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2012 Tax

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2012 Tax

2012 tax 10. 2012 tax   Retirement Plans, Pensions, and Annuities Table of Contents What's New Reminder IntroductionThe General Rule. 2012 tax Individual retirement arrangements (IRAs). 2012 tax Civil service retirement benefits. 2012 tax Useful Items - You may want to see: General InformationIn-plan rollovers to designated Roth accounts. 2012 tax How To Report Cost (Investment in the Contract) Taxation of Periodic PaymentsExclusion limited to cost. 2012 tax Exclusion not limited to cost. 2012 tax Simplified Method Taxation of Nonperiodic PaymentsLump-Sum Distributions RolloversIn-plan rollovers to designated Roth accounts. 2012 tax Special Additional TaxesTax on Early Distributions Tax on Excess Accumulation Survivors and Beneficiaries What's New 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), 408, 408A, or 457(b) plans). 2012 tax However, these distributions are taken into account when determining the modified adjusted gross income threshold. 2012 tax Distributions from a nonqualified retirement plan are included in net investment income. 2012 tax See Form 8960, Net Investment Income Tax - Individuals, Estates, and Trusts, and its instructions for more information. 2012 tax Reminder Starting in 2013, the American Taxpayer Relief Act of 2012 expanded the rules for in-plan Roth rollovers to include more taxpayers. 2012 tax For more information, see Designated Roth accounts discussed later. 2012 tax Introduction This chapter discusses the tax treatment of distributions you receive from: An employee pension or annuity from a qualified plan, A disability retirement, and A purchased commercial annuity. 2012 tax What is not covered in this chapter. 2012 tax   The following topics are not discussed in this chapter. 2012 tax The General Rule. 2012 tax   This is the method generally used to determine the tax treatment of pension and annuity income from nonqualified plans (including commercial annuities). 2012 tax For a qualified plan, you generally cannot use the General Rule unless your annuity starting date is before November 19, 1996. 2012 tax For more information about the General Rule, see Publication 939, General Rule for Pensions and Annuities. 2012 tax Individual retirement arrangements (IRAs). 2012 tax   Information on the tax treatment of amounts you receive from an IRA is in chapter 17. 2012 tax Civil service retirement benefits. 2012 tax    If you are retired from the federal government (regular, phased, or disability retirement), see Publication 721, Tax Guide to U. 2012 tax S. 2012 tax Civil Service Retirement Benefits. 2012 tax Publication 721 also covers the information that you need if you are the survivor or beneficiary of a federal employee or retiree who died. 2012 tax Useful Items - You may want to see: Publication 575 Pension and Annuity Income 721 Tax Guide to U. 2012 tax S. 2012 tax Civil Service Retirement Benefits 939 General Rule for Pensions and Annuities Form (and Instructions) W-4P Withholding Certificate for Pension or Annuity Payments 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. 2012 tax 4972 Tax on Lump-Sum Distributions 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts General Information Designated Roth accounts. 2012 tax   A designated Roth account is a separate account created under a qualified Roth contribution program to which participants may elect to have part or all of their elective deferrals to a 401(k), 403(b), or 457(b) plan designated as Roth contributions. 2012 tax Elective deferrals that are designated as Roth contributions are included in your income. 2012 tax However, qualified distributions are not included in your income. 2012 tax See Publication 575 for more information. 2012 tax In-plan rollovers to designated Roth accounts. 2012 tax   If you are a participant in a 401(k), 403(b), or 457(b) plan, your plan may permit you to roll over amounts in those plans to a designated Roth account within the same plan. 2012 tax The rollover of any untaxed amounts must be included in income. 2012 tax See Publication 575 for more information. 2012 tax More than one program. 2012 tax   If you receive benefits from more than one program under a single trust or plan of your employer, such as a pension plan and a profit-sharing plan, you may have to figure the taxable part of each pension or annuity contract separately. 2012 tax Your former employer or the plan administrator should be able to tell you if you have more than one pension or annuity contract. 2012 tax Section 457 deferred compensation plans. 2012 tax    If you work for a state or local government or for a tax-exempt organization, you may be able to participate in a section 457 deferred compensation plan. 2012 tax If your plan is an eligible plan, you are not taxed currently on pay that is deferred under the plan or on any earnings from the plan's investment of the deferred pay. 2012 tax You are generally taxed on amounts deferred in an eligible state or local government plan only when they are distributed from the plan. 2012 tax You are taxed on amounts deferred in an eligible tax-exempt organization plan when they are distributed or otherwise made available to you. 2012 tax   Your 457(b) plan may have a designated Roth account option. 2012 tax If so, you may be able to roll over amounts to the designated Roth account or make contributions. 2012 tax Elective deferrals to a designated Roth account are included in your income. 2012 tax Qualified distributions from a designated Roth account are not subject to tax. 2012 tax   This chapter covers the tax treatment of benefits under eligible section 457 plans, but it does not cover the treatment of deferrals. 2012 tax For information on deferrals under section 457 plans, see Retirement Plan Contributions under Employee Compensation in Publication 525, Taxable and Nontaxable Income. 2012 tax   For general information on these deferred compensation plans, see Section 457 Deferred Compensation Plans in Publication 575. 2012 tax Disability pensions. 2012 tax   If you retired on disability, you generally must include in income any disability pension you receive under a plan that is paid for by your employer. 2012 tax You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A until you reach minimum retirement age. 2012 tax Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. 2012 tax    You may be entitled to a tax credit if you were permanently and totally disabled when you retired. 2012 tax For information on the credit for the elderly or the disabled, see chapter 33. 2012 tax   Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. 2012 tax Report the payments on Form 1040, lines 16a and 16b, or on Form 1040A, lines 12a and 12b. 2012 tax    Disability payments for injuries incurred as a direct result of a terrorist attack directed against the United States (or its allies) are not included in income. 2012 tax For more information about payments to survivors of terrorist attacks, see Publication 3920, Tax Relief for Victims of Terrorist Attacks. 2012 tax   For more information on how to report disability pensions, including military and certain government disability pensions, see chapter 5. 2012 tax Retired public safety officers. 2012 tax   An eligible retired public safety officer can elect to exclude from income distributions of up to $3,000 made directly from a government retirement plan to the provider of accident, health, or long-term disability insurance. 2012 tax See Insurance Premiums for Retired Public Safety Officers in Publication 575 for more information. 2012 tax Railroad retirement benefits. 2012 tax   Part of any railroad retirement benefits you receive is treated for tax purposes as social security benefits, and part is treated as an employee pension. 2012 tax For information about railroad retirement benefits treated as social security benefits, see Publication 915, Social Security and Equivalent Railroad Retirement Benefits. 2012 tax For information about railroad retirement benefits treated as an employee pension, see Railroad Retirement Benefits in Publication 575. 2012 tax Withholding and estimated tax. 2012 tax   The payer of your pension, profit-sharing, stock bonus, annuity, or deferred compensation plan will withhold income tax on the taxable parts of amounts paid to you. 2012 tax You can tell the payer how much to withhold, or not to withhold, by filing Form W-4P. 2012 tax If you choose not to have tax withheld, or you do not have enough tax withheld, you may have to pay estimated tax. 2012 tax   If you receive an eligible rollover distribution, you cannot choose not to have tax withheld. 