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H&r block at home 1. H&r block at home   Traditional IRAs Table of Contents What's New for 2013 What's New for 2014 Introduction Who Can Open a Traditional IRA?What Is Compensation? When Can a Traditional IRA Be Opened? How Can a Traditional IRA Be Opened?Individual Retirement Account Individual Retirement Annuity Individual Retirement Bonds Simplified Employee Pension (SEP) Employer and Employee Association Trust Accounts Required Disclosures How Much Can Be Contributed?Limit. H&r block at home When repayment contributions can be made. H&r block at home No deduction. H&r block at home Reserve component. H&r block at home Figuring your IRA deduction. H&r block at home Reporting the repayment. H&r block at home Example. H&r block at home General Limit Kay Bailey Hutchison Spousal IRA Limit Filing Status Less Than Maximum Contributions More Than Maximum Contributions When Can Contributions Be Made? How Much Can You Deduct?Kay Bailey Hutchison Spousal IRA. H&r block at home Are You Covered by an Employer Plan? Limit if Covered by Employer Plan Reporting Deductible Contributions Nondeductible Contributions Examples — Worksheet for Reduced IRA Deduction for 2013 What if You Inherit an IRA?Treating it as your own. H&r block at home Can You Move Retirement Plan Assets?Transfers to Roth IRAs from other retirement plans. H&r block at home Trustee-to-Trustee Transfer Rollovers Transfers Incident To Divorce Converting From Any Traditional IRA Into a Roth IRA Recharacterizations When Can You Withdraw or Use Assets?Contributions Returned Before Due Date of Return When Must You Withdraw Assets? (Required Minimum Distributions)IRA Owners IRA Beneficiaries Which Table Do You Use To Determine Your Required Minimum Distribution? What Age(s) Do You Use With the Table(s)? Miscellaneous Rules for Required Minimum Distributions Are Distributions Taxable?January 2013 QCDs treated as made in 2012. H&r block at home 2013 Reporting. H&r block at home Additional reporting requirements if you made the election to treat a January 2013 QCD as made in 2012. H&r block at home One-time transfer. H&r block at home Testing period rules apply. H&r block at home More information. H&r block at home Distributions Fully or Partly Taxable Figuring the Nontaxable and Taxable Amounts Recognizing Losses on Traditional IRA Investments Other Special IRA Distribution Situations Reporting and Withholding Requirements for Taxable Amounts What Acts Result in Penalties or Additional Taxes?Prohibited Transactions Investment in Collectibles Excess Contributions Early Distributions Excess Accumulations (Insufficient Distributions) Reporting Additional Taxes What's New for 2013 Traditional IRA contribution and deduction limit. H&r block at home  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. H&r block at home 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. H&r block at home For more information, see How Much Can Be Contributed? in this chapter. H&r block at home Modified AGI limit for traditional IRA contributions increased. H&r block at home  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. H&r block at home 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. H&r block at home If your modified AGI is $188,000 or more, you cannot take a deduction for contributions to a traditional IRA. H&r block at home See How Much Can You Deduct? in this chapter. H&r block at home Net Investment Income Tax. H&r block at home  For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan (for example, 401(a), 403(a), 403(b), 457(b) plans, and IRAs). H&r block at home However, these distributions are taken into account when determining the modified adjusted gross income threshold. H&r block at home Distributions from a nonqualified retirement plan are included in net investment income. H&r block at home See Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions for more information. H&r block at home What's New for 2014 Modified AGI limit for traditional IRA contributions increased. H&r block at home  For 2014, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is: More than $96,000 but less than $116,000 for a married couple filing a joint return or a qualifying widow(er), More than $60,000 but less than $70,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. H&r block at home If you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work, but you are not, your deduction is phased out if your modified AGI is more than $181,000 but less than $191,000. H&r block at home If your modified AGI is $191,000 or more, you cannot take a deduction for contributions to a traditional IRA. H&r block at home Introduction This chapter discusses the original IRA. H&r block at home In this publication the original IRA (sometimes called an ordinary or regular IRA) is referred to as a “traditional IRA. H&r block at home ” A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA. H&r block at home The following are two advantages of a traditional IRA: You may be able to deduct some or all of your contributions to it, depending on your circumstances. H&r block at home Generally, amounts in your IRA, including earnings and gains, are not taxed until they are distributed. H&r block at home 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. H&r block at home You can have a traditional IRA whether or not you are covered by any other retirement plan. H&r block at home However, you may not be able to deduct all of your contributions if you or your spouse is covered by an employer retirement plan. H&r block at home See How Much Can You Deduct , later. H&r block at home Both spouses have compensation. H&r block at home   If both you and your spouse have compensation and are under age 70½, each of you can open an IRA. H&r block at home You cannot both participate in the same IRA. H&r block at home If you file a joint return, only one of you needs to have compensation. H&r block at home What Is Compensation? Generally, compensation is what you earn from working. H&r block at home For a summary of what compensation does and does not include, see Table 1-1. H&r block at home Compensation includes all of the items discussed next (even if you have more than one type). H&r block at home Wages, salaries, etc. H&r block at home   Wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services are compensation. H&r block at home 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). H&r block at home Scholarship and fellowship payments are compensation for IRA purposes only if shown in box 1 of Form W-2. H&r block at home Commissions. H&r block at home   An amount you receive that is a percentage of profits or sales price is compensation. H&r block at home Self-employment income. H&r block at home   If you are self-employed (a sole proprietor or a partner), compensation is the net earnings from your trade or business (provided your personal services are a material income-producing factor) reduced by the total of: The deduction for contributions made on your behalf to retirement plans, and The deduction allowed for the deductible part of your self-employment taxes. H&r block at home   Compensation includes earnings from self-employment even if they are not subject to self-employment tax because of your religious beliefs. H&r block at home Self-employment loss. H&r block at home   If you have a net loss from self-employment, do not subtract the loss from your salaries or wages when figuring your total compensation. H&r block at home Alimony and separate maintenance. H&r block at home   For IRA purposes, compensation includes any taxable alimony and separate maintenance payments you receive under a decree of divorce or separate maintenance. H&r block at home Nontaxable combat pay. H&r block at home   If you were a member of the U. H&r block at home S. H&r block at home Armed Forces, compensation includes any nontaxable combat pay you received. H&r block at home This amount should be reported in box 12 of your 2013 Form W-2 with code Q. H&r block at home Table 1-1. H&r block at home Compensation for Purposes of an IRA Includes . H&r block at home . H&r block at home . H&r block at home Does not include . H&r block at home . H&r block at home . H&r block at home   earnings and profits from property. H&r block at home wages, salaries, etc. H&r block at home     interest and dividend income. H&r block at home commissions. H&r block at home     pension or annuity income. H&r block at home self-employment income. H&r block at home     deferred compensation. H&r block at home alimony and separate maintenance. H&r block at home     income from certain  partnerships. H&r block at home nontaxable combat pay. H&r block at home     any amounts you exclude from income. H&r block at home     What Is Not Compensation? Compensation does not include any of the following items. H&r block at home Earnings and profits from property, such as rental income, interest income, and dividend income. H&r block at home Pension or annuity income. H&r block at home Deferred compensation received (compensation payments postponed from a past year). H&r block at home Income from a partnership for which you do not provide services that are a material income-producing