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Free tax preparation 2012 7. Free tax preparation 2012   Ship Passenger Tax Table of Contents A tax of $3 per passenger is imposed on certain ship voyages, as explained later under Taxable situations. Free tax preparation 2012 The tax is imposed only once for each passenger, either at the time of first embarkation or disembarkation in the United States. Free tax preparation 2012 The person providing the voyage (the operator of the vessel) is liable for the tax. Free tax preparation 2012 Voyage. Free tax preparation 2012   A voyage is the vessel's journey that includes the outward and homeward trips or passages. Free tax preparation 2012 The voyage starts when the vessel begins to load passengers and continues until the vessel has completed at least one outward and one homeward passage. Free tax preparation 2012 The tax may be imposed even if a passenger does not make both an outward and a homeward passage as long as the voyage begins or ends in the United States. Free tax preparation 2012 Passenger. Free tax preparation 2012   A passenger is an individual carried on the vessel other than the Master or a crew member or other individual engaged in the business of the vessel or its owners. Free tax preparation 2012 Example 1. Free tax preparation 2012 John Smith works as a guest lecturer. Free tax preparation 2012 The cruise line hired him for the benefit of the passengers. Free tax preparation 2012 Therefore, he is engaged in the business of the vessel and is not a passenger. Free tax preparation 2012 Example 2. Free tax preparation 2012 Marian Green is a travel agent. Free tax preparation 2012 She is taking the cruise as a promotional trip to determine if she wants to offer it to her clients. Free tax preparation 2012 She is a passenger. Free tax preparation 2012 Taxable situations. Free tax preparation 2012   There are two taxable situations. Free tax preparation 2012 The first situation involves voyages on commercial passenger vessels extending over one or more nights. Free tax preparation 2012 A voyage extends over one or more nights if it extends for more than 24 hours. Free tax preparation 2012 A passenger vessel is any vessel with stateroom or berth accommodations for more than 16 passengers. Free tax preparation 2012   The second situation involves voyages on a commercial vessel transporting passengers engaged in gambling on the vessel beyond the territorial waters of the United States. Free tax preparation 2012 Territorial waters of the United States are those waters within the international boundary line between the United States and any contiguous foreign country or within 3 nautical miles (3. Free tax preparation 2012 45 statute miles) from low tide on the coastline. Free tax preparation 2012 If passengers participate as players in any policy game or other lottery, or any other game of chance for money or other thing of value that the owner or operator of the vessel (or their employee, agent, or franchisee) conducts, sponsors, or operates, the voyage is subject to the ship passenger tax. Free tax preparation 2012 The tax applies regardless of the duration of the voyage. Free tax preparation 2012 A casual, friendly game of chance with other passengers that is not conducted, sponsored, or operated by the owner or operator is not gambling for determining if the voyage is subject to the ship passenger tax. Free tax preparation 2012 Exemptions. Free tax preparation 2012   The tax does not apply when a vessel is on a voyage of less than 12 hours between 2 points in the United States or if a vessel is owned or operated by a state or local government. Free tax preparation 2012 Prev  Up  Next   Home   More Online Publications
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Free tax preparation 2012 17. Free tax preparation 2012   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 tax preparation 2012  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 tax preparation 2012 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 tax preparation 2012 For more information, see How Much Can Be Contributed? later. Free tax preparation 2012 Roth IRA contribution limit. Free tax preparation 2012  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 tax preparation 2012 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 tax preparation 2012 However, if your modified adjusted gross income (AGI) is above a certain amount, your contribution limit may be reduced. Free tax preparation 2012 For more information, see How Much Can Be Contributed? under Can You Contribute to a Roth IRA? later. Free tax preparation 2012 Modified AGI limit for traditional IRA contributions increased. Free tax preparation 2012  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 tax preparation 2012 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 tax preparation 2012 If your modified AGI is $188,000 or more, you cannot take a deduction for contributions to a traditional IRA. Free tax preparation 2012 See How Much Can You Deduct , later. Free tax preparation 2012 Modified AGI limit for Roth IRA contributions increased. Free tax preparation 2012  For 2013, your Roth IRA contribution limit is reduced (phased out) in the following situations. Free tax preparation 2012 Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $178,000. Free tax preparation 2012 You cannot make a Roth IRA contribution if your modified AGI is $188,000 or more. Free tax preparation 2012 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 tax preparation 2012 You cannot make a Roth IRA contribution if your modified AGI is $127,000 or more. Free tax preparation 2012 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 tax preparation 2012 You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more. Free tax preparation 2012 See Can You Contribute to a Roth IRA , later. Free tax preparation 2012 Net Investment Income Tax. Free tax preparation 2012   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 tax preparation 2012 However, these distributions are taken into account when determining the modified adjusted gross income threshold. Free tax preparation 2012 Distributions from a nonqualified retirement plan are included in net investment income. Free tax preparation 2012 See Form 8960, Net Investment Income Tax - Individuals, Estates, and Trusts, and its instructions for more information. Free tax preparation 2012 Name change. Free tax preparation 2012  All spousal IRAs have been renamed Kay Bailey Hutchison Spousal IRAs. Free tax preparation 2012 There are no changes to the rules regarding these IRAs. Free tax preparation 2012 See Kay Bailey Hutchison Spousal IRA Limit , later, for more information. Free tax preparation 2012 Reminders 2014 limits. Free tax preparation 2012   You can find information about the 2014 contribution and AGI limits in Publication 590. Free tax preparation 2012 Contributions to both traditional and Roth IRAs. Free tax preparation 2012   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 tax preparation 2012 Statement of required minimum distribution. Free tax preparation 2012  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 tax preparation 2012 The report or offer must include the date by which the amount must be distributed. Free tax preparation 2012 The report is due January 31 of the year in which the minimum distribution is required. Free tax preparation 2012 It can be provided with the year-end fair market value statement that you normally get each year. Free tax preparation 2012 No report is required for IRAs of owners who have died. Free tax preparation 2012 IRA interest. Free tax preparation 2012  Although interest earned from