Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

Form 1040 X

Taxcut Software2012 1040ez1042ezFile Free State TaxesFederal Tax FormsHandr BlockFree Tax Filing OnlineIrs Free FileI Need To File 2009 Tax ReturnFile Amended Tax Return Online1040ez 2010 File Online2012 Amended Tax FormsFiling State ReturnsIrs 1040 Ez OnlineHow Do I File My 2012 Taxes For FreeFirst Time Filing Taxes College StudentWhen Is The Last Day To File Taxes 2012Turbotax Deluxe Federal E File State 2012 For Pc DownloadMy Pay1040ez InstructionsIrs Ez FileFree Tax Preparation ServicesHow Do You Amend Tax ReturnsFile 2010 Taxes For FreeFree File 2011 Tax ReturnPa Ez FormFree Tax PrepUnemployment And TaxesTurbotax 1040ezMilitary TurbotaxDownload 2010 Tax FormsCorporate Tax SoftwareWww.1040xHow Can I File My 2012 Taxes OnlineFreetaxes ComTaxes 2012 FormsFederal Tax Forms 1040ezTurbotax For MilitaryFree Tax Filing Online StateFree Income Tax Preparation

Form 1040 X

Form 1040 x Publication 225 - Introductory Material Table of Contents IntroductionOrdering forms and publications. Form 1040 x Tax questions. Form 1040 x Future Developments What's New for 2013 What's New for 2014 Reminders Introduction You are in the business of farming if you cultivate, operate, or manage a farm for profit, either as owner or tenant. Form 1040 x A farm includes livestock, dairy, poultry, fish, fruit, and truck farms. Form 1040 x It also includes plantations, ranches, ranges, and orchards. Form 1040 x This publication explains how the federal tax laws apply to farming. Form 1040 x Use this publication as a guide to figure your taxes and complete your farm tax return. Form 1040 x If you need more information on a subject, get the specific IRS tax publication covering that subject. Form 1040 x We refer to many of these free publications throughout this publication. Form 1040 x See chapter 16 for information on ordering these publications. Form 1040 x The explanations and examples in this publication reflect the Internal Revenue Service's interpretation of tax laws enacted by Congress, Treasury regulations, and court decisions. Form 1040 x However, the information given does not cover every situation and is not intended to replace the law or change its meaning. Form 1040 x This publication covers subjects on which a court may have made a decision more favorable to taxpayers than the interpretation of the Service. Form 1040 x Until these differing interpretations are resolved by higher court decisions, or in some other way, this publication will continue to present the interpretation of the Service. Form 1040 x The IRS Mission. Form 1040 x   Provide America's taxpayers top quality service by helping them understand and meet their tax responsibilities and by applying the tax law with integrity and fairness to all. Form 1040 x Comments and suggestions. Form 1040 x   We welcome your comments about this publication and your suggestions for future editions. Form 1040 x   You can write to us at the following address: Internal Revenue Service Business Forms and Publications Branch SE:W:CAR:MP:T:B 1111 Constitution Ave. Form 1040 x NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Form 1040 x Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Form 1040 x   You can email us at taxforms@irs. Form 1040 x gov. Form 1040 x Please put “Publications Comment” on the subject line. Form 1040 x You can also send us comments from www. Form 1040 x irs. Form 1040 x gov/formspubs/, select “Comment on Tax Forms and Publications” under “More Information. Form 1040 x ”   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. Form 1040 x Ordering forms and publications. Form 1040 x   Visit www. Form 1040 x irs. Form 1040 x 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. Form 1040 x Internal Revenue Service 1201 N. Form 1040 x Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Form 1040 x   If you have a tax question, check the information available on IRS. Form 1040 x gov or call 1-800-829-1040. Form 1040 x We cannot answer tax questions sent to either of the above addresses. Form 1040 x Comments on IRS enforcement actions. Form 1040 x   The Small Business and Agricultural Regulatory Enforcement Ombudsman and 10 Regional Fairness Boards were established to receive comments from small business about federal agency enforcement actions. Form 1040 x The Ombudsman will annually evaluate the enforcement activities of each agency and rate its responsiveness to small business. Form 1040 x If you wish to comment on the enforcement actions of the IRS, you can: Call 1-888-734-3247, Fax your comments to 202-481-5719, Write to Office of the National Ombudsman U. Form 1040 x S. Form 1040 x Small Business Administration 409 3rd Street, S. Form 1040 x W. Form 1040 x  Washington, DC 20416 Send an email to ombudsman@sba. Form 1040 x gov, or Download the appraisal form at  www. Form 1040 x sba. Form 1040 x gov/ombudsman. Form 1040 x Treasury Inspector General for Tax Administration. Form 1040 x   If you want to confidentially report misconduct, waste, fraud, or abuse by an IRS employee, you can call 1-800-366-4484 (1-800-877-8339 for TTY/TDD users). Form 1040 x You can remain anonymous. Form 1040 x Farm tax classes. Form 1040 x   Many state Cooperative Extension Services conduct farm tax workshops in conjunction with the IRS. Form 1040 x Contact your county extension office for more information. Form 1040 x Rural tax education website. Form 1040 x   The Rural Tax Education website is a source for information concerning agriculturally related income and deductions and self-employment tax. Form 1040 x The website is available for farmers and ranchers, other agricultural producers, Extension educators, and any one interested in learning about the tax side of the agricultural community. Form 1040 x Members of the National Farm Income Tax Extension Committee are contributors for the website and the website is