factor. H&r block at home Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b. H&r block at home Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs. H&r block at home When Can a Traditional IRA Be Opened? You can open a traditional IRA at any time. H&r block at home However, the time for making contributions for any year is limited. H&r block at home See When Can Contributions Be Made , later. H&r block at home How Can a Traditional IRA Be Opened? You can open different kinds of IRAs with a variety of organizations. H&r block at home You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. H&r block at home You can also open an IRA through your stockbroker. H&r block at home Any IRA must meet Internal Revenue Code requirements. H&r block at home The requirements for the various arrangements are discussed below. H&r block at home Kinds of traditional IRAs. H&r block at home   Your traditional IRA can be an individual retirement account or annuity. H&r block at home It can be part of either a simplified employee pension (SEP) or an employer or employee association trust account. H&r block at home Individual Retirement Account An individual retirement account is a trust or custodial account set up in the United States for the exclusive benefit of you or your beneficiaries. H&r block at home The account is created by a written document. H&r block at home The document must show that the account meets all of the following requirements. H&r block at home The trustee or custodian must be a bank, a federally insured credit union, a savings and loan association, or an entity approved by the IRS to act as trustee or custodian. H&r block at home The trustee or custodian generally cannot accept contributions of more than the deductible amount for the year. H&r block at home However, rollover contributions and employer contributions to a simplified employee pension (SEP) can be more than this amount. H&r block at home Contributions, except for rollover contributions, must be in cash. H&r block at home See Rollovers , later. H&r block at home You must have a nonforfeitable right to the amount at all times. H&r block at home Money in your account cannot be used to buy a life insurance policy. H&r block at home Assets in your account cannot be combined with other property, except in a common trust fund or common investment fund. H&r block at home You must start receiving distributions by April 1 of the year following the year in which you reach age 70½. H&r block at home See When Must You Withdraw Assets? (Required Minimum Distributions) , later. H&r block at home Individual Retirement Annuity You can open an individual retirement annuity by purchasing an annuity contract or an endowment contract from a life insurance company. H&r block at home An individual retirement annuity must be issued in your name as the owner, and either you or your beneficiaries who survive you are the only ones who can receive the benefits or payments. H&r block at home An individual retirement annuity must meet all the following requirements. H&r block at home Your entire interest in the contract must be nonforfeitable. H&r block at home The contract must provide that you cannot transfer any portion of it to any person other than the issuer. H&r block at home There must be flexible premiums so that if your compensation changes, your payment can also change. H&r block at home This provision applies to contracts issued after November 6, 1978. H&r block at home The contract must provide that contributions cannot be more than the deductible amount for an IRA for the year, and that you must use any refunded premiums to pay for future premiums or to buy more benefits before the end of the calendar year after the year in which you receive the refund. H&r block at home Distributions must begin by April 1 of the year following the year in which you reach age 70½. H&r block at home See When Must You Withdraw Assets? (Required Minimum Distributions) , later. H&r block at home Individual Retirement Bonds The sale of individual retirement bonds issued by the federal government was suspended after April 30, 1982. H&r block at home The bonds have the following features. H&r block at home They stop earning interest when you reach age 70½. H&r block at home If you die, interest will stop 5 years after your death, or on the date you would have reached age 70½, whichever is earlier. H&r block at home You cannot transfer the bonds. H&r block at home If you cash (redeem) the bonds before the year in which you reach age 59½, you may be subject to a 10% additional tax. H&r block at home See Age 59½ Rule under Early Distributions, later. H&r block at home You can roll over redemption proceeds into IRAs. H&r block at home Simplified Employee Pension (SEP) A simplified employee pension (SEP) is a written arrangement that allows your employer to make deductible contributions to a traditional IRA (a SEP IRA) set up for you to receive such contributions. H&r block at home Generally, distributions from SEP IRAs are subject to the withdrawal and tax rules that apply to traditional IRAs. H&r block at home See Publication 560 for more information about SEPs. H&r block at home Employer and Employee Association Trust Accounts Your employer or your labor union or other employee association can set up a trust to provide individual retirement accounts for employees or members. H&r block at home The requirements for individual retirement accounts apply to these traditional IRAs. H&r block at home Required Disclosures The trustee or issuer (sometimes called the sponsor) of your traditional IRA generally must give you a disclosure statement at least 7 days before you open your IRA. H&r block at home However, the sponsor does not have to give you the statement until the date you open (or purchase, if earlier) your IRA, provided you are given at least 7 days from that date to revoke the IRA. H&r block at home The disclosure statement must explain certain items in plain language. H&r block at home For example, the statement should explain when and how you can revoke the IRA, and include the name, address, and telephone number of the person to receive the notice of cancellation. H&r block at home This explanation must appear at the beginning of the disclosure statement. H&r block at home If you revoke your IRA within the revocation period, the sponsor must return to you the entire amount you paid. H&r block at home The sponsor must report on the appropriate IRS forms both your contribution to the IRA (unless it was made by a trustee-to-trustee transfer) and the amount returned to you. H&r block at home These requirements apply to all sponsors. H&r block at home How Much Can Be Contributed? There are limits and other rules that affect the amount that can be contributed to a traditional IRA. H&r block at home These limits and rules are explained below. H&r block at home Community property laws. H&r block at home   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. H&r block at home This is the rule even in states with community property laws. H&r block at home Brokers' commissions. H&r block at home   Brokers' commissions paid in connection with your traditional IRA are subject to the contribution limit. H&r block at home For information about whether you can deduct brokers' commissions, see Brokers' commissions , later, under How Much Can You Deduct. H&r block at home Trustees' fees. H&r block at home   Trustees' administrative fees are not subject to the contribution limit. H&r block at home For information about whether you can deduct trustees' fees, see Trustees' fees , later, under How Much Can You Deduct. H&r block at home Qualified reservist repayments. H&r block at home   If you were a member of a reserve component and you were ordered or called to active duty after September 11, 2001, you may be able to contribute (repay) to an IRA amounts equal to any qualified reservist distributions (defined later under Early Distributions) you received. H&r block at home 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. H&r block at home To be eligible to make these repayment contributions, you must have received a qualified reservist distribution from an IRA or from a section 401(k) or 403(b) plan or a similar arrangement. H&r block at home Limit. H&r block at home   Your qualified reservist repayments cannot be more than your qualified reservist distributions, explained under Early Distributions , later. H&r block at home When repayment contributions can be made. H&r block at home   You cannot make these repayment contributions later than the date that is 2 years after your active duty period ends. H&r block at home No deduction. H&r block at home   You cannot deduct qualified reservist repayments. H&r block at home Reserve component. H&r block at home   The term “reserve component” means the: Army National Guard of the United States, Army Reserve, Naval Reserve, Marine Corps Reserve, Air National Guard of the United States, Air Force Reserve, Coast Guard Reserve, or Reserve Corps of the Public Health Service. H&r block at home Figuring your IRA deduction. H&r block at home   The repayment of qualified reservist distributions does not affect the amount you can deduct as an IRA