your IRA is generally not taxed in the year earned, it is not tax-exempt interest. Free tax preparation 2012 Tax on your traditional IRA is generally deferred until you take a distribution. Free tax preparation 2012 Do not report this interest on your tax return as tax-exempt interest. Free tax preparation 2012 Form 8606. Free tax preparation 2012   To designate contributions as nondeductible, you must file Form 8606, Nondeductible IRAs. Free tax preparation 2012 The term “50 or older” is used several times in this chapter. Free tax preparation 2012 It refers to an IRA owner who is age 50 or older by the end of the tax year. Free tax preparation 2012 Introduction An individual retirement arrangement (IRA) is a personal savings plan that gives you tax advantages for setting aside money for your retirement. Free tax preparation 2012 This chapter discusses the following topics. Free tax preparation 2012 The rules for a traditional IRA (any IRA that is not a Roth or SIMPLE IRA). Free tax preparation 2012 The Roth IRA, which features nondeductible contributions and tax-free distributions. Free tax preparation 2012 Simplified Employee Pensions (SEPs) and Savings Incentive Match Plans for Employees (SIMPLEs) are not discussed in this chapter. Free tax preparation 2012 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 tax preparation 2012 For information about contributions, deductions, withdrawals, transfers, rollovers, and other transactions, see Publication 590. Free tax preparation 2012 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 tax preparation 2012 ” A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA. Free tax preparation 2012 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 tax preparation 2012 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 tax preparation 2012 What is compensation?   Generally, compensation is what you earn from working. Free tax preparation 2012 Compensation includes wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services. Free tax preparation 2012 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 tax preparation 2012   Scholarship and fellowship payments are compensation for this purpose only if shown in box 1 of Form W-2. Free tax preparation 2012   Compensation also includes commissions and taxable alimony and separate maintenance payments. Free tax preparation 2012 Self-employment income. Free tax preparation 2012   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 tax preparation 2012   Compensation includes earnings from self-employment even if they are not subject to self-employment tax because of your religious beliefs. Free tax preparation 2012 Nontaxable combat pay. Free tax preparation 2012   For IRA purposes, if you were a member of the U. Free tax preparation 2012 S. Free tax preparation 2012 Armed Forces, your compensation includes any nontaxable combat pay you receive. Free tax preparation 2012 What is not compensation?   Compensation does not include any of the following items. Free tax preparation 2012 Earnings and profits from property, such as rental income, interest income, and dividend income. Free tax preparation 2012 Pension or annuity income. Free tax preparation 2012 Deferred compensation received (compensation payments postponed from a past year). Free tax preparation 2012 Income from a partnership for which you do not provide services that are a material income-producing factor. Free tax preparation 2012 Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b. Free tax preparation 2012 Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs. Free tax preparation 2012 When and How Can a Traditional IRA Be Opened? You can open a traditional IRA at any time. Free tax preparation 2012 However, the time for making contributions for any year is limited. Free tax preparation 2012 See When Can Contributions Be Made , later. Free tax preparation 2012 You can open different kinds of IRAs with a variety of organizations. Free tax preparation 2012 You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. Free tax preparation 2012 You can also open an IRA through your stockbroker. Free tax preparation 2012 Any IRA must meet Internal Revenue Code requirements. Free tax preparation 2012 Kinds of traditional IRAs. Free tax preparation 2012   Your traditional IRA can be an individual retirement account or annuity. Free tax preparation 2012 It can be part of either a simplified employee pension (SEP) or an employer or employee association trust account. Free tax preparation 2012 How Much Can Be Contributed? There are limits and other rules that affect the amount that can be contributed to a traditional IRA. Free tax preparation 2012 These limits and other rules are explained below. Free tax preparation 2012 Community property laws. Free tax preparation 2012   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 tax preparation 2012 This is the rule even in states with community property laws. Free tax preparation 2012 Brokers' commissions. Free tax preparation 2012   Brokers' commissions paid in connection with your traditional IRA are subject to the contribution limit. Free tax preparation 2012 Trustees' fees. Free tax preparation 2012   Trustees' administrative fees are not subject to the contribution limit. Free tax preparation 2012 Qualified reservist repayments. Free tax preparation 2012   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 tax preparation 2012 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 tax preparation 2012 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 tax preparation 2012   For more information, see Qualified reservist repayments under How Much Can Be Contributed? in chapter 1 of Publication 590. Free tax preparation 2012 Contributions on your behalf to a traditional IRA reduce your limit for contributions to a Roth IRA. Free tax preparation 2012 (See Roth IRAs, later. Free tax preparation 2012 ) General limit. Free tax preparation 2012   For 2013, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts. Free tax preparation 2012 $5,500 ($6,500 if you are 50 or older). Free tax preparation 2012 Your taxable compensation (defined earlier) for the year. Free tax preparation 2012 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 tax preparation 2012 (See Nondeductible Contributions , later. Free tax preparation 2012 ) Qualified reservist repayments do not affect this limit. Free tax preparation 2012 Example 1. Free tax preparation 2012 Betty, who is 34 years old and single, earned $24,000 in 2013. Free tax preparation 2012 Her IRA contributions for 2013 are limited to $5,500. Free tax preparation 2012 Example 2. Free tax preparation 2012 John, an unmarried college student working part time, earned $3,500 in 2013. Free tax preparation 2012 His IRA contributions for 2013 are limited to $3,500, the amount of his compensation. Free tax preparation 2012 Kay Bailey Hutchison Spousal IRA limit. Free tax preparation 2012   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 tax preparation 2012 $5,500 ($6,500 if you are 50 or older). Free tax preparation 2012 The total compensation includible in the gross income of both you and your spouse for the year, reduced by the following two amounts. Free tax preparation 2012 Your spouse's IRA contribution for the year to a traditional IRA. Free tax preparation 2012 Any contribution for the year to a Roth IRA on behalf of your spouse. Free tax preparation 2012 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 tax preparation 2012 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 tax preparation 2012 Contributions must be in the form of money (cash, check, or money order). Free tax preparation 2012 Property cannot be contributed. Free