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Free online state taxes 17. Free online state taxes   Individual Retirement Arrangements (IRAs) Table of Contents What's New Reminders Introduction Useful Items - You may want to see: Traditional IRAsWho Can Open a Traditional IRA? When and How Can a Traditional IRA Be Opened? How Much Can Be Contributed? When Can Contributions Be Made? How Much Can You Deduct? Nondeductible Contributions Inherited IRAs Can You Move Retirement Plan Assets? When Can You Withdraw or Use IRA Assets? When Must You Withdraw IRA Assets? (Required Minimum Distributions) Are Distributions Taxable? What Acts Result in Penalties or Additional Taxes? Roth IRAsWhat Is a Roth IRA? When Can a Roth IRA Be Opened? Can You Contribute to a Roth IRA? Can You Move Amounts Into a Roth IRA? Are Distributions Taxable? What's New Traditional IRA contribution and deduction limit. Free online state taxes  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. Free online state taxes 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. Free online state taxes For more information, see How Much Can Be Contributed? later. Free online state taxes Roth IRA contribution limit. Free online state taxes  If contributions on your behalf are made only to Roth IRAs, your contribution limit for 2013 will generally be the lesser of: $5,500, or Your taxable compensation for the year. Free online state taxes If you were age 50 or older before 2014 and contributions on your behalf were made only to Roth IRAs, your contribution limit for 2013 will generally be the lesser of: $6,500, or Your taxable compensation for the year. Free online state taxes However, if your modified adjusted gross income (AGI) is above a certain amount, your contribution limit may be reduced. Free online state taxes For more information, see How Much Can Be Contributed? under Can You Contribute to a Roth IRA? later. Free online state taxes Modified AGI limit for traditional IRA contributions increased. Free online state taxes  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. Free online state taxes 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. Free online state taxes If your modified AGI is $188,000 or more, you cannot take a deduction for contributions to a traditional IRA. Free online state taxes See How Much Can You Deduct , later. Free online state taxes Modified AGI limit for Roth IRA contributions increased. Free online state taxes  For 2013, your Roth IRA contribution limit is reduced (phased out) in the following situations. Free online state taxes Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $178,000. Free online state taxes You cannot make a Roth IRA contribution if your modified AGI is $188,000 or more. Free online state taxes Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2013 and your modified AGI is at least $112,000. Free online state taxes You cannot make a Roth IRA contribution if your modified AGI is $127,000 or more. Free online state taxes Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. Free online state taxes You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more. Free online state taxes See Can You Contribute to a Roth IRA , later. Free online state taxes Net Investment Income Tax. Free online state taxes   For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan including IRAs (for example; 401(a), 403(a), 403(b), 408, 408A, or 457(b) plans). Free online state taxes However, these distributions are taken into account when determining the modified adjusted gross income threshold. Free online state taxes Distributions from a nonqualified retirement plan are included in net investment income. Free online state taxes See Form 8960, Net Investment Income Tax - Individuals, Estates, and Trusts, and its instructions for more information. Free online state taxes Name change. Free online state taxes  All spousal IRAs have been renamed Kay Bailey Hutchison Spousal IRAs. Free online state taxes There are no changes to the rules regarding these IRAs. Free online state taxes See Kay Bailey Hutchison Spousal IRA Limit , later, for more information. Free online state taxes Reminders 2014 limits. Free online state taxes   You can find information about the 2014 contribution and AGI limits in Publication 590. Free online state taxes Contributions to both traditional and Roth IRAs. Free online state taxes   For information on your combined contribution limit if you contribute to both traditional and Roth IRAs, see Roth IRAs and traditional IRAs under How Much Can Be Contributed? in Roth IRAs, later. Free online state taxes Statement of required minimum distribution. Free online state taxes  If a minimum distribution from your IRA is required, the trustee, custodian, or issuer that held the IRA at the end of the preceding year must either report the amount of the required minimum distribution to you, or offer to calculate it for you. Free online state taxes The report or offer must include the date by which the amount must be distributed. Free online state taxes The report is due January 31 of the year in which the minimum distribution is required. Free online state taxes It can be provided with the year-end fair market value statement that you normally get each year. Free online state taxes No report is required for IRAs of owners who have died. Free online state taxes IRA interest. Free online state taxes  Although interest earned from your IRA is generally not taxed in the year earned, it is not tax-exempt interest. Free online state taxes Tax on your traditional IRA is generally deferred until you take a distribution. Free online state taxes Do not report this interest on your tax return as tax-exempt interest. Free online state taxes Form 8606. Free online state taxes   To designate contributions as nondeductible, you must file Form 8606, Nondeductible IRAs. Free online state taxes The term “50 or older” is used several times in this chapter. Free online state taxes It refers to an IRA owner who is age 50 or older by the end of the tax year. Free online state taxes Introduction An individual retirement arrangement (IRA) is a personal savings plan that gives you tax advantages for setting aside money for your retirement. Free online state taxes This chapter discusses the following topics. Free online state taxes The rules for a traditional IRA (any IRA that is not a Roth or SIMPLE IRA). Free online state taxes The Roth IRA, which features nondeductible contributions and tax-free distributions. Free online state taxes Simplified Employee Pensions (SEPs) and Savings Incentive Match Plans for Employees (SIMPLEs) are not discussed in this chapter. Free online state taxes For more information on these plans and employees' SEP IRAs and SIMPLE IRAs that are part of these plans, see Publications 560 and 590. Free online state taxes For information about contributions, deductions, withdrawals, transfers, rollovers, and other transactions, see Publication 590. Free online state taxes Useful Items - You may want to see: Publication 560 Retirement Plans for Small Business 590 Individual Retirement Arrangements (IRAs) Form (and Instructions) 5329 Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts 8606 Nondeductible IRAs Traditional IRAs In this chapter, the original IRA (sometimes called an ordinary or regular IRA) is referred to as a “traditional IRA. Free online state taxes ” A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA. Free online state taxes Two advantages of a traditional IRA are: You may be able to deduct some or all of your contributions to it, depending on your circumstances, and Generally, amounts in your IRA, including earnings and gains, are not taxed until they are distributed. Free online state taxes 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. Free online state taxes What is compensation?   Generally, compensation is what you earn from working. Free online state taxes Compensation includes wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services. Free online state taxes 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). Free online state taxes   Scholarship and fellowship payments are compensation for this purpose only if shown in box 1 of Form W-2. Free online state taxes   Compensation also includes commissions and taxable alimony and separate maintenance payments. Free online state taxes Self-employment income. Free online state taxes   If you are self-employed (a sole proprietor or a partner), compensation is the net earnings from your trade or business (provided your personal services are a material income-producing factor) reduced by the total of: The deduction for contributions made on your behalf to retirement plans, and The deductible part of your self-employment tax. Free online state taxes   Compensation includes earnings from self-employment even if they are not subject to self-employment tax because of your religious beliefs. Free online state taxes Nontaxable combat pay. Free online state taxes   For IRA purposes, if you were a member of the U. Free online state taxes S. Free online state taxes Armed Forces, your compensation includes any nontaxable combat pay you receive. Free online state taxes What is not compensation?   