2012 tax Generally, 20% will be withheld, but no tax will be withheld on a direct rollover of an eligible rollover distribution. 2012 tax See Direct rollover option under Rollovers, later. 2012 tax   For more information, see Pensions and Annuities under Tax Withholding for 2014 in chapter 4. 2012 tax Qualified plans for self-employed individuals. 2012 tax   Qualified plans set up by self-employed individuals are sometimes called Keogh or H. 2012 tax R. 2012 tax 10 plans. 2012 tax Qualified plans can be set up by sole proprietors, partnerships (but not a partner), and corporations. 2012 tax They can cover self-employed persons, such as the sole proprietor or partners, as well as regular (common-law) employees. 2012 tax    Distributions from a qualified plan are usually fully taxable because most recipients have no cost basis. 2012 tax If you have an investment (cost) in the plan, however, your pension or annuity payments from a qualified plan are taxed under the Simplified Method. 2012 tax For more information about qualified plans, see Publication 560, Retirement Plans for Small Business. 2012 tax Purchased annuities. 2012 tax   If you receive pension or annuity payments from a privately purchased annuity contract from a commercial organization, such as an insurance company, you generally must use the General Rule to figure the tax-free part of each annuity payment. 2012 tax For more information about the General Rule, get Publication 939. 2012 tax Also, see Variable Annuities in Publication 575 for the special provisions that apply to these annuity contracts. 2012 tax Loans. 2012 tax   If you borrow money from your retirement plan, you must treat the loan as a nonperiodic distribution from the plan unless certain exceptions apply. 2012 tax This treatment also applies to any loan under a contract purchased under your retirement plan, and to the value of any part of your interest in the plan or contract that you pledge or assign. 2012 tax This means that you must include in income all or part of the amount borrowed. 2012 tax Even if you do not have to treat the loan as a nonperiodic distribution, you may not be able to deduct the interest on the loan in some situations. 2012 tax For details, see Loans Treated as Distributions in Publication 575. 2012 tax For information on the deductibility of interest, see chapter 23. 2012 tax Tax-free exchange. 2012 tax   No gain or loss is recognized on an exchange of an annuity contract for another annuity contract if the insured or annuitant remains the same. 2012 tax However, if an annuity contract is exchanged for a life insurance or endowment contract, any gain due to interest accumulated on the contract is ordinary income. 2012 tax See Transfers of Annuity Contracts in Publication 575 for more information about exchanges of annuity contracts. 2012 tax How To Report If you file Form 1040, report your total annuity on line 16a and the taxable part on line 16b. 2012 tax If your pension or annuity is fully taxable, enter it on line 16b; do not make an entry on line 16a. 2012 tax If you file Form 1040A, report your total annuity on line 12a and the taxable part on line 12b. 2012 tax If your pension or annuity is fully taxable, enter it on line 12b; do not make an entry on line 12a. 2012 tax More than one annuity. 2012 tax   If you receive more than one annuity and at least one of them is not fully taxable, enter the total amount received from all annuities on Form 1040, line 16a, or Form 1040A, line 12a, and enter the taxable part on Form 1040, line 16b, or Form 1040A, line 12b. 2012 tax If all the annuities you receive are fully taxable, enter the total of all of them on Form 1040, line 16b, or Form 1040A, line 12b. 2012 tax Joint return. 2012 tax   If you file a joint return and you and your spouse each receive one or more pensions or annuities, report the total of the pensions and annuities on Form 1040, line 16a, or Form 1040A, line 12a, and report the taxable part on Form 1040, line 16b, or Form 1040A, line 12b. 2012 tax Cost (Investment in the Contract) Before you can figure how much, if any, of a distribution from your pension or annuity plan is taxable, you must determine your cost (your investment in the contract) in the pension or annuity. 2012 tax Your total cost in the plan includes the total premiums, contributions, or other amounts you paid. 2012 tax This includes the amounts your employer contributed that were taxable to you when paid. 2012 tax Cost does not include any amounts you deducted or were excluded from your income. 2012 tax From this total cost, subtract any refunds of premiums, rebates, dividends, unrepaid loans that were not included in your income, or other tax-free amounts that you received by the later of the annuity starting date or the date on which you received your first payment. 2012 tax Your annuity starting date is the later of the first day of the first period for which you received a payment or the date the plan's obligations became fixed. 2012 tax Designated Roth accounts. 2012 tax   Your cost in these accounts is your designated Roth contributions that were included in your income as wages subject to applicable withholding requirements. 2012 tax Your cost will also include any in-plan Roth rollovers you included in income. 2012 tax Foreign employment contributions. 2012 tax   If you worked in a foreign country and contributions were made to your retirement plan, special rules apply in determining your cost. 2012 tax See Foreign employment contributions under Cost (Investment in the Contract) in Publication 575. 2012 tax Taxation of Periodic Payments Fully taxable payments. 2012 tax   Generally, if you did not pay any part of the cost of your employee pension or annuity and your employer did not withhold part of the cost from your pay while you worked, the amounts you receive each year are fully taxable. 2012 tax You must report them on your income tax return. 2012 tax Partly taxable payments. 2012 tax   If you paid part of the cost of your pension or annuity, you are not taxed on the part of the pension or annuity you receive that represents a return of your cost. 2012 tax The rest of the amount you receive is generally taxable. 2012 tax You figure the tax-free part of the payment using either the Simplified Method or the General Rule. 2012 tax Your annuity starting date and whether or not your plan is qualified determine which method you must or may use. 2012 tax   If your annuity starting date is after November 18, 1996, and your payments are from a qualified plan, you must use the Simplified Method. 2012 tax Generally, you must use the General Rule if your annuity is paid under a nonqualified plan, and you cannot use this method if your annuity is paid under a qualified plan. 2012 tax   If you had more than one partly taxable pension or annuity, figure the tax-free part and the taxable part of each separately. 2012 tax   If your annuity is paid under a qualified plan and your annuity starting date is after July 1, 1986, and before November 19, 1996, you could have chosen to use either the General Rule or the Simplified Method. 2012 tax Exclusion limit. 2012 tax   Your annuity starting date determines the total amount of annuity payments that you can exclude from your taxable income over the years. 2012 tax Once your annuity starting date is determined, it does not change. 2012 tax If you calculate the taxable portion of your annuity payments using the simplified method worksheet, the annuity starting date determines the recovery period for your cost. 2012 tax That recovery period begins on your annuity starting date and is not affected by the date you first complete the worksheet. 2012 tax Exclusion limited to cost. 2012 tax   If your annuity starting date is after 1986, the total amount of annuity income that you can exclude over the years as a recovery of the cost cannot exceed your total cost. 2012 tax Any unrecovered cost at your (or the last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. 2012 tax This deduction is not subject to the 2%-of-adjusted-gross-income limit. 2012 tax Exclusion not limited to cost. 2012 tax   If your annuity starting date is before 1987, you can continue to take your monthly exclusion for as long as you receive your annuity. 