tax preparation 2012 Contributions must be made by due date. Free tax preparation 2012   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 tax preparation 2012 Age 70½ rule. Free tax preparation 2012   Contributions cannot be made to your traditional IRA for the year in which you reach age 70½ or for any later year. Free tax preparation 2012   You attain age 70½ on the date that is 6 calendar months after the 70th anniversary of your birth. Free tax preparation 2012 If you were born on or before June 30, 1943, you cannot contribute for 2013 or any later year. Free tax preparation 2012 Designating year for which contribution is made. Free tax preparation 2012   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 tax preparation 2012 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 tax preparation 2012 Filing before a contribution is made. Free tax preparation 2012   You can file your return claiming a traditional IRA contribution before the contribution is actually made. Free tax preparation 2012 Generally, the contribution must be made by the due date of your return, not including extensions. Free tax preparation 2012 Contributions not required. Free tax preparation 2012   You do not have to contribute to your traditional IRA for every tax year, even if you can. Free tax preparation 2012 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 tax preparation 2012 However, if you or your spouse was covered by an employer retirement plan, you may not be able to deduct this amount. Free tax preparation 2012 See Limit If Covered by Employer Plan , later. Free tax preparation 2012 You may be able to claim a credit for contributions to your traditional IRA. Free tax preparation 2012 For more information, see chapter 37. Free tax preparation 2012 Trustees' fees. Free tax preparation 2012   Trustees' administrative fees that are billed separately and paid in connection with your traditional IRA are not deductible as IRA contributions. Free tax preparation 2012 However, they may be deductible as a miscellaneous itemized deduction on Schedule A (Form 1040). Free tax preparation 2012 See chapter 28. Free tax preparation 2012 Brokers' commissions. Free tax preparation 2012   Brokers' commissions are part of your IRA contribution and, as such, are deductible subject to the limits. Free tax preparation 2012 Full deduction. Free tax preparation 2012   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 tax preparation 2012 100% of your compensation. Free tax preparation 2012 This limit is reduced by any contributions made to a 501(c)(18) plan on your behalf. Free tax preparation 2012 Kay Bailey Hutchison Spousal IRA. Free tax preparation 2012   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 tax preparation 2012 $5,500 ($6,500 if the spouse with the lower compensation is age 50 or older in 2013). Free tax preparation 2012 The total compensation includible in the gross income of both spouses for the year reduced by the following three amounts. Free tax preparation 2012 The IRA deduction for the year of the spouse with the greater compensation. Free tax preparation 2012 Any designated nondeductible contribution for the year made on behalf of the spouse with the greater compensation. Free tax preparation 2012 Any contributions for the year to a Roth IRA on behalf of the spouse with the greater compensation. Free tax preparation 2012 This limit is reduced by any contributions to a 501(c)(18) plan on behalf of the spouse with the lesser compensation. Free tax preparation 2012 Note. Free tax preparation 2012 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 tax preparation 2012 After a divorce or legal separation, you can deduct only contributions to your own IRA. Free tax preparation 2012 Your deductions are subject to the rules for single individuals. Free tax preparation 2012 Covered by an employer retirement plan. Free tax preparation 2012   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 tax preparation 2012 This is discussed later under Limit If Covered by Employer Plan . Free tax preparation 2012 Limits on the amount you can deduct do not affect the amount that can be contributed. Free tax preparation 2012 See Nondeductible Contributions , later. Free tax preparation 2012 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 tax preparation 2012 The “Retirement plan” box should be checked if you were covered. Free tax preparation 2012 Reservists and volunteer firefighters should also see Situations in Which You Are Not Covered by an Employer Plan , later. Free tax preparation 2012 If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer. Free tax preparation 2012 Federal judges. Free tax preparation 2012   For purposes of the IRA deduction, federal judges are covered by an employer retirement plan. Free tax preparation 2012 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 tax preparation 2012 These rules differ depending on whether the plan is a defined contribution plan or a defined benefit plan. Free tax preparation 2012 Tax year. Free tax preparation 2012   Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. Free tax preparation 2012 For almost all people, the tax year is the calendar year. Free tax preparation 2012 Defined contribution plan. Free tax preparation 2012   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 tax preparation 2012   A defined contribution plan is a plan that provides for a separate account for each person covered by the plan. Free tax preparation 2012 Types of defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans. Free tax preparation 2012 Defined benefit plan. Free tax preparation 2012   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 tax preparation 2012 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 tax preparation 2012   A defined benefit plan is any plan that is not a defined contribution plan. Free tax preparation 2012 Defined benefit plans include pension plans and annuity plans. Free tax preparation 2012 No vested interest. Free tax preparation 2012   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 tax preparation 2012 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 tax preparation 2012 Social security or railroad retirement. Free tax preparation 2012   Coverage under social security or railroad retirement is not coverage under an employer retirement plan. Free tax preparation 2012 Benefits from a previous employer's plan. Free tax preparation 2012   If you receive retirement benefits from a previous employer's plan, you are not covered by that plan. Free tax preparation 2012 Reservists. Free tax preparation 2012   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 tax preparation 2012 You are not covered by the plan if both of the following conditions are met. Free tax preparation 2012 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 tax preparation 2012 You did not serve more than 90 days on active duty during the year (not counting duty for training). Free tax preparation 2012 Volunteer firefighters. Free tax preparation 2012   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 tax preparation 2012 You are not covered by the plan if both of the following conditions are met. Free tax preparation 2012 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 tax preparation 2012 Your accrued retirement benefits at the beginning of the year will not provide more than $1,800 per year at retirement. Free tax preparation 2012 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 tax preparation 2012 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 tax preparation 2012 These amounts vary depending on your filing status. Free tax preparation 2012 To determine if your deduction