Compensation does not include any of the following items. Free online state taxes Earnings and profits from property, such as rental income, interest income, and dividend income. Free online state taxes Pension or annuity income. Free online state taxes Deferred compensation received (compensation payments postponed from a past year). Free online state taxes Income from a partnership for which you do not provide services that are a material income-producing factor. Free online state taxes Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b. Free online state taxes Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs. Free online state taxes When and How Can a Traditional IRA Be Opened? You can open a traditional IRA at any time. Free online state taxes However, the time for making contributions for any year is limited. Free online state taxes See When Can Contributions Be Made , later. Free online state taxes You can open different kinds of IRAs with a variety of organizations. Free online state taxes You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. Free online state taxes You can also open an IRA through your stockbroker. Free online state taxes Any IRA must meet Internal Revenue Code requirements. Free online state taxes Kinds of traditional IRAs. Free online state taxes   Your traditional IRA can be an individual retirement account or annuity. Free online state taxes It can be part of either a simplified employee pension (SEP) or an employer or employee association trust account. Free online state taxes How Much Can Be Contributed? There are limits and other rules that affect the amount that can be contributed to a traditional IRA. Free online state taxes These limits and other rules are explained below. Free online state taxes Community property laws. Free online state taxes   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. Free online state taxes This is the rule even in states with community property laws. Free online state taxes Brokers' commissions. Free online state taxes   Brokers' commissions paid in connection with your traditional IRA are subject to the contribution limit. Free online state taxes Trustees' fees. Free online state taxes   Trustees' administrative fees are not subject to the contribution limit. Free online state taxes Qualified reservist repayments. Free online state taxes   If you are (or were) a member of a reserve component and you were ordered or called to active duty after September 11, 2001, you may be able to contribute (repay) to an IRA amounts equal to any qualified reservist distributions you received. Free online state taxes 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. Free online state taxes To be eligible to make these repayment contributions, you must have received a qualified reservist distribution from an IRA or from a section 401(k) or 403(b) plan or similar arrangement. Free online state taxes   For more information, see Qualified reservist repayments under How Much Can Be Contributed? in chapter 1 of Publication 590. Free online state taxes Contributions on your behalf to a traditional IRA reduce your limit for contributions to a Roth IRA. Free online state taxes (See Roth IRAs, later. Free online state taxes ) General limit. Free online state taxes   For 2013, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts. Free online state taxes $5,500 ($6,500 if you are 50 or older). Free online state taxes Your taxable compensation (defined earlier) for the year. Free online state taxes 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. Free online state taxes (See Nondeductible Contributions , later. Free online state taxes ) Qualified reservist repayments do not affect this limit. Free online state taxes Example 1. Free online state taxes Betty, who is 34 years old and single, earned $24,000 in 2013. Free online state taxes Her IRA contributions for 2013 are limited to $5,500. Free online state taxes Example 2. Free online state taxes John, an unmarried college student working part time, earned $3,500 in 2013. Free online state taxes His IRA contributions for 2013 are limited to $3,500, the amount of his compensation. Free online state taxes Kay Bailey Hutchison Spousal IRA limit. Free online state taxes   For 2013, if you file a joint return and your taxable compensation is less than that of your spouse, the most that can be contributed for the year to your IRA is the smaller of the following amounts. Free online state taxes $5,500 ($6,500 if you are 50 or older). Free online state taxes The total compensation includible in the gross income of both you and your spouse for the year, reduced by the following two amounts. Free online state taxes Your spouse's IRA contribution for the year to a traditional IRA. Free online state taxes Any contribution for the year to a Roth IRA on behalf of your spouse. Free online state taxes This means that the total combined contributions that can be made for the year to your IRA and your spouse's IRA can be as much as $11,000 ($12,000 if only one of you is 50 or older, or $13,000 if both of you are 50 or older). Free online state taxes 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). Free online state taxes Contributions must be in the form of money (cash, check, or money order). Free online state taxes Property cannot be contributed. Free online state taxes Contributions must be made by due date. Free online state taxes   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. Free online state taxes Age 70½ rule. Free online state taxes   Contributions cannot be made to your traditional IRA for the year in which you reach age 70½ or for any later year. Free online state taxes   You attain age 70½ on the date that is 6 calendar months after the 70th anniversary of your birth. Free online state taxes If you were born on or before June 30, 1943, you cannot contribute for 2013 or any later year. Free online state taxes Designating year for which contribution is made. Free online state taxes   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. Free online state taxes 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). Free online state taxes Filing before a contribution is made. Free online state taxes   You can file your return claiming a traditional IRA contribution before the contribution is actually made. Free online state taxes Generally, the contribution must be made by the due date of your return, not including extensions. Free online state taxes Contributions not required. Free online state taxes   You do not have to contribute to your traditional IRA for every tax year, even if you can. Free online state taxes How Much Can You Deduct? Generally, you can deduct the lesser of: The contributions to your traditional IRA for the year, or The general limit (or the Kay Bailey Hutchison Spousal IRA limit, if it applies). Free online state taxes However, if you or your spouse was covered by an employer retirement plan, you may not be able to deduct this amount. Free online state taxes See Limit If Covered by Employer Plan , later. Free online state taxes You may be able to claim a credit for contributions to your traditional IRA. Free online state taxes For more information, see chapter 37. Free online state taxes Trustees' fees. Free online state taxes   Trustees' administrative fees that are billed separately and paid in connection with your traditional IRA are not deductible as IRA contributions. Free online state taxes However, they may be deductible as a miscellaneous itemized deduction on Schedule A (Form 1040). Free online state taxes See chapter 28. Free online state taxes Brokers' commissions. Free online state taxes   Brokers' commissions are part of your IRA contribution and, as such, are deductible subject to the limits. Free online state taxes Full deduction. Free online state taxes   If neither you nor your spouse was covered for any part of the year by an employer retirement plan, you can take a deduction for total contributions to one or more traditional IRAs of up to the lesser of: $5,500 ($6,500 if you are age 50 or older in 2013). Free online state taxes 100% of your compensation. Free online state taxes This limit is reduced by any contributions made to a 501(c)(18) plan on your behalf. Free online state taxes Kay Bailey Hutchison Spousal IRA. Free online state taxes   In the case of a married couple with unequal compensation who file a joint return, the deduction for contributions to the traditional IRA of the spouse with less compensation is limited to the lesser of the following amounts. Free online state taxes $5,500 ($6,500 if the spouse with the lower compensation is age 50 or older in 2013). Free online state taxes The total compensation includible in the gross income of both spouses for the year reduced by the following three amounts. Free online state taxes The IRA deduction for the year of the spouse with the greater compensation. Free online state taxes Any designated nondeductible contribution for the year made on behalf of the spouse with the greater compensation. Free online state taxes Any contributions for the year to a Roth IRA on behalf of the spouse with the greater compensation. Free online state taxes This limit is reduced by any contributions to a 501(c)(18) plan on behalf of the spouse with the lesser compensation. Free online state taxes Note. Free online state taxes 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. Free online state taxes After a divorce or legal separation, you can deduct only contributions to your own IRA. Free online state taxes Your deductions are subject to the rules for single individuals. Free online state taxes Covered by an employer retirement plan. Free online state taxes   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. Free online state taxes This is discussed later under Limit If Covered by Employer Plan . Free online state taxes Limits on the amount you can deduct do not affect the amount that can be contributed. Free online state taxes See Nondeductible Contributions , later. Free online state taxes 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. Free online state taxes The “Retirement plan” box should be checked if you were covered. Free online state taxes Reservists and volunteer firefighters should also see Situations in Which You Are Not Covered by an Employer Plan , later. Free online state taxes If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer. Free online state taxes Federal judges. Free online state taxes   For purposes of the IRA deduction, federal judges are covered by an employer retirement plan. Free online state taxes For Which Year(s) Are You Covered by an Employer Plan? Special rules apply to determine the tax years for which you are covered by an employer plan. Free online state