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2011 Irs Form 1041

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2011 Irs Form 1041

2011 irs form 1041 7. 2011 irs form 1041   Coverdell Education Savings Account (ESA) Table of Contents Introduction What Is a Coverdell ESAQualified Education Expenses ContributionsContribution Limits Additional Tax on Excess Contributions Rollovers and Other TransfersRollovers Changing the Designated Beneficiary Transfer Because of Divorce DistributionsTax-Free Distributions Taxable Distributions When Assets Must Be Distributed Introduction If your modified adjusted gross income (MAGI) is less than $110,000 ($220,000 if filing a joint return), you may be able to establish a Coverdell ESA to finance the qualified education expenses of a designated beneficiary. 2011 irs form 1041 For most taxpayers, MAGI is the adjusted gross income as figured on their federal income tax return. 2011 irs form 1041 There is no limit on the number of separate Coverdell ESAs that can be established for a designated beneficiary. 2011 irs form 1041 However, total contributions for the beneficiary in any year cannot be more than $2,000, no matter how many accounts have been established. 2011 irs form 1041 See Contributions , later. 2011 irs form 1041 This benefit applies not only to higher education expenses, but also to elementary and secondary education expenses. 2011 irs form 1041 What is the tax benefit of the Coverdell ESA. 2011 irs form 1041   Contributions to a Coverdell ESA are not deductible, but amounts deposited in the account grow tax free until distributed. 2011 irs form 1041   If, for a year, distributions from an account are not more than a designated beneficiary's qualified education expenses at an eligible educational institution, the beneficiary will not owe tax on the distributions. 2011 irs form 1041 See Tax-Free Distributions , later. 2011 irs form 1041    Table 7-1 summarizes the main features of the Coverdell ESA. 2011 irs form 1041 Table 7-1. 2011 irs form 1041 Coverdell ESA at a Glance Do not rely on this table alone. 2011 irs form 1041 It provides only general highlights. 2011 irs form 1041 See the text for definitions of terms in bold type and for more complete explanations. 2011 irs form 1041 Question Answer What is a Coverdell ESA? A savings account that is set up to pay the qualified education expenses of a designated beneficiary. 2011 irs form 1041 Where can it be established? It can be opened in the United States at any bank or other IRS-approved entity that offers Coverdell ESAs. 2011 irs form 1041 Who can have a Coverdell ESA? Any beneficiary who is under age 18 or is a special needs beneficiary. 2011 irs form 1041 Who can contribute to a Coverdell ESA? Generally, any individual (including the beneficiary) whose modified adjusted gross income for the year is less than $110,000 ($220,000 in the case of a joint return). 2011 irs form 1041 Are distributions tax free? Yes, if the distributions are not more than the beneficiary's adjusted qualified education expenses for the year. 2011 irs form 1041 What Is a Coverdell ESA A Coverdell ESA is a trust or custodial account created or organized in the United States only for the purpose of paying the qualified education expenses of the Designated beneficiary (defined later) of the account. 2011 irs form 1041 When the account is established, the designated beneficiary must be under age 18 or a special needs beneficiary. 2011 irs form 1041 To be treated as a Coverdell ESA, the account must be designated as a Coverdell ESA when it is created. 2011 irs form 1041 The document creating and governing the account must be in writing and must satisfy the following requirements. 2011 irs form 1041 The trustee or custodian must be a bank or an entity approved by the IRS. 2011 irs form 1041 The document must provide that the trustee or custodian can only accept a contribution that meets all of the following conditions. 2011 irs form 1041 The contribution is in cash. 2011 irs form 1041 The contribution is made before the beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary. 2011 irs form 1041 The contribution would not result in total contributions for the year (not including rollover contributions) being more than $2,000. 2011 irs form 1041 Money in the account cannot be invested in life insurance contracts. 2011 irs form 1041 Money in the account cannot be combined with other property except in a common trust fund or common investment fund. 2011 irs form 1041 The balance in the account generally must be distributed within 30 days after the earlier of the following events. 2011 irs form 1041 The beneficiary reaches age 30, unless the beneficiary is a special needs beneficiary. 2011 irs form 1041 The beneficiary's death. 2011 irs form 1041 Qualified Education Expenses Generally, these are expenses required for the enrollment or attendance of the designated beneficiary at an eligible educational institution. 2011 irs form 1041 For purposes of Coverdell ESAs, the expenses can be either qualified higher education expenses or qualified elementary and secondary education expenses. 2011 irs form 1041 Designated beneficiary. 2011 irs form 1041   This is the individual named in the document creating the trust or custodial account to receive the benefit of the funds in the account. 2011 irs form 1041 Contributions to a qualified tuition program (QTP). 2011 irs form 1041   A contribution to a QTP is a qualified education expense if the contribution is on behalf of the designated beneficiary of the Coverdell ESA. 2011 irs form 1041 In the case of a change in beneficiary, this is a qualified expense only if the new beneficiary is a family member of that designated beneficiary. 2011 irs form 1041 See chapter 8, Qualified Tuition Program . 2011 irs form 1041 Eligible Educational Institution For purposes of Coverdell ESAs, an eligible educational institution can be either an eligible postsecondary school or an eligible elementary or secondary school. 2011 irs form 1041 Eligible postsecondary school. 2011 irs form 1041   This is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. 2011 irs form 1041 S. 2011 irs form 1041 Department of Education. 2011 irs form 1041 It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. 2011 irs form 1041 The educational institution should be able to tell you if it is an eligible educational institution. 2011 irs form 1041   Certain educational institutions located outside the United States also participate in the U. 2011 irs form 1041 S. 2011 irs form 1041 Department of Education's Federal Student Aid (FSA) programs. 2011 irs form 1041 Eligible elementary or secondary school. 2011 irs form 1041   This is any public, private, or religious school that provides elementary or secondary education (kindergarten through grade 12), as determined under state law. 2011 irs form 1041 Qualified Higher Education Expenses These are expenses related to enrollment or attendance at an eligible postsecondary school. 2011 irs form 1041 As shown in the following list, to be qualified, some of the expenses must be required by the school and some must be incurred by students who are enrolled at least half-time. 2011 irs form 1041 The following expenses must be required for enrollment or attendance of a designated beneficiary at an eligible postsecondary school. 2011 irs form 1041 Tuition and fees. 2011 irs form 1041 Books, supplies, and equipment. 2011 irs form 1041 Expenses for special needs services needed by a special needs beneficiary must be incurred in connection with enrollment or attendance at an eligible postsecondary school. 2011 irs form 1041 Expenses for room and board must be incurred by students who are enrolled at least half-time (defined below). 2011 irs form 1041 The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. 2011 irs form 1041 The allowance for room and board, as determined by the school, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. 2011 irs form 1041 The actual amount charged if the student is residing in housing owned or operated by the school. 2011 irs form 1041 Half-time student. 2011 irs form 1041   A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic work load for the course of study the student is pursuing, as determined under the standards of the school where the student is enrolled. 2011 irs form 1041 Qualified Elementary and Secondary Education Expenses These are expenses related to enrollment or attendance at an eligible elementary or secondary school. 2011 irs form 1041 As shown in the following list, to be qualified, some of the expenses must be required or provided by the school. 2011 irs form 1041 There are special rules for computer-related expenses. 2011 irs form 1041 The following expenses must be incurred by a designated beneficiary in connection with enrollment or attendance at an eligible elementary or secondary school. 2011 irs form 1041 Tuition and fees. 2011 irs form 1041 Books, supplies, and equipment. 2011 irs form 1041 Academic tutoring. 2011 irs form 1041 Special needs services for a special needs beneficiary. 2011 irs form 1041 The following expenses must be required or provided by an eligible elementary or secondary school in connection with attendance or enrollment at the school. 