contribution. H&r block at home Reporting the repayment. H&r block at home   If you repay a qualified reservist distribution, include the amount of the repayment with nondeductible contributions on line 1 of Form 8606. H&r block at home Example. H&r block at home   In 2013, your IRA contribution limit is $5,500. H&r block at home However, because of your filing status and AGI, the limit on the amount you can deduct is $3,500. H&r block at home You can make a nondeductible contribution of $2,000 ($5,500 - $3,500). H&r block at home In an earlier year you received a $3,000 qualified reservist distribution, which you would like to repay this year. H&r block at home   For 2013, you can contribute a total of $8,500 to your IRA. H&r block at home This is made up of the maximum deductible contribution of $3,500; a nondeductible contribution of $2,000; and a $3,000 qualified reservist repayment. H&r block at home You contribute the maximum allowable for the year. H&r block at home Since you are making a nondeductible contribution ($2,000) and a qualified reservist repayment ($3,000), you must file Form 8606 with your return and include $5,000 ($2,000 + $3,000) on line 1 of Form 8606. H&r block at home The qualified reservist repayment is not deductible. H&r block at home Contributions on your behalf to a traditional IRA reduce your limit for contributions to a Roth IRA. H&r block at home See chapter 2 for information about Roth IRAs. H&r block at home General Limit For 2013, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts: $5,500 ($6,500 if you are age 50 or older), or Your taxable compensation (defined earlier) for the year. H&r block at home Note. H&r block at home This limit is reduced by any contributions to a section 501(c)(18) plan (generally, a pension plan created before June 25, 1959, that is funded entirely by employee contributions). H&r block at home 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. H&r block at home (See Nondeductible Contributions , later. H&r block at home ) Qualified reservist repayments do not affect this limit. H&r block at home Examples. H&r block at home George, who is 34 years old and single, earns $24,000 in 2013. H&r block at home His IRA contributions for 2013 are limited to $5,500. H&r block at home Danny, an unmarried college student working part time, earns $3,500 in 2013. H&r block at home His IRA contributions for 2013 are limited to $3,500, the amount of his compensation. H&r block at home More than one IRA. H&r block at home   If you have more than one IRA, the limit applies to the total contributions made on your behalf to all your traditional IRAs for the year. H&r block at home Annuity or endowment contracts. H&r block at home   If you invest in an annuity or endowment contract under an individual retirement annuity, no more than $5,500 ($6,500 if you are age 50 or older) can be contributed toward its cost for the tax year, including the cost of life insurance coverage. H&r block at home If more than this amount is contributed, the annuity or endowment contract is disqualified. H&r block at home Kay Bailey Hutchison Spousal IRA Limit For 2013, if you file a joint return and your taxable compensation is less than that of your spouse, the most that can be contributed for the year to your IRA is the smaller of the following two amounts: $5,500 ($6,500 if you are age 50 or older), or The total compensation includible in the gross income of both you and your spouse for the year, reduced by the following two amounts. H&r block at home Your spouse's IRA contribution for the year to a traditional IRA. H&r block at home Any contributions for the year to a Roth IRA on behalf of your spouse. H&r block at home This means that the total combined contributions that can be made for the year to your IRA and your spouse's IRA can be as much as $11,000 ($12,000 if only one of you is age 50 or older or $13,000 if both of you are age 50 or older). H&r block at home Note. H&r block at home This traditional IRA limit is reduced by any contributions to a section 501(c)(18) plan (generally, a pension plan created before June 25, 1959, that is funded entirely by employee contributions). H&r block at home Example. H&r block at home Kristin, a full-time student with no taxable compensation, marries Carl during the year. H&r block at home Neither of them was age 50 by the end of 2013. H&r block at home For the year, Carl has taxable compensation of $30,000. H&r block at home He plans to contribute (and deduct) $5,500 to a traditional IRA. H&r block at home If he and Kristin file a joint return, each can contribute $5,500 to a traditional IRA. H&r block at home This is because Kristin, who has no compensation, can add Carl's compensation, reduced by the amount of his IRA contribution ($30,000 − $5,500 = $24,500), to her own compensation (-0-) to figure her maximum contribution to a traditional IRA. H&r block at home In her case, $5,500 is her contribution limit, because $5,500 is less than $24,500 (her compensation for purposes of figuring her contribution limit). H&r block at home Filing Status Generally, except as discussed earlier under Kay Bailey Hutchison Spousal IRA Limit , your filing status has no effect on the amount of allowable contributions to your traditional IRA. H&r block at home However, if during the year either you or your spouse was covered by a retirement plan at work, your deduction may be reduced or eliminated, depending on your filing status and income. H&r block at home See How Much Can You Deduct , later. H&r block at home Example. H&r block at home Tom and Darcy are married and both are 53. H&r block at home They both work and each has a traditional IRA. H&r block at home Tom earned $3,800 and Darcy earned $48,000 in 2013. H&r block at home Because of the Kay Bailey Hutchison Spousal IRA limit rule, even though Tom earned less than $6,500, they can contribute up to $6,500 to his IRA for 2013 if they file a joint return. H&r block at home They can contribute up to $6,500 to Darcy's IRA. H&r block at home If they file separate returns, the amount that can be contributed to Tom's IRA is limited by his earned income, $3,800. H&r block at home Less Than Maximum Contributions If contributions to your traditional IRA for a year were less than the limit, you cannot contribute more after the due date of your return for that year to make up the difference. H&r block at home Example. H&r block at home Rafael, who is 40, earns $30,000 in 2013. H&r block at home Although he can contribute up to $5,500 for 2013, he contributes only $3,000. H&r block at home After April 15, 2014, Rafael cannot make up the difference between his actual contributions for 2013 ($3,000) and his 2013 limit ($5,500). H&r block at home He cannot contribute $2,500 more than the limit for any later year. H&r block at home More Than Maximum Contributions If contributions to your IRA for a year were more than the limit, you can apply the excess contribution in one year to a later year if the contributions for that later year are less than the maximum allowed for that year. H&r block at home However, a penalty or additional tax may apply. H&r block at home See Excess Contributions , later, under What Acts Result in Penalties or Additional Taxes. H&r block at home 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). H&r block at home Contributions must be in the form of money (cash, check, or money order). H&r block at home Property cannot be contributed. H&r block at home Although property cannot be contributed, your IRA may invest in certain property. H&r block at home For example, your IRA may purchase shares of stock. H&r block at home For other restrictions on the use of funds in your IRA, see Prohibited Transactions , later in this chapter. H&r block at home You may be able to transfer or roll over certain property from one retirement plan to another. H&r block at home See the discussion of rollovers and other transfers later in this chapter under Can You Move Retirement Plan Assets . H&r block at home You can make a contribution to your IRA by having your income tax refund (or a portion of your refund), if any, paid directly to your traditional IRA, Roth IRA, or SEP IRA. H&r block at home For details, see the instructions for your income tax return or Form 8888, Allocation of Refund (Including Savings Bond Purchases). H&r block at home Contributions can be made to your traditional IRA for each year that you receive compensation and have not reached age 70½. H&r block at home For any year in which you do not work, contributions cannot be made to your IRA unless you receive alimony, nontaxable combat pay, military differential pay, or file a joint return with a spouse who has compensation. H&r block at home See Who Can Open a Traditional IRA , earlier. H&r block at home Even if contributions cannot be made for the current year, the amounts contributed for years in which you did qualify can remain in your IRA. H&r block at home Contributions can resume for any years that you qualify. H&r block at home Contributions must be made by due date. H&r block at home   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. H&r block at home For most people, this means that contributions for 2013 must