taxes These rules differ depending on whether the plan is a defined contribution plan or a defined benefit plan. Free online state taxes Tax year. Free online state taxes   Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. Free online state taxes For almost all people, the tax year is the calendar year. Free online state taxes Defined contribution plan. Free online state taxes   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. Free online state taxes   A defined contribution plan is a plan that provides for a separate account for each person covered by the plan. Free online state taxes Types of defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans. Free online state taxes Defined benefit plan. Free online state taxes   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. Free online state taxes 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. Free online state taxes   A defined benefit plan is any plan that is not a defined contribution plan. Free online state taxes Defined benefit plans include pension plans and annuity plans. Free online state taxes No vested interest. Free online state taxes   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. Free online state taxes Situations in Which You Are Not Covered by an Employer Plan Unless you are covered under another employer plan, you are not covered by an employer plan if you are in one of the situations described below. Free online state taxes Social security or railroad retirement. Free online state taxes   Coverage under social security or railroad retirement is not coverage under an employer retirement plan. Free online state taxes Benefits from a previous employer's plan. Free online state taxes   If you receive retirement benefits from a previous employer's plan, you are not covered by that plan. Free online state taxes Reservists. Free online state taxes   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. Free online state taxes You are not covered by the plan if both of the following conditions are met. Free online state taxes 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. Free online state taxes You did not serve more than 90 days on active duty during the year (not counting duty for training). Free online state taxes Volunteer firefighters. Free online state taxes   If the only reason you participate in a plan is because you are a volunteer firefighter, you may not be covered by the plan. Free online state taxes You are not covered by the plan if both of the following conditions are met. Free online state taxes 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. Free online state taxes Your accrued retirement benefits at the beginning of the year will not provide more than $1,800 per year at retirement. Free online state taxes Limit If Covered by Employer Plan If either you or your spouse was covered by an employer retirement plan, you may be entitled to only a partial (reduced) deduction or no deduction at all, depending on your income and your filing status. Free online state taxes 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. Free online state taxes These amounts vary depending on your filing status. Free online state taxes To determine if your deduction is subject to phaseout, you must determine your modified adjusted gross income (AGI) and your filing status. Free online state taxes See Filing status and Modified adjusted gross income (AGI) , later. Free online state taxes Then use Table 17-1 or 17-2 to determine if the phaseout applies. Free online state taxes Social security recipients. Free online state taxes   Instead of using Table 17-1 or Table 17-2, use the worksheets in Appendix B of Publication 590 if, for the year, all of the following apply. Free online state taxes You received social security benefits. Free online state taxes You received taxable compensation. Free online state taxes Contributions were made to your traditional IRA. Free online state taxes You or your spouse was covered by an employer retirement plan. Free online state taxes Use those worksheets to figure your IRA deduction, your nondeductible contribution, and the taxable portion, if any, of your social security benefits. Free online state taxes Deduction phaseout. Free online state taxes   If you were covered by an employer retirement plan and you did not receive any social security retirement benefits, your IRA deduction may be reduced or eliminated depending on your filing status and modified AGI as shown in Table 17-1. Free online state taxes Table 17-1. Free online state taxes Effect of Modified AGI1 on Deduction if You Are Covered by Retirement Plan at Work If you are covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. Free online state taxes IF your filing status is. Free online state taxes . Free online state taxes . Free online state taxes   AND your modified AGI is. Free online state taxes . Free online state taxes . Free online state taxes   THEN you can take. Free online state taxes . Free online state taxes . Free online state taxes single   or  head of household   $59,000 or less   a full deduction. Free online state taxes   more than $59,000 but less than $69,000   a partial deduction. Free online state taxes   $69,000 or more   no deduction. Free online state taxes married filing jointly   or  qualifying widow(er)   $95,000 or less   a full deduction. Free online state taxes   more than $95,000 but less than $115,000   a partial deduction. Free online state taxes   $115,000 or more   no deduction. Free online state taxes married filing separately2   less than $10,000   a partial deduction. Free online state taxes   $10,000 or more   no deduction. Free online state taxes 1Modified AGI (adjusted gross income). Free online state taxes See Modified adjusted gross income (AGI) . Free online state taxes 2If you did not live with your spouse at any time during the year, your filing status is considered Single for this purpose (therefore, your IRA deduction is determined under the “Single” column). Free online state taxes If your spouse is covered. Free online state taxes   If you are not covered by an employer retirement plan, but your spouse is, and you did not receive any social security benefits, your IRA deduction may be reduced or eliminated entirely depending on your filing status and modified AGI as shown in Table 17-2. Free online state taxes Filing status. Free online state taxes   Your filing status depends primarily on your marital status. Free online state taxes 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. Free online state taxes If you need more information on filing status, see chapter 2. Free online state taxes Lived apart from spouse. Free online state taxes   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. Free online state taxes Table 17-2. Free online state taxes Effect of Modified AGI1 on Deduction if You Are NOT Covered by Retirement Plan at Work If you are not covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. Free online state taxes IF your filing status is. Free online state taxes . Free online state taxes . Free online state taxes   AND your modified AGI is. Free online state taxes . Free online state taxes . Free online state taxes   THEN you can take. Free online state taxes . Free online state taxes . Free online state taxes single, head of household, or qualifying widow(er)   any amount   a full deduction. Free online state taxes married filing jointly or separately with a spouse who is not covered by a plan at work   any amount   a full deduction. Free online state taxes married filing jointly with a spouse who is covered by a plan at work   $178,000 or less   a full deduction. Free online state taxes   more than $178,000 but less than $188,000   a partial deduction. Free online state taxes   $188,000 or more   no deduction. Free online state taxes married filing separately with a spouse who is covered by a plan at work2   less than $10,000   a partial deduction. Free online state taxes   $10,000 or more   no deduction. Free online state taxes 1Modified AGI (adjusted gross income). Free online state taxes See Modified adjusted gross income (AGI) . Free online state taxes 2You are entitled to the full deduction if you did not live with your spouse at any time during the year. Free online state taxes Modified adjusted gross income (AGI). Free online state taxes   How you figure your modified AGI depends on whether you are filing Form 1040 or Form 1040A. Free online state taxes If you made contributions to your IRA for 2013 and received a distribution from your IRA in 2013, see Publication 590. Free online state taxes You may be able to use Worksheet 17-1 to figure your modified AGI. Free online state taxes    Do not assume that your modified AGI is the same as your compensation. Free online state taxes Your modified AGI may include income in addition to your compensation (discussed earlier), such as interest, dividends, and income from IRA distributions. Free online state taxes Form 1040. Free online state taxes   If you file Form 1040, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following eight amounts. Free online state taxes IRA deduction. Free online state taxes Student loan interest deduction. Free online state taxes Tuition and fees deduction. Free online state taxes Domestic production activities deduction. Free online state taxes Foreign earned income exclusion. Free online state taxes Foreign housing exclusion or deduction. Free online state taxes Exclusion of qualified savings bond interest shown on Form 8815, Exclusion of Interest From Series EE and I U. Free online state taxes S. Free online state taxes Savings Bonds Issued After 1989. Free online state taxes Exclusion of employer-provided adoption benefits shown on Form 8839, Qualified Adoption Expenses. Free online state taxes This is your modified AGI. Free online state taxes Form 1040A. Free online state taxes   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. Free online state taxes IRA deduction. Free online state