2011 irs form 1041 Room and board. 2011 irs form 1041 Uniforms. 2011 irs form 1041 Transportation. 2011 irs form 1041 Supplementary items and services (including extended day programs). 2011 irs form 1041 The purchase of computer technology, equipment, or Internet access and related services is a qualified elementary and secondary education expense if it is to be used by the beneficiary and the beneficiary's family during any of the years the beneficiary is in elementary or secondary school. 2011 irs form 1041 (This does not include expenses for computer software designed for sports, games, or hobbies unless the software is predominantly educational in nature. 2011 irs form 1041 ) Contributions Any individual (including the designated beneficiary) can contribute to a Coverdell ESA if the individual's MAGI (defined later under Contribution Limits ) for the year is less than $110,000. 2011 irs form 1041 For individuals filing joint returns, that amount is $220,000. 2011 irs form 1041 Organizations, such as corporations and trusts, can also contribute to Coverdell ESAs. 2011 irs form 1041 There is no requirement that an organization's income be below a certain level. 2011 irs form 1041 Contributions must meet all of the following requirements. 2011 irs form 1041 They must be in cash. 2011 irs form 1041 They cannot be made after the beneficiary reaches age 18, unless the beneficiary is a special needs beneficiary. 2011 irs form 1041 They must be made by the due date of the contributor's tax return (not including extensions). 2011 irs form 1041 Contributions can be made to one or several Coverdell ESAs for the same designated beneficiary provided that the total contributions are not more than the contribution limits (defined later) for a year. 2011 irs form 1041 Contributions can be made, without penalty, to both a Coverdell ESA and a QTP in the same year for the same beneficiary. 2011 irs form 1041 Table 7-2 summarizes many of the features of contributing to a Coverdell ESA. 2011 irs form 1041 When contributions considered made. 2011 irs form 1041   Contributions made to a Coverdell ESA for the preceding tax year are considered to have been made on the last day of the preceding year. 2011 irs form 1041 They must be made by the due date (not including extensions) for filing your return for the preceding year. 2011 irs form 1041   For example, if you make a contribution to a Coverdell ESA in February 2014, and you designate it as a contribution for 2013, you are considered to have made that contribution on December 31, 2013. 2011 irs form 1041 Contribution Limits There are two yearly limits: One on the total amount that can be contributed for each designated beneficiary in any year, and One on the amount that any individual can contribute for any one designated beneficiary for a year. 2011 irs form 1041 Limit for each designated beneficiary. 2011 irs form 1041   For 2013, the total of all contributions to all Coverdell ESAs set up for the benefit of any one designated beneficiary cannot be more than $2,000. 2011 irs form 1041 This includes contributions (other than rollovers) to all the beneficiary's Coverdell ESAs from all sources. 2011 irs form 1041 Rollovers are discussed under Rollovers and Other Transfers , later. 2011 irs form 1041 Example. 2011 irs form 1041 When Maria Luna was born in 2012, three separate Coverdell ESAs were set up for her, one by her parents, one by her grandfather, and one by her aunt. 2011 irs form 1041 In 2013, the total of all contributions to Maria's three Coverdell ESAs cannot be more than $2,000. 2011 irs form 1041 For example, if her grandfather contributed $2,000 to one of her Coverdell ESAs, no one else could contribute to any of her three accounts. 2011 irs form 1041 Or, if her parents contributed $1,000 and her aunt $600, her grandfather or someone else could contribute no more than $400. 2011 irs form 1041 These contributions could be put into any of Maria's Coverdell ESA accounts. 2011 irs form 1041 Limit for each contributor. 2011 irs form 1041   Generally, you can contribute up to $2,000 for each designated beneficiary for 2013. 2011 irs form 1041 This is the most you can contribute for the benefit of any one beneficiary for the year, regardless of the number of Coverdell ESAs set up for the beneficiary. 2011 irs form 1041 Example. 2011 irs form 1041 The facts are the same as in the previous example except that Maria Luna's older brother, Edgar, also has a Coverdell ESA. 2011 irs form 1041 If their grandfather contributed $2,000 to Maria's Coverdell ESA in 2013, he could also contribute $2,000 to Edgar's Coverdell ESA. 2011 irs form 1041 Reduced limit. 2011 irs form 1041   Your contribution limit may be reduced. 2011 irs form 1041 If your MAGI (defined on this page) is between $95,000 and $110,000 (between $190,000 and $220,000 if filing a joint return), the $2,000 limit for each designated beneficiary is gradually reduced (see Figuring the limit , later). 2011 irs form 1041 If your MAGI is $110,000 or more ($220,000 or more if filing a joint return), you cannot contribute to anyone's Coverdell ESA. 2011 irs form 1041 Table 7-2. 2011 irs form 1041 Coverdell ESA Contributions at a Glance Do not rely on this table alone. 2011 irs form 1041 It provides only general highlights. 2011 irs form 1041 See the text for more complete explanations. 2011 irs form 1041 Question Answer Are contributions deductible? No. 2011 irs form 1041 What is the annual contribution limit per designated beneficiary? $2,000 for each designated beneficiary. 2011 irs form 1041 What if more than one Coverdell ESA has been opened for the same designated beneficiary? The annual contribution limit is $2,000 for each beneficiary, no matter how many Coverdell ESAs are set up for that beneficiary. 2011 irs form 1041 What if more than one individual makes contributions for the same designated beneficiary? The annual contribution limit is $2,000 per beneficiary, no matter how many individuals contribute. 2011 irs form 1041 Can contributions other than cash be made to a Coverdell ESA? No. 2011 irs form 1041 When must contributions stop? No contributions can be made to a beneficiary's Coverdell ESA after he or she reaches age 18, unless the beneficiary is a special needs beneficiary. 2011 irs form 1041 Modified adjusted gross income (MAGI). 2011 irs form 1041   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. 2011 irs form 1041 MAGI when using Form 1040A. 2011 irs form 1041   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. 2011 irs form 1041 MAGI when using Form 1040. 2011 irs form 1041   If you file Form 1040, your MAGI is the AGI on line 38 of that form, modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. 2011 irs form 1041 MAGI when using Form 1040NR. 2011 irs form 1041   If you file Form 1040NR, your MAGI is the AGI on line 36 of that form. 2011 irs form 1041 MAGI when using Form 1040NR-EZ. 2011 irs form 1041   If you file Form 1040NR-EZ, your MAGI is the AGI on line 10 of that form. 2011 irs form 1041   If you have any of these adjustments, you can use Worksheet 7-1. 2011 irs form 1041 MAGI for a Coverdell ESA , later, to figure your MAGI for Form 1040. 2011 irs form 1041 Worksheet 7-1. 2011 irs form 1041 MAGI for a Coverdell ESA 1. 2011 irs form 1041 Enter your adjusted gross income  (Form 1040, line 38)   1. 2011 irs form 1041   2. 2011 irs form 1041 Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. 2011 irs form 1041       3. 2011 irs form 1041 Enter your foreign housing deduction (Form 2555, line 50)   3. 2011 irs form 1041         4. 2011 irs form 1041 Enter the amount of income from Puerto Rico you are excluding   4. 2011 irs form 1041       5. 2011 irs form 1041 Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. 2011 irs form 1041       6. 2011 irs form 1041 Add lines 2, 3, 4, and 5   6. 2011 irs form 1041   7. 2011 irs form 1041 Add lines 1 and 6. 2011 irs form 1041 This is your  modified adjusted gross income   7. 2011 irs form 1041   Figuring the limit. 2011 irs form 1041    To figure the limit on the amount you can contribute for each designated beneficiary, multiply $2,000 by a fraction. 2011 irs form 1041 The numerator (top number) is your MAGI minus $95,000 ($190,000 if filing a joint return). 2011 irs form 1041 The denominator (bottom number) is $15,000 ($30,000 if filing a joint return). 2011 irs form 1041 Subtract the result from $2,000. 2011 irs form 1041 This is the amount you can contribute for each beneficiary. 2011 irs form 1041 You can use Worksheet 7-2. 2011 irs form 1041 Coverdell ESA Contribution Limit to figure the limit on contributions. 2011 irs form 1041    Worksheet 7-2. 2011 irs form 1041 Coverdell ESA Contribution Limit 1. 2011 irs form 1041 Maximum contribution   1. 2011 irs form 1041 $2,000 2. 2011 irs form 1041 Enter your modified adjusted gross income (MAGI) for purposes of figuring the contribution limit to a Coverdell ESA (see definition or Worksheet 7-1, earlier)   2. 2011 irs form 1041   3. 2011 irs form 1041 Enter $190,000 if married filing jointly; $95,000 for all other filers   3. 2011 irs form 1041   4. 2011 irs form 1041 Subtract line 3 from line 2. 