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How To Fill Out 1040x Example

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How To Fill Out 1040x Example

How to fill out 1040x example 4. How to fill out 1040x example   Underpayment Penalty for 2013 Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: General RuleFarmers and fishermen. How to fill out 1040x example Higher income taxpayers. How to fill out 1040x example Minimum required for higher income taxpayers. How to fill out 1040x example Estate or trust payments of estimated tax. How to fill out 1040x example Lowering or eliminating the penalty. How to fill out 1040x example ExceptionsLess Than $1,000 Due No Tax Liability Last Year Figuring Your Required Annual Payment (Part I) Short Method for Figuring the Penalty (Part III) Regular Method for Figuring the Penalty (Part IV)Figuring Your Underpayment (Part IV, Section A) Worksheet for Form 2210, Part IV, Section B—Figuring the Penalty Annualized Income Installment Method (Schedule AI) Farmers and Fishermen Waiver of PenaltyFarmers and fishermen. How to fill out 1040x example Introduction If you did not pay enough tax, either through withholding or by making timely estimated tax payments, you will have underpaid your estimated tax and may have to pay a penalty. How to fill out 1040x example You may understand this chapter better if you can refer to a copy of your latest federal income tax return. How to fill out 1040x example No penalty. How to fill out 1040x example   Generally, you will not have to pay a penalty for 2013 if any of the following apply. How to fill out 1040x example The total of your withholding and timely estimated tax payments was at least as much as your 2012 tax. How to fill out 1040x example (See Special rules for certain individuals for higher income taxpayers and farmers and fishermen. How to fill out 1040x example ) The tax balance due on your 2013 return is no more than 10% of your total 2013 tax, and you paid all required estimated tax payments on time. How to fill out 1040x example Your total tax for 2013 (defined later) minus your withholding is less than $1,000. How to fill out 1040x example You did not have a tax liability for 2012. How to fill out 1040x example You did not have any withholding taxes and your current year tax (less any household employment taxes) is less than $1,000. How to fill out 1040x example IRS can figure the penalty for you. How to fill out 1040x example   If you think you owe the penalty, but you do not want to figure it yourself when you file your tax return, you may not have to. How to fill out 1040x example Generally, the IRS will figure the penalty for you and send you a bill. How to fill out 1040x example   You only need to figure your penalty in the following three situations. How to fill out 1040x example You are requesting a waiver of part, but not all, of the penalty. How to fill out 1040x example You are using the annualized income installment method to figure the penalty. How to fill out 1040x example You are treating the federal income tax withheld from your income as paid on the dates actually withheld. How to fill out 1040x example However, if these situations do not apply to you, and you think you can lower or eliminate your penalty, complete Form 2210 or Form 2210-F and attach it to your return. How to fill out 1040x example See Form 2210 , later. How to fill out 1040x example Topics - This chapter discusses: The general rule for the underpayment penalty, Special rules for certain individuals, Exceptions to the underpayment penalty, How to figure your underpayment and the amount of your penalty on Form 2210, and How to ask the IRS to waive the penalty. How to fill out 1040x example Useful Items - You may want to see: Form (and Instructions) 2210 Underpayment of Estimated Tax by Individuals, Estates, and Trusts 2210-F Underpayment of Estimated Tax by Farmers and Fishermen See chapter 5 for information about getting these forms. How to fill out 1040x example General Rule In general, you may owe a penalty for 2013 if the total of your withholding and timely estimated tax payments did not equal at least the smaller of: 90% of your 2013 tax, or 100% of your 2012 tax. How to fill out 1040x example (Your 2012 tax return must cover a 12-month period. How to fill out 1040x example ) Your 2013 tax, for this purpose, is defined under Total tax for 2013 , later. How to fill out 1040x example Special rules for certain individuals. How to fill out 1040x example   There are special rules for farmers and fishermen and certain higher income taxpayers. How to fill out 1040x example Farmers and fishermen. How to fill out 1040x example   If at least two-thirds of your gross income for 2012 or 2013 is from farming or fishing, substitute  662/3% for 90% in (1) above. How to fill out 1040x example   See Farmers and Fishermen , later. How to fill out 1040x example Higher income taxpayers. How to fill out 1040x example   If your AGI for 2012 was more than $150,000 ($75,000 if your 2013 filing status is married filing a separate return), substitute 110% for 100% in (2) under General Rule . How to fill out 1040x example This rule does not apply to farmers or fishermen. How to fill out 1040x example   For 2012, AGI is the amount shown on Form 1040, line 37; Form 1040A, line 21; and Form 1040EZ, line 4. How to fill out 1040x example Penalty figured separately for each period. How to fill out 1040x example   Because the penalty is figured separately for