taxes Student loan interest deduction. Free online state taxes Tuition and fees deduction. Free online state taxes Exclusion of qualified savings bond interest shown on Form 8815. Free online state taxes This is your modified AGI. Free online state taxes Both contributions for 2013 and distributions in 2013. Free online state taxes   If all three of the following apply, any IRA distributions you received in 2013 may be partly tax free and partly taxable. Free online state taxes You received distributions in 2013 from one or more traditional IRAs. Free online state taxes You made contributions to a traditional IRA for 2013. Free online state taxes Some of those contributions may be nondeductible contributions. Free online state taxes If this is your situation, you must figure the taxable part of the traditional IRA distribution before you can figure your modified AGI. Free online state taxes To do this, you can use Worksheet 1-5, Figuring the Taxable Part of Your IRA Distribution, in Publication 590. Free online state taxes   If at least one of the above does not apply, figure your modified AGI using Worksheet 17-1, later. Free online state taxes    How to figure your reduced IRA deduction. Free online state taxes   You can figure your reduced IRA deduction for either Form 1040 or Form 1040A by using the worksheets in chapter 1 of Publication 590. Free online state taxes Also, the instructions for Form 1040 and Form 1040A include similar worksheets that you may be able to use instead. Free online state taxes Worksheet 17-1. Free online state taxes Figuring Your Modified AGI Use this worksheet to figure your modified adjusted gross income for traditional IRA purposes. Free online state taxes 1. Free online state taxes Enter your adjusted gross income (AGI) from Form 1040, line 38, or Form 1040A, line 22, figured without taking into account the amount from Form 1040, line 32, or Form 1040A, line 17 1. Free online state taxes   2. Free online state taxes Enter any student loan interest deduction from Form 1040, line 33, or Form 1040A, line 18 2. Free online state taxes   3. Free online state taxes Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 3. Free online state taxes   4. Free online state taxes Enter any domestic production activities deduction from Form 1040, line 35 4. Free online state taxes   5. Free online state taxes Enter any foreign earned income and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 5. Free online state taxes   6. Free online state taxes Enter any foreign housing deduction from Form 2555, line 50 6. Free online state taxes   7. Free online state taxes Enter any excludable savings bond interest from Form 8815, line 14 7. Free online state taxes   8. Free online state taxes Enter any excluded employer-provided adoption benefits from Form 8839, line 28 8. Free online state taxes   9. Free online state taxes Add lines 1 through 8. Free online state taxes This is your Modified AGI for traditional IRA purposes 9. Free online state taxes   Reporting Deductible Contributions If you file Form 1040, enter your IRA deduction on line 32 of that form. Free online state taxes If you file Form 1040A, enter your IRA deduction on line 17. Free online state taxes You cannot deduct IRA contributions on Form 1040EZ. Free online state taxes Nondeductible Contributions Although your deduction for IRA contributions may be reduced or eliminated, contributions can be made to your IRA up to the general limit or, if it applies, the Kay Bailey Hutchison Spousal IRA limit. Free online state taxes The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. Free online state taxes Example. Free online state taxes Mike is 28 years old and single. Free online state taxes In 2013, he was covered by a retirement plan at work. Free online state taxes His salary was $57,312. Free online state taxes His modified AGI was $70,000. Free online state taxes Mike made a $5,500 IRA contribution for 2013. Free online state taxes Because he was covered by a retirement plan and his modified AGI was over $69,000, he cannot deduct his $5,500 IRA contribution. Free online state taxes He must designate this contribution as a nondeductible contribution by reporting it on Form 8606, as explained next. Free online state taxes Form 8606. Free online state taxes   To designate contributions as nondeductible, you must file Form 8606. Free online state taxes   You do not have to designate a contribution as nondeductible until you file your tax return. Free online state taxes When you file, you can even designate otherwise deductible contributions as nondeductible. Free online state taxes   You must file Form 8606 to report nondeductible contributions even if you do not have to file a tax return for the year. Free online state taxes 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. Free online state taxes In those situations, a Form 8606 is completed for the year you take a distribution from that IRA. Free online state taxes See Form 8606 under Distributions Fully or Partly Taxable, later. Free online state taxes Failure to report nondeductible contributions. Free online state taxes   If you do not report nondeductible contributions, all of the contributions to your traditional IRA will be treated as deductible contributions when withdrawn. Free online state taxes All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. Free online state taxes Penalty for overstatement. Free online state taxes   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. Free online state taxes Penalty for failure to file Form 8606. Free online state taxes   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. Free online state taxes    Tax on earnings on nondeductible contributions. Free online state taxes   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. Free online state taxes See When Can You Withdraw or Use IRA Assets , later. Free online state taxes Cost basis. Free online state taxes   You will have a cost basis in your traditional IRA if you made any nondeductible contributions. Free online state taxes Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions. Free online state taxes Inherited IRAs If you inherit a traditional IRA, you are called a beneficiary. Free online state taxes A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. Free online state taxes Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive. Free online state taxes Inherited from spouse. Free online state taxes   If you inherit a traditional IRA from your spouse, you generally have the following three choices. Free online state taxes You can: Treat it as your own IRA by designating yourself as the account owner. Free online state taxes Treat it as your own by rolling it over into your IRA, or to the extent it is taxable, into a: Qualified employer plan, Qualified employee annuity plan (section 403(a) plan), Tax-sheltered annuity plan (section 403(b) plan), or Deferred compensation plan of a state or local government (section 457 plan). Free online state taxes Treat yourself as the beneficiary rather than treating the IRA as your own. Free online state taxes Treating it as your own. Free online state taxes   You will be considered to have chosen to treat the IRA as your own if: Contributions (including rollover contributions) are made to the inherited IRA, or You do not take the required minimum distribution for a year as a beneficiary of the IRA. Free online state taxes You will only be considered to have chosen to treat the IRA as your own if: You are the sole beneficiary of the IRA, and You have an unlimited right to withdraw amounts from it. Free online state taxes   However, if you receive a distribution from your deceased spouse's IRA, you can roll that distribution over into your own IRA within the 60-day time limit, as long as the distribution is not a required distribution, even if you are not the sole beneficiary of your deceased spouse's IRA. Free online state taxes Inherited from someone other than spouse. Free online state taxes   If you inherit a traditional IRA from anyone other than your deceased spouse, you cannot treat the inherited IRA as your own. Free online state taxes This means that you cannot make any contributions to the IRA. Free online state taxes It also means you cannot roll over any amounts into or out of the inherited IRA. Free online state taxes However, you can make a trustee-to-trustee transfer as long as the IRA into which amounts are being moved is set up and maintained in the name of the deceased IRA owner for the benefit of you as beneficiary. Free online state taxes For more information, see the discussion of inherited IRAs under Rollover From One IRA Into Another, later. Free online state taxes Can You Move Retirement Plan Assets? You can transfer, tax free, assets (money or property) from other retirement plans (including traditional IRAs) to a traditional IRA. Free online state taxes You can make the following kinds of transfers. Free online state taxes Transfers from one trustee to another. Free online state taxes Rollovers. Free online state taxes Transfers incident to a divorce. Free online state taxes Transfers to Roth IRAs. Free online state taxes   Under certain conditions, you can move assets from a traditional IRA or from a designated Roth account to a Roth IRA. Free online state taxes You can also move assets from a qualified retirement plan to a Roth IRA. Free online state taxes See Can You Move Amounts Into a Roth IRA? under Roth IRAs, later. Free online state taxes Trustee-to-Trustee Transfer A transfer of funds in your traditional IRA from one trustee directly to another, either at your request or at the trustee's request, is not a rollover. Free online state taxes Because there is no distribution to you, the transfer is tax free. Free online state taxes Because it is not a rollover, it is not affected by the 1-year waiting period required between rollovers, discussed later under Rollover From One IRA Into Another . Free online state taxes For information