2011 irs form 1041 If zero or less, enter -0- on line 4, skip lines 5 through 7, and enter $2,000 on line 8   4. 2011 irs form 1041   5. 2011 irs form 1041 Enter $30,000 if married filing jointly; $15,000 for all other filers   5. 2011 irs form 1041     Note. 2011 irs form 1041 If the amount on line 4 is greater than or equal to the amount on line 5, stop here. 2011 irs form 1041 You are not allowed to contribute to a Coverdell ESA for 2013. 2011 irs form 1041       6. 2011 irs form 1041 Divide line 4 by line 5 and enter the result as a decimal (rounded to at least 3 places)   6. 2011 irs form 1041 . 2011 irs form 1041 7. 2011 irs form 1041 Multiply line 1 by line 6   7. 2011 irs form 1041   8. 2011 irs form 1041 Subtract line 7 from line 1   8. 2011 irs form 1041   Note: The total Coverdell ESA contributions from all sources for the designated beneficiary during the tax year may not exceed $2,000. 2011 irs form 1041 Example. 2011 irs form 1041 Paul, who is single, had a MAGI of $96,500 for 2013. 2011 irs form 1041 Paul can contribute up to $1,800 in 2013 for each beneficiary, as shown in the illustrated Worksheet 7-2, Coverdell ESA Contribution Limit–Illustrated. 2011 irs form 1041 Worksheet 7-2. 2011 irs form 1041 Coverdell ESA Contribution Limit—Illustrated 1. 2011 irs form 1041 Maximum contribution   1. 2011 irs form 1041 $2,000 2. 2011 irs form 1041 Enter your modified adjusted gross  income (MAGI) for purposes of figuring the contribution limit to a Coverdell ESA (see definition or Worksheet 7-1, earlier)   2. 2011 irs form 1041 96,500 3. 2011 irs form 1041 Enter $190,000 if married filing jointly; $95,000 for all other filers   3. 2011 irs form 1041 95,000 4. 2011 irs form 1041 Subtract line 3 from line 2. 2011 irs form 1041 If zero or less, enter -0- on line 4, skip lines 5 through 7, and enter $2,000 on line 8   4. 2011 irs form 1041 1,500 5. 2011 irs form 1041 Enter $30,000 if married filing jointly; $15,000 for all other filers   5. 2011 irs form 1041 15,000   Note. 2011 irs form 1041 If the amount on line 4 is greater than or equal to the amount on line 5,  stop here. 2011 irs form 1041 You are not allowed to  contribute to a Coverdell ESA for 2013. 2011 irs form 1041       6. 2011 irs form 1041 Divide line 4 by line 5 and enter the result as a decimal (rounded to at least 3 places)   6. 2011 irs form 1041 . 2011 irs form 1041 100 7. 2011 irs form 1041 Multiply line 1 by line 6   7. 2011 irs form 1041 200 8. 2011 irs form 1041 Subtract line 7 from line 1   8. 2011 irs form 1041 1,800 Note: The total Coverdell ESA contributions from all sources for the designated beneficiary during the tax year may not exceed $2,000. 2011 irs form 1041 Additional Tax on Excess Contributions The beneficiary must pay a 6% excise tax each year on excess contributions that are in a Coverdell ESA at the end of the year. 2011 irs form 1041 Excess contributions are the total of the following two amounts. 2011 irs form 1041 Contributions to any designated beneficiary's Coverdell ESA for the year that are more than $2,000 (or, if less, the total of each contributor's limit for the year, as discussed earlier). 2011 irs form 1041 Excess contributions for the preceding year, reduced by the total of the following two amounts: Distributions (other than those rolled over as discussed later) during the year, and The contribution limit for the current year minus the amount contributed for the current year. 2011 irs form 1041 Exceptions. 2011 irs form 1041   The excise tax does not apply if excess contributions made during 2013 (and any earnings on them) are distributed before the first day of the sixth month of the following tax year (June 1, 2014, for a calendar year taxpayer). 2011 irs form 1041   However, you must include the distributed earnings in gross income for the year in which the excess contribution was made. 2011 irs form 1041 You should receive Form 1099-Q, Payments From Qualified Education Programs, from each institution from which excess contributions were distributed. 2011 irs form 1041 Box 2 of that form will show the amount of earnings on your excess contributions. 2011 irs form 1041 Code “2” or “3” entered in the blank box below boxes 5 and 6 indicate the year in which the earnings are taxable. 2011 irs form 1041 See Instructions for Recipient on the back of copy B of your Form 1099-Q. 2011 irs form 1041 Enter the amount of earnings on line 21 of Form 1040 (or Form 1040NR) for the applicable tax year. 2011 irs form 1041 For more information, see Taxable Distributions , later. 2011 irs form 1041   The excise tax does not apply to any rollover contribution. 2011 irs form 1041 Note. 2011 irs form 1041 Contributions made in one year for the preceding tax year are considered to have been made on the last day of the preceding year. 2011 irs form 1041 Example. 2011 irs form 1041 In 2012, Greta's parents and grandparents contributed a total of $2,300 to Greta's Coverdell ESA— an excess contribution of $300. 2011 irs form 1041 Because Greta did not withdraw the excess before June 1, 2013, she had to pay an additional tax of $18 (6% × $300) when she filed her 2012 tax return. 2011 irs form 1041 In 2013, excess contributions of $500 were made to Greta's account, however, she withdrew $250 from that account to use for qualified education expenses. 2011 irs form 1041 Using the steps shown earlier under Additional Tax on Excess Contributions , Greta figures the excess contribution in her account at the end of 2013 as follows. 2011 irs form 1041 (1)   $500 excess contributions made in 2013     + (2)   $300 excess contributions in ESA at end of 2012     − (2a)   $250 distribution during 2013         $550 excess at end of 2013   × 6%=$33           If Greta limits 2014 contributions to $1,450 ($2,000 maximum allowed − $550 excess contributions from 2013), she will not owe any additional tax in 2014 for excess contributions. 2011 irs form 1041 Figuring and reporting the additional tax. 2011 irs form 1041   You figure this excise tax in Part V of Form 5329. 2011 irs form 1041 Report the additional tax on Form 1040, line 58 (or Form 1040NR, line 56). 2011 irs form 1041 Rollovers and Other Transfers Assets can be rolled over from one Coverdell ESA to another or the designated beneficiary can be changed. 2011 irs form 1041 The beneficiary's interest can be transferred to a spouse or former spouse because of divorce. 2011 irs form 1041 Rollovers Any amount distributed from a Coverdell ESA is not taxable if it is rolled over to another Coverdell ESA for the benefit of the same beneficiary or a member of the beneficiary's family (including the beneficiary's spouse) who is under age 30. 2011 irs form 1041 This age limitation does not apply if the new beneficiary is a special needs beneficiary. 2011 irs form 1041 An amount is rolled over if it is paid to another Coverdell ESA within 60 days after the date of the distribution. 2011 irs form 1041 Do not report qualifying rollovers (those that meet the above criteria) anywhere on Form 1040 or 1040NR. 2011 irs form 1041 These are not taxable distributions. 2011 irs form 1041 Members of the beneficiary's family. 2011 irs form 1041   For these purposes, the beneficiary's family includes the beneficiary's spouse and the following other relatives of the beneficiary. 2011 irs form 1041 Son, daughter, stepchild, foster child, adopted child, or a descendant of any of them. 2011 irs form 1041 Brother, sister, stepbrother, or stepsister. 2011 irs form 1041 Father or mother or ancestor of either. 2011 irs form 1041 Stepfather or stepmother. 2011 irs form 1041 Son or daughter of a brother or sister. 2011 irs form 1041 Brother or sister of father or mother. 2011 irs form 1041 Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. 2011 irs form 1041 The spouse of any individual listed above. 2011 irs form 1041 First cousin. 2011 irs form 1041 Example. 2011 irs form 1041 When Aaron graduated from college last year he had $5,000 left in his Coverdell ESA. 2011 irs form 1041 He wanted to give this money to his younger sister, who was still in high school. 2011 irs form 1041 In order to avoid paying tax on the distribution of the amount remaining in his account, Aaron contributed the same amount to his sister's Coverdell ESA within 60 days of the distribution. 2011 irs form 1041 Only one rollover per Coverdell ESA is allowed during the 12-month period ending on the date of the payment or distribution. 2011 irs form 1041 This rule does not apply to the rollover of a military death gratuity or payment from Servicemembers' Group Life Insurance (SGLI). 2011 irs form 1041 Military death gratuity. 2011 irs form 1041   If you received a military death gratuity or a payment from Servicemembers' Group Life Insurance (SGLI), you may roll over all or part of the amount received to one or more Coverdell ESAs for the benefit of members of the beneficiary's family (see Members of the beneficiary's family , earlier). 2011 irs form 1041 Such payments are made to an eligible survivor upon the death of a member of the armed forces. 2011 irs form 1041 The contribution to a Coverdell ESA from survivor benefits received cannot be made later than 1 year after the date on which you receive the gratuity or SGLI payment. 