is subject to phaseout, you must determine your modified adjusted gross income (AGI) and your filing status. Free tax preparation 2012 See Filing status and Modified adjusted gross income (AGI) , later. Free tax preparation 2012 Then use Table 17-1 or 17-2 to determine if the phaseout applies. Free tax preparation 2012 Social security recipients. Free tax preparation 2012   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 tax preparation 2012 You received social security benefits. Free tax preparation 2012 You received taxable compensation. Free tax preparation 2012 Contributions were made to your traditional IRA. Free tax preparation 2012 You or your spouse was covered by an employer retirement plan. Free tax preparation 2012 Use those worksheets to figure your IRA deduction, your nondeductible contribution, and the taxable portion, if any, of your social security benefits. Free tax preparation 2012 Deduction phaseout. Free tax preparation 2012   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 tax preparation 2012 Table 17-1. Free tax preparation 2012 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 tax preparation 2012 IF your filing status is. Free tax preparation 2012 . Free tax preparation 2012 . Free tax preparation 2012   AND your modified AGI is. Free tax preparation 2012 . Free tax preparation 2012 . Free tax preparation 2012   THEN you can take. Free tax preparation 2012 . Free tax preparation 2012 . Free tax preparation 2012 single   or  head of household   $59,000 or less   a full deduction. Free tax preparation 2012   more than $59,000 but less than $69,000   a partial deduction. Free tax preparation 2012   $69,000 or more   no deduction. Free tax preparation 2012 married filing jointly   or  qualifying widow(er)   $95,000 or less   a full deduction. Free tax preparation 2012   more than $95,000 but less than $115,000   a partial deduction. Free tax preparation 2012   $115,000 or more   no deduction. Free tax preparation 2012 married filing separately2   less than $10,000   a partial deduction. Free tax preparation 2012   $10,000 or more   no deduction. Free tax preparation 2012 1Modified AGI (adjusted gross income). Free tax preparation 2012 See Modified adjusted gross income (AGI) . Free tax preparation 2012 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 tax preparation 2012 If your spouse is covered. Free tax preparation 2012   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 tax preparation 2012 Filing status. Free tax preparation 2012   Your filing status depends primarily on your marital status. Free tax preparation 2012 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 tax preparation 2012 If you need more information on filing status, see chapter 2. Free tax preparation 2012 Lived apart from spouse. Free tax preparation 2012   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 tax preparation 2012 Table 17-2. Free tax preparation 2012 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 tax preparation 2012 IF your filing status is. Free tax preparation 2012 . Free tax preparation 2012 . Free tax preparation 2012   AND your modified AGI is. Free tax preparation 2012 . Free tax preparation 2012 . Free tax preparation 2012   THEN you can take. Free tax preparation 2012 . Free tax preparation 2012 . Free tax preparation 2012 single, head of household, or qualifying widow(er)   any amount   a full deduction. Free tax preparation 2012 married filing jointly or separately with a spouse who is not covered by a plan at work   any amount   a full deduction. Free tax preparation 2012 married filing jointly with a spouse who is covered by a plan at work   $178,000 or less   a full deduction. Free tax preparation 2012   more than $178,000 but less than $188,000   a partial deduction. Free tax preparation 2012   $188,000 or more   no deduction. Free tax preparation 2012 married filing separately with a spouse who is covered by a plan at work2   less than $10,000   a partial deduction. Free tax preparation 2012   $10,000 or more   no deduction. Free tax preparation 2012 1Modified AGI (adjusted gross income). Free tax preparation 2012 See Modified adjusted gross income (AGI) . Free tax preparation 2012 2You are entitled to the full deduction if you did not live with your spouse at any time during the year. Free tax preparation 2012 Modified adjusted gross income (AGI). Free tax preparation 2012   How you figure your modified AGI depends on whether you are filing Form 1040 or Form 1040A. Free tax preparation 2012 If you made contributions to your IRA for 2013 and received a distribution from your IRA in 2013, see Publication 590. Free tax preparation 2012 You may be able to use Worksheet 17-1 to figure your modified AGI. Free tax preparation 2012    Do not assume that your modified AGI is the same as your compensation. Free tax preparation 2012 Your modified AGI may include income in addition to your compensation (discussed earlier), such as interest, dividends, and income from IRA distributions. Free tax preparation 2012 Form 1040. Free tax preparation 2012   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 tax preparation 2012 IRA deduction. Free tax preparation 2012 Student loan interest deduction. Free tax preparation 2012 Tuition and fees deduction. Free tax preparation 2012 Domestic production activities deduction. Free tax preparation 2012 Foreign earned income exclusion. Free tax preparation 2012 Foreign housing exclusion or deduction. Free tax preparation 2012 Exclusion of qualified savings bond interest shown on Form 8815, Exclusion of Interest From Series EE and I U. Free tax preparation 2012 S. Free tax preparation 2012 Savings Bonds Issued After 1989. Free tax preparation 2012 Exclusion of employer-provided adoption benefits shown on Form 8839, Qualified Adoption Expenses. Free tax preparation 2012 This is your modified AGI. Free tax preparation 2012 Form 1040A. Free tax preparation 2012   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 tax preparation 2012 IRA deduction. Free tax preparation 2012 Student loan interest deduction. Free tax preparation 2012 Tuition and fees deduction. Free tax preparation 2012 Exclusion of qualified savings bond interest shown on Form 8815. Free tax preparation 2012 This is your modified AGI. Free tax preparation 2012 Both contributions for 2013 and distributions in 2013. Free tax preparation 2012   If all three of the following apply, any IRA distributions you received in 2013 may be partly tax free and partly taxable. Free tax preparation 2012 You received distributions in 2013 from one or more traditional IRAs. Free tax preparation 2012 You made contributions to a traditional IRA for 2013. Free tax preparation 2012 Some of those contributions may be nondeductible contributions. Free tax preparation 2012 If this is your situation, you must figure the taxable part of the traditional IRA distribution before you can figure your modified AGI. Free tax preparation 2012 To do this, you can use Worksheet 1-5, Figuring the Taxable Part of Your IRA Distribution, in Publication 590. Free tax preparation 2012   If at least one of the above does not apply, figure your modified AGI using Worksheet 17-1, later. Free tax preparation 2012    How to figure your reduced IRA deduction. Free tax preparation 2012   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 tax preparation 2012 Also, the instructions for Form 1040 and Form 1040A include similar worksheets that you may be able to use instead. Free tax preparation 2012 Worksheet 17-1. Free tax preparation 2012 Figuring Your Modified AGI Use this worksheet to figure your modified adjusted gross income for traditional IRA purposes. Free tax