about direct transfers to IRAs from retirement plans other than IRAs, see Can You Move Retirement Plan Assets? in chapter 1 and Can You Move Amounts Into a Roth IRA? in chapter 2 of Publication 590. Free online state taxes Rollovers Generally, a rollover is a tax-free distribution to you of cash or other assets from one retirement plan that you contribute (roll over) to another retirement plan. Free online state taxes The contribution to the second retirement plan is called a “rollover contribution. Free online state taxes ” Note. Free online state taxes An amount rolled over tax free from one retirement plan to another is generally includible in income when it is distributed from the second plan. Free online state taxes Kinds of rollovers to a traditional IRA. Free online state taxes   You can roll over amounts from the following plans into a traditional IRA: A traditional IRA, An employer's qualified retirement plan for its employees, A deferred compensation plan of a state or local government (section 457 plan), or A tax-sheltered annuity plan (section 403(b) plan). Free online state taxes Treatment of rollovers. Free online state taxes   You cannot deduct a rollover contribution, but you must report the rollover distribution on your tax return as discussed later under Reporting rollovers from IRAs and under Reporting rollovers from employer plans . Free online state taxes Kinds of rollovers from a traditional IRA. Free online state taxes   You may be able to roll over, tax free, a distribution from your traditional IRA into a qualified plan. Free online state taxes These plans include the federal Thrift Savings Fund (for federal employees), deferred compensation plans of state or local governments (section 457 plans), and tax-sheltered annuity plans (section 403(b) plans). Free online state taxes The part of the distribution that you can roll over is the part that would otherwise be taxable (includible in your income). Free online state taxes Qualified plans may, but are not required to, accept such rollovers. Free online state taxes Time limit for making a rollover contribution. Free online state taxes   You generally must make the rollover contribution by the 60th day after the day you receive the distribution from your traditional IRA or your employer's plan. Free online state taxes The IRS may waive the 60-day requirement where the failure to do so would be against equity or good conscience, such as in the event of a casualty, disaster, or other event beyond your reasonable control. Free online state taxes For more information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Free online state taxes Extension of rollover period. Free online state taxes   If an amount distributed to you from a traditional IRA or a qualified employer retirement plan is a frozen deposit at any time during the 60-day period allowed for a rollover, special rules extend the rollover period. Free online state taxes For more information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Free online state taxes More information. Free online state taxes   For more information on rollovers, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Free online state taxes Rollover From One IRA Into Another You can withdraw, tax free, all or part of the assets from one traditional IRA if you reinvest them within 60 days in the same or another traditional IRA. Free online state taxes Because this is a rollover, you cannot deduct the amount that you reinvest in an IRA. Free online state taxes Waiting period between rollovers. Free online state taxes   Generally, if you make a tax-free rollover of any part of a distribution from a traditional IRA, you cannot, within a 1-year period, make a tax-free rollover of any later distribution from that same IRA. Free online state taxes You also cannot make a tax-free rollover of any amount distributed, within the same 1-year period, from the IRA into which you made the tax-free rollover. Free online state taxes   The 1-year period begins on the date you receive the IRA distribution, not on the date you roll it over into an IRA. Free online state taxes Example. Free online state taxes You have two traditional IRAs, IRA-1 and IRA-2. Free online state taxes You make a tax-free rollover of a distribution from IRA-1 into a new traditional IRA (IRA-3). Free online state taxes You cannot, within 1 year of the distribution from IRA-1, make a tax-free rollover of any distribution from either IRA-1 or IRA-3 into another traditional IRA. Free online state taxes However, the rollover from IRA-1 into IRA-3 does not prevent you from making a tax-free rollover from IRA-2 into any other traditional IRA. Free online state taxes This is because you have not, within the last year, rolled over, tax free, any distribution from IRA-2 or made a tax-free rollover into IRA-2. Free online state taxes Exception. Free online state taxes   For an exception for distributions from failed financial institutions, see Rollover From One IRA Into Another under Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Free online state taxes Partial rollovers. Free online state taxes   If you withdraw assets from a traditional IRA, you can roll over part of the withdrawal tax free and keep the rest of it. Free online state taxes The amount you keep will generally be taxable (except for the part that is a return of nondeductible contributions). Free online state taxes The amount you keep may be subject to the 10% additional tax on early distributions, discussed later under What Acts Result in Penalties or Additional Taxes? . Free online state taxes Required distributions. Free online state taxes   Amounts that must be distributed during a particular year under the required distribution rules (discussed later) are not eligible for rollover treatment. Free online state taxes Inherited IRAs. Free online state taxes   If you inherit a traditional IRA from your spouse, you generally can roll it over, or you can choose to make the inherited IRA your own. Free online state taxes See Treating it as your own , earlier. Free online state taxes Not inherited from spouse. Free online state taxes   If you inherit a traditional IRA from someone other than your spouse, you cannot roll it over or allow it to receive a rollover contribution. Free online state taxes You must withdraw the IRA assets within a certain period. Free online state taxes For more information, see When Must You Withdraw Assets? in chapter 1 of Publication 590. Free online state taxes Reporting rollovers from IRAs. Free online state taxes   Report any rollover from one traditional IRA to the same or another traditional IRA on lines 15a and 15b, Form 1040, or lines 11a and 11b, Form 1040A, as follows. Free online state taxes   Enter the total amount of the distribution on Form 1040, line 15a, or Form 1040A, line 11a. Free online state taxes If the total amount on Form 1040, line 15a, or Form 1040A, line 11a, was rolled over, enter zero on Form 1040, line 15b, or Form 1040A, line 11b. Free online state taxes If the total distribution was not rolled over, enter the taxable portion of the part that was not rolled over on Form 1040, line 15b, or Form 1040A, line 11b. Free online state taxes Put “Rollover” next to Form 1040, line 15b, or Form 1040A, line 11b. Free online state taxes See your tax return instructions. Free online state taxes   If you rolled over the distribution into a qualified plan (other than an IRA) or you make the rollover in 2014, attach a statement explaining what you did. Free online state taxes Rollover From Employer's Plan Into an IRA You can roll over into a traditional IRA all or part of an eligible rollover distribution you receive from your (or your deceased spouse's): Employer's qualified pension, profit-sharing, or stock bonus plan; Annuity plan; Tax-sheltered annuity plan (section 403(b) plan); or Governmental deferred compensation plan (section 457 plan). Free online state taxes A qualified plan is one that meets the requirements of the Internal Revenue Code. Free online state taxes Eligible rollover distribution. Free online state taxes   Generally, an eligible rollover distribution is any distribution of all or part of the balance to your credit in a qualified retirement plan except the following. Free online state taxes A required minimum distribution (explained later under When Must You Withdraw IRA Assets? (Required Minimum Distributions) ). Free online state taxes A hardship distribution. Free online state taxes Any of a series of substantially equal periodic distributions paid at least once a year over: Your lifetime or life expectancy, The lifetimes or life expectancies of you and your beneficiary, or A period of 10 years or more. Free online state taxes Corrective distributions of excess contributions or excess deferrals, and any income allocable to the excess, or of excess annual additions and any allocable gains. Free online state taxes A loan treated as a distribution because it does not satisfy certain requirements either when made or later (such as upon default), unless the participant's accrued benefits are reduced (offset) to repay the loan. Free online state taxes Dividends on employer securities. Free online state taxes The cost of life insurance coverage. Free online state taxes Any nontaxable amounts that you roll over into your traditional IRA become part of your basis (cost) in your IRAs. Free online state taxes To recover your basis when you take distributions from your IRA, you must complete Form 8606 for the year of the distribution. Free online state taxes See Form 8606 under Distributions Fully or Partly Taxable, later. Free online state taxes Rollover by nonspouse beneficiary. Free online state taxes   A direct transfer from a deceased employee's qualified pension, profit-sharing, or stock bonus plan; annuity plan; tax-sheltered annuity (section 403(b)) plan; or governmental deferred compensation (section 457) plan to an IRA set up to receive the distribution on your behalf