2011 irs form 1041   This rollover contribution is not subject to (but is in addition to) the contribution limits discussed earlier under Contribution Limits . 2011 irs form 1041 The amount you roll over cannot exceed the total survivor benefits you received, reduced by contributions from these benefits to a Roth IRA or other Coverdell ESAs. 2011 irs form 1041   The amount contributed from the survivor benefits is treated as part of your basis (cost) in the Coverdell ESA, and will not be taxed when distributed. 2011 irs form 1041 See Distributions , later. 2011 irs form 1041 The limit of one rollover per Coverdell ESA during a 12-month period does not apply to a military death gratuity or SGLI payment. 2011 irs form 1041 Changing the Designated Beneficiary The designated beneficiary can be changed. 2011 irs form 1041 See Members of the beneficiary's family , earlier. 2011 irs form 1041 There are no tax consequences if, at the time of the change, the new beneficiary is under age 30 or is a special needs beneficiary. 2011 irs form 1041 Example. 2011 irs form 1041 Assume the same situation for Aaron as in the last example (see Rollovers , earlier). 2011 irs form 1041 Instead of closing his Coverdell ESA and paying the distribution into his sister's Coverdell ESA, Aaron could have instructed the trustee of his account to simply change the name of the beneficiary on his account to that of his sister. 2011 irs form 1041 Transfer Because of Divorce If a spouse or former spouse receives a Coverdell ESA under a divorce or separation instrument, it is not a taxable transfer. 2011 irs form 1041 After the transfer, the spouse or former spouse treats the Coverdell ESA as his or her own. 2011 irs form 1041 Example. 2011 irs form 1041 In their divorce settlement, Peg received her ex-husband's Coverdell ESA. 2011 irs form 1041 In this process, the account was transferred into her name. 2011 irs form 1041 Peg now treats the funds in this Coverdell ESA as if she were the original owner. 2011 irs form 1041 Distributions The designated beneficiary of a Coverdell ESA can take a distribution at any time. 2011 irs form 1041 Whether the distributions are tax free depends, in part, on whether the distributions are equal to or less than the amount of Adjusted qualified education expenses (defined later) that the beneficiary has in the same tax year. 2011 irs form 1041 See Table 7-3, Coverdell ESA Distributions at a Glance, for highlights. 2011 irs form 1041 Table 7-3. 2011 irs form 1041 Coverdell ESA Distributions at a Glance Do not rely on this table alone. 2011 irs form 1041 It provides only general highlights. 2011 irs form 1041 See the text for definitions of terms in bold type and for more complete explanations. 2011 irs form 1041 Question Answer Is a distribution from a Coverdell ESA to pay for a designated beneficiary's qualified education expenses tax free? Generally, yes, to the extent the amount of the distribution is not more than the designated beneficiary's adjusted qualified education expenses. 2011 irs form 1041 After the designated beneficiary completes his or her education at an eligible educational institution, can amounts remaining in the Coverdell ESA be distributed? Yes. 2011 irs form 1041 Amounts must be distributed when the designated beneficiary reaches age 30, unless he or she is a special needs beneficiary. 2011 irs form 1041 Also, certain transfers to members of the beneficiary's family are permitted. 2011 irs form 1041 Does the designated beneficiary need to be enrolled for a minimum number of courses to take a tax-free distribution? No. 2011 irs form 1041 Adjusted qualified education expenses. 2011 irs form 1041   To determine if total distributions for the year are more than the amount of qualified education expenses, reduce total qualified education expenses by any tax-free educational assistance. 2011 irs form 1041 Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. 2011 irs form 1041 The amount you get by subtracting tax-free educational assistance from your total qualified education expenses is your adjusted qualified education expenses. 2011 irs form 1041 Tax-Free Distributions Generally, distributions are tax free if they are not more than the beneficiary's adjusted qualified education expenses for the year. 2011 irs form 1041 Do not report tax-free distributions (including qualifying rollovers) on your tax return. 2011 irs form 1041 Taxable Distributions A portion of the distributions is generally taxable to the beneficiary if the total distributions are more than the beneficiary's adjusted qualified education expenses for the year. 2011 irs form 1041 Excess distribution. 2011 irs form 1041   This is the part of the total distribution that is more than the beneficiary's adjusted qualified education expenses for the year. 2011 irs form 1041 Earnings and basis. 2011 irs form 1041   You will receive a Form 1099-Q for each of the Coverdell ESAs from which money was distributed in 2013. 2011 irs form 1041 The amount of your gross distribution will be shown in box 1. 2011 irs form 1041 For 2013, instead of dividing the gross distribution between your earnings (box 2) and your basis (already-taxed amount) (box 3), the payer or trustee may report the fair market value (account balance) of the Coverdell ESA as of December 31, 2013. 2011 irs form 1041 This will be shown in the blank box below boxes 5 and 6. 2011 irs form 1041   The amount contributed from survivor benefits (see Military death gratuity , earlier) is treated as part of your basis and will not be taxed when distributed. 2011 irs form 1041 Figuring the Taxable Portion of a Distribution The taxable portion is the amount of the excess distribution that represents earnings that have accumulated tax free in the account. 2011 irs form 1041 Figure the taxable portion for 2013 as shown in the following steps. 2011 irs form 1041 Multiply the total amount distributed by a fraction. 2011 irs form 1041 The numerator is the basis (contributions not previously distributed) at the end of 2012 plus total contributions for 2013 and the denominator is the value (balance) of the account at the end of 2013 plus the amount distributed during 2013. 2011 irs form 1041 Subtract the amount figured in (1) from the total amount distributed during 2013. 2011 irs form 1041 The result is the amount of earnings included in the distribution(s). 2011 irs form 1041 Multiply the amount of earnings figured in (2) by a fraction. 2011 irs form 1041 The numerator is the adjusted qualified education expenses paid during 2013 and the denominator is the total amount distributed during 2013. 2011 irs form 1041 Subtract the amount figured in (3) from the amount figured in (2). 2011 irs form 1041 The result is the amount the beneficiary must include in income. 2011 irs form 1041 The taxable amount must be reported on Form 1040 or Form 1040NR, line 21. 2011 irs form 1041 Example. 2011 irs form 1041 You received an $850 distribution from your Coverdell ESA, to which $1,500 had been contributed before 2013. 2011 irs form 1041 There were no contributions in 2013. 2011 irs form 1041 This is your first distribution from the account, so your basis in the account on December 31, 2012, was $1,500. 2011 irs form 1041 The value (balance) of your account on December 31, 2013, was $950. 2011 irs form 1041 You had $700 of adjusted qualified education expenses (AQEE) for the year. 2011 irs form 1041 Using the steps in Figuring the Taxable Portion of a Distribution , earlier, figure the taxable portion of your distribution as follows. 2011 irs form 1041   1. 2011 irs form 1041 $850 (distribution) × $1,500 basis + $0 contributions  $950 value + $850 distribution       =$708 (basis portion of distribution)     2. 2011 irs form 1041 $850 (distribution)−$708 (basis portion of distribution)     =$142 (earnings included in distribution)   3. 2011 irs form 1041 $142 (earnings) × $700 AQEE  $850 distribution           =$117 (tax-free earnings)     4. 2011 irs form 1041 $142 (earnings)−$117 (tax-free earnings)=$25 (taxable earnings)                 You must include $25 in income as distributed earnings not used for qualified education expenses. 2011 irs form 1041 Report this amount on Form 1040, line 21, listing the type and amount of income on the dotted line. 2011 irs form 1041 Worksheet 7-3, Coverdell ESA–Taxable Distributions and Basis , at the end of this chapter, can help you figure your adjusted qualified education expenses, how much of your distribution must be included in income, and the remaining basis in your Coverdell ESA(s). 2011 irs form 1041 Coordination With American Opportunity and Lifetime Learning Credits The American opportunity or lifetime learning credit can be claimed in the same year the beneficiary takes a tax-free distribution from a Coverdell ESA, as long as the same expenses are not used for both benefits. 2011 irs form 1041 This means the beneficiary must reduce qualified higher education expenses by tax-free educational assistance, and then further reduce them by any expenses taken into account in determining an American opportunity or lifetime learning credit. 2011 irs form 1041 Example. 