hosted by Utah State University Cooperative Extension. Form 1040 x You can visit the website at www. Form 1040 x ruraltax. Form 1040 x org. Form 1040 x Future Developments The IRS has created a page on IRS. Form 1040 x gov for information about Publication 225, at  www. Form 1040 x irs. Form 1040 x gov/pub225. Form 1040 x Information about recent developments affecting Publication 225 will be posted on that page. Form 1040 x What's New for 2013 The following items highlight a number of administrative and tax law changes for 2013. Form 1040 x They are discussed in more detail throughout the publication. Form 1040 x Standard mileage rate. Form 1040 x  For 2013, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use is 56. Form 1040 x 5 cents. Form 1040 x See chapter 4. Form 1040 x Simplified method for business use of home deduction. Form 1040 x  The IRS now provides a simplified method to determine your expenses for business use of your home. Form 1040 x For more information, see Schedule C (Form 1040), Part II, and its instructions. Form 1040 x See chapter 4. Form 1040 x Increased section 179 expense deduction dollar limits. Form 1040 x  The maximum amount you can elect to deduct for most section 179 property you placed in service in 2013 is $500,000. Form 1040 x This limit is reduced by the amount by which the cost of the property placed in service during the tax year exceeds $2 million. Form 1040 x See chapter 7. Form 1040 x Extension of special depreciation allowance for certain qualified property acquired after December 31, 2007. Form 1040 x  You may be able to take a 50% special depreciation allowance for certain qualified property acquired after December 31, 2007, and placed in service before January 1, 2014. Form 1040 x See chapter 7. Form 1040 x Expiration of the 3-year recovery period for certain race horses. Form 1040 x . Form 1040 x  The 3-year recovery period for race horses two years old or younger will expire for such horses placed in service after December 31, 2013. Form 1040 x See chapter 7. Form 1040 x Tax rates. Form 1040 x  For tax years beginning in 2013, the social security part of the self-employment tax increases from 10. Form 1040 x 4% to 12. Form 1040 x 4%. Form 1040 x As a result, the self-employment tax is increased from 13. Form 1040 x 3% to 15. Form 1040 x 3%. Form 1040 x See chapter 12. Form 1040 x Maximum net earnings. Form 1040 x  The maximum net self-employment earnings subject to the social security part (12. Form 1040 x 4%) of the self-employment tax increased to $113,700 for 2013. Form 1040 x There is no maximum limit on earnings subject to the Medicare part (2. Form 1040 x 9%). Form 1040 x See chapter 12. Form 1040 x Net investment income tax. Form 1040 x  For tax years beginning in 2013, individuals, estates, and trusts may be subject to the net investment income tax (NIIT). Form 1040 x If you are a trader in financial instruments and commodities and required to file Schedule C (Form 1040), your investment income (for purposes of the NIIT) may be reduced by your interest and other investment expenses to the extent those expenses are not used to reduce your self-employment income. Form 1040 x For information about NIIT and the special rule for traders in financial instruments and commodities, see the Instructions for Form 8960. Form 1040 x Social Security and Medicare Tax for 2013. Form 1040 x  The employee tax rate for social security is 6. Form 1040 x 2%. Form 1040 x The employer tax rate for social security remains unchanged at 6. Form 1040 x 2%. Form 1040 x The social security wage base limit is $113,700. Form 1040 x The Medicare tax rate is 1. Form 1040 x 45% each for the employee and employer, unchanged from 2012. Form 1040 x There is no wage base limit for Medicare tax. Form 1040 x See chapter 13. Form 1040 x Additional Medicare Tax. Form 1040 x  For tax years beginning in 2013, a 0. Form 1040 x 9% Additional Medicare Tax applies to your Medicare wages, Railroad Tax Act (RRTA) compensation, and self-employment income above a threshold amount. Form 1040 x Use Form 8959, Additional Medicare Tax, to figure this tax. Form 1040 x For more information, see the Instructions for Form 8959 and the Instructions for Schedule SE (Form 1040). Form 1040 x In addition to withholding Medicare tax at 1. Form 1040 x 45%, you must withhold a 0. Form 1040 x 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Form 1040 x You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Form 1040 x Additional Medicare Tax is only imposed on the employee. Form 1040 x There is no employer share of Additional Medicare Tax. Form 1040 x All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. Form 1040 x For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E), Employer's Tax Guide. Form 1040 x For more information on Additional Medicare Tax, visit IRS. Form 1040 x gov and enter “Additional Medicare Tax” in the search box. Form 1040 x See chapter 13. Form 1040 x Leave-Based donation programs to aid victims of Hurricane Sandy. Form 1040 x  Under these programs, employees may donate their vacation, sick, or personal leave in exchange for employer cash payments made before January 1, 2014, to qualified tax-exempt organizations providing relief for the victims of Hurricane Sandy. Form 1040 x The donated leave will not be included in the income or wages of the employee. Form 1040 x The employer may deduct the cash payments as business expenses or charitable contributions. Form 1040 x See chapter 13. Form 1040 x Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans extended. Form 1040 x  The work opportunity tax credit is now available for eligible unemployed veterans who begin work before January 1, 2014. Form 1040 x Qualified tax-exempt organizations that hire eligible unemployed veterans can claim the work opportunity tax credit against their payroll tax liability using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. Form 