2012 tax If you chose a joint and survivor annuity, your survivor can continue to take the survivor's exclusion figured as of the annuity starting date. 2012 tax The total exclusion may be more than your cost. 2012 tax Simplified Method Under the Simplified Method, you figure the tax-free part of each annuity payment by dividing your cost by the total number of anticipated monthly payments. 2012 tax For an annuity that is payable for the lives of the annuitants, this number is based on the annuitants' ages on the annuity starting date and is determined from a table. 2012 tax For any other annuity, this number is the number of monthly annuity payments under the contract. 2012 tax Who must use the Simplified Method. 2012 tax   You must use the Simplified Method if your annuity starting date is after November 18, 1996, and you both: Receive pension or annuity payments from a qualified employee plan, qualified employee annuity, or a tax-sheltered annuity (403(b)) plan, and On your annuity starting date, you were either under age 75, or entitled to less than 5 years of guaranteed payments. 2012 tax Guaranteed payments. 2012 tax   Your annuity contract provides guaranteed payments if a minimum number of payments or a minimum amount (for example, the amount of your investment) is payable even if you and any survivor annuitant do not live to receive the minimum. 2012 tax If the minimum amount is less than the total amount of the payments you are to receive, barring death, during the first 5 years after payments begin (figured by ignoring any payment increases), you are entitled to less than 5 years of guaranteed payments. 2012 tax How to use the Simplified Method. 2012 tax    Complete the Simplified Method Worksheet in Publication 575 to figure your taxable annuity for 2013. 2012 tax Single-life annuity. 2012 tax    If your annuity is payable for your life alone, use Table 1 at the bottom of the worksheet to determine the total number of expected monthly payments. 2012 tax Enter on line 3 the number shown for your age at the annuity starting date. 2012 tax Multiple-lives annuity. 2012 tax   If your annuity is payable for the lives of more than one annuitant, use Table 2 at the bottom of the worksheet to determine the total number of expected monthly payments. 2012 tax Enter on line 3 the number shown for the combined ages of you and the youngest survivor annuitant at the annuity starting date. 2012 tax   However, if your annuity starting date is before 1998, do not use Table 2 and do not combine the annuitants' ages. 2012 tax Instead you must use Table 1 and enter on line 3 the number shown for the primary annuitant's age on the annuity starting date. 2012 tax    Be sure to keep a copy of the completed worksheet; it will help you figure your taxable annuity next year. 2012 tax Example. 2012 tax Bill Smith, age 65, began receiving retirement benefits in 2013, under a joint and survivor annuity. 2012 tax Bill's annuity starting date is January 1, 2013. 2012 tax The benefits are to be paid for the joint lives of Bill and his wife Kathy, age 65. 2012 tax Bill had contributed $31,000 to a qualified plan and had received no distributions before the annuity starting date. 2012 tax Bill is to receive a retirement benefit of $1,200 a month, and Kathy is to receive a monthly survivor benefit of $600 upon Bill's death. 2012 tax Bill must use the Simplified Method to figure his taxable annuity because his payments are from a qualified plan and he is under age 75. 2012 tax Because his annuity is payable over the lives of more than one annuitant, he uses his and Kathy's combined ages and Table 2 at the bottom of the worksheet in completing line 3 of the worksheet. 2012 tax His completed worksheet is shown in Worksheet 10-A. 2012 tax Bill's tax-free monthly amount is $100 ($31,000 ÷ 310) as shown on line 4 of the worksheet. 2012 tax Upon Bill's death, if Bill has not recovered the full $31,000 investment, Kathy will also exclude $100 from her $600 monthly payment. 2012 tax The full amount of any annuity payments received after 310 payments are paid must be included in gross income. 2012 tax If Bill and Kathy die before 310 payments are made, a miscellaneous itemized deduction will be allowed for the unrecovered cost on the final income tax return of the last to die. 2012 tax This deduction is not subject to the 2%-of-adjusted- gross-income limit. 2012 tax Worksheet 10-A. 2012 tax Simplified Method Worksheet for Bill Smith 1. 2012 tax Enter the total pension or annuity payments received this year. 2012 tax Also, add this amount to the total for Form 1040, line 16a, or Form 1040A, line 12a 1. 2012 tax 14,400 2. 2012 tax Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion*. 2012 tax See Cost (Investment in the Contract) , earlier 2. 2012 tax 31,000       Note: If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year's worksheet on line 4 below (even if the amount of your pension or annuity has changed). 2012 tax Otherwise, go to line 3. 2012 tax         3. 2012 tax Enter the appropriate number from Table 1 below. 2012 tax But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, enter the appropriate number from Table 2 below 3. 2012 tax 310     4. 2012 tax Divide line 2 by the number on line 3 4. 2012 tax 100     5. 2012 tax Multiply line 4 by the number of months for which this year's payments were made. 2012 tax If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. 2012 tax Otherwise, go to line 6 5. 2012 tax 1,200     6. 2012 tax Enter any amounts previously recovered tax free in years after 1986. 2012 tax This is the amount shown on line 10 of your worksheet for last year 6. 2012 tax -0-     7. 2012 tax Subtract line 6 from line 2 7. 2012 tax 31,000     8. 2012 tax Enter the smaller of line 5 or line 7 8. 2012 tax 1,200 9. 2012 tax Taxable amount for year. 2012 tax Subtract line 8 from line 1. 2012 tax Enter the result, but not less than zero. 2012 tax Also, add this amount to the total for Form 1040, line 16b, or Form 1040A, line 12b 9. 2012 tax 13,200   Note: If your Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. 2012 tax If you are a retired public safety officer, see Insurance Premiums for Retired Public Safety Officers in Publication 575 before entering an amount on your tax return. 2012 tax     10. 2012 tax Was your annuity starting date before 1987? □ Yes. 2012 tax STOP. 2012 tax Do not complete the rest of this worksheet. 2012 tax  ☑ No. 2012 tax Add lines 6 and 8. 2012 tax This is the amount you have recovered tax free through 2013. 2012 tax You will need this number if you need to fill out this worksheet next year 10. 2012 tax 1,200 11. 2012 tax Balance of cost to be recovered. 2012 tax Subtract line 10 from line 2. 2012 tax If zero, you will not have to complete this worksheet next year. 2012 tax The payments you receive next year will generally be fully taxable 11. 2012 tax 29,800 TABLE 1 FOR LINE 3 ABOVE   AND your annuity starting date was— IF the age at annuity starting date was. 2012 tax . 2012 tax . 2012 tax before November 19, 1996, enter on line 3. 2012 tax . 2012 tax . 2012 tax after November 18, 1996, enter on line 3. 2012 tax . 2012 tax . 2012 tax 55 or under 300 360 56–60 260 310 61–65 240 260 66–70 170 210 71 or older 120 160 TABLE 2 FOR LINE 3 ABOVE IF the combined ages at annuity starting date were. 2012 tax . 2012 tax . 2012 tax   THEN enter on line 3. 2012 tax . 2012 tax . 2012 tax 110 or under   410 111–120   360 121–130   310 131–140   260 141 or older   210 * A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996. 2012 tax Who must use the General Rule. 2012 tax   You must use the General Rule if you receive pension or annuity payments from: A nonqualified plan (such as a private annuity, a purchased commercial annuity, or a nonqualified employee plan), or A qualified plan if you are age 75 or older on your annuity starting date and your annuity payments are guaranteed for at least 5 years. 2012 tax Annuity starting before November 19, 1996. 2012 tax   If your annuity starting date is after July 1, 1986, and before November 19, 1996, you had to use the General Rule for either circumstance just described. 2012 tax You also had to use it for any fixed-period annuity. 2012 tax If you did not have to use the General Rule, you could have chosen to use it. 2012 tax If your annuity starting date is before July 2, 1986, you had to use the General Rule unless you could use the Three-Year Rule. 2012 tax   If you had to use the General Rule (or chose to use it), you must continue to use it each year that you recover your cost. 2012 tax Who cannot use the General Rule. 2012 tax   You cannot use the General Rule if you receive your pension or annuity from a qualified plan and none of the circumstances described in the preceding discussions apply to you. 2012 tax See Who must use the Simplified Method , earlier. 