2011 irs form 1041 Derek Green had $5,800 of qualified higher education expenses for 2013, his first year in college. 2011 irs form 1041 He paid his college expenses from the following sources. 2011 irs form 1041     Partial tuition scholarship (tax free) $1,500     Coverdell ESA distribution 1,000     Gift from parents 2,100     Earnings from part-time job 1,200           Of his $5,800 of qualified higher education expenses, $4,000 was tuition and related expenses that also qualified for an American opportunity credit. 2011 irs form 1041 Derek's parents claimed a $2,500 American opportunity credit (based on $4,000 expenses) on their tax return. 2011 irs form 1041 Before Derek can determine the taxable portion of his Coverdell ESA distribution, he must reduce his total qualified higher education expenses. 2011 irs form 1041     Total qualified higher education expenses $5,800     Minus: Tax-free educational assistance −1,500     Minus: Expenses taken into account in  figuring American opportunity credit − 4,000     Equals: Adjusted qualified higher education  expenses (AQHEE) $ 300           Since the adjusted qualified higher education expenses ($300) are less than the Coverdell ESA distribution ($1,000), part of the distribution will be taxable. 2011 irs form 1041 The balance in Derek's account was $1,800 on December 31, 2013. 2011 irs form 1041 Prior to 2013, $2,100 had been contributed to this account. 2011 irs form 1041 Contributions for 2013 totaled $400. 2011 irs form 1041 Using the four steps outlined earlier, Derek figures the taxable portion of his distribution as shown below. 2011 irs form 1041   1. 2011 irs form 1041 $1,000 (distribution) × $2,100 basis + $400 contributions  $1,800 value + $1,000 distribution           =$893 (basis portion of distribution)     2. 2011 irs form 1041 $1,000 (distribution)−$893 (basis portion of distribution)     = $107 (earnings included in distribution)   3. 2011 irs form 1041 $107 (earnings) × $300 AQHEE  $1,000 distribution       =$32 (tax-free earnings)     4. 2011 irs form 1041 $107 (earnings)−$32 (tax-free earnings)=$75 (taxable earnings)                 Derek must include $75 in income (Form 1040, line 21). 2011 irs form 1041 This is the amount of distributed earnings not used for adjusted qualified higher education expenses. 2011 irs form 1041 Coordination With Qualified Tuition Program (QTP) Distributions If a designated beneficiary receives distributions from both a Coverdell ESA and a QTP in the same year, and the total distribution is more than the beneficiary's adjusted qualified higher education expenses, those expenses must be allocated between the distribution from the Coverdell ESA and the distribution from the QTP before figuring how much of each distribution is taxable. 2011 irs form 1041 The following two examples illustrate possible allocations. 2011 irs form 1041 Example 1. 2011 irs form 1041 In 2013, Beatrice graduated from high school and began her first semester of college. 2011 irs form 1041 That year, she had $1,000 of qualified elementary and secondary education expenses (QESEE) for high school and $3,000 of qualified higher education expenses (QHEE) for college. 2011 irs form 1041 To pay these expenses, Beatrice withdrew $800 from her Coverdell ESA and $4,200 from her QTP. 2011 irs form 1041 No one claimed Beatrice as a dependent, nor was she eligible for an education credit. 2011 irs form 1041 She did not receive any tax-free educational assistance in 2013. 2011 irs form 1041 Beatrice must allocate her total qualified education expenses between the two distributions. 2011 irs form 1041 Beatrice knows that tax-free treatment will be available if she applies her $800 Coverdell ESA distribution toward her $1,000 of qualified education expenses for high school. 2011 irs form 1041 The qualified expenses are greater than the distribution, making the $800 Coverdell ESA distribution tax free. 2011 irs form 1041 Next, Beatrice matches her $4,200 QTP distribution to her $3,000 of QHEE, and finds she has an excess QTP distribution of $1,200 ($4,200 QTP − $3,000 QHEE). 2011 irs form 1041 She cannot use the extra $200 of high school expenses (from (1) above) against the QTP distribution because those expenses do not qualify a QTP for tax-free treatment. 2011 irs form 1041 Finally, Beatrice figures the taxable and tax-free portions of her QTP distribution based on her $3,000 of QHEE. 2011 irs form 1041 (See Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program for more information. 2011 irs form 1041 ) Example 2. 2011 irs form 1041 Assume the same facts as in Example 1 , except that Beatrice withdrew $1,800 from her Coverdell ESA and $3,200 from her QTP. 2011 irs form 1041 In this case, she allocates her qualified education expenses as follows. 2011 irs form 1041 Using the same reasoning as in Example 1, Beatrice matches $1,000 of her Coverdell ESA distribution to her $1,000 of QESEE—she has $800 of her distribution remaining. 2011 irs form 1041 Because higher education expenses can also qualify a Coverdell ESA distribution for tax-free treatment, Beatrice allocates her $3,000 of QHEE between the remaining $800 Coverdell ESA and the $3,200 QTP distributions ($4,000 total). 2011 irs form 1041   $3,000 QHEE × $800 ESA distribution  $4,000 total distribution = $600 QHEE (ESA)     $3,000 QHEE × $3,200 QTP distribution  $4,000 total distribution = $2,400 QHEE (QTP)   Beatrice then figures the taxable part of her: Coverdell ESA distribution based on qualified education expenses of $1,600 ($1,000 QESEE + $600 QHEE). 2011 irs form 1041 See Figuring the Taxable Portion of a Distribution , earlier, in this chapter. 2011 irs form 1041   QTP distribution based on her $2,400 of QHEE (see Figuring the Taxable Portion of a Distribution in chapter 8, Qualified Tuition Program). 2011 irs form 1041 The above examples show two types of allocation between distributions from a Coverdell ESA and a QTP. 2011 irs form 1041 However, you do not have to allocate your expenses in the same way. 2011 irs form 1041 You can use any reasonable method. 2011 irs form 1041 Losses on Coverdell ESA Investments If you have a loss on your investment in a Coverdell ESA, you may be able to deduct the loss on your income tax return. 2011 irs form 1041 You can deduct the loss only when all amounts from that account have been distributed and the total distributions are less than your unrecovered basis. 2011 irs form 1041 Your basis is the total amount of contributions to that Coverdell ESA. 2011 irs form 1041 You claim the loss as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23 (Schedule A (Form 1040NR), line 9), subject to the 2%-of-adjusted-gross-income limit. 2011 irs form 1041 If you have distributions from more than one Coverdell ESA account during a year, you must combine the information (amount of distribution, basis, etc. 2011 irs form 1041 ) from all such accounts in order to determine your taxable earnings for the year. 2011 irs form 1041 By doing this, the loss from one ESA account reduces the distributed earnings (if any) from any other ESA account. 2011 irs form 1041 For examples of the calculation, see Losses on QTP Investments in chapter 8, Qualified Tuition Program. 2011 irs form 1041 Additional Tax on Taxable Distributions Generally, if you receive a taxable distribution, you also must pay a 10% additional tax on the amount included in income. 2011 irs form 1041 Exceptions. 2011 irs form 1041   The 10% additional tax does not apply to distributions: Paid to a beneficiary (or to the estate of the designated beneficiary) on or after the death of the designated beneficiary. 2011 irs form 1041 Made because the designated beneficiary is disabled. 2011 irs form 1041 A person is considered to be disabled if he or she shows proof that he or she cannot do any substantial gainful activity because of his or her physical or mental condition. 2011 irs form 1041 A physician must determine that his or her condition can be expected to result in death or to be of long-continued and indefinite duration. 2011 irs form 1041 Included in income because the designated beneficiary received: A tax-free scholarship or fellowship (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), or Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. 2011 irs form 1041 Made on account of the attendance of the designated beneficiary at a U. 2011 irs form 1041 S. 2011 irs form 1041 military academy (such as the USMA at West Point). 2011 irs form 1041 This exception applies only to the extent that the amount of the distribution does not exceed the costs of advanced education (as defined in section 2005(d)(3) of title 10 of the U. 2011 irs form 1041 S. 2011 irs form 1041 Code) attributable to such attendance. 2011 irs form 1041 Included in income only because the qualified education expenses were taken into account in determining the American opportunity or lifetime learning credit (see Coordination With American Opportunity and Lifetime Learning Credits , earlier). 2011 irs form 1041 Made before June 1, 2014, of an excess 2013 contribution (and any earnings on it). 2011 irs form 1041 The distributed earnings must be included in gross income for the year in which the excess contribution was made. 2011 irs form 1041 Exception (3) applies only to the extent the distribution is not more than the scholarship, allowance, or payment. 