1040 x For more information, visit IRS. Form 1040 x gov and enter “work opportunity credit” in the search box. Form 1040 x See chapter 13. Form 1040 x Estimated tax. Form 1040 x  For tax years beginning in 2013, the Net Investment Income Tax (NIIT) may need to be included when calculating your estimated tax. Form 1040 x Also, when figuring your estimated tax, you may need to include the 0. Form 1040 x 9% Additional Medicare Tax applicable to Medicare wages, Railroad Retirement Tax Act (RRTA) compensation, and self-employment income above the threshold amount based on your filing status. Form 1040 x For more information, see Publication 505. Form 1040 x What's New for 2014 Maximum net earnings. Form 1040 x  The maximum net self-employment earnings subject to the social security part of the self-employment tax for 2014 will be discussed in the 2013 Publication 334. Form 1040 x See chapter 12. Form 1040 x Social security and Medicare tax for 2014. Form 1040 x  The employee and employer tax rates for social security and the maximum amount of wages subject to social security tax for 2014 will be discussed in Publication 51 (Circular A), Agricultural Employer's Tax Guide (For use in 2014). Form 1040 x The Medicare tax rate for 2014 will also be discussed in Publication 51 (Circular A) (For use in 2014). Form 1040 x There is no limit on the amount of wages subject to Medicare tax. Form 1040 x See chapter 13. Form 1040 x Reminders The following reminders and other items may help you file your tax return. Form 1040 x   IRS e-file (Electronic Filing) You can file your tax returns electronically using an IRS e-file option. Form 1040 x The benefits of IRS e-file include faster refunds, increased accuracy, and acknowledgment of IRS receipt of your return. Form 1040 x You can use one of the following IRS e-file options. Form 1040 x Use an authorized IRS e-file provider. Form 1040 x Use a personal computer. Form 1040 x Visit a Volunteer Income Tax Assistance (VITA) or Tax Counseling for the Elderly (TCE) site. Form 1040 x For details on these fast filing methods, see your income tax package. Form 1040 x Principal agricultural activity codes. Form 1040 x  You must enter on line B of Schedule F (Form 1040) a code that identifies your principal agricultural activity. Form 1040 x It is important to use the correct code because this information will identify market segments of the public for IRS Taxpayer Education programs. Form 1040 x The U. Form 1040 x S. Form 1040 x Census Bureau also uses this information for its economic census. Form 1040 x See the list of Principal Agricultural Activity Codes on page 2 of Schedule F (Form 1040). Form 1040 x Publication on employer identification numbers (EIN). Form 1040 x  Publication 1635, Understanding Your Employer Identification Number, provides general information on employer identification numbers. Form 1040 x Topics include how to apply for an EIN and how to complete Form SS-4. Form 1040 x Change of address. Form 1040 x  If you change your home address, you should use Form 8822, Change of Addres, to notify the IRS. Form 1040 x If you change your business address, you should use Form 8822-B, Change of Address or Responsible Party — Business, to notify the IRS. Form 1040 x Be sure to include your suite, room, or other unit number. Form 1040 x Reportable transactions. Form 1040 x  You must file Form 8886, Reportable Transaction Disclosure Statement, to report certain transactions. Form 1040 x You may have to pay a penalty if you are required to file Form 8886 but do not do so. Form 1040 x Reportable transactions include (1) transactions the same as or substantially similar to tax avoidance transactions identified by the IRS, (2) transactions offered to you under conditions of confidentiality and for which you paid an advisor a minimum fee, (3) transactions for which you have or a related party has a right to a full or partial refund of fees if all or part of the intended tax consequences from the transaction are not sustained, (4) transactions that result in losses of at least $2 million in any single year or $4 million in any combination of years, and (5) transactions with asset holding periods of 45 days or less and that result in a tax credit of more than $250,000. Form 1040 x For more information, see the Instructions for Form 8886. Form 1040 x Form W-4 for 2014. Form 1040 x  You should make new Forms W-4 available to your employees and encourage them to check their income tax withholding for 2014. Form 1040 x Those employees who owed a large amount of tax or received a large refund for 2013 may need to submit a new Form W-4. Form 1040 x See Publication 919, How Do I Adjust My Tax Withholding. Form 1040 x Form 1099-MISC. Form 1040 x  Generally, file Form 1099-MISC if you pay at least $600 in rents, services, and other miscellaneous payments in your farming business to an individual (for example, an accountant, an attorney, or a veterinarian) who is not your employee. Form 1040 x Limited Liability Company (LLC). Form 1040 x  For purposes of this publication, a limited liability company (LLC) is a business entity organized in the United States under state law. Form 1040 x Unlike a partnership, all of the members of an LLC have limited personal liability for its debts. Form 1040 x An LLC may be classified for federal income tax purposes as a partnership, corporation, or an entity disregarded as separate from its owner by applying the rules in Regulations section 301. Form 1040 x 7701-3. Form 1040 x See Publication 3402 for more details. Form 1040 x Photographs of missing children. Form 1040 x  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Form 1040 x Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Form 1040 x 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. Form 1040 x Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Understanding your CP504 Notice