be made by April 15, 2014, and contributions for 2014 must be made by April 15, 2015. H&r block at home Age 70½ rule. H&r block at home   Contributions cannot be made to your traditional IRA for the year in which you reach age 70½ or for any later year. H&r block at home   You attain age 70½ on the date that is 6 calendar months after the 70th anniversary of your birth. H&r block at home If you were born on or before June 30, 1943, you cannot contribute for 2013 or any later year. H&r block at home Designating year for which contribution is made. H&r block at home   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. H&r block at home 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). H&r block at home Filing before a contribution is made. H&r block at home    You can file your return claiming a traditional IRA contribution before the contribution is actually made. H&r block at home Generally, the contribution must be made by the due date of your return, not including extensions. H&r block at home Contributions not required. H&r block at home   You do not have to contribute to your traditional IRA for every tax year, even if you can. H&r block at home How Much Can You Deduct? Generally, you can deduct the lesser of: The contributions to your traditional IRA for the year, or The general limit (or the Kay Bailey Hutchison Spousal IRA limit, if applicable) explained earlier under How Much Can Be Contributed . H&r block at home However, if you or your spouse was covered by an employer retirement plan, you may not be able to deduct this amount. H&r block at home See Limit if Covered by Employer Plan , later. H&r block at home You may be able to claim a credit for contributions to your traditional IRA. H&r block at home For more information, see chapter 4. H&r block at home Trustees' fees. H&r block at home   Trustees' administrative fees that are billed separately and paid in connection with your traditional IRA are not deductible as IRA contributions. H&r block at home However, they may be deductible as a miscellaneous itemized deduction on Schedule A (Form 1040). H&r block at home For information about miscellaneous itemized deductions, see Publication 529, Miscellaneous Deductions. H&r block at home Brokers' commissions. H&r block at home   These commissions are part of your IRA contribution and, as such, are deductible subject to the limits. H&r block at home Full deduction. H&r block at home   If neither you nor your spouse was covered for any part of the year by an employer retirement plan, you can take a deduction for total contributions to one or more of your traditional IRAs of up to the lesser of: $5,500 ($6,500 if you are age 50 or older), or 100% of your compensation. H&r block at home   This limit is reduced by any contributions made to a 501(c)(18) plan on your behalf. H&r block at home Kay Bailey Hutchison Spousal IRA. H&r block at home   In the case of a married couple with unequal compensation who file a joint return, the deduction for contributions to the traditional IRA of the spouse with less compensation is limited to the lesser of: $5,500 ($6,500 if the spouse with the lower compensation is age 50 or older), or The total compensation includible in the gross income of both spouses for the year reduced by the following three amounts. H&r block at home The IRA deduction for the year of the spouse with the greater compensation. H&r block at home Any designated nondeductible contribution for the year made on behalf of the spouse with the greater compensation. H&r block at home Any contributions for the year to a Roth IRA on behalf of the spouse with the greater compensation. H&r block at home   This limit is reduced by any contributions to a section 501(c)(18) plan on behalf of the spouse with the lesser compensation. H&r block at home Note. H&r block at home 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. H&r block at home After a divorce or legal separation, you can deduct only the contributions to your own IRA. H&r block at home Your deductions are subject to the rules for single individuals. H&r block at home Covered by an employer retirement plan. H&r block at home   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. H&r block at home This is discussed later under Limit if Covered by Employer Plan . H&r block at home Limits on the amount you can deduct do not affect the amount that can be contributed. H&r block at home 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. H&r block at home The “Retirement Plan” box should be checked if you were covered. H&r block at home Reservists and volunteer firefighters should also see Situations in Which You Are Not Covered , later. H&r block at home If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer. H&r block at home Federal judges. H&r block at home   For purposes of the IRA deduction, federal judges are covered by an employer plan. H&r block at home For Which Year(s) Are You Covered? Special rules apply to determine the tax years for which you are covered by an employer plan. H&r block at home These rules differ depending on whether the plan is a defined contribution plan or a defined benefit plan. H&r block at home Tax year. H&r block at home   Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. H&r block at home For almost all people, the tax year is the calendar year. H&r block at home Defined contribution plan. H&r block at home   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. H&r block at home However, also see Situations in Which You Are Not Covered , later. H&r block at home   A defined contribution plan is a plan that provides for a separate account for each person covered by the plan. H&r block at home In a defined contribution plan, the amount to be contributed to each participant's account is spelled out in the plan. H&r block at home The level of benefits actually provided to a participant depends on the total amount contributed to that participant's account and any earnings and losses on those contributions. H&r block at home Types of defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans. H&r block at home Example. H&r block at home Company A has a money purchase pension plan. H&r block at home Its plan year is from July 1 to June 30. H&r block at home The plan provides that contributions must be allocated as of June 30. H&r block at home Bob, an employee, leaves Company A on December 31, 2012. H&r block at home The contribution for the plan year ending on June 30, 2013, is made February 15, 2014. H&r block at home Because an amount is contributed to Bob's account for the plan year, Bob is covered by the plan for his 2013 tax year. H&r block at home   A special rule applies to certain plans in which it is not possible to determine if an amount will be contributed to your account for a given plan year. H&r block at home If, for a plan year, no amounts have been allocated to your account that are attributable to employer contributions, employee contributions, or forfeitures, by the last day of the plan year, and contributions are discretionary for the plan year, you are not covered for the tax year in which the plan year ends. H&r block at home If, after the plan year ends, the employer makes a contribution for that plan year, you are covered for the tax year in which the contribution is made. H&r block at home Example. H&r block at home Mickey was covered by a profit-sharing plan and left the company on December 31, 2012. H&r block at home The plan year runs from July 1 to June 30. H&r block at home Under the terms of the plan, employer contributions do not have to be made, but if they are made, they are contributed to the plan before the due date for filing the company's tax return. H&r block at home Such contributions are allocated as of the last day of the plan year, and allocations are made to the accounts of individuals who have any service during the plan year. H&r block at home As of June 30, 2013, no contributions were made that were allocated to the June 30, 2013, plan year, and no forfeitures had been allocated within the plan year. H&r block at home In addition, as of that date, the company was not obligated to make a contribution for such plan year and it was impossible to determine whether or not a contribution would be made for the plan year. H&r block at home On December 31, 2013, the company decided to contribute to the plan for the plan year ending June 30, 2013. H&r block at home That contribution was made on February 15, 2014. H&r block at home Mickey is an active participant in the plan for his 2014 tax year but not for his 2013 tax year. H&r block at home No vested interest. H&r block at home   If an amount is allocated to your account for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the account. H&r block at home Defined benefit plan. H&r block at home   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. H&r block at home 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. H&r block at home   A defined benefit plan is any plan that is not a defined contribution plan. H&r block at home In a defined benefit plan, the level of benefits to be provided to each participant is spelled out in the plan. H&r block at home The plan administrator figures the amount