2011 irs form 1041 Figuring the additional tax. 2011 irs form 1041    Use Part II of Form 5329, to figure any additional tax. 2011 irs form 1041 Report the amount on Form 1040, line 58, or Form 1040NR, line 56. 2011 irs form 1041 When Assets Must Be Distributed Any assets remaining in a Coverdell ESA must be distributed when either one of the following two events occurs. 2011 irs form 1041 The designated beneficiary reaches age 30. 2011 irs form 1041 In this case, the remaining assets must be distributed within 30 days after the beneficiary reaches age 30. 2011 irs form 1041 However, this rule does not apply if the beneficiary is a special needs beneficiary. 2011 irs form 1041 The designated beneficiary dies before reaching age 30. 2011 irs form 1041 In this case, the remaining assets must generally be distributed within 30 days after the date of death. 2011 irs form 1041 Exception for Transfer to Surviving Spouse or Family Member If a Coverdell ESA is transferred to a surviving spouse or other family member as the result of the death of the designated beneficiary, the Coverdell ESA retains its status. 2011 irs form 1041 (“Family member” was defined earlier under Rollovers . 2011 irs form 1041 ) This means the spouse or other family member can treat the Coverdell ESA as his or her own and does not need to withdraw the assets until he or she reaches age 30. 2011 irs form 1041 This age limitation does not apply if the new beneficiary is a special needs beneficiary. 2011 irs form 1041 There are no tax consequences as a result of the transfer. 2011 irs form 1041 How To Figure the Taxable Earnings When a total distribution is made because the designated beneficiary either reached age 30 or died, the earnings that accumulated tax free in the account must be included in taxable income. 2011 irs form 1041 You determine these earnings as shown in the following two steps. 2011 irs form 1041 Multiply the amount distributed by a fraction. 2011 irs form 1041 The numerator is the basis (contributions not previously distributed) at the end of 2012 plus total contributions for 2013 and the denominator is the balance in the account at the end of 2013 plus the amount distributed during 2013. 2011 irs form 1041 Subtract the amount figured in (1) from the total amount distributed during 2013. 2011 irs form 1041 The result is the amount of earnings included in the distribution. 2011 irs form 1041 For an example, see steps (1) and (2) of the Example under Figuring the Taxable Portion of a Distribution, earlier. 2011 irs form 1041 The beneficiary or other person receiving the distribution must report this amount on Form 1040, line 21, or Form 1040NR, line 21, listing the type and amount of income on the dotted line. 2011 irs form 1041 Worksheet 7-3 Instructions. 2011 irs form 1041 Coverdell ESA—Taxable Distributions and Basis Line G. 2011 irs form 1041 Enter the total distributions received from all Coverdell ESAs during 2013. 2011 irs form 1041 Do not include amounts rolled over to another ESA within 60 days (only one rollover is allowed during any 12-month period). 2011 irs form 1041 Also, do not include excess contributions that were distributed with the related earnings (or less any loss) before the first day of the sixth month of the tax year following the year for which the contributions were made. 2011 irs form 1041 Line 2. 2011 irs form 1041 Your basis (amount already taxed) in this Coverdell ESA as of December 31, 2012, is the total of:   •All contributions to this Coverdell ESA before 2013 •Minus the tax-free portion of any distributions from this Coverdell ESA before 2013. 2011 irs form 1041   If your last distribution from this Coverdell ESA was before 2013, you must start with the basis in your account as of the end of the last year in which you took a distribution. 2011 irs form 1041 For years before 2002, you can find that amount on the last line of the worksheet in the Instructions for Form 8606, Nondeductible IRAs, that you completed for that year. 2011 irs form 1041 For years after 2001, you can find that amount by using the ending basis from the worksheet in Publication 970 for that year. 2011 irs form 1041 You can determine your basis in this Coverdell ESA as of December 31, 2012, by adding to the basis as of the end of that year any contributions made to that account after the year of the distribution and before 2013. 2011 irs form 1041 Line 4. 2011 irs form 1041 Enter the total distributions received from this Coverdell ESA in 2013. 2011 irs form 1041 Do not include amounts rolled over to another Coverdell ESA within 60 days (only one rollover is allowed during any 12-month period). 2011 irs form 1041   Also, do not include excess contributions that were distributed with the related earnings (or less any loss) before the first day of the sixth month of the tax year following the year of the contributions. 2011 irs form 1041 Line 7. 2011 irs form 1041 Enter the total value of this Coverdell ESA as of December 31, 2013, plus any outstanding rollovers contributed to the account after 2012, but before the end of the 60-day rollover period. 2011 irs form 1041 A statement should be sent to you by January 31, 2014, for this Coverdell ESA showing the value on December 31, 2013. 2011 irs form 1041   A rollover is a tax-free withdrawal from one Coverdell ESA that is contributed to another Coverdell ESA. 2011 irs form 1041 An outstanding rollover is any amount withdrawn within 60 days before the end of 2013 (November 2 through December 31) that was rolled over after December 31, 2013, but within the 60-day rollover period. 2011 irs form 1041 Worksheet 7-3. 2011 irs form 1041 Coverdell ESA—Taxable Distributions and Basis How to complete this worksheet. 2011 irs form 1041 • • • Complete Part I, lines A through H, on only one worksheet. 2011 irs form 1041  Complete a separate Part II, lines 1 through 15, for each of your Coverdell ESAs. 2011 irs form 1041  Complete Part III, the Summary (line 16), on only one worksheet. 2011 irs form 1041 Part I. 2011 irs form 1041 Qualified Education Expenses (Complete for total expenses)       A. 2011 irs form 1041 Enter your total qualified education expenses for 2013   A. 2011 irs form 1041   B. 2011 irs form 1041 Enter those qualified education expenses paid for with tax-free educational assistance (for example, tax-free scholarships, veterans' educational benefits, Pell grants, employer-provided educational assistance)   B. 2011 irs form 1041         C. 2011 irs form 1041 Enter those qualified higher education expenses deducted on Schedule C or C-EZ (Form 1040). 2011 irs form 1041 Schedule F (Form 1040), or as a miscellaneous itemized deduction on Schedule A (Form 1040 or 1040NR)   C. 2011 irs form 1041         D. 2011 irs form 1041 Enter those qualified higher education expenses on which  an American opportunity or lifetime learning credit was based   D. 2011 irs form 1041         E. 2011 irs form 1041 Add lines B, C, and D   D. 2011 irs form 1041   F. 2011 irs form 1041 Subtract line E from line A. 2011 irs form 1041 This is your adjusted qualified education expense for 2013   E. 2011 irs form 1041   G. 2011 irs form 1041 Enter your total distributions from all Coverdell ESAs during 2013. 2011 irs form 1041 Do not include rollovers  or the return of excess contributions (see instructions)   F. 2011 irs form 1041   H. 2011 irs form 1041 Divide line F by line G. 2011 irs form 1041 Enter the result as a decimal (rounded to at least 3 places). 2011 irs form 1041 If the  result is 1. 2011 irs form 1041 000 or more, enter 1. 2011 irs form 1041 000   G. 2011 irs form 1041 . 2011 irs form 1041 Part II. 2011 irs form 1041 Taxable Distributions and Basis (Complete separately for each account) 1. 2011 irs form 1041 Enter the amount contributed to this Coverdell ESA for 2013, including contributions made for 2013 from January 1, 2014, through April 15, 2014. 2011 irs form 1041 Do not include rollovers or the return of excess contributions   1. 2011 irs form 1041   2. 2011 irs form 1041 Enter your basis in this Coverdell ESA as of December 31, 2012 (see instructions)   2. 2011 irs form 1041   3. 2011 irs form 1041 Add lines 1 and 2   3. 2011 irs form 1041   4. 2011 irs form 1041 Enter the total distributions from this Coverdell ESA during 2013. 2011 irs form 1041 Do not include rollovers  or the return of excess contributions (see instructions)   4. 2011 irs form 1041   5. 2011 irs form 1041 Multiply line 4 by line H. 2011 irs form 1041 This is the amount of adjusted qualified  education expense attributable to this Coverdell ESA   5. 2011 irs form 1041         6. 2011 irs form 1041 Subtract line 5 from line 4   6. 2011 irs form 1041         7. 2011 irs form 1041 Enter the total value of this Coverdell ESA as of December 31, 2013,  plus any outstanding rollovers (see instructions)   7. 2011 irs form 1041         8. 2011 irs form 1041 Add lines 4 and 7   8. 2011 irs form 1041         9. 2011 irs form 1041 Divide line 3 by line 8. 2011 irs form 1041 Enter the result as a decimal (rounded to  at least 3 places). 2011 irs form 1041 If the result is 1. 