You have an unpaid amount due on your account. If you do not pay the amount due immediately, the IRS will seize (levy) your state income tax refund and apply it to pay the amount you owe.

Printable samples of this notice (PDF)

Tax publications you may find useful

How to get help

Calling the 1-800 number listed on the top right corner of your notice is the fastest way to get your questions answered.

You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).

Or you may qualify for help from a Low Income Taxpayer Clinic.
 


What you need to do

  • Read your notice carefully — it explains your due date, amount due, and payment options.
  • Make your payment by your due date. Go to the payments page to find out more about your payment options.

You may want to...


Answers to Common Questions

What is the notice telling me?
This notice is telling you that we intend to issue a levy against your state tax refund because you still have a balance due on one of your tax accounts. You must pay this amount immediately to avoid this. It is also telling you that we will begin searching for other assets on which to issue a levy. We may also file a Federal Tax Lien, if we have not already done so.

What do I have to do?
Pay the amount due shown on the notice. Mail us your payment in the envelope we sent you. Include the bottom part of the notice to make sure we correctly credit your account.

If you can't pay the whole amount now, call us at the number printed at the top of the notice to see if you qualify for an installment agreement.

How much time do I have?
You must pay your balance due by the due date shown on your notice.

What happens if I don't pay or contact the IRS?
If you don't pay the amount due, we may seize ("levy") any state tax refund to which you're entitled. This is your notice of intent to levy as required by Internal Revenue Code section 6331(d).

If you still have an outstanding balance after we seize ("levy") your state tax refund, we may send you a notice giving you a right to a hearing before the IRS Office of Appeals, if you have not already received such a notice. We may then seize ("levy") or take possession of your other property or your rights to property. Property includes:

  • Wages, real estate commissions, and other income
  • Bank accounts
  • Business assets
  • Personal assets (including your car and home)
  • Social Security benefits

If you don't pay the amount due or call us to make payment arrangements, we can file a Notice of Federal Tax Lien on your property at any time, if we haven’t already done so.

If the lien is in place, you may find it difficult to sell or borrow against your property. The tax lien would also appear on your credit report ― which may harm your credit rating ― and your creditors would also be publicly notified that the IRS has priority to seize your property.

Who should I contact?
If you have any questions about the notice, call us at the number printed at the top of the notice. A customer service representative will assist you.

What if I don't agree or have already taken corrective action?
If you do not agree with this notice, contact us immediately at the number printed at the top of the notice. We will do our best to help you. If you have already paid this liability or arranged to pay it with an installment agreement, you should still call us at the number printed at the top of the notice to make sure your account reflects this.

Page Last Reviewed or Updated: 05-Mar-2014

The Form 1040 X

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