needed to provide those benefits and those amounts are contributed to the plan. H&r block at home Defined benefit plans include pension plans and annuity plans. H&r block at home Example. H&r block at home Nick, an employee of Company B, is eligible to participate in Company B's defined benefit plan, which has a July 1 to June 30 plan year. H&r block at home Nick leaves Company B on December 31, 2012. H&r block at home Because Nick is eligible to participate in the plan for its year ending June 30, 2013, he is covered by the plan for his 2013 tax year. H&r block at home No vested interest. H&r block at home   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. H&r block at home Situations in Which You Are Not Covered Unless you are covered by another employer plan, you are not covered by an employer plan if you are in one of the situations described below. H&r block at home Social security or railroad retirement. H&r block at home   Coverage under social security or railroad retirement is not coverage under an employer retirement plan. H&r block at home Benefits from previous employer's plan. H&r block at home   If you receive retirement benefits from a previous employer's plan, you are not covered by that plan. H&r block at home Reservists. H&r block at home   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. H&r block at home You are not covered by the plan if both of the following conditions are met. H&r block at home 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. H&r block at home You did not serve more than 90 days on active duty during the year (not counting duty for training). H&r block at home Volunteer firefighters. H&r block at home   If the only reason you participate in a plan is because you are a volunteer firefighter, you may not be covered by the plan. H&r block at home You are not covered by the plan if both of the following conditions are met. H&r block at home 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. H&r block at home Your accrued retirement benefits at the beginning of the year will not provide more than $1,800 per year at retirement. H&r block at home Limit if Covered by Employer Plan As discussed earlier, the deduction you can take for contributions made to your traditional IRA depends on whether you or your spouse was covered for any part of the year by an employer retirement plan. H&r block at home Your deduction is also affected by how much income you had and by your filing status. H&r block at home Your deduction may also be affected by social security benefits you received. H&r block at home Reduced or no deduction. H&r block at home   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. H&r block at home   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. H&r block at home These amounts vary depending on your filing status. H&r block at home   To determine if your deduction is subject to the phaseout, you must determine your modified adjusted gross income (AGI) and your filing status, as explained later under Deduction Phaseout . H&r block at home Once you have determined your modified AGI and your filing status, you can use Table 1-2 or Table 1-3 to determine if the phaseout applies. H&r block at home Social Security Recipients Instead of using Table 1-2 or Table 1-3 and Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, later, complete the worksheets in Appendix B of this publication if, for the year, all of the following apply. H&r block at home You received social security benefits. H&r block at home You received taxable compensation. H&r block at home Contributions were made to your traditional IRA. H&r block at home You or your spouse was covered by an employer retirement plan. H&r block at home Use the worksheets in Appendix B to figure your IRA deduction, your nondeductible contribution, and the taxable portion, if any, of your social security benefits. H&r block at home Appendix B includes an example with filled-in worksheets to assist you. H&r block at home Table 1-2. H&r block at home Effect of Modified AGI1 on Deduction if You Are Covered by a Retirement Plan at Work If you are covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. H&r block at home IF your filing status is . H&r block at home . H&r block at home . H&r block at home AND your modified adjusted gross income (modified AGI) is . H&r block at home . H&r block at home . H&r block at home THEN you can take . H&r block at home . H&r block at home . H&r block at home single or head of household $59,000 or less a full deduction. H&r block at home more than $59,000 but less than $69,000 a partial deduction. H&r block at home $69,000 or more no deduction. H&r block at home married filing jointly or  qualifying widow(er) $95,000 or less a full deduction. H&r block at home more than $95,000 but less than $115,000 a partial deduction. H&r block at home $115,000 or more no deduction. H&r block at home married filing separately2 less than $10,000 a partial deduction. H&r block at home $10,000 or more no deduction. H&r block at home 1 Modified AGI (adjusted gross income). H&r block at home See Modified adjusted gross income (AGI) , later. H&r block at home  2 If you did not live with your spouse at any time during the year, your filing status is considered Single for this purpose (therefore, your IRA deduction is determined under the “Single” filing status). H&r block at home Table 1-3. H&r block at home Effect of Modified AGI1 on Deduction if You Are NOT Covered by a Retirement Plan at Work If you are not covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. H&r block at home IF your filing status is . H&r block at home . H&r block at home . H&r block at home AND your modified adjusted gross income (modified AGI) is . H&r block at home . H&r block at home . H&r block at home THEN you can take . H&r block at home . H&r block at home . H&r block at home single, head of household, or qualifying widow(er) any amount a full deduction. H&r block at home married filing jointly or separately with a spouse who is not covered by a plan at work any amount a full deduction. H&r block at home married filing jointly with a spouse who is covered by a plan at work $178,000 or less a full deduction. H&r block at home more than $178,000 but less than $188,000 a partial deduction. H&r block at home $188,000 or more no deduction. H&r block at home married filing separately with a spouse who is covered by a plan at work2 less than $10,000 a partial deduction. H&r block at home $10,000 or more no deduction. H&r block at home 1 Modified AGI (adjusted gross income). H&r block at home See Modified adjusted gross income (AGI) , later. H&r block at home  2 You are entitled to the full deduction if you did not live with your spouse at any time during the year. H&r block at home For 2014, if you are not covered by a retirement plan at work and you are married filing jointly with a spouse who is covered by a plan at work, your deduction is phased out if your modified AGI is more than $181,000 but less than $191,000. H&r block at home If your AGI is $191,000 or more, you cannot take a deduction for a contribution to a traditional IRA. H&r block at home Deduction Phaseout The amount of any reduction in the limit on your IRA deduction (phaseout) depends on whether you or your spouse was covered by an employer retirement plan. H&r block at home Covered by a retirement plan. H&r block at home   If you are covered by an employer retirement plan and you did not receive any social security retirement benefits, your IRA deduction may be reduced or eliminated depending on your filing status and modified AGI, as shown in Table 1-2. H&r block at home For 2014, if you are covered by a retirement plan at work, your IRA deduction will not be reduced (phased out) unless your modified AGI is: More than $60,000 but less than $70,000 for a single individual (or head of household), More than $96,000 but less than $116,000 for a married couple filing a joint return (or a qualifying widow(er)), or Less than $10,000 for a married individual filing a separate return. H&r block at home If your spouse is covered. H&r block at home   If you are not covered by an employer retirement plan, but your spouse is, and you did not receive any social security benefits, your IRA deduction may be reduced or eliminated entirely depending on your filing status and modified AGI as shown in Table 1-3. H&r block at home Filing status. H&r block at home   Your filing status depends primarily on your marital status. H&r block at home 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. H&r block at home If you need more information on filing status, see Publication 501, Exemptions, Standard Deduction, and Filing Information. H&r block at home Lived apart from spouse. H&r block at home   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. H&r block at home Modified adjusted gross income (AGI). H&r block at home   You can use Worksheet 1-1 to figure your modified AGI. H&r block at home If you made contributions to your IRA for 2013 and received a distribution from your IRA in 2013, see Both contributions for 2013 and distributions in 2013 , later. H&r block at home    Do not assume that your modified AGI is the same as your compensation. H&r