2011 irs form 1041 000 or more, enter 1. 2011 irs form 1041 000   9. 2011 irs form 1041 . 2011 irs form 1041       10. 2011 irs form 1041 Multiply line 4 by line 9. 2011 irs form 1041 This is the amount of basis allocated to your  distributions, and is tax free   10. 2011 irs form 1041     Note. 2011 irs form 1041 If line 6 is zero, skip lines 11 through 13, enter -0- on line 14, and go to line 15. 2011 irs form 1041       11. 2011 irs form 1041 Subtract line 10 from line 4   11. 2011 irs form 1041   12. 2011 irs form 1041 Divide line 5 by line 4. 2011 irs form 1041 Enter the result as a decimal (rounded to  at least 3 places). 2011 irs form 1041 If the result is 1. 2011 irs form 1041 000 or more, enter 1. 2011 irs form 1041 000   12. 2011 irs form 1041 . 2011 irs form 1041       13. 2011 irs form 1041 Multiply line 11 by line 12. 2011 irs form 1041 This is the amount of qualified education  expenses allocated to your distributions, and is tax free   13. 2011 irs form 1041   14. 2011 irs form 1041 Subtract line 13 from line 11. 2011 irs form 1041 This is the portion of the distributions from this  Coverdell ESA in 2013 that you must include in income   14. 2011 irs form 1041   15. 2011 irs form 1041 Subtract line 10 from line 3. 2011 irs form 1041 This is your basis in this Coverdell ESA as of December 31, 2013   15. 2011 irs form 1041   Part III. 2011 irs form 1041 Summary (Complete only once)       16. 2011 irs form 1041 Taxable amount. 2011 irs form 1041 Add together all amounts on line 14 for all your Coverdell ESAs. 2011 irs form 1041 Enter here  and include on Form 1040, line 21, or Form 1040NR, line 21, listing the type and amount of income on the dotted line   16. 2011 irs form 1041   Prev  Up  Next   Home   More Online 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The 2011 Irs Form 1041

2011 irs form 1041 Publication 560 - Introductory Material Table of Contents Future Developments What's New Reminders IntroductionSEP plans. 2011 irs form 1041 SIMPLE plans. 2011 irs form 1041 Qualified plans. 2011 irs form 1041 Ordering forms and publications. 2011 irs form 1041 Tax questions. 2011 irs form 1041 Future Developments For the latest information about developments related to Publication 560, such as legislation enacted after we release it, go to www. 2011 irs form 1041 irs. 2011 irs form 1041 gov/pub560. 2011 irs form 1041 What's New Compensation limit increased for 2013 and 2014. 2011 irs form 1041  For 2013 the maximum compensation used for figuring contributions and benefits increases to $255,000. 2011 irs form 1041 This limit increases to $260,000 for 2014. 2011 irs form 1041 Elective deferral limit for 2013 and 2014. 2011 irs form 1041  The limit on elective deferrals, other than catch-up contributions, increases to $17,500 for 2013 and remains at $17,500 for 2014. 2011 irs form 1041 These limits apply for participants in SARSEPs, 401(k) plans (excluding SIMPLE plans), section 403(b) plans and section 457(b) plans. 2011 irs form 1041 Defined contribution limit increased for 2013 and 2014. 2011 irs form 1041  The limit on contributions, other than catch-up contributions, for a participant in a defined contribution plan increases to $51,000 for 2013. 2011 irs form 1041 This limit increases to $52,000 for 2014. 2011 irs form 1041 SIMPLE plan salary reduction contribution limit for 2013 and 2014. 2011 irs form 1041  The limit on salary reduction contributions, other than catch-up contributions, increases to $12,000 for 2013 and remains at $12,000 for 2014. 2011 irs form 1041 Catch-up contribution limit remains unchanged for 2013 and 2014. 2011 irs form 1041  A plan can permit participants who are age 50 or over at the end of the calendar year to make catch-up contributions in addition to elective deferrals and SIMPLE plan salary reduction contributions. 2011 irs form 1041 The catch-up contribution limitation for defined contribution plans other than SIMPLE plans remains unchanged at $5,500 for 2013 and 2014. 2011 irs form 1041 The catch-up contribution limitation for SIMPLE plans remains unchanged at $2,500 for 2013 and 2014. 2011 irs form 1041 The catch-up contributions a participant can make for a year cannot exceed the lesser of the following amounts. 2011 irs form 1041 The catch-up contribution limit. 2011 irs form 1041 The excess of the participant's compensation over the elective deferrals that are not catch-up contributions. 2011 irs form 1041 See “Catch-up contributions” under Contribution Limits and Limit on Elective Deferrals in chapters 3 and 4, respectively, for more information. 2011 irs form 1041 All section references are to the Internal Revenue Code, unless otherwise stated. 2011 irs form 1041 Reminders In-plan Roth rollovers. 2011 irs form 1041  Section 402A(c)(4) provides for a distribution from an individual's account in a 401(k) plan, other than from a designated Roth account, that is rolled over to the individual's designated Roth account in the same plan. 2011 irs form 1041 An in-plan Roth rollover is not treated as a distribution for most purposes. 2011 irs form 1041 Section 402A(c)(4) was added by the Small Business Jobs Act of 2010 and applies to distributions made after September 27, 2010. 2011 irs form 1041 For additional guidance on in-plan Roth rollovers, see Notice 2010-84, 2010-51 I. 2011 irs form 1041 R. 2011 irs form 1041 B. 2011 irs form 1041 872, available at  www. 2011 irs form 1041 irs. 2011 irs form 1041 gov/irb/2010-51_IRB/ar11. 2011 irs form 1041 html. 2011 irs form 1041 In-plan Roth rollovers expanded. 2011 irs form 1041  Beginning in 2013, a plan with designated Roth accounts can permit a participant to roll over amounts into a designated Roth account from his or her other accounts in the same plan, regardless of whether the participant is eligible for a distribution from the other accounts. 2011 irs form 1041 Section 402A(c)(4) was amended by the American Taxpayer Relief Act of 2012. 2011 irs form 1041 For more information, see Notice 2013-74, 2013-52 I. 2011 irs form 1041 R. 2011 irs form 1041 B. 2011 irs form 1041 819, available at www. 2011 irs form 1041 irs. 2011 irs form 1041 gov/irb/2013-52_IRB/ar11. 2011 irs form 1041 html. 2011 irs form 1041 Credit for startup costs. 2011 irs form 1041  You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SEP, SIMPLE, or qualified plan. 2011 irs form 1041 The credit equals 50% of the cost to set up and administer the plan and educate employees about the plan, up to a maximum of $500 per year for each of the first 3 years of the plan. 2011 irs form 1041 You can choose to start claiming the credit in the tax year before the tax year in which the plan becomes effective. 2011 irs form 1041 You must have had 100 or fewer employees who received at least $5,000 in compensation from you for the preceding year. 2011 irs form 1041 At least one participant must be a non-highly compensated employee. 2011 irs form 1041 The employees generally cannot be substantially the same employees for whom contributions were made or benefits accrued under a plan of any of the following employers in the 3-tax-year period immediately before the first year to which the credit applies. 2011 irs form 1041 You. 2011 irs form 1041 A member of a controlled group that includes you. 2011 irs form 1041 A predecessor of (1) or (2). 2011 irs form 1041 The credit is part of the general business credit, which can be carried back or forward to other tax years if it cannot be used in the current year. 2011 irs form 1041 However, the part of the general business credit attributable to the small employer pension plan startup cost credit cannot be carried back to a tax year beginning before January 1, 2002. 2011 irs form 1041 You cannot deduct the part of the startup costs equal to the credit claimed for a tax year, but you can choose not to claim the allowable credit for a tax year. 2011 irs form 1041 To take the credit, use Form 8881, Credit for Small Employer Pension Plan Startup Costs. 2011 irs form 1041 Retirement savings contributions credit. 2011 irs form 1041  Retirement plan participants (including self-employed individuals) who make contributions to their plan may qualify for the retirement savings contribution credit. 2011 irs form 1041 The maximum contribution eligible for the credit is $2,000. 2011 irs form 1041 To take the credit, use Form 8880, Credit for Qualified Retirement Savings Contributions. 2011 irs form 1041 For more information on who is eligible for the credit, retirement plan contributions eligible for the credit and how to figure the credit, see Form 8880 and its instructions or go to the IRS website and search Retirement Topics-Retirement Savings Contributions Credit (Saver's Credit). 2011 irs form 1041 Photographs of missing children. 2011 irs form 1041  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. 2011 irs form 1041 Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. 2011 irs form 1041 You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. 2011 irs form 1041 Introduction This publication discusses retirement plans you can set up and maintain for yourself and your employees. 2011 irs form 1041 In this publication, “you” refers to the employer. 