can be treated as an eligible rollover distribution if you are the designated beneficiary of the plan and not the employee's spouse. Free online state taxes The IRA is treated as an inherited IRA. Free online state taxes For more information about inherited IRAs, see Inherited IRAs , earlier. Free online state taxes Reporting rollovers from employer plans. Free online state taxes    Enter the total distribution (before income tax or other deductions were withheld) on Form 1040, line 16a, or Form 1040A, line 12a. Free online state taxes This amount should be shown in box 1 of Form 1099-R. Free online state taxes From this amount, subtract any contributions (usually shown in box 5 of Form 1099-R) that were taxable to you when made. Free online state taxes From that result, subtract the amount that was rolled over either directly or within 60 days of receiving the distribution. Free online state taxes Enter the remaining amount, even if zero, on Form 1040, line 16b, or Form 1040A, line 12b. Free online state taxes Also, enter "Rollover" next to Form 1040, line 16b, or Form 1040A, line 12b. Free online state taxes Transfers Incident to Divorce If an interest in a traditional IRA is transferred from your spouse or former spouse to you by a divorce or separate maintenance decree or a written document related to such a decree, the interest in the IRA, starting from the date of the transfer, is treated as your IRA. Free online state taxes The transfer is tax free. Free online state taxes For detailed information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Free online state taxes Converting From Any Traditional IRA to a Roth IRA Allowable conversions. Free online state taxes   You can withdraw all or part of the assets from a traditional IRA and reinvest them (within 60 days) in a Roth IRA. Free online state taxes The amount that you withdraw and timely contribute (convert) to the Roth IRA is called a conversion contribution. Free online state taxes If properly (and timely) rolled over, the 10% additional tax on early distributions will not apply. Free online state taxes However, a part or all of the conversion contribution from your traditional IRA is included in your gross income. Free online state taxes Required distributions. Free online state taxes   You cannot convert amounts that must be distributed from your traditional IRA for a particular year (including the calendar year in which you reach age 70½) under the required distribution rules (discussed later). Free online state taxes Income. Free online state taxes   You must include in your gross income distributions from a traditional IRA that you would have had to include in income if you had not converted them into a Roth IRA. Free online state taxes These amounts are normally included in income on your return for the year that you converted them from a traditional IRA to a Roth IRA. Free online state taxes   You do not include in gross income any part of a distribution from a traditional IRA that is a return of your basis, as discussed later. Free online state taxes   You must file Form 8606 to report 2013 conversions from traditional, SEP, or SIMPLE IRAs to a Roth IRA in 2013 (unless you recharacterized the entire amount) and to figure the amount to include in income. Free online state taxes   If you must include any amount in your gross income, you may have to increase your withholding or make estimated tax payments. Free online state taxes See chapter 4. Free online state taxes Recharacterizations You may be able to treat a contribution made to one type of IRA as having been made to a different type of IRA. Free online state taxes This is called recharacterizing the contribution. Free online state taxes See Can You Move Retirement Plan Assets? in chapter 1 of Publication 590 for more detailed information. Free online state taxes How to recharacterize a contribution. Free online state taxes   To recharacterize a contribution, you generally must have the contribution transferred from the first IRA (the one to which it was made) to the second IRA in a trustee-to-trustee transfer. Free online state taxes If the transfer is made by the due date (including extensions) for your tax return for the year during which the contribution was made, you can elect to treat the contribution as having been originally made to the second IRA instead of to the first IRA. Free online state taxes If you recharacterize your contribution, you must do all three of the following. Free online state taxes Include in the transfer any net income allocable to the contribution. Free online state taxes If there was a loss, the net income you must transfer may be a negative amount. Free online state taxes Report the recharacterization on your tax return for the year during which the contribution was made. Free online state taxes Treat the contribution as having been made to the second IRA on the date that it was actually made to the first IRA. Free online state taxes No deduction allowed. Free online state taxes   You cannot deduct the contribution to the first IRA. Free online state taxes Any net income you transfer with the recharacterized contribution is treated as earned in the second IRA. Free online state taxes Required notifications. Free online state taxes   To recharacterize a contribution, you must notify both the trustee of the first IRA (the one to which the contribution was actually made) and the trustee of the second IRA (the one to which the contribution is being moved) that you have elected to treat the contribution as having been made to the second IRA rather than the first. Free online state taxes You must make the notifications by the date of the transfer. Free online state taxes Only one notification is required if both IRAs are maintained by the same trustee. Free online state taxes The notification(s) must include all of the following information. Free online state taxes The type and amount of the contribution to the first IRA that is to be recharacterized. Free online state taxes The date on which the contribution was made to the first IRA and the year for which it was made. Free online state taxes A direction to the trustee of the first IRA to transfer in a trustee-to-trustee transfer the amount of the contribution and any net income (or loss) allocable to the contribution to the trustee of the second IRA. Free online state taxes The name of the trustee of the first IRA and the name of the trustee of the second IRA. Free online state taxes Any additional information needed to make the transfer. Free online state taxes Reporting a recharacterization. Free online state taxes   If you elect to recharacterize a contribution to one IRA as a contribution to another IRA, you must report the recharacterization on your tax return as directed by Form 8606 and its instructions. Free online state taxes You must treat the contribution as having been made to the second IRA. Free online state taxes When Can You Withdraw or Use IRA Assets? There are rules limiting use of your IRA assets and distributions from it. Free online state taxes Violation of the rules generally results in additional taxes in the year of violation. Free online state taxes See What Acts Result in Penalties or Additional Taxes , later. Free online state taxes Contributions returned before the due date of return. Free online state taxes   If you made IRA contributions in 2013, you can withdraw them tax free by the due date of your return. Free online state taxes If you have an extension of time to file your return, you can withdraw them tax free by the extended due date. Free online state taxes You can do this if, for each contribution you withdraw, both of the following conditions apply. Free online state taxes You did not take a deduction for the contribution. Free online state taxes You withdraw any interest or other income earned on the contribution. Free online state taxes You can take into account any loss on the contribution while it was in the IRA when calculating the amount that must be withdrawn. Free online state taxes If there was a loss, the net income earned on the contribution may be a negative amount. Free online state taxes Note. Free online state taxes To calculate the amount you must withdraw, see Worksheet 1-4 under When Can You Withdraw or Use Assets? in chapter 1 of Publication 590. Free online state taxes Earnings includible in income. Free online state taxes   You must include in income any earnings on the contributions you withdraw. Free online state taxes Include the earnings in income for the year in which you made the contributions, not in the year in which you withdraw them. Free online state taxes Generally, except for any part of a withdrawal that is a return of nondeductible contributions (basis), any withdrawal of your contributions after the due date (or extended due date) of your return will be treated as a taxable distribution. Free online state taxes Excess contributions can also be recovered tax free as discussed under What Acts Result in Penalties or Additional Taxes?, later. Free online state taxes    Early distributions tax. Free online state taxes   The 10% additional tax on distributions made before you reach age 59½ does not apply to these tax-free withdrawals of your contributions. Free online state taxes However, the distribution of interest or other income must be reported on Form 5329 and, unless the distribution qualifies as an exception to the age 59½ rule, it will be subject to this tax. Free online state taxes When Must You Withdraw IRA Assets? (Required Minimum Distributions) You cannot keep funds in a traditional IRA indefinitely. Free online state taxes Eventually they must be distributed. Free online state taxes If there are no distributions, or if the distributions are not large enough, you may have to pay a 50% excise tax on the amount not distributed as required. Free online state taxes See Excess Accumulations (Insufficient Distributions) , later. Free online state taxes The requirements for