block at home Your modified AGI may include income in addition to your compensation (discussed earlier) such as interest, dividends, and income from IRA distributions. H&r block at home Form 1040. H&r block at home   If you file Form 1040, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. H&r block at home IRA deduction. H&r block at home Student loan interest deduction. H&r block at home Tuition and fees deduction. H&r block at home Domestic production activities deduction. H&r block at home Foreign earned income exclusion. H&r block at home Foreign housing exclusion or deduction. H&r block at home Exclusion of qualified savings bond interest shown on Form 8815. H&r block at home Exclusion of employer-provided adoption benefits shown on Form 8839. H&r block at home This is your modified AGI. H&r block at home Form 1040A. H&r block at home   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. H&r block at home IRA deduction. H&r block at home Student loan interest deduction. H&r block at home Tuition and fees deduction. H&r block at home Exclusion of qualified savings bond interest shown on Form 8815. H&r block at home This is your modified AGI. H&r block at home Form 1040NR. H&r block at home   If you file Form 1040NR, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. H&r block at home IRA deduction. H&r block at home Student loan interest deduction. H&r block at home Domestic production activities deduction. H&r block at home Exclusion of qualified savings bond interest shown on Form 8815. H&r block at home Exclusion of employer-provided adoption benefits shown on Form 8839. H&r block at home This is your modified AGI. H&r block at home Income from IRA distributions. H&r block at home   If you received distributions in 2013 from one or more traditional IRAs and your traditional IRAs include only deductible contributions, the distributions are fully taxable and are included in your modified AGI. H&r block at home Both contributions for 2013 and distributions in 2013. H&r block at home   If all three of the following apply, any IRA distributions you received in 2013 may be partly tax free and partly taxable. H&r block at home You received distributions in 2013 from one or more traditional IRAs, You made contributions to a traditional IRA for 2013, and Some of those contributions may be nondeductible contributions. H&r block at home (See Nondeductible Contributions and Worksheet 1-2, later. H&r block at home ) If this is your situation, you must figure the taxable part of the traditional IRA distribution before you can figure your modified AGI. H&r block at home To do this, you can use Worksheet 1-5, later. H&r block at home   If at least one of the above does not apply, figure your modified AGI using Worksheet 1-1, later. H&r block at home How To Figure Your Reduced IRA Deduction If you or your spouse is covered by an employer retirement plan and you did not receive any social security benefits, you can figure your reduced IRA deduction by using Worksheet 1-2. H&r block at home Figuring Your Reduced IRA Deduction for 2013. H&r block at home The Instructions for Form 1040, Form 1040A, and Form 1040NR include similar worksheets that you can use instead of the worksheet in this publication. H&r block at home If you or your spouse is covered by an employer retirement plan, and you received any social security benefits, see Social Security Recipients , earlier. H&r block at home Note. H&r block at home If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. H&r block at home Worksheet 1-1. H&r block at home Figuring Your Modified AGI Use this worksheet to figure your modified AGI for traditional IRA purposes. H&r block at home 1. H&r block at home Enter your adjusted gross income (AGI) from Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37, figured without taking into account the amount from Form 1040, line 32; Form 1040A, line 17; or Form 1040NR, line 32 1. H&r block at home   2. H&r block at home Enter any student loan interest deduction from Form 1040, line 33; Form 1040A, line 18; or Form 1040NR, line 33 2. H&r block at home   3. H&r block at home Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 3. H&r block at home   4. H&r block at home Enter any domestic production activities deduction from Form 1040, line 35, or Form 1040NR, line 34 4. H&r block at home   5. H&r block at home Enter any foreign earned income exclusion and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 5. H&r block at home   6. H&r block at home Enter any foreign housing deduction from Form 2555, line 50 6. H&r block at home   7. H&r block at home Enter any excludable savings bond interest from Form 8815, line 14 7. H&r block at home   8. H&r block at home Enter any excluded employer-provided adoption benefits from Form 8839, line 28 8. H&r block at home   9. H&r block at home Add lines 1 through 8. H&r block at home This is your Modified AGI for traditional IRA purposes 9. H&r block at home   Reporting Deductible Contributions If you file Form 1040, enter your IRA deduction on line 32 of that form. H&r block at home If you file Form 1040A, enter your IRA deduction on line 17 of that form. H&r block at home If you file Form 1040NR, enter your IRA deduction on line 32 of that form. H&r block at home You cannot deduct IRA contributions on Form 1040EZ or Form 1040NR-EZ. H&r block at home Self-employed. H&r block at home   If you are self-employed (a sole proprietor or partner) and have a SIMPLE IRA, enter your deduction for allowable plan contributions on Form 1040, line 28. H&r block at home If you file Form 1040NR, enter your deduction on line 28 of that form. H&r block at home Nondeductible Contributions Although your deduction for IRA contributions may be reduced or eliminated, contributions can be made to your IRA of up to the general limit or, if it applies, the Kay Bailey Hutchison Spousal IRA limit. H&r block at home The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. H&r block at home Example. H&r block at home Tony is 29 years old and single. H&r block at home In 2013, he was covered by a retirement plan at work. H&r block at home His salary is $62,000. H&r block at home His modified AGI is $70,000. H&r block at home Tony makes a $5,500 IRA contribution for 2013. H&r block at home Because he was covered by a retirement plan and his modified AGI is above $69,000, he cannot deduct his $5,500 IRA contribution. H&r block at home He must designate this contribution as a nondeductible contribution by reporting it on Form 8606. H&r block at home Repayment of reservist distributions. H&r block at home   Nondeductible contributions may include repayments of qualified reservist distributions. H&r block at home For more information, see Qualified reservist repayments under How Much Can Be Contributed, earlier. H&r block at home Form 8606. H&r block at home   To designate contributions as nondeductible, you must file Form 8606. H&r block at home (See the filled-in Forms 8606 in this chapter. H&r block at home )   You do not have to designate a contribution as nondeductible until you file your tax return. H&r block at home When you file, you can even designate otherwise deductible contributions as nondeductible contributions. H&r block at home   You must file Form 8606 to report nondeductible contributions even if you do not have to file a tax return for the year. H&r block at home    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. H&r block at home In those situations, a Form 8606 is completed for the year you take a distribution from that IRA. H&r block at home See Form 8606 under Distributions Fully or Partly Taxable, later. H&r block at home Failure to report nondeductible contributions. H&r block at home   If you do not report nondeductible contributions, all of the contributions to your traditional IRA will be treated like deductible contributions when withdrawn. H&r block at home All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. H&r block at home Penalty for overstatement. H&r block at home   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. H&r block at home Penalty for failure to file Form 8606. H&r block at home   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. H&r block at home Tax on earnings on nondeductible contributions. H&r block at home   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. H&r block at home Cost basis. H&r block at home   You will have a cost basis in your traditional IRA if you made any nondeductible contributions. H&r block at home Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions. H&r block at home    Commonly, distributions from your traditional IRAs will include both taxable and nontaxable (cost basis) amounts. H&r block at home See Are Distributions Taxable, later, for more information. H&r block at home Recordkeeping. H&r block at home There is a recordkeeping worksheet, Appendix A. H&r block at home Summary Record of Traditional IRA(s) for 2013 , that you can use to keep a record of deductible and nondeductible IRA contributions. H&r block at home Examples — Worksheet for Reduced IRA Deduction for 2013 The following examples illustrate the use of Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013. H&r block at home Example 