2011 irs form 1041 See chapter 1 for the definition of the term employer and the definitions of other terms used in this publication. 2011 irs form 1041 This publication covers the following types of retirement plans. 2011 irs form 1041 SEP (simplified employee pension) plans. 2011 irs form 1041 SIMPLE (savings incentive match plan for employees) plans. 2011 irs form 1041 Qualified plans (also called H. 2011 irs form 1041 R. 2011 irs form 1041 10 plans or Keogh plans when covering self-employed individuals), including 401(k) plans. 2011 irs form 1041 SEP, SIMPLE, and qualified plans offer you and your employees a tax-favored way to save for retirement. 2011 irs form 1041 You can deduct contributions you make to the plan for your employees. 2011 irs form 1041 If you are a sole proprietor, you can deduct contributions you make to the plan for yourself. 2011 irs form 1041 You can also deduct trustees' fees if contributions to the plan do not cover them. 2011 irs form 1041 Earnings on the contributions are generally tax free until you or your employees receive distributions from the plan. 2011 irs form 1041 Under a 401(k) plan, employees can have you contribute limited amounts of their before-tax (after-tax, in the case of a qualified Roth contribution program) pay to the plan. 2011 irs form 1041 These amounts (and the earnings on them) are generally tax free until your employees receive distributions from the plan or, in the case of a qualified distribution from a designated Roth account, completely tax free. 2011 irs form 1041 What this publication covers. 2011 irs form 1041   This publication contains the information you need to understand the following topics. 2011 irs form 1041 What type of plan to set up. 2011 irs form 1041 How to set up a plan. 2011 irs form 1041 How much you can contribute to a plan. 2011 irs form 1041 How much of your contribution is deductible. 2011 irs form 1041 How to treat certain distributions. 2011 irs form 1041 How to report information about the plan to the IRS and your employees. 2011 irs form 1041 Basic features of SEP, SIMPLE, and qualified plans. 2011 irs form 1041 The key rules for SEP, SIMPLE, and qualified plans are outlined in Table 1. 2011 irs form 1041 SEP plans. 2011 irs form 1041   SEPs provide a simplified method for you to make contributions to a retirement plan for yourself and your employees. 2011 irs form 1041 Instead of setting up a profit-sharing or money purchase plan with a trust, you can adopt a SEP agreement and make contributions directly to a traditional individual retirement account or a traditional individual retirement annuity (SEP-IRA) set up for yourself and each eligible employee. 2011 irs form 1041 SIMPLE plans. 2011 irs form 1041   Generally, if you had 100 or fewer employees who received at least $5,000 in compensation last year, you can set up a SIMPLE plan. 2011 irs form 1041 Under a SIMPLE plan, employees can choose to make salary reduction contributions rather than receiving these amounts as part of their regular pay. 2011 irs form 1041 In addition, you will contribute matching or nonelective contributions. 2011 irs form 1041 The two types of SIMPLE plans are the SIMPLE IRA plan and the SIMPLE 401(k) plan. 2011 irs form 1041 Qualified plans. 2011 irs form 1041   The qualified plan rules are more complex than the SEP plan and SIMPLE plan rules. 2011 irs form 1041 However, there are advantages to qualified plans, such as increased flexibility in designing plans and increased contribution and deduction limits in some cases. 2011 irs form 1041 Table 1. 2011 irs form 1041 Key Retirement Plan Rules for 2013 Type  of  Plan Last Date for Contribution Maximum Contribution Maximum Deduction When To Set Up Plan SEP Due date of employer's return (including extensions). 2011 irs form 1041 Smaller of $51,000 or 25%1 of participant's compensation. 2011 irs form 1041 2 25%1 of all participants' compensation. 2011 irs form 1041 2 Any time up to the due date of employer's return (including extensions). 2011 irs form 1041 SIMPLE IRA and SIMPLE 401(k) Salary reduction contributions: 30 days after the end of the month for which the contributions are to be made. 2011 irs form 1041 4  Matching or nonelective contributions: Due date of employer's return (including extensions). 2011 irs form 1041 Employee contribution: Salary reduction contribution up to $12,000, $14,500 if age 50 or over. 2011 irs form 1041   Employer contribution:  Either dollar-for-dollar matching contributions, up to 3% of employee's compensation,3 or fixed nonelective contributions of 2% of compensation. 2011 irs form 1041 2 Same as maximum contribution. 2011 irs form 1041 Any time between 1/1 and 10/1 of the calendar year. 2011 irs form 1041   For a new employer coming into existence after 10/1, as soon as administratively feasible. 2011 irs form 1041 Qualified Plan: Defined Contribution Plan  Elective deferral: Due date of employer's return (including extensions). 2011 irs form 1041 4   Employer contribution: Money Purchase or Profit-Sharing: Due date of employer's return (including extensions). 2011 irs form 1041  Employee contribution: Elective deferral up to $17,500, $23,000 if age 50 or over. 2011 irs form 1041   Employer contribution: Money Purchase: Smaller of $51,000 or 100%1 of participant's compensation. 2011 irs form 1041 2  Profit-Sharing: Smaller of $51,000 or 100%1 of participant's compensation. 2011 irs form 1041 2  25%1 of all participants' compensation2, plus amount of elective deferrals made. 2011 irs form 1041   By the end of the tax year. 2011 irs form 1041 Qualified Plan: Defined Benefit Plan Contributions generally must be paid in quarterly installments, due 15 days after the end of each quarter. 2011 irs form 1041 See Minimum Funding Requirement in chapter 4. 2011 irs form 1041 Amount needed to provide an annual benefit no larger than the smaller of $205,000 or 100% of the participant's average compensation for his or her highest 3 consecutive calendar years. 2011 irs form 1041 Based on actuarial assumptions and computations. 2011 irs form 1041 By the end of the tax year. 2011 irs form 1041 1Net earnings from self-employment must take the contribution into account. 2011 irs form 1041 See Deduction Limit for Self-Employed Individuals in chapters 2 and 4 . 2011 irs form 1041  2Compensation is generally limited to $255,000 in 2013. 2011 irs form 1041  3Under a SIMPLE 401(k) plan, compensation is generally limited to $255,000 in 2013. 2011 irs form 1041  4Certain plans subject to Department of Labor rules may have an earlier due date for salary reduction contributions and elective deferrals. 2011 irs form 1041 What this publication does not cover. 2011 irs form 1041   Although the purpose of this publication is to provide general information about retirement plans you can set up for your employees, it does not contain all the rules and exceptions that apply to these plans. 2011 irs form 1041 You may also need professional help and guidance. 2011 irs form 1041   Also, this publication does not cover all the rules that may be of interest to employees. 2011 irs form 1041 For example, it does not cover the following topics. 2011 irs form 1041 The comprehensive IRA rules an employee needs to know. 2011 irs form 1041 These rules are covered in Publication 590, Individual Retirement Arrangements (IRAs). 2011 irs form 1041 The comprehensive rules that apply to distributions from retirement plans. 2011 irs form 1041 These rules are covered in Publication 575, Pension and Annuity Income. 2011 irs form 1041 The comprehensive rules that apply to section 403(b) plans. 2011 irs form 1041 These rules are covered in Publication 571, Tax-Sheltered Annuity Plans (403(b) Plans). 2011 irs form 1041 Comments and suggestions. 2011 irs form 1041   We welcome your comments about this publication and your suggestions for future editions. 2011 irs form 1041   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. 2011 irs form 1041 NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. 2011 irs form 1041 Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. 2011 irs form 1041   You can send your comments from www. 2011 irs form 1041 irs. 2011 irs form 1041 gov/formspubs. 2011 irs form 1041 Click on “More Information” and then on “Give us feedback. 2011 irs form 1041 ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. 2011 irs form 1041 Ordering forms and publications. 2011 irs form 1041   Visit www. 2011 irs form 1041 irs. 2011 irs form 1041 gov/formspubs to download forms  and publications, call 1-800-TAX-FORM  (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. 2011 irs form 1041 Internal Revenue Service 1201 N. 2011 irs form 1041 Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. 2011 irs form 1041   If you have a tax question, check the information available on IRS. 2011 irs form 1041 gov or call 1-800-829-1040. 2011 irs form 1041 We cannot answer tax questions sent to either of the above addresses. 2011 irs form 1041 Note. 2011 irs form 1041 Forms filed electronically with the Department of Labor are not available on the IRS website. 2011 irs form 1041 Instead, see www. 2011 irs form 1041 efast. 2011 irs form 1041 dol. 2011 irs form 1041 gov. 2011 irs form 1041 Prev  Up  Next   Home   More Online Publications