2011 efile For more details about the tests to be a qualifying child, see Rule 8 . 2011 efile If you are a qualifying child of another taxpayer, you cannot claim the EIC. 2011 efile This is true even if the person for whom you are a qualifying child does not claim the EIC or meet all of the rules to claim the EIC. 2011 efile Put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). 2011 efile Example. 2011 efile You lived with your mother all year. 2011 efile You are age 26, unmarried, and permanently and totally disabled. 2011 efile Your only income was from a community center where you went three days a week to answer telephones. 2011 efile You earned $5,000 for the year and provided more than half of your own support. 2011 efile Because you meet the relationship, age, residency, and joint return tests, you are a qualifying child of your mother for the EIC. 2011 efile She can claim the EIC if she meets all the other requirements. 2011 efile Because you are a qualifying child of your mother, you cannot claim the EIC. 2011 efile This is so even if your mother cannot or does not claim the EIC. 2011 efile Joint returns. 2011 efile   You generally cannot be a qualifying child of another taxpayer if you are married and file a joint return. 2011 efile   However, you may be a qualifying child of another taxpayer if you and your spouse file a joint return for the year only to get a refund of income tax withheld or estimated tax paid. 2011 efile But neither you nor your spouse can be a qualifying child of another taxpayer if you claim the EIC on your joint return. 2011 efile Child of person not required to file a return. 2011 efile   You are not the qualifying child of another taxpayer (and so may qualify to claim the EIC) if the person for whom you meet the relationship, age, residency, and joint return tests is not required to file an income tax return and either: Does not file an income tax return, or Files a return only to get a refund of income tax withheld or estimated tax paid. 2011 efile Example. 2011 efile You lived all year with your father. 2011 efile You are 27 years old, unmarried, permanently and totally disabled, and earned $13,000. 2011 efile You have no other income, no children, and provided more than half of your own support. 2011 efile Your father had no gross income, is not required to file a 2013 tax return, and does not file a 2013 tax return. 2011 efile As a result, you are not your father's qualifying child. 2011 efile You can claim the EIC if you meet all the other requirements to do so. 2011 efile   See Rule 13 in Publication 596 for additional examples. 2011 efile Rule 14. 2011 efile You Must Have Lived in the United States More Than Half of the Year Your home (and your spouse's, if filing a joint return) must have been in the United States for more than half the year. 2011 efile If it was not, put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). 2011 efile United States. 2011 efile   This means the 50 states and the District of Columbia. 2011 efile It does not include Puerto Rico or U. 2011 efile S. 2011 efile possessions such as Guam. 2011 efile Homeless shelter. 2011 efile   Your home can be any location where you regularly live. 2011 efile You do not need a traditional home. 2011 efile If you lived in one or more homeless shelters in the United States for more than half the year, you meet this rule. 2011 efile Military personnel stationed outside the United States. 2011 efile   U. 2011 efile S. 2011 efile military personnel stationed outside the United States on extended active duty (defined in Rule 8 ) are considered to live in the United States during that duty period for purposes of the EIC. 2011 efile Part D. 2011 efile Figuring and Claiming the EIC Read this part if you have met all the rules in Parts A and B, or all the rules in Parts A and C. 2011 efile Part D discusses Rule 15 . 2011 efile You must meet this rule, in addition to the rules in Parts A and B , or Parts A and C , to qualify for the earned income credit. 2011 efile This part of the chapter also explains how to figure the amount of your credit. 2011 efile You have two choices. 2011 efile Have the IRS figure the EIC for you. 2011 efile If you want to do this, see IRS Will Figure the EIC for You . 2011 efile Figure the EIC yourself. 2011 efile If you want to do this, see How To Figure the EIC Yourself . 2011 efile Rule 15. 2011 efile Your Earned Income Must Be Less Than: $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children, $43,038 ($48,378 for married filing jointly) if you have two qualifying children, $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. 2011 efile Earned income generally means wages, salaries, tips, other taxable employee pay, and net earnings from self-employment. 2011 efile Employee pay is earned income only if it is taxable. 2011 efile Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. 2011 efile But there is an exception for nontaxable combat pay, which you can choose to include in earned income. 2011 efile Earned income is explained in detail in Rule 7 . 2011 efile Figuring earned income. 2011 efile   If you are self-employed, a statutory employee, or a member of the clergy or a church employee who files Schedule SE (Form 1040), you will figure your earned income when you fill out Part 4 of EIC Worksheet B in the Form 1040 instructions. 2011 efile   Otherwise, figure your earned income by using the worksheet in Step 5 of the Form 1040 instructions for lines 64a and 64b or the Form 1040A instructions for lines 38a and 38b, or the worksheet in Step 2 of the Form 1040EZ instructions for lines 8a and 8b. 2011 efile   When using one of those worksheets to figure your earned income, you will start with the amount on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ). 2011 efile You will then reduce that amount by any amount included on that line and described in the following list: Scholarship or fellowship grants not reported on a Form W-2, Inmate's income, and Pension or annuity from deferred compensation plans. 2011 efile Scholarship or fellowship grants not reported on a Form W-2. 2011 efile   A scholarship or fellowship grant that was not reported to you on a Form W-2 is not considered earned income for the earned income credit. 2011 efile Inmate's income. 2011 efile   Amounts received for work performed while an inmate in a penal institution are not earned income for the earned income credit. 2011 efile This includes amounts received for work performed while in a work release program or while in a halfway house. 2011 efile If you received any amount for work done while an inmate in a penal institution and that amount is included in the total on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ), put “PRI” and the amount on the dotted line next to line 7 (Form 1040), in the space to the left of the entry space for line 7 (Form 1040A), or in the space to the left of line 1 (Form 1040EZ). 2011 efile Pension or annuity from deferred compensation plans. 2011 efile   A pension or annuity from a nonqualified deferred compensation plan or a nongovernmental section 457 plan is not considered earned income for the earned income credit. 2011 efile If you received such an amount and it was included in the total on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ), put “DFC” and the amount on the dotted line next to line 7 (Form 1040), in the space to the left of the entry space for line 7 (Form 1040A), or in the space to the left of line 1 (Form 1040EZ). 2011 efile This amount may be reported in box 11 of your Form W-2. 2011 efile If you received such an amount but box 11 is blank, contact your employer for the amount received as a pension or annuity. 2011 efile Clergy. 2011 efile   If you are a member of the clergy who files Schedule SE and the amount on line 2 of that schedule includes an amount that was also reported on line 7 (Form 1040), subtract that amount from the amount on line 7 (Form 1040) and enter the result in the first space of the worksheet in Step 5 of the Form 1040 instructions for lines 64a and 64b. 2011 efile Put “Clergy” on the dotted line next to line 64a (Form 1040). 2011 efile Church employees. 2011 efile    A church employee means an employee (other than a minister or member of a religious order) of a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes. 2011 efile If you received wages as a