2012 tax More information. 2012 tax   For complete information on using the General Rule, including the actuarial tables you need, see Publication 939. 2012 tax Taxation of Nonperiodic Payments Nonperiodic distributions are also known as amounts not received as an annuity. 2012 tax They include all payments other than periodic payments and corrective distributions. 2012 tax Examples of nonperiodic payments are cash withdrawals, distributions of current earnings, certain loans, and the value of annuity contracts transferred without full and adequate consideration. 2012 tax Corrective distributions of excess plan contributions. 2012 tax   Generally, if the contributions made for you during the year to certain retirement plans exceed certain limits, the excess is taxable to you. 2012 tax To correct an excess, your plan may distribute it to you (along with any income earned on the excess). 2012 tax For information on plan contribution limits and how to report corrective distributions of excess contributions, see Retirement Plan Contributions under Employee Compensation in Publication 525. 2012 tax Figuring the taxable amount of nonperiodic payments. 2012 tax   How you figure the taxable amount of a nonperiodic distribution depends on whether it is made before the annuity starting date, or on or after the annuity starting date. 2012 tax If it is made before the annuity starting date, its tax treatment also depends on whether it is made under a qualified or nonqualified plan. 2012 tax If it is made under a nonqualified plan, its tax treatment depends on whether it fully discharges the contract, is received under certain life insurance or endowment contracts, or is allocable to an investment you made before August 14, 1982. 2012 tax Annuity starting date. 2012 tax   The annuity starting date is either the first day of the first period for which you receive an annuity payment under the contract or the date on which the obligation under the contract becomes fixed, whichever is later. 2012 tax Distribution on or after annuity starting date. 2012 tax   If you receive a nonperiodic payment from your annuity contract on or after the annuity starting date, you generally must include all of the payment in gross income. 2012 tax Distribution before annuity starting date. 2012 tax   If you receive a nonperiodic distribution before the annuity starting date from a qualified retirement plan, you generally can allocate only part of it to the cost of the contract. 2012 tax You exclude from your gross income the part that you allocate to the cost. 2012 tax You include the remainder in your gross income. 2012 tax   If you receive a nonperiodic distribution before the annuity starting date from a plan other than a qualified retirement plan (nonqualified plan), it is allocated first to earnings (the taxable part) and then to the cost of the contract (the tax-free part). 2012 tax This allocation rule applies, for example, to a commercial annuity contract you bought directly from the issuer. 2012 tax    Distributions from nonqualified plans are subject to the net investment income tax. 2012 tax See the Instructions for Form 8960. 2012 tax   For more information, see Figuring the Taxable Amount under Taxation of Nonperiodic Payments in Publication 575. 2012 tax Lump-Sum Distributions This section on lump-sum distributions only applies if the plan participant was born before January 2, 1936. 2012 tax If the plan participant was born after January 1, 1936, the taxable amount of this nonperiodic payment is reported as discussed earlier. 2012 tax A lump-sum distribution is the distribution or payment in one tax year of a plan participant's entire balance from all of the employer's qualified plans of one kind (for example, pension, profit-sharing, or stock bonus plans). 2012 tax A distribution from a nonqualified plan (such as a privately purchased commercial annuity or a section 457 deferred compensation plan of a state or local government or tax-exempt organization) cannot qualify as a lump-sum distribution. 2012 tax The participant's entire balance from a plan does not include certain forfeited amounts. 2012 tax It also does not include any deductible voluntary employee contributions allowed by the plan after 1981 and before 1987. 2012 tax For more information about distributions that do not qualify as lump-sum distributions, see Distributions that do not qualify under Lump-Sum Distributions in Publication 575. 2012 tax If you receive a lump-sum distribution from a qualified employee plan or qualified employee annuity and the plan participant was born before January 2, 1936, you may be able to elect optional methods of figuring the tax on the distribution. 2012 tax The part from active participation in the plan before 1974 may qualify as capital gain subject to a 20% tax rate. 2012 tax The part from participation after 1973 (and any part from participation before 1974 that you do not report as capital gain) is ordinary income. 2012 tax You may be able to use the 10-year tax option, discussed later, to figure tax on the ordinary income part. 2012 tax Use Form 4972 to figure the separate tax on a lump-sum distribution using the optional methods. 2012 tax The tax figured on Form 4972 is added to the regular tax figured on your other income. 2012 tax This may result in a smaller tax than you would pay by including the taxable amount of the distribution as ordinary income in figuring your regular tax. 2012 tax How to treat the distribution. 2012 tax   If you receive a lump-sum distribution, you may have the following options for how you treat the taxable part. 2012 tax Report the part of the distribution from participation before 1974 as a capital gain (if you qualify) and the part from participation after 1973 as ordinary income. 2012 tax Report the part of the distribution from participation before 1974 as a capital gain (if you qualify) and use the 10-year tax option to figure the tax on the part from participation after 1973 (if you qualify). 2012 tax Use the 10-year tax option to figure the tax on the total taxable amount (if you qualify). 2012 tax Roll over all or part of the distribution. 2012 tax See Rollovers , later. 2012 tax No tax is currently due on the part rolled over. 2012 tax Report any part not rolled over as ordinary income. 2012 tax Report the entire taxable part of the distribution as ordinary income on your tax return. 2012 tax   The first three options are explained in the following discussions. 2012 tax Electing optional lump-sum treatment. 2012 tax   You can choose to use the 10-year tax option or capital gain treatment only once after 1986 for any plan participant. 2012 tax If you make this choice, you cannot use either of these optional treatments for any future distributions for the participant. 2012 tax Taxable and tax-free parts of the distribution. 2012 tax    The taxable part of a lump-sum distribution is the employer's contributions and income earned on your account. 2012 tax You may recover your cost in the lump sum and any net unrealized appreciation (NUA) in employer securities tax free. 2012 tax Cost. 2012 tax   In general, your cost is the total of: The plan participant's nondeductible contributions to the plan, The plan participant's taxable costs of any life insurance contract distributed, Any employer contributions that were taxable to the plan participant, and Repayments of any loans that were taxable to the plan participant. 2012 tax You must reduce this cost by amounts previously distributed tax free. 2012 tax Net unrealized appreciation (NUA). 2012 tax   The NUA in employer securities (box 6 of Form 1099-R) received as part of a lump-sum distribution is generally tax free until you sell or exchange the securities. 2012 tax (For more information, see Distributions of employer securities under Taxation of Nonperiodic Payments in Publication 575. 2012 tax ) Capital Gain Treatment Capital gain treatment applies only to the taxable part of a lump-sum distribution resulting from participation in the plan before 1974. 2012 tax The amount treated as capital gain is taxed at a 20% rate. 2012 tax You can elect this treatment only once for any plan participant, and only if the plan participant was born before January 2, 1936. 