preparation 2012 1. Free tax preparation 2012 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 tax preparation 2012   2. Free tax preparation 2012 Enter any student loan interest deduction from Form 1040, line 33, or Form 1040A, line 18 2. Free tax preparation 2012   3. Free tax preparation 2012 Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 3. Free tax preparation 2012   4. Free tax preparation 2012 Enter any domestic production activities deduction from Form 1040, line 35 4. Free tax preparation 2012   5. Free tax preparation 2012 Enter any foreign earned income and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 5. Free tax preparation 2012   6. Free tax preparation 2012 Enter any foreign housing deduction from Form 2555, line 50 6. Free tax preparation 2012   7. Free tax preparation 2012 Enter any excludable savings bond interest from Form 8815, line 14 7. Free tax preparation 2012   8. Free tax preparation 2012 Enter any excluded employer-provided adoption benefits from Form 8839, line 28 8. Free tax preparation 2012   9. Free tax preparation 2012 Add lines 1 through 8. Free tax preparation 2012 This is your Modified AGI for traditional IRA purposes 9. Free tax preparation 2012   Reporting Deductible Contributions If you file Form 1040, enter your IRA deduction on line 32 of that form. Free tax preparation 2012 If you file Form 1040A, enter your IRA deduction on line 17. Free tax preparation 2012 You cannot deduct IRA contributions on Form 1040EZ. Free tax preparation 2012 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 tax preparation 2012 The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. Free tax preparation 2012 Example. Free tax preparation 2012 Mike is 28 years old and single. Free tax preparation 2012 In 2013, he was covered by a retirement plan at work. Free tax preparation 2012 His salary was $57,312. Free tax preparation 2012 His modified AGI was $70,000. Free tax preparation 2012 Mike made a $5,500 IRA contribution for 2013. Free tax preparation 2012 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 tax preparation 2012 He must designate this contribution as a nondeductible contribution by reporting it on Form 8606, as explained next. Free tax preparation 2012 Form 8606. Free tax preparation 2012   To designate contributions as nondeductible, you must file Form 8606. Free tax preparation 2012   You do not have to designate a contribution as nondeductible until you file your tax return. Free tax preparation 2012 When you file, you can even designate otherwise deductible contributions as nondeductible. Free tax preparation 2012   You must file Form 8606 to report nondeductible contributions even if you do not have to file a tax return for the year. Free tax preparation 2012 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 tax preparation 2012 In those situations, a Form 8606 is completed for the year you take a distribution from that IRA. Free tax preparation 2012 See Form 8606 under Distributions Fully or Partly Taxable, later. Free tax preparation 2012 Failure to report nondeductible contributions. Free tax preparation 2012   If you do not report nondeductible contributions, all of the contributions to your traditional IRA will be treated as deductible contributions when withdrawn. Free tax preparation 2012 All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. Free tax preparation 2012 Penalty for overstatement. Free tax preparation 2012   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 tax preparation 2012 Penalty for failure to file Form 8606. Free tax preparation 2012   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 tax preparation 2012    Tax on earnings on nondeductible contributions. Free tax preparation 2012   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 tax preparation 2012 See When Can You Withdraw or Use IRA Assets , later. Free tax preparation 2012 Cost basis. Free tax preparation 2012   You will have a cost basis in your traditional IRA if you made any nondeductible contributions. Free tax preparation 2012 Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions. Free tax preparation 2012 Inherited IRAs If you inherit a traditional IRA, you are called a beneficiary. Free tax preparation 2012 A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. Free tax preparation 2012 Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive. Free tax preparation 2012 Inherited from spouse. Free tax preparation 2012   If you inherit a traditional IRA from your spouse, you generally have the following three choices. Free tax preparation 2012 You can: Treat it as your own IRA by designating yourself as the account owner. Free tax preparation 2012 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 tax preparation 2012 Treat yourself as the beneficiary rather than treating the IRA as your own. Free tax preparation 2012 Treating it as your own. Free tax preparation 2012   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 tax preparation 2012 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 tax preparation 2012   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 tax preparation 2012 Inherited from someone other than spouse. Free tax preparation 2012   If you inherit a traditional IRA from anyone other than your deceased spouse, you cannot treat the inherited IRA as your own. Free tax preparation 2012 This means that you cannot make any contributions to the IRA. Free tax preparation 2012 It also means you cannot roll over any amounts into or out of the inherited IRA. Free tax preparation 2012 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 tax preparation 2012 For more information, see the discussion of inherited IRAs under Rollover From One IRA Into Another, later. Free tax preparation 2012 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 tax preparation 2012 You can make the following kinds of transfers. Free tax preparation 2012 Transfers from one trustee to another. Free tax preparation 2012 Rollovers. Free tax preparation 2012 Transfers incident to a divorce. Free tax preparation 2012 Transfers to Roth IRAs. Free tax preparation 2012   Under certain conditions, you can move assets from a traditional IRA or from a designated Roth account to a Roth IRA. Free tax preparation 2012 You can also move assets from a qualified retirement plan to a Roth IRA. Free tax preparation 2012 See Can You Move Amounts Into a Roth IRA? under Roth IRAs, later. Free tax preparation 2012 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 tax preparation 2012 Because there is no distribution to you, the transfer is tax free. Free tax preparation 2012 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 tax preparation 2012 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 tax preparation 2012 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 tax preparation 2012 The contribution to the second retirement plan is called a “rollover contribution. Free tax preparation 2012 ” Note. Free tax preparation 2012 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 tax preparation 2012 Kinds of rollovers to a traditional IRA. Free tax preparation 2012   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 tax preparation 2012 Treatment of rollovers. Free tax preparation 2012   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 tax preparation 2012 Kinds of rollovers from a traditional IRA. Free tax preparation 2012   You may be able to roll over, tax free, a distribution from your traditional IRA into a qualified plan. Free tax preparation 2012 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 tax preparation 2012 The part of the distribution that you can roll over is the part that would otherwise