1. H&r block at home For 2013, Tom and Betty file a joint return on Form 1040. H&r block at home They are both 39 years old. H&r block at home They are both employed and Tom is covered by his employer's retirement plan. H&r block at home Tom's salary is $59,000 and Betty's is $32,555. H&r block at home They each have a traditional IRA and their combined modified AGI, which includes $5,000 interest and dividend income, is $96,555. H&r block at home Because their modified AGI is between $95,000 and $115,000 and Tom is covered by an employer plan, Tom is subject to the deduction phaseout discussed earlier under Limit if Covered by Employer Plan . H&r block at home For 2013, Tom contributed $5,500 to his IRA and Betty contributed $5,500 to hers. H&r block at home Even though they file a joint return, they must use separate worksheets to figure the IRA deduction for each of them. H&r block at home Tom can take a deduction of only $5,080. H&r block at home He can choose to treat the $5,080 as either deductible or nondeductible contributions. H&r block at home He can either leave the $420 ($5,500 − $5,080) of nondeductible contributions in his IRA or withdraw them by April 15, 2014. H&r block at home He decides to treat the $5,080 as deductible contributions and leave the $420 of nondeductible contributions in his IRA. H&r block at home Using Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, Tom figures his deductible and nondeductible amounts as shown on Worksheet 1-2. H&r block at home Figuring Your Reduced IRA Deduction for 2013—Example 1 Illustrated. H&r block at home Betty figures her IRA deduction as follows. H&r block at home Betty can treat all or part of her contributions as either deductible or nondeductible. H&r block at home This is because her $5,500 contribution for 2013 is not subject to the deduction phaseout discussed earlier under Limit if Covered by Employer Plan . H&r block at home She does not need to use Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, because their modified AGI is not within the phaseout range that applies. H&r block at home Betty decides to treat her $5,500 IRA contributions as deductible. H&r block at home The IRA deductions of $5,080 and $5,500 on the joint return for Tom and Betty total $10,580. H&r block at home Example 2. H&r block at home For 2013, Ed and Sue file a joint return on Form 1040. H&r block at home They are both 39 years old. H&r block at home Ed is covered by his employer's retirement plan. H&r block at home Ed's salary is $45,000. H&r block at home Sue had no compensation for the year and did not contribute to an IRA. H&r block at home Sue is not covered by an employer plan. H&r block at home Ed contributed $5,500 to his traditional IRA and $5,500 to a traditional IRA for Sue (a Kay Bailey Hutchison Spousal IRA). H&r block at home Their combined modified AGI, which includes $2,000 interest and dividend income and a large capital gain from the sale of stock, is $180,555. H&r block at home Because the combined modified AGI is $115,000 or more, Ed cannot deduct any of the contribution to his traditional IRA. H&r block at home He can either leave the $5,500 of nondeductible contributions in his IRA or withdraw them by April 15, 2014. H&r block at home Sue figures her IRA deduction as shown on Worksheet 1-2. H&r block at home Figuring Your Reduced IRA Deduction for 2013—Example 2 Illustrated. H&r block at home Worksheet 1-2. H&r block at home Figuring Your Reduced IRA Deduction for 2013 (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. H&r block at home ) Note. H&r block at home If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. H&r block at home IF you . H&r block at home . H&r block at home . H&r block at home AND your  filing status is . H&r block at home . H&r block at home . H&r block at home AND your modified AGI is over . H&r block at home . H&r block at home . H&r block at home THEN enter on  line 1 below . H&r block at home . H&r block at home . H&r block at home       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. H&r block at home Enter applicable amount from table above 1. H&r block at home   2. H&r block at home Enter your modified AGI (that of both spouses, if married filing jointly) 2. H&r block at home     Note. H&r block at home If line 2 is equal to or more than the amount on line 1, stop here. H&r block at home  Your IRA contributions are not deductible. H&r block at home See Nondeductible Contributions , earlier. H&r block at home     3. H&r block at home Subtract line 2 from line 1. H&r block at home If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. H&r block at home You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. H&r block at home   4. H&r block at home Multiply line 3 by the percentage below that applies to you. H&r block at home If the result is not a multiple of $10, round it to the next highest multiple of $10. H&r block at home (For example, $611. H&r block at home 40 is rounded to $620. H&r block at home ) However, if the result is less than $200, enter $200. H&r block at home         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. H&r block at home 5% (. H&r block at home 275) (by 32. H&r block at home 5% (. H&r block at home 325) if you are age 50 or older). H&r block at home All others, multiply line 3 by 55% (. H&r block at home 55) (by 65% (. H&r block at home 65) if you are age 50 or older). H&r block at home 4. H&r block at home   5. H&r block at home Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). H&r block at home If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. H&r block at home If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. H&r block at home   6. H&r block at home Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). H&r block at home If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. H&r block at home 6. H&r block at home   7. H&r block at home IRA deduction. H&r block at home Compare lines 4, 5, and 6. H&r block at home Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. H&r block at home If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. H&r block at home   8. H&r block at home Nondeductible contribution. H&r block at home Subtract line 7 from line 5 or 6, whichever is smaller. H&r block at home  Enter the result here and on line 1 of your Form 8606 8. H&r block at home   Worksheet 1-2. H&r block at home Figuring Your Reduced IRA Deduction for 2013—Example 1 Illustrated (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. H&r block at home ) Note. H&r block at home If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. H&r block at home IF you . H&r block at home . H&r block at home . H&r block at home AND your  filing status is . H&r block at home . H&r block at home . H&r block at home AND your modified AGI is over . H&r block at home . H&r block at home . H&r block at home THEN enter on  line 1 below . H&r block at home . H&r block at home . H&r block at home       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. H&r block at home Enter applicable amount from table above 1. H&r block at home 115,000 2. H&r block at home Enter your modified AGI (that of both spouses, if married filing jointly) 2. H&r block at home 96,555   Note. H&r block at home If line 2 is equal to or more than the amount on line 1, stop here. H&r block at home  Your IRA contributions are not deductible. H&r block at home See Nondeductible Contributions , earlier. H&r block at home     3. H&r block at home Subtract line 2 from line 1. H&r block at home If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. H&r block at home You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. H&r block at home 18,445 4. H&r block at home Multiply line 3 by the percentage below that applies to you. H&r block at home If the result is not a multiple of $10, round it to the next highest multiple of $10. H&r block at home (For example, $611. H&r block at home 40 is rounded to $620. H&r block at home ) However, if the result is less than $200, enter $200. H&r block at home         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. H&r block at home 5% (. H&r block at home 275) (by 32. H&r block at home 5% (. H&r block at home 325) if you are age 50 or older). H&r block at home All others, multiply line 3 by 55% (. H&r block at home 55) (by 65% (. H&r block at home 65) if you are age 50 or older). H&r block at home 4. H&r block at home 5,080 5. H&r block at home Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). H&r block at home If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. H&r block at home If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. H&r block at home 59,000 6. H&r block at home Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). H&r block at home If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. H&r block at home 6. H&r block at home 5,500 7. H&r block at home IRA deduction. H&r block at home Compare lines 4, 5, and 6. H&r block at home Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. H&r block at home If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. H&r block at home 5,080 8. H&r block at home Nondeductible contribution. H&r block at home Subtract line 7 from line 5 or 6, whichever is smaller. H&r block