2012 tax Complete Part II of Form 4972 to choose the 20% capital gain election. 2012 tax For more information, see Capital Gain Treatment under Lump-Sum Distributions in Publication 575. 2012 tax 10-Year Tax Option The 10-year tax option is a special formula used to figure a separate tax on the ordinary income part of a lump-sum distribution. 2012 tax You pay the tax only once, for the year in which you receive the distribution, not over the next 10 years. 2012 tax You can elect this treatment only once for any plan participant, and only if the plan participant was born before January 2, 1936. 2012 tax The ordinary income part of the distribution is the amount shown in box 2a of the Form 1099-R given to you by the payer, minus the amount, if any, shown in box 3. 2012 tax You also can treat the capital gain part of the distribution (box 3 of Form 1099-R) as ordinary income for the 10-year tax option if you do not choose capital gain treatment for that part. 2012 tax Complete Part III of Form 4972 to choose the 10-year tax option. 2012 tax You must use the special Tax Rate Schedule shown in the instructions for Part III to figure the tax. 2012 tax Publication 575 illustrates how to complete Form 4972 to figure the separate tax. 2012 tax Rollovers If you withdraw cash or other assets from a qualified retirement plan in an eligible rollover distribution, you can defer tax on the distribution by rolling it over to another qualified retirement plan or a traditional IRA. 2012 tax For this purpose, the following plans are qualified retirement plans. 2012 tax A qualified employee plan. 2012 tax A qualified employee annuity. 2012 tax A tax-sheltered annuity plan (403(b) plan). 2012 tax An eligible state or local government section 457 deferred compensation plan. 2012 tax Eligible rollover distributions. 2012 tax   Generally, an eligible rollover distribution is any distribution of all or any part of the balance to your credit in a qualified retirement plan. 2012 tax For information about exceptions to eligible rollover distributions, see Publication 575. 2012 tax Rollover of nontaxable amounts. 2012 tax   You may be able to roll over the nontaxable part of a distribution (such as your after-tax contributions) made to another qualified retirement plan that is a qualified employee plan or a 403(b) plan, or to a traditional or Roth IRA. 2012 tax The transfer must be made either through a direct rollover to a qualified plan or 403(b) plan that separately accounts for the taxable and nontaxable parts of the rollover or through a rollover to a traditional or Roth IRA. 2012 tax   If you roll over only part of a distribution that includes both taxable and nontaxable amounts, the amount you roll over is treated as coming first from the taxable part of the distribution. 2012 tax   Any after-tax contributions that you roll over into your traditional IRA become part of your basis (cost) in your IRAs. 2012 tax To recover your basis when you take distributions from your IRA, you must complete Form 8606 for the year of the distribution. 2012 tax For more information, see the Form 8606 instructions. 2012 tax Direct rollover option. 2012 tax   You can choose to have any part or all of an eligible rollover distribution paid directly to another qualified retirement plan that accepts rollover distributions or to a traditional or Roth IRA. 2012 tax If you choose the direct rollover option, or have an automatic rollover, no tax will be withheld from any part of the distribution that is directly paid to the trustee of the other plan. 2012 tax Payment to you option. 2012 tax   If an eligible rollover distribution is paid to you, 20% generally will be withheld for income tax. 2012 tax However, the full amount is treated as distributed to you even though you actually receive only 80%. 2012 tax You generally must include in income any part (including the part withheld) that you do not roll over within 60 days to another qualified retirement plan or to a traditional or Roth IRA. 2012 tax (See Pensions and Annuities under Tax Withholding for 2014 in chapter 4. 2012 tax )    If you decide to roll over an amount equal to the distribution before withholding, your contribution to the new plan or IRA must include other money (for example, from savings or amounts borrowed) to replace the amount withheld. 2012 tax Time for making rollover. 2012 tax   You generally must complete the rollover of an eligible rollover distribution paid to you by the 60th day following the day on which you receive the distribution from your employer's plan. 2012 tax (If an amount distributed to you becomes a frozen deposit in a financial institution during the 60-day period after you receive it, the rollover period is extended for the period during which the distribution is in a frozen deposit in a financial institution. 2012 tax )   The IRS may waive the 60-day requirement where the failure to do so would be against equity or good conscience, such as in the event of a casualty, disaster, or other event beyond your reasonable control. 2012 tax   The administrator of a qualified plan must give you a written explanation of your distribution options within a reasonable period of time before making an eligible rollover distribution. 2012 tax Qualified domestic relations order (QDRO). 2012 tax   You may be able to roll over tax free all or part of a distribution from a qualified retirement plan that you receive under a QDRO. 2012 tax If you receive the distribution as an employee's spouse or former spouse (not as a nonspousal beneficiary), the rollover rules apply to you as if you were the employee. 2012 tax You can roll over the distribution from the plan into a traditional IRA or to another eligible retirement plan. 2012 tax See Rollovers in Publication 575 for more information on benefits received under a QDRO. 2012 tax Rollover by surviving spouse. 2012 tax   You may be able to roll over tax free all or part of a distribution from a qualified retirement plan you receive as the surviving spouse of a deceased employee. 2012 tax The rollover rules apply to you as if you were the employee. 2012 tax You can roll over a distribution into a qualified retirement plan or a traditional or Roth IRA. 2012 tax For a rollover to a Roth IRA, see Rollovers to Roth IRAs , later. 2012 tax    A distribution paid to a beneficiary other than the employee's surviving spouse is generally not an eligible rollover distribution. 2012 tax However, see Rollovers by nonspouse beneficiary next. 2012 tax Rollovers by nonspouse beneficiary. 2012 tax   If you are a designated beneficiary (other than a surviving spouse) of a deceased employee, you may be able to roll over tax free all or a portion of a distribution you receive from an eligible retirement plan of the employee. 2012 tax The distribution must be a direct trustee-to-trustee transfer to your traditional or Roth IRA that was set up to receive the distribution. 2012 tax The transfer will be treated as an eligible rollover distribution and the receiving plan will be treated as an inherited IRA. 2012 tax For information on inherited IRAs, see What if You Inherit an IRA? in chapter 1 of Publication 590, Individual Retirement Arrangements (IRAs). 2012 tax Retirement bonds. 2012 tax   If you redeem retirement bonds purchased under a qualified bond purchase plan, you can roll over the proceeds that exceed your basis tax free into an IRA (as discussed in Publication 590) or a qualified employer plan. 2012 tax Designated Roth accounts. 2012 tax   You can roll over an eligible rollover distribution from a designated Roth account into another designated Roth account or a Roth IRA. 2012 tax If you want to roll over the part of the distribution that is not included in income, you must make a direct rollover of the entire distribution or you can roll over the entire amount (or any portion) to a Roth IRA. 2012 tax For more information on rollovers from designated Roth accounts, see Rollovers in Publication 575. 2012 tax In-plan rollovers to designated Roth accounts. 2012 tax   If you are a plan participant in a 401(k), 403(b), or 457(b) plan, your plan may permit you to roll over amounts in those plans to a designated Roth account within the same plan. 2012 tax The rollover of any untaxed amounts must be included in income. 2012 tax See Designated Roth accounts under Rollovers in Publication 575 for more information. 