be taxable (includible in your income). Free tax preparation 2012 Qualified plans may, but are not required to, accept such rollovers. Free tax preparation 2012 Time limit for making a rollover contribution. Free tax preparation 2012   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 tax preparation 2012 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 tax preparation 2012 For more information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Free tax preparation 2012 Extension of rollover period. Free tax preparation 2012   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 tax preparation 2012 For more information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Free tax preparation 2012 More information. Free tax preparation 2012   For more information on rollovers, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Free tax preparation 2012 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 tax preparation 2012 Because this is a rollover, you cannot deduct the amount that you reinvest in an IRA. Free tax preparation 2012 Waiting period between rollovers. Free tax preparation 2012   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 tax preparation 2012 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 tax preparation 2012   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 tax preparation 2012 Example. Free tax preparation 2012 You have two traditional IRAs, IRA-1 and IRA-2. Free tax preparation 2012 You make a tax-free rollover of a distribution from IRA-1 into a new traditional IRA (IRA-3). Free tax preparation 2012 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 tax preparation 2012 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 tax preparation 2012 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 tax preparation 2012 Exception. Free tax preparation 2012   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 tax preparation 2012 Partial rollovers. Free tax preparation 2012   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 tax preparation 2012 The amount you keep will generally be taxable (except for the part that is a return of nondeductible contributions). Free tax preparation 2012 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 tax preparation 2012 Required distributions. Free tax preparation 2012   Amounts that must be distributed during a particular year under the required distribution rules (discussed later) are not eligible for rollover treatment. Free tax preparation 2012 Inherited IRAs. Free tax preparation 2012   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 tax preparation 2012 See Treating it as your own , earlier. Free tax preparation 2012 Not inherited from spouse. Free tax preparation 2012   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 tax preparation 2012 You must withdraw the IRA assets within a certain period. Free tax preparation 2012 For more information, see When Must You Withdraw Assets? in chapter 1 of Publication 590. Free tax preparation 2012 Reporting rollovers from IRAs. Free tax preparation 2012   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 tax preparation 2012   Enter the total amount of the distribution on Form 1040, line 15a, or Form 1040A, line 11a. Free tax preparation 2012 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 tax preparation 2012 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 tax preparation 2012 Put “Rollover” next to Form 1040, line 15b, or Form 1040A, line 11b. Free tax preparation 2012 See your tax return instructions. Free tax preparation 2012   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 tax preparation 2012 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 tax preparation 2012 A qualified plan is one that meets the requirements of the Internal Revenue Code. Free tax preparation 2012 Eligible rollover distribution. Free tax preparation 2012   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 tax preparation 2012 A required minimum distribution (explained later under When Must You Withdraw IRA Assets? (Required Minimum Distributions) ). Free tax preparation 2012 A hardship distribution. Free tax preparation 2012 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 tax preparation 2012 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 tax preparation 2012 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 tax preparation 2012 Dividends on employer securities. Free tax preparation 2012 The cost of life insurance coverage. Free tax preparation 2012 Any nontaxable amounts that you roll over into your traditional IRA become part of your basis (cost) in your IRAs. Free tax preparation 2012 To recover your basis when you take distributions from your IRA, you must complete Form 8606 for the year of the distribution. Free tax preparation 2012 See Form 8606 under Distributions Fully or Partly Taxable, later. Free tax preparation 2012 Rollover by nonspouse beneficiary. Free tax preparation 2012   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 tax preparation 2012 The IRA is treated as an inherited IRA. Free tax preparation 2012 For more information about inherited IRAs, see Inherited IRAs , earlier. Free tax preparation 2012 Reporting rollovers from employer plans. Free tax preparation 2012    Enter the total distribution (before income tax or other deductions were withheld) on Form 1040, line 16a, or Form 1040A, line 12a. Free tax preparation 2012 This amount should be shown in box 1 of Form 1099-R. Free tax preparation 2012 From this amount, subtract any contributions (usually shown in box 5 of Form 1099-R) that were taxable to you when made. Free tax preparation 2012 From that result, subtract the amount that was rolled over either directly or within 60 days of receiving the distribution. Free tax preparation 2012 Enter the remaining amount, even if zero, on Form 1040, line 16b, or Form 1040A, line 12b. Free tax preparation 2012 Also, enter "Rollover" next to Form 1040, line 16b, or Form 1040A, line 12b. Free tax preparation 2012 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 tax preparation 2012 The transfer is tax free. Free tax preparation 2012 For detailed information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Free tax preparation 2012 Converting From Any Traditional IRA to a Roth IRA Allowable conversions. Free tax preparation 2012   You can withdraw all or part of the assets from a traditional IRA and reinvest them (within 60 days) in a Roth IRA. Free tax preparation 2012 The amount that you withdraw and timely contribute (convert) to the Roth IRA is called a conversion contribution. Free tax preparation 2012 If properly (and timely) rolled over, the 10% additional tax on early distributions will not apply. Free tax preparation 2012 However, a part or all of the conversion contribution from your traditional IRA is included in your gross income. Free tax preparation 2012 Required distributions. Free tax preparation 2012   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 tax preparation 2012 Income. Free tax preparation 2012   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 tax preparation 2012 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 tax preparation 2012   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 tax preparation 2012   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 tax preparation 2012   If you must include any amount in your gross income, you may have to increase your withholding or make estimated tax payments. Free tax preparation 2012 See chapter 4. Free tax preparation 2012 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 tax preparation 2012 This is called recharacterizing the contribution. Free tax preparation 2012 See Can You