distributing IRA funds differ depending on whether you are the IRA owner or the beneficiary of a decedent's IRA. Free online state taxes Required minimum distribution. Free online state taxes   The amount that must be distributed each year is referred to as the required minimum distribution. Free online state taxes Required distributions not eligible for rollover. Free online state taxes   Amounts that must be distributed (required minimum distributions) during a particular year are not eligible for rollover treatment. Free online state taxes IRA owners. Free online state taxes   If you are the owner of a traditional IRA, you must generally start receiving distributions from your IRA by April 1 of the year following the year in which you reach age 70½. Free online state taxes April 1 of the year following the year in which you reach age 70½ is referred to as the required beginning date. Free online state taxes Distributions by the required beginning date. Free online state taxes   You must receive at least a minimum amount for each year starting with the year you reach age 70½ (your 70½ year). Free online state taxes If you do not (or did not) receive that minimum amount in your 70½ year, then you must receive distributions for your 70½ year by April 1 of the next year. Free online state taxes   If an IRA owner dies after reaching age 70½, but before April 1 of the next year, no minimum distribution is required because death occurred before the required beginning date. Free online state taxes Even if you begin receiving distributions before you attain age 70½, you must begin calculating and receiving required minimum distributions by your required beginning date. Free online state taxes Distributions after the required beginning date. Free online state taxes   The required minimum distribution for any year after the year you turn 70½ must be made by December 31 of that later year. Free online state taxes    Beneficiaries. Free online state taxes   If you are the beneficiary of a decedent's traditional IRA, the requirements for distributions from that IRA generally depend on whether the IRA owner died before or after the required beginning date for distributions. Free online state taxes More information. Free online state taxes   For more information, including how to figure your minimum required distribution each year and how to figure your required distribution if you are a beneficiary of a decedent's IRA, see When Must You Withdraw Assets? in chapter 1 of Publication 590. Free online state taxes Are Distributions Taxable? In general, distributions from a traditional IRA are taxable in the year you receive them. Free online state taxes Exceptions. Free online state taxes   Exceptions to distributions from traditional IRAs being taxable in the year you receive them are: Rollovers, Qualified charitable distributions (QCD), discussed later, Tax-free withdrawals of contributions, discussed earlier, and The return of nondeductible contributions, discussed later under Distributions Fully or Partly Taxable . Free online state taxes    Although a conversion of a traditional IRA is considered a rollover for Roth IRA purposes, it is not an exception to the rule that distributions from a traditional IRA are taxable in the year you receive them. Free online state taxes Conversion distributions are includible in your gross income subject to this rule and the special rules for conversions explained in Converting From Any Traditional IRA Into a Roth IRA under Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Free online state taxes Qualified charitable distributions (QCD). Free online state taxes   A QCD is generally a nontaxable distribution made directly by the trustee of your IRA to an organization eligible to receive tax-deductible contributions. Free online state taxes Special rules apply if you made a qualified charitable distribution in January 2013 that you elected to treat as made in 2012. Free online state taxes See Qualified Charitable Distributions in Publication 590 for more information. Free online state taxes Ordinary income. Free online state taxes   Distributions from traditional IRAs that you include in income are taxed as ordinary income. Free online state taxes No special treatment. Free online state taxes   In figuring your tax, you cannot use the 10-year tax option or capital gain treatment that applies to lump-sum distributions from qualified retirement plans. Free online state taxes Distributions Fully or Partly Taxable Distributions from your traditional IRA may be fully or partly taxable, depending on whether your IRA includes any nondeductible contributions. Free online state taxes Fully taxable. Free online state taxes   If only deductible contributions were made to your traditional IRA (or IRAs, if you have more than one), you have no basis in your IRA. Free online state taxes Because you have no basis in your IRA, any distributions are fully taxable when received. Free online state taxes See Reporting taxable distributions on your return , later. Free online state taxes Partly taxable. Free online state taxes    If you made nondeductible contributions or rolled over any after-tax amounts to any of your traditional IRAs, you have a cost basis (investment in the contract) equal to the amount of those contributions. Free online state taxes These nondeductible contributions are not taxed when they are distributed to you. Free online state taxes They are a return of your investment in your IRA. Free online state taxes   Only the part of the distribution that represents nondeductible contributions and rolled over after-tax amounts (your cost basis) is tax free. Free online state taxes If nondeductible contributions have been made or after-tax amounts have been rolled over to your IRA, distributions consist partly of nondeductible contributions (basis) and partly of deductible contributions, earnings, and gains (if there are any). Free online state taxes Until all of your basis has been distributed, each distribution is partly nontaxable and partly taxable. Free online state taxes Form 8606. Free online state taxes   You must complete Form 8606 and attach it to your return if you receive a distribution from a traditional IRA and have ever made nondeductible contributions or rolled over after-tax amounts to any of your traditional IRAs. Free online state taxes Using the form, you will figure the nontaxable distributions for 2013 and your total IRA basis for 2013 and earlier years. Free online state taxes Note. Free online state taxes If you are required to file Form 8606, but you are not required to file an income tax return, you still must file Form 8606. Free online state taxes Send it to the IRS at the time and place you would otherwise file an income tax return. Free online state taxes Distributions reported on Form 1099-R. Free online state taxes   If you receive a distribution from your traditional IRA, you will receive Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Free online state taxes , or a similar statement. Free online state taxes IRA distributions are shown in boxes 1 and 2a of Form 1099-R. Free online state taxes A number or letter code in box 7 tells you what type of distribution you received from your IRA. Free online state taxes Withholding. Free online state taxes   Federal income tax is withheld from distributions from traditional IRAs unless you choose not to have tax withheld. Free online state taxes See chapter 4. Free online state taxes IRA distributions delivered outside the United States. Free online state taxes   In general, if you are a U. Free online state taxes S. Free online state taxes citizen or resident alien and your home address is outside the United States or its possessions, you cannot choose exemption from withholding on distributions from your traditional IRA. Free online state taxes Reporting taxable distributions on your return. Free online state taxes    Report fully taxable distributions, including early distributions on Form 1040, line 15b, or Form 1040A, line 11b (no entry is required on Form 1040, line 15a, or Form 1040A, line 11a). Free online state taxes If only part of the distribution is taxable, enter the total amount on Form 1040, line 15a, or Form 1040A, line 11a, and the taxable part on Form 1040, line 15b, or Form 1040A, line 11b. Free online state taxes You cannot report distributions on Form 1040EZ. Free online state taxes What Acts Result in Penalties or Additional Taxes? The tax advantages of using traditional IRAs for retirement savings can be offset by additional taxes and penalties if you do not follow the rules. Free online state taxes There are additions to the regular tax for using your IRA funds in prohibited transactions. Free online state taxes There are also additional taxes for the following activities. Free online state taxes Investing in collectibles. Free online state taxes Making excess contributions. Free online state taxes Taking early distributions. Free online state taxes Allowing excess amounts to accumulate (failing to take required distributions). Free online state taxes There are penalties for overstating the amount of nondeductible contributions and for failure to file a Form 8606, if required. Free online state taxes Prohibited Transactions Generally, a prohibited transaction is any improper use of your traditional IRA by you, your beneficiary, or any disqualified person. Free online state taxes Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendent, and any spouse of a lineal descendent). Free online state taxes The following are examples of prohibited transactions with a traditional IRA. Free online state taxes Borrowing money from it. Free online state taxes Selling property to it. Free online state taxes Receiving unreasonable compensation for managing it. Free online state taxes Using it as security for a loan. Free online state taxes Buying property for personal use (present or future) with IRA funds. Free online state taxes Effect on an IRA