2012 tax Rollovers to Roth IRAs. 2012 tax   You can roll over distributions directly from a qualified retirement plan (other than a designated Roth account) to a Roth IRA. 2012 tax   You must include in your gross income distributions from a qualified retirement plan (other than a designated Roth account) that you would have had to include in income if you had not rolled them over into a Roth IRA. 2012 tax You do not include in gross income any part of a distribution from a qualified retirement plan that is a return of contributions to the plan that were taxable to you when paid. 2012 tax In addition, the 10% tax on early distributions does not apply. 2012 tax More information. 2012 tax   For more information on the rules for rolling over distributions, see Rollovers in Publication 575. 2012 tax Special Additional Taxes To discourage the use of pension funds for purposes other than normal retirement, the law imposes additional taxes on early distributions of those funds and on failures to withdraw the funds timely. 2012 tax Ordinarily, you will not be subject to these taxes if you roll over all early distributions you receive, as explained earlier, and begin drawing out the funds at a normal retirement age, in reasonable amounts over your life expectancy. 2012 tax These special additional taxes are the taxes on: Early distributions, and Excess accumulation (not receiving minimum distributions). 2012 tax These taxes are discussed in the following sections. 2012 tax If you must pay either of these taxes, report them on Form 5329. 2012 tax However, you do not have to file Form 5329 if you owe only the tax on early distributions and your Form 1099-R correctly shows a “1” in box 7. 2012 tax Instead, enter 10% of the taxable part of the distribution on Form 1040, line 58 and write “No” under the heading “Other Taxes” to the left of line 58. 2012 tax Even if you do not owe any of these taxes, you may have to complete Form 5329 and attach it to your Form 1040. 2012 tax This applies if you meet an exception to the tax on early distributions but box 7 of your Form 1099-R does not indicate an exception. 2012 tax Tax on Early Distributions Most distributions (both periodic and nonperiodic) from qualified retirement plans and nonqualified annuity contracts made to you before you reach age 59½ are subject to an additional tax of 10%. 2012 tax This tax applies to the part of the distribution that you must include in gross income. 2012 tax For this purpose, a qualified retirement plan is: A qualified employee plan, A qualified employee annuity plan, A tax-sheltered annuity plan, or An eligible state or local government section 457 deferred compensation plan (to the extent that any distribution is attributable to amounts the plan received in a direct transfer or rollover from one of the other plans listed here or an IRA). 2012 tax 5% rate on certain early distributions from deferred annuity contracts. 2012 tax   If an early withdrawal from a deferred annuity is otherwise subject to the 10% additional tax, a 5% rate may apply instead. 2012 tax A 5% rate applies to distributions under a written election providing a specific schedule for the distribution of your interest in the contract if, as of March 1, 1986, you had begun receiving payments under the election. 2012 tax On line 4 of Form 5329, multiply the line 3 amount by 5% instead of 10%. 2012 tax Attach an explanation to your return. 2012 tax Distributions from Roth IRAs allocable to a rollover from an eligible retirement plan within the 5-year period. 2012 tax   If, within the 5-year period starting with the first day of your tax year in which you rolled over an amount from an eligible retirement plan to a Roth IRA, you take a distribution from the Roth IRA, you may have to pay the additional 10% tax on early distributions. 2012 tax You generally must pay the 10% additional tax on any amount attributable to the part of the rollover that you had to include in income. 2012 tax The additional tax is figured on Form 5329. 2012 tax For more information, see Form 5329 and its instructions. 2012 tax For information on qualified distributions from Roth IRAs, see Additional Tax on Early Distributions in chapter 2 of Publication 590. 2012 tax Distributions from designated Roth accounts allocable to in-plan Roth rollovers within the 5-year period. 2012 tax   If, within the 5-year period starting with the first day of your tax year in which you rolled over an amount from a 401(k), 403(b), or 457(b) plan to a designated Roth account, you take a distribution from the designated Roth account, you may have to pay the additional 10% tax on early distributions. 2012 tax You generally must pay the 10% additional tax on any amount attributable to the part of the in-plan rollover that you had to include in income. 2012 tax The additional tax is figured on Form 5329. 2012 tax For more information, see Form 5329 and its instructions. 2012 tax For information on qualified distributions from designated Roth accounts, see Designated Roth accounts under Taxation of Periodic Payments in Publication 575. 2012 tax Exceptions to tax. 2012 tax    Certain early distributions are excepted from the early distribution tax. 2012 tax If the payer knows that an exception applies to your early distribution, distribution code “2,” “3,” or “4” should be shown in box 7 of your Form 1099-R and you do not have to report the distribution on Form 5329. 2012 tax If an exception applies but distribution code “1” (early distribution, no known exception) is shown in box 7, you must file Form 5329. 2012 tax Enter the taxable amount of the distribution shown in box 2a of your Form 1099-R on line 1 of Form 5329. 2012 tax On line 2, enter the amount that can be excluded and the exception number shown in the Form 5329 instructions. 2012 tax    If distribution code “1” is incorrectly shown on your Form 1099-R for a distribution received when you were age 59½ or older, include that distribution on Form 5329. 2012 tax Enter exception number “12” on line 2. 2012 tax General exceptions. 2012 tax   The tax does not apply to distributions that are: Made as part of a series of substantially equal periodic payments (made at least annually) for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary (if from a qualified retirement plan, the payments must begin after your separation from service), Made because you are totally and permanently disabled, or Made on or after the death of the plan participant or contract holder. 2012 tax Additional exceptions for qualified retirement plans. 2012 tax   The tax does not apply to distributions that are: From a qualified retirement plan (other than an IRA) after your separation from service in or after the year you reached age 55 (age 50 for qualified public safety employees), From a qualified retirement plan (other than an IRA) to an alternate payee under a qualified domestic relations order, From a qualified retirement plan to the extent you have deductible medical expenses that exceed 10% (or 7. 2012 tax 5% if you or your spouse are age 65 or older) of your adjusted gross income, whether or not you itemize your deductions for the year, From an employer plan under a written election that provides a specific schedule for distribution of your entire interest if, as of March 1, 1986, you had separated from service and had begun receiving payments under the election, From an employee stock ownership plan for dividends on employer securities held by the plan, From a qualified retirement plan due to an IRS levy of the plan, From elective deferral accounts under 401(k) or 403(b) plans or similar arrangements that are qualified reservist distributions, or Phased retirement annuity payments made to federal employees. 2012 tax See Pub. 2012 tax 721 for more information on the phased retirement program. 2012 tax Qualified public safety employees. 2012 tax   If you are a qualified public safety employee, distributions made from a governmental defined benefit pension plan are not subject to the additional tax on early distributions. 2012 tax You are a qualified public safety employee if you provide police protection, firefighting services, or emergency medical services for a state or municipality, and you separated from service in or after the year you attained age 50. 2012 tax Qualified reservist distributions. 2012 tax   A qualified reservist distribution is not subject to the additional tax on early distributions. 