Move Retirement Plan Assets? in chapter 1 of Publication 590 for more detailed information. Free tax preparation 2012 How to recharacterize a contribution. Free tax preparation 2012   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 tax preparation 2012 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 tax preparation 2012 If you recharacterize your contribution, you must do all three of the following. Free tax preparation 2012 Include in the transfer any net income allocable to the contribution. Free tax preparation 2012 If there was a loss, the net income you must transfer may be a negative amount. Free tax preparation 2012 Report the recharacterization on your tax return for the year during which the contribution was made. Free tax preparation 2012 Treat the contribution as having been made to the second IRA on the date that it was actually made to the first IRA. Free tax preparation 2012 No deduction allowed. Free tax preparation 2012   You cannot deduct the contribution to the first IRA. Free tax preparation 2012 Any net income you transfer with the recharacterized contribution is treated as earned in the second IRA. Free tax preparation 2012 Required notifications. Free tax preparation 2012   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 tax preparation 2012 You must make the notifications by the date of the transfer. Free tax preparation 2012 Only one notification is required if both IRAs are maintained by the same trustee. Free tax preparation 2012 The notification(s) must include all of the following information. Free tax preparation 2012 The type and amount of the contribution to the first IRA that is to be recharacterized. Free tax preparation 2012 The date on which the contribution was made to the first IRA and the year for which it was made. Free tax preparation 2012 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 tax preparation 2012 The name of the trustee of the first IRA and the name of the trustee of the second IRA. Free tax preparation 2012 Any additional information needed to make the transfer. Free tax preparation 2012 Reporting a recharacterization. Free tax preparation 2012   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 tax preparation 2012 You must treat the contribution as having been made to the second IRA. Free tax preparation 2012 When Can You Withdraw or Use IRA Assets? There are rules limiting use of your IRA assets and distributions from it. Free tax preparation 2012 Violation of the rules generally results in additional taxes in the year of violation. Free tax preparation 2012 See What Acts Result in Penalties or Additional Taxes , later. Free tax preparation 2012 Contributions returned before the due date of return. Free tax preparation 2012   If you made IRA contributions in 2013, you can withdraw them tax free by the due date of your return. Free tax preparation 2012 If you have an extension of time to file your return, you can withdraw them tax free by the extended due date. Free tax preparation 2012 You can do this if, for each contribution you withdraw, both of the following conditions apply. Free tax preparation 2012 You did not take a deduction for the contribution. Free tax preparation 2012 You withdraw any interest or other income earned on the contribution. Free tax preparation 2012 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 tax preparation 2012 If there was a loss, the net income earned on the contribution may be a negative amount. Free tax preparation 2012 Note. Free tax preparation 2012 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 tax preparation 2012 Earnings includible in income. Free tax preparation 2012   You must include in income any earnings on the contributions you withdraw. Free tax preparation 2012 Include the earnings in income for the year in which you made the contributions, not in the year in which you withdraw them. Free tax preparation 2012 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 tax preparation 2012 Excess contributions can also be recovered tax free as discussed under What Acts Result in Penalties or Additional Taxes?, later. Free tax preparation 2012    Early distributions tax. Free tax preparation 2012   The 10% additional tax on distributions made before you reach age 59½ does not apply to these tax-free withdrawals of your contributions. Free tax preparation 2012 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 tax preparation 2012 When Must You Withdraw IRA Assets? (Required Minimum Distributions) You cannot keep funds in a traditional IRA indefinitely. Free tax preparation 2012 Eventually they must be distributed. Free tax preparation 2012 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 tax preparation 2012 See Excess Accumulations (Insufficient Distributions) , later. Free tax preparation 2012 The requirements for distributing IRA funds differ depending on whether you are the IRA owner or the beneficiary of a decedent's IRA. Free tax preparation 2012 Required minimum distribution. Free tax preparation 2012   The amount that must be distributed each year is referred to as the required minimum distribution. Free tax preparation 2012 Required distributions not eligible for rollover. Free tax preparation 2012   Amounts that must be distributed (required minimum distributions) during a particular year are not eligible for rollover treatment. Free tax preparation 2012 IRA owners. Free tax preparation 2012   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 tax preparation 2012 April 1 of the year following the year in which you reach age 70½ is referred to as the required beginning date. Free tax preparation 2012 Distributions by the required beginning date. Free tax preparation 2012   You must receive at least a minimum amount for each year starting with the year you reach age 70½ (your 70½ year). Free tax preparation 2012 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 tax preparation 2012   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 tax preparation 2012 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 tax preparation 2012 Distributions after the required beginning date. Free tax preparation 2012   The required minimum distribution for any year after the year you turn 70½ must be made by December 31 of that later year. Free tax preparation 2012    Beneficiaries. Free tax preparation 2012   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 tax preparation 2012 More information. Free tax preparation 2012   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 tax preparation 2012 Are Distributions Taxable? In general, distributions from a traditional IRA are taxable in the year you receive them. Free tax preparation 2012 Exceptions. Free tax preparation 2012   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 tax preparation 2012    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 tax preparation 2012 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 tax preparation 2012 Qualified charitable distributions (QCD). Free tax preparation 2012   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 tax preparation 2012 Special rules apply if you made a qualified charitable distribution in January 2013 that you elected to treat as made in 2012. Free tax preparation 2012 See Qualified Charitable Distributions in Publication 590 for more information. Free tax preparation 2012 Ordinary income. Free tax preparation 2012   Distributions from traditional IRAs that you include in income are taxed as ordinary income. Free tax preparation 2012 No special treatment. Free tax preparation 2012   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 tax preparation 2012 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 