account. Free online state taxes   Generally, if you or your beneficiary engages in a prohibited transaction in connection with your traditional IRA account at any time during the year, the account stops being an IRA as of the first day of that year. Free online state taxes Effect on you or your beneficiary. Free online state taxes   If your account stops being an IRA because you or your beneficiary engaged in a prohibited transaction, the account is treated as distributing all its assets to you at their fair market values on the first day of the year. Free online state taxes If the total of those values is more than your basis in the IRA, you will have a taxable gain that is includible in your income. Free online state taxes For information on figuring your gain and reporting it in income, see Are Distributions Taxable , earlier. Free online state taxes The distribution may be subject to additional taxes or penalties. Free online state taxes Taxes on prohibited transactions. Free online state taxes   If someone other than the owner or beneficiary of a traditional IRA engages in a prohibited transaction, that person may be liable for certain taxes. Free online state taxes In general, there is a 15% tax on the amount of the prohibited transaction and a 100% additional tax if the transaction is not corrected. Free online state taxes More information. Free online state taxes   For more information on prohibited transactions, see What Acts Result in Penalties or Additional Taxes? in chapter 1 of Publication 590. Free online state taxes Investment in Collectibles If your traditional IRA invests in collectibles, the amount invested is considered distributed to you in the year invested. Free online state taxes You may have to pay the 10% additional tax on early distributions, discussed later. Free online state taxes Collectibles. Free online state taxes   These include: Artworks, Rugs, Antiques, Metals, Gems, Stamps, Coins, Alcoholic beverages, and Certain other tangible personal property. Free online state taxes Exception. Free online state taxes    Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U. Free online state taxes S. Free online state taxes gold coins, or one-ounce silver coins minted by the Treasury Department. Free online state taxes It can also invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion. Free online state taxes Excess Contributions Generally, an excess contribution is the amount contributed to your traditional IRA(s) for the year that is more than the smaller of: The maximum deductible amount for the year. Free online state taxes For 2013, this is $5,500 ($6,500 if you are 50 or older), or Your taxable compensation for the year. Free online state taxes Tax on excess contributions. Free online state taxes   In general, if the excess contributions for a year are not withdrawn by the date your return for the year is due (including extensions), you are subject to a 6% tax. Free online state taxes You must pay the 6% tax each year on excess amounts that remain in your traditional IRA at the end of your tax year. Free online state taxes The tax cannot be more than 6% of the combined value of all your IRAs as of the end of your tax year. Free online state taxes Excess contributions withdrawn by due date of return. Free online state taxes   You will not have to pay the 6% tax if you withdraw an excess contribution made during a tax year and you also withdraw interest or other income earned on the excess contribution. Free online state taxes You must complete your withdrawal by the date your tax return for that year is due, including extensions. Free online state taxes How to treat withdrawn contributions. Free online state taxes   Do not include in your gross income an excess contribution that you withdraw from your traditional IRA before your tax return is due if both the following conditions are met. Free online state taxes No deduction was allowed for the excess contribution. Free online state taxes You withdraw the interest or other income earned on the excess contribution. Free online state taxes You can take into account any loss on the contribution while it was in the IRA when calculating the amount that must be withdrawn. Free online state taxes If there was a loss, the net income you must withdraw may be a negative amount. Free online state taxes How to treat withdrawn interest or other income. Free online state taxes   You must include in your gross income the interest or other income that was earned on the excess contribution. Free online state taxes Report it on your return for the year in which the excess contribution was made. Free online state taxes Your withdrawal of interest or other income may be subject to an additional 10% tax on early distributions, discus
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The Free Online State Taxes

Free online state taxes Publication 521 - Introductory Material Table of Contents What's New Reminders IntroductionOrdering forms and publications. Free online state taxes Tax questions. Free online state taxes Useful Items - You may want to see: What's New Standard mileage rate. Free online state taxes  For 2013, the standard mileage rate for using your vehicle to move to a new home is 24 cents per mile. Free online state taxes See Travel by car under Deductible Moving Expenses. Free online state taxes Reminders Future developments. Free online state taxes  For the latest information about developments related to Publication 521, such as legislation enacted after it was published, go to www. Free online state taxes irs. Free online state taxes gov/pub521. Free online state taxes Change of address. Free online state taxes  If you change your mailing address, be sure to notify the IRS using Form 8822, Change of Address. Free online state taxes Mail it to the Internal Revenue Service Center for your old address. Free online state taxes Addresses for the service centers are on the back of the form. Free online state taxes If you change your business address or the identity of your responsible party, use Form 8822-B, Change of Address or Responsible Party—Business. Free online state taxes Photographs of missing children. Free online state taxes  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Free online state taxes Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Free online state taxes 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. Free online state taxes Introduction This publication explains the deduction of certain expenses of moving to a new home because you changed job locations or started a new job. Free online state taxes It includes the following topics. Free online state taxes Who can deduct moving expenses. Free online state taxes What moving expenses are deductible. Free online state taxes What moving expenses are not deductible. Free online state taxes How a reimbursement affects your moving expense deduction. Free online state taxes How and when to report moving expenses. Free online state taxes Special rules for members of the Armed Forces. Free online state taxes Form 3903, Moving Expenses, is used to claim the moving expense deduction. Free online state taxes An example of how to report your moving expenses, including a filled-in Form 3903, is shown near the end of the publication. Free online state taxes You may be able to deduct moving expenses whether you are self-employed or an employee. Free online state taxes Your expenses generally must be related to starting work at your new job location. Free online state taxes However, certain retirees and survivors may qualify to claim the deduction even though they are not starting work at a new job location. Free online state taxes See Who Can Deduct Moving Expenses. Free online state taxes Recordkeeping. Free online state taxes    It is important to maintain an accurate record of expenses you paid to move. Free online state taxes You should save items such as receipts, bills, cancelled checks, credit card statements, and mileage logs. Free online state taxes Also, you should save your Form W-2 and statements of reimbursement from your employer. Free online state taxes Comments and suggestions. Free online state taxes   We welcome your comments about this publication and your suggestions for future editions. Free online state taxes   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Free online state taxes NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Free online state taxes Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Free online state taxes   You can send your comments from www. Free online state taxes irs. Free online state taxes gov/formspubs/. Free online state taxes Click on “More Information” and then on “Comment on Tax Forms and Publications”. Free online state taxes   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. Free online state taxes Ordering forms and publications. Free online state taxes   Visit www. Free online state taxes irs. Free online state taxes 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. Free online state taxes Internal Revenue Service 1201 N. Free online state taxes Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Free online state taxes   If you have a tax question, check the information available on IRS. Free online state taxes gov or call 1-800-829-1040. Free online state taxes We cannot answer tax questions sent to either of the above addresses. Free online state taxes Useful Items - You may want to see: Publication 3 Armed Forces' Tax Guide Forms (and Instructions) 1040 U. Free online state taxes S. Free online state taxes Individual Income Tax Return 1040X Amended U. Free online state taxes S. Free online state taxes Individual Income Tax Return 3903 Moving Expenses 8822 Change of Address 8822–B Change of Address or Responsible Party-Business See How To Get Tax Help, near the end of this publication, for information about getting the publications and the forms listed above. Free online state taxes Prev  Up  Next   Home   More Online Publications