2012 tax A qualified reservist distribution is a distribution (a) from elective deferrals under a section 401(k) or 403(b) plan, or a similar arrangement, (b) to an individual ordered or called to active duty (because he or she is a member of a reserve component) for a period of more than 179 days or for an indefinite period, and (c) made during the period beginning on the date of the order or call and ending at the close of the active duty period. 2012 tax You must have been ordered or called to active duty after September 11, 2001. 2012 tax For more information, see Qualified reservist distributions under Special Additional Taxes in Publication 575. 2012 tax Additional exceptions for nonqualified annuity contracts. 2012 tax   The tax does not apply to distributions from: A deferred annuity contract to the extent allocable to investment in the contract before August 14, 1982, A deferred annuity contract under a qualified personal injury settlement, A deferred annuity contract purchased by your employer upon termination of a qualified employee plan or qualified employee annuity plan and held by your employer until your separation from service, or An immediate annuity contract (a single premium contract providing substantially equal annuity payments that start within 1 year from the date of purchase and are paid at least annually). 2012 tax Tax on Excess Accumulation To make sure that most of your retirement benefits are paid to you during your lifetime, rather than to your beneficiaries after your death, the payments that you receive from qualified retirement plans must begin no later than your required beginning date (defined later). 2012 tax The payments each year cannot be less than the required minimum distribution. 2012 tax Required distributions not made. 2012 tax   If the actual distributions to you in any year are less than the minimum required distribution for that year, you are subject to an additional tax. 2012 tax The tax equals 50% of the part of the required minimum distribution that was not distributed. 2012 tax   For this purpose, a qualified retirement plan includes: A qualified employee plan, A qualified employee annuity plan, An eligible section 457 deferred compensation plan, or A tax-sheltered annuity plan (403(b) plan)(for benefits accruing after 1986). 2012 tax Waiver. 2012 tax   The tax may be waived if you establish that the shortfall in distributions was due to reasonable error and that reasonable steps are being taken to remedy the shortfall. 2012 tax See the Instructions for Form 5329 for the procedure to follow if you believe you qualify for a waiver of this tax. 2012 tax State insurer delinquency proceedings. 2012 tax   You might not receive the minimum distribution because assets are invested in a contract issued by an insurance company in state insurer delinquency proceedings. 2012 tax If your payments are reduced below the minimum due to these proceedings, you should contact your plan administrator. 2012 tax Under certain conditions, you will not have to pay the 50% excise tax. 2012 tax Required beginning date. 2012 tax   Unless the rule for 5% owners applies, you generally must begin to receive distributions from your qualified retirement plan by April 1 of the year that follows the later of: The calendar year in which you reach age 70½, or The calendar year in which you retire from employment with the employer maintaining the plan. 2012 tax However, your plan may require you to begin to receive distributions by April 1 of the year that follows the year in which you reach age 70½, even if you have not retired. 2012 tax   If you reached age 70½ in 2013, you may be required to receive your first distribution by April 1, 2014. 2012 tax Your required distribution then must be made for 2014 by December 31, 2014. 2012 tax 5% owners. 2012 tax   If you are a 5% owner, you must begin to receive distributions by April 1 of the year that follows the calendar year in which you reach age 70½. 2012 tax   You are a 5% owner if, for the plan year ending in the calendar year in which you reach age 70½, you own (or are considered to own under section 318 of the Internal Revenue Code) more than 5% of the outstanding stock (or more than 5% of the total voting power of all stock) of the employer, or more than 5% of the capital or profits interest in the employer. 2012 tax Age 70½. 2012 tax   You reach age 70½ on the date that is 6 calendar months after the date of your 70th birthday. 2012 tax   For example, if you are retired and your 70th birthday was on June 30, 2013, you were age 70½ on December 30, 2013. 2012 tax If your 70th birthday was on July 1, 2013, you reached age 70½ on January 1, 2014. 2012 tax Required distributions. 2012 tax   By the required beginning date, as explained earlier, you must either: Receive your entire interest in the plan (for a tax-sheltered annuity, your entire benefit accruing after 1986), or Begin receiving periodic distributions in annual amounts calculated to distribute your entire interest (for a tax-sheltered annuity, your entire benefit accruing after 1986) over your life or life expectancy or over the joint lives or joint life expectancies of you and a designated beneficiary (or over a shorter period). 2012 tax Additional information. 2012 tax   For more information on this rule, see Tax on Excess Accumulation in Publication 575. 2012 tax Form 5329. 2012 tax   You must file Form 5329 if you owe tax because you did not receive a minimum required distribution from your qualified retirement plan. 2012 tax Survivors and Beneficiaries Generally, a survivor or beneficiary reports pension or annuity income in the same way the plan participant would have. 2012 tax However, some special rules apply. 2012 tax See Publication 575 for more information. 2012 tax Survivors of employees. 2012 tax   If you are entitled to receive a survivor annuity on the death of an employee who died, you can exclude part of each annuity payment as a tax-free recovery of the employee's investment in the contract. 2012 tax You must figure the taxable and tax-free parts of your annuity payments using the method that applies as if you were the employee. 2012 tax Survivors of retirees. 2012 tax   If you receive benefits as a survivor under a joint and survivor annuity, include those benefits in income in the same way the retiree would have included them in income. 2012 tax If you receive a survivor annuity because of the death of a retiree who had reported the annuity under the Three-Year Rule and recovered all of the cost tax free, your survivor payments are fully taxable. 2012 tax    If the retiree was reporting the annuity payments under the General Rule, you must apply the same exclusion percentage to your initial survivor annuity payment called for in the contract. 2012 tax The resulting tax-free amount will then remain fixed. 2012 tax Any increases in the survivor annuity are fully taxable. 2012 tax    If the retiree was reporting the annuity payments under the Simplified Method, the part of each payment that is tax free is the same as the tax-free amount figured by the retiree at the annuity starting date. 2012 tax This amount remains fixed even if the annuity payments are increased or decreased. 2012 tax See Simplified Method , earlier. 2012 tax   In any case, if the annuity starting date is after 1986, the total exclusion over the years cannot be more than the cost. 2012 tax Estate tax deduction. 2012 tax   If your annuity was a joint and survivor annuity that was included in the decedent's estate, an estate tax may have been paid on it. 2012 tax You can deduct the part of the total estate tax that was based on the annuity. 2012 tax The deceased annuitant must have died after the annuity starting date. 2012 tax (For details, see section 1. 2012 tax 691(d)-1 of the regulations. 2012 tax ) Deduct it in equal amounts over your remaining life expectancy. 2012 tax   If the decedent died before the annuity starting date of a deferred annuity contract and you receive a death benefit under that contract, the amount you receive (either in a lump sum or as periodic payments) in excess of the decedent's cost is included in your gross income as income in respect of a decedent for which you may be able to claim an estate tax deduction. 2012 tax   You can take the estate tax deduction as an itemized deduction on Schedule A, Form 1040. 2012 tax This deduction is not subject to the 2%-of-adjusted-gross-income limit on miscellaneous deductions. 2012 tax See Publication 559, Survivors, Executors, and Administrators, for more information on the estate tax deduction. 2012 tax Prev  Up  Next   Home   More Online Publications
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Understanding Your CP295A Notice