tax preparation 2012 Fully taxable. Free tax preparation 2012   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 tax preparation 2012 Because you have no basis in your IRA, any distributions are fully taxable when received. Free tax preparation 2012 See Reporting taxable distributions on your return , later. Free tax preparation 2012 Partly taxable. Free tax preparation 2012    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 tax preparation 2012 These nondeductible contributions are not taxed when they are distributed to you. Free tax preparation 2012 They are a return of your investment in your IRA. Free tax preparation 2012   Only the part of the distribution that represents nondeductible contributions and rolled over after-tax amounts (your cost basis) is tax free. Free tax preparation 2012 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 tax preparation 2012 Until all of your basis has been distributed, each distribution is partly nontaxable and partly taxable. Free tax preparation 2012 Form 8606. Free tax preparation 2012   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 tax preparation 2012 Using the form, you will figure the nontaxable distributions for 2013 and your total IRA basis for 2013 and earlier years. Free tax preparation 2012 Note. Free tax preparation 2012 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 tax preparation 2012 Send it to the IRS at the time and place you would otherwise file an income tax return. Free tax preparation 2012 Distributions reported on Form 1099-R. Free tax preparation 2012   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 tax preparation 2012 , or a similar statement. Free tax preparation 2012 IRA distributions are shown in boxes 1 and 2a of Form 1099-R. Free tax preparation 2012 A number or letter code in box 7 tells you what type of distribution you received from your IRA. Free tax preparation 2012 Withholding. Free tax preparation 2012   Federal income tax is withheld from distributions from traditional IRAs unless you choose not to have tax withheld. Free tax preparation 2012 See chapter 4. Free tax preparation 2012 IRA distributions delivered outside the United States. Free tax preparation 2012   In general, if you are a U. Free tax preparation 2012 S. Free tax preparation 2012 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 tax preparation 2012 Reporting taxable distributions on your return. Free tax preparation 2012    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 tax preparation 2012 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 tax preparation 2012 You cannot report distributions on Form 1040EZ. Free tax preparation 2012 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 tax preparation 2012 There are additions to the regular tax for using your IRA funds in prohibited transactions. Free tax preparation 2012 There are also additional taxes for the following activities. Free tax preparation 2012 Investing in collectibles. Free tax preparation 2012 Making excess contributions. Free tax preparation 2012 Taking early distributions. Free tax preparation 2012 Allowing excess amounts to accumulate (failing to take required distributions). Free tax preparation 2012 There are penalties for overstating the amount of nondeductible contributions and for failure to file a Form 8606, if required. Free tax preparation 2012 Prohibited Transactions Generally, a prohibited transaction is any improper use of your traditional IRA by you, your beneficiary, or any disqualified person. Free tax preparation 2012 Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendent, and any spouse of a lineal descendent). Free tax preparation 2012 The following are examples of prohibited transactions with a traditional IRA. Free tax preparation 2012 Borrowing money from it. Free tax preparation 2012 Selling property to it. Free tax preparation 2012 Receiving unreasonable compensation for managing it. Free tax preparation 2012 Using it as security for a loan. Free tax preparation 2012 Buying property for personal use (present or future) with IRA funds. Free tax preparation 2012 Effect on an IRA account. Free tax preparation 2012   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 tax preparation 2012 Effect on you or your beneficiary. Free tax preparation 2012   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 tax preparation 2012 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 tax preparation 2012 For information on figuring your gain and reporting it in income, see Are Distributions Taxable , earlier. Free tax preparation 2012 The distribution may be subject to additional taxes or penalties. Free tax preparation 2012 Taxes on prohibited transactions. Free tax preparation 2012   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 tax preparation 2012 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 tax preparation 2012 More information. Free tax preparation 2012   For more information on prohibited transactions, see What Acts Result in Penalties or Additional Taxes? in chapter 1 of Publication 590. Free tax preparation 2012 Investment in Collectibles If your traditional IRA invests in collectibles, the amount invested is considered distributed to you in the year invested. Free tax preparation 2012 You may have to pay the 10% additional tax on early distributions, discussed later. Free tax preparation 2012 Collectibles. Free tax preparation 2012   These include: Artworks, Rugs, Antiques, Metals, Gems, Stamps, Coins, Alcoholic beverages, and Certain other tangible personal property. Free tax preparation 2012 Exception. Free tax preparation 2012    Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U. Free tax preparation 2012 S. Free tax preparation 2012 gold coins, or one-ounce silver coins minted by the Treasury Department. Free tax preparation 2012 It can also invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion. Free tax preparation 2012 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 tax preparation 2012 For 2013, this is $5,500 ($6,500 if you are 50 or older), or Your taxable compensation for the year. Free tax preparation 2012 Tax on excess contributions. Free tax preparation 2012   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 tax preparation 2012 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 tax preparation 2012 The tax cannot be more than 6% of the combined value of all your IRAs as of the end of your tax year. Free tax preparation 2012 Excess contributions withdrawn by due date of return. Free tax preparation 2012   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 tax preparation 2012 You must complete your withdrawal by the date your tax return for that year is due, including extensions. Free tax preparation 2012 How to treat withdrawn contributions. Free tax preparation 2012   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 tax preparation 2012 No deduction was allowed for the excess contribution. Free tax preparation 2012 You withdraw the interest or other income earned on the excess contribution. Free tax preparation 2012 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 tax preparation 2012 If there was a loss, the net income you must withdraw may be a negative amount. Free tax preparation 2012 How to treat withdrawn interest or other income. Free tax preparation 2012   You must include in your gross income the interest or other income that was earned on the excess contribution. Free tax preparation 2012 Report it on your return for the year in which the excess contribution was made. Free tax preparation 2012 Your withdrawal of interest or other income may be subject to an additional 10% tax on early distributions, discus