at home  Enter the result here and on line 1 of your Form 8606 8. H&r block at home 420 Worksheet 1-2. H&r block at home Figuring Your Reduced IRA Deduction for 2013—Example 2 Illustrated (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. H&r block at home ) Note. H&r block at home If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. H&r block at home IF you . H&r block at home . H&r block at home . H&r block at home AND your  filing status is . H&r block at home . H&r block at home . H&r block at home AND your modified AGI is over . H&r block at home . H&r block at home . H&r block at home THEN enter on  line 1 below . H&r block at home . H&r block at home . H&r block at home       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. H&r block at home Enter applicable amount from table above 1. H&r block at home 188,000 2. H&r block at home Enter your modified AGI (that of both spouses, if married filing jointly) 2. H&r block at home 180,555   Note. H&r block at home If line 2 is equal to or more than the amount on line 1, stop here. H&r block at home  Your IRA contributions are not deductible. H&r block at home See Nondeductible Contributions , earlier. H&r block at home     3. H&r block at home Subtract line 2 from line 1. H&r block at home If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. H&r block at home You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. H&r block at home 7,445 4. H&r block at home Multiply line 3 by the percentage below that applies to you. H&r block at home If the result is not a multiple of $10, round it to the next highest multiple of $10. H&r block at home (For example, $611. H&r block at home 40 is rounded to $620. H&r block at home ) However, if the result is less than $200, enter $200. H&r block at home         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. H&r block at home 5% (. H&r block at home 275) (by 32. H&r block at home 5% (. H&r block at home 325) if you are age 50 or older). H&r block at home All others, multiply line 3 by 55% (. H&r block at home 55) (by 65% (. H&r block at home 65) if you are age 50 or older). H&r block at home 4. H&r block at home 4,100 5. H&r block at home Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). H&r block at home If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. H&r block at home If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. H&r block at home 39,500 6. H&r block at home Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). H&r block at home If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. H&r block at home 6. H&r block at home 5,500 7. H&r block at home IRA deduction. H&r block at home Compare lines 4, 5, and 6. H&r block at home Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. H&r block at home If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. H&r block at home 4,100 8. H&r block at home Nondeductible contribution. H&r block at home Subtract line 7 from line 5 or 6, whichever is smaller. H&r block at home  Enter the result here and on line 1 of your Form 8606 8. H&r block at home 1,400 What if You Inherit an IRA? If you inherit a traditional IRA, you are called a beneficiary. H&r block at home A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. H&r block at home Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive. H&r block at home Inherited from spouse. H&r block at home   If you inherit a traditional IRA from your spouse, you generally have the following three choices. H&r block at home You can: Treat it as your own IRA by designating yourself as the account owner. H&r block at home Treat it as your own by rolling it over into your IRA, or to the extent it is taxable, into a: Qualified employer plan, Qualified employee annuity plan (section 403(a) plan), Tax-sheltered annuity plan (s
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Understanding Your CP282 Notice

You received this notice because you indicated on your Form 1065, U.S. Return of Partnership Income, or Form1065-B, U.S. Return of Income for Electing Large Partnerships, that you have foreign partners.

Generally, when a foreign person engages in a trade or business in the United States, all income from sources in the United States connected with the conduct of that trade or business is considered to be Effectively Connected Taxable Income (ECTI). A partnership (foreign or domestic) that has income effectively connected with a U.S. trade or business (or income treated as effectively connected) must pay a withholding tax on the ECTI that it allocates to its foreign partners (Section 1446 of the Internal Revenue Code). The partnership, or a withholding agent for the partnership, must pay the withholding tax. A partnership that must pay the withholding tax but fails to do so may be liable for the payment of the tax plus any penalties and interest.


What you need to do if you determine you are liable for withholding:

Page Last Reviewed or Updated: 30-Jan-2014

How to get help

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

The H&r Block At Home

H&r block at home Publication 503 - Introductory Material Table of Contents Future Developments Reminders IntroductionOrdering forms and publications. H&r block at home Tax questions. H&r block at home Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 503, such as legislation enacted after it was published, go to www. H&r block at home irs. H&r block at home gov/pub503. H&r block at home Reminders Taxpayer identification number needed for each qualifying person. H&r block at home  You must include on line 2 of Form 2441, Child and Dependent Care Expenses, the name and taxpayer identification number (generally the social security number) of each qualifying person. H&r block at home See Taxpayer identification number under Qualifying Person Test, later. H&r block at home You may have to pay employment taxes. H&r block at home  If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer who has to pay employment taxes. H&r block at home Usually, you are not a household employer if the person who cares for your dependent or spouse does so at his or her home or place of business. H&r block at home See Employment Taxes for Household Employers, later. H&r block at home Photographs of missing children. H&r block at home  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. H&r block at home Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. H&r block at home 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. H&r block at home Introduction This publication explains the tests you must meet to claim the credit for child and dependent care expenses. H&r block at home It explains how to figure and claim the credit. H&r block at home You may be able to claim the credit if you pay someone to care for your dependent who is under age 13 or for your spouse or dependent who is not able to care for himself or herself. H&r block at home The credit can be up to 35% of your expenses. H&r block at home To qualify, you must pay these expenses so you can work or look for work. H&r block at home This publication also discusses some of the employment tax rules for household employers. H&r block at home Dependent care benefits. H&r block at home   If you received any dependent care benefits from your employer during the year, you may be able to exclude from your income all or part of them. H&r block at home You must complete Form 2441, Part III, before you can figure the amount of your credit. H&r block at home See Dependent Care Benefits under How To Figure the Credit, later. H&r block at home Comments and suggestions. H&r block at home   We welcome your comments about this publication and your suggestions for future editions. H&r block at home   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. H&r block at home NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. H&r block at home Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. H&r block at home   You can send your comments from www. H&r block at home irs. H&r block at home gov/formspubs/. H&r block at home Click on “More Information” and then on “Comment on Tax Forms and Publications. H&r block at home ”   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. H&r block at home Ordering forms and publications. H&r block at home   Visit www. H&r block at home irs. H&r block at home 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. H&r block at home Internal Revenue Service 1201 N. H&r block at home Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. H&r block at home   If you have a tax question, check the information available on IRS. H&r block at home gov or call 1-800-829-1040. H&r block at home We cannot answer tax questions sent to either of the above addresses. H&r block at home Useful Items - You may want to see: Publication 501 Exemptions, Standard Deduction, and Filing Information 926 Household Employer's Tax Guide Form (and Instructions) 2441 Child and Dependent Care Expenses Schedule H (Form 1040) Household Employment Taxes W-10 Dependent Care Provider's Identification and Certification See How To Get Tax Help , near the end of this publication, for information about getting these publications and forms. H&r block at home Prev  Up  Next   Home   More Online Publications