We charged you a penalty on your Form 5500.


What you need to do

  • Pay the amount due to avoid additional penalty and interest charges.

  • Answers to Common Questions

    What steps can I take if I can't pay the full amount?
    Visit our website under the payment tab for more information about payment options.

    What if I don't pay the amount by the due date?
    Additional penalties and interest will accrue.

    Can I request the penalty be removed or reduced?
    If you believe a penalty should be reconsidered, mail a signed statement to the address on your notice. Identify which penalty you want reconsidered and why. We'll review the information and let you know if we accept your explanation.


    Understanding your notice

    Your notice may look different from the sample because the information contained in your notice is tailored to your situation.

    Notice CP295A, Page 1

    Notice CP295A, Page 2

    Notice CP295A, Page 3

    Notice CP295A, Page 4

Page Last Reviewed or Updated: 30-Jan-2014

How to get help

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

The 2012 Tax

2012 tax 13. 2012 tax   How To Get Tax Help Table of Contents Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. 2012 tax Free help with your tax return. 2012 tax   You can get free help preparing your return nationwide from IRS-certified volunteers. 2012 tax The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. 2012 tax The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. 2012 tax Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. 2012 tax In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. 2012 tax To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. 2012 tax gov, download the IRS2Go app, or call 1-800-906-9887. 2012 tax   As part of the TCE program, AARP offers the Tax-Aide counseling program. 2012 tax To find the nearest AARP Tax-Aide site, visit AARP's website at www. 2012 tax aarp. 2012 tax org/money/taxaide or call 1-888-227-7669. 2012 tax For more information on these programs, go to IRS. 2012 tax gov and enter “VITA” in the search box. 2012 tax Internet. 2012 tax    IRS. 2012 tax gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. 2012 tax Download the free IRS2Go app from the iTunes app store or from Google Play. 2012 tax Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. 2012 tax Check the status of your 2013 refund with the Where's My Refund? application on IRS. 2012 tax gov or download the IRS2Go app and select the Refund Status option. 2012 tax The IRS issues more than 9 out of 10 refunds in less than 21 days. 2012 tax Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. 2012 tax You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. 2012 tax The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. 2012 tax Use the Interactive Tax Assistant (ITA) to research your tax questions. 2012 tax No need to wait on the phone or stand in line. 2012 tax The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. 2012 tax When you reach the response screen, you can print the entire interview and the final response for your records. 2012 tax New subject areas are added on a regular basis. 2012 tax  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. 2012 tax gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. 2012 tax You can use the IRS Tax Map, to search publications and instructions by topic or keyword. 2012 tax The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. 2012 tax When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. 2012 tax Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. 2012 tax You can also ask the IRS to mail a return or an account transcript to you. 2012 tax Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. 2012 tax gov or by calling 1-800-908-9946. 2012 tax Tax return and tax account transcripts are generally available for the current year and the past three years. 2012 tax Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. 2012 tax Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. 2012 tax If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. 2012 tax Check the status of your amended return using Where's My Amended Return? Go to IRS. 2012 tax gov and enter Where's My Amended Return? in the search box. 2012 tax You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. 2012 tax It can take up to 3 weeks from the date you mailed it to show up in our system. 2012 tax Make a payment using one of several safe and convenient electronic payment options available on IRS. 2012 tax gov. 2012 tax Select the Payment tab on the front page of IRS. 2012 tax gov for more information. 2012 tax Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. 2012 tax Figure your income tax withholding with the IRS Withholding Calculator on IRS. 2012 tax gov. 2012 tax Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. 2012 tax Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. 2012 tax gov. 2012 tax Request an Electronic Filing PIN by going to IRS. 2012 tax gov and entering Electronic Filing PIN in the search box. 2012 tax Download forms, instructions and publications, including accessible versions for people with disabilities. 2012 tax Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. 2012 tax gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. 2012 tax An employee can answer questions about your tax account or help you set up a payment plan. 2012 tax Before you visit, check the Office Locator on IRS. 2012 tax gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. 2012 tax If you have a special need, such as a disability, you can request an appointment. 2012 tax Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. 2012 tax Apply for an Employer Identification Number (EIN). 2012 tax Go to IRS. 2012 tax gov and enter Apply for an EIN in the search box. 2012 tax Read the Internal Revenue Code, regulations, or other official guidance. 2012 tax Read Internal Revenue Bulletins. 2012 tax Sign up to receive local and national tax news and more by email. 2012 tax Just click on “subscriptions” above the search box on IRS. 2012 tax gov and choose from a variety of options. 2012 tax    Phone. 2012 tax You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. 2012 tax Download the free IRS2Go app from the iTunes app store or from Google Play. 2012 tax Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. 2012 tax gov, or download the IRS2Go app. 2012 tax Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. 2012 tax The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. 2012 tax Most VITA and TCE sites offer free electronic filing. 2012 tax Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. 2012 tax Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. 2012 tax Call the automated Where's My Refund? information hotline to check the status of your 2013 refund 24 hours a day, 7 days a week at 1-800-829-1954. 2012 tax If you e-file, you can start checking on the status of your return within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. 2012 tax The IRS issues more than 9 out of 10 refunds in less than 21 days. 2012 tax Where's My Refund? will give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. 2012 tax Before you call this automated hotline, have your 2013 tax return handy so you can enter your social security number, your filing status, and the exact whole dollar amount of your refund. 2012 tax The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. 2012 tax Note, the above information is for our automated hotline. 2012 tax Our live phone and walk-in assistors can research the status of your refund only if it's been 21 days or more since you filed electronically or more than 6 weeks since you mailed your paper return. 2012 tax Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. 2012 tax You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. 2012 tax It can take up to 3 weeks from the date you mailed it to show up in our system. 2012 tax Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, publications, and prior-year forms and instructions (limited to 5 years). 2012 tax You should receive your order within 10 business days. 2012 tax Call TeleTax, 1-800-829-4477, to listen to pre-recorded messages covering general and business tax information. 2012 tax If, between January and April 15, you still have questions about the Form 1040, 1040A, or 1040EZ (like filing requirements, dependents, credits, Schedule D, pensions and IRAs or self-employment taxes), call 1-800-829-1040. 2012 tax Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. 2012 tax The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. 2012 tax These individuals can also contact the IRS through relay services such as the Federal Relay Service. 2012 tax    Walk-in. 2012 tax You can find a selection of forms, publications and services — in-person. 2012 tax Products. 2012 tax You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. 2012 tax Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. 2012 tax Services. 2012 tax You can walk in to your local TAC for face-to-face tax help. 2012 tax An employee can answer questions about your tax account or help you set up a payment plan. 2012 tax Before visiting, use the Office Locator tool on IRS. 2012 tax gov, or choose the Contact Us option on the IRS2Go app and search Local Offices for days and hours of operation, and services provided. 2012 tax    Mail. 2012 tax You can send your order for forms, instructions, and publications to the address below. 2012 tax You should receive a response within 10 business days after your request is received. 2012 tax Internal Revenue Service 1201 N. 2012 tax Mitsubishi Motorway Bloomington, IL 61705-6613    The Taxpayer Advocate Service Is Here to Help You. 2012 tax The Taxpayer Advocate Service (TAS) is your voice at the IRS. 2012 tax Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. 2012 tax   What can TAS do for you? We can offer you free help with IRS problems that you can't resolve on your own. 2012 tax We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. 2012 tax You face (or your business is facing) an immediate threat of adverse action. 2012 tax You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. 2012 tax   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. 2012 tax Here's why we can help: TAS is an independent organization within the IRS. 2012 tax Our advocates know how to work with the IRS. 2012 tax Our services are free and tailored to meet your needs. 2012 tax We have offices in every state, the District of Columbia, and Puerto Rico. 2012 tax   How can you reach us? If you think TAS can help you, call your local advocate, whose number is in your local directory and at Taxpayer Advocate, or call us toll-free at 1-877-777-4778. 2012 tax   How else does TAS help taxpayers?  TAS also works to resolve large-scale, systemic problems that affect many taxpayers. 2012 tax If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System. 2012 tax Low Income Taxpayer Clinics. 2012 tax   Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals, and tax collection disputes. 2012 tax Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. 2012 tax Visit Taxpayer Advocate or see IRS Publication 4134, Low Income Taxpayer Clinic List. 2012 tax Prev  Up  Next   Home   More Online Publications