each payment period, you may owe a penalty for an earlier payment period even if you later paid enough to make up the underpayment. How to fill out 1040x example This is true even if you are due a refund when you file your income tax return. How to fill out 1040x example Example. How to fill out 1040x example You did not make estimated tax payments for 2013 because you thought you had enough tax withheld from your wages. How to fill out 1040x example Early in January 2014, you made an estimate of your total 2013 tax. How to fill out 1040x example Then you realized that your withholding was $2,000 less than the amount needed to avoid a penalty for underpayment of estimated tax. How to fill out 1040x example On January 10, you made an estimated tax payment of $3,000, which is the difference between your withholding and your estimate of your total tax. How to fill out 1040x example Your final return shows your total tax to be $50 less than your estimate, so you are due a refund. How to fill out 1040x example You do not owe a penalty for your payment due January 15, 2014. How to fill out 1040x example However, you may owe a penalty through January 10, 2014, the day you made the $3,000 payment, for your underpayments for the earlier payment periods. How to fill out 1040x example Minimum required each period. How to fill out 1040x example   You will owe a penalty for any 2013 payment period for which your estimated tax payment plus your withholding for the period and overpayments applied from previous periods was less than the smaller of: 22. How to fill out 1040x example 5% of your 2013 tax, or 25% of your 2012 tax. How to fill out 1040x example (Your 2012 tax return must cover a 12-month period. How to fill out 1040x example ) Minimum required for higher income taxpayers. How to fill out 1040x example   If you are subject to the rule for higher income taxpayers, discussed above, substitute 27. How to fill out 1040x example 5% for 25% in (2) under General Rule . How to fill out 1040x example When penalty is charged. How to fill out 1040x example   If you miss a payment or you paid less than the minimum required in a period, you may be charged an underpayment penalty from the date the amount was due to the date the payment is made. How to fill out 1040x example If a payment is mailed, the date of the U. How to fill out 1040x example S. How to fill out 1040x example postmark is considered the date of payment. How to fill out 1040x example   If a payment is made electronically, the date the payment is shown on your payment account (checking, savings, etc. How to fill out 1040x example ) is considered to be the date of payment. How to fill out 1040x example Estate or trust payments of estimated tax. How to fill out 1040x example   If you have estimated taxes credited to you from an estate or trust (Schedule K-1 (Form 1041)), treat the payment as made by you on January 15, 2014. How to fill out 1040x example Amended returns. How to fill out 1040x example    If you file an amended return by the due date of your original return, use the tax shown on your amended return to figure your required estimated tax payments. How to fill out 1040x example If you file an amended return after the due date of the original return, use the tax shown on the original return. How to fill out 1040x example   However, if you and your spouse file a joint return after the due date to replace separate returns you originally filed by the due date, use the tax shown on the joint return to figure your required estimated tax payments. How to fill out 1040x example This rule applies only if both original separate returns were filed on time. How to fill out 1040x example 2012 separate returns and 2013 joint return. How to fill out 1040x example    If you file a joint return with your spouse for 2013, but you filed separate returns for 2012, your 2012 tax is the total of the tax shown on your separate returns. How to fill out 1040x example You filed a separate return if you filed as single, head of household, or married filing separately. How to fill out 1040x example 2012 joint return and 2013 separate returns. How to fill out 1040x example    If you file a separate return for 2013, but you filed a joint return with your spouse for 2012, your 2012 tax is your share of the tax on the joint return. How to fill out 1040x example You are filing a separate return if you file as single, head of household, or married filing separately. How to fill out 1040x example   To figure your share of the taxes on a joint return, first figure the tax both you and your spouse would have paid had you filed separate returns for 2012 using the same filing status as for 2013. How to fill out 1040x example Then multiply the tax on the joint return by the following fraction. How to fill out 1040x example   The tax you would have paid had you filed a separate return   The total tax you and your spouse would have paid had you filed separate returns Example. How to fill out 1040x example Lisa and Paul filed a joint return for 2012 showing taxable income of $49,000 and a tax of $6,484. How to fill out 1040x example Of the $49,000 taxable income, $41,000 was Lisa's and the rest was Paul's. How to fill out 1040x example For 2013, they file married filing separately. How to fill out 1040x example Lisa figures her share of the tax on the 2012 joint return as follows. How to fill out 1040x example 2012 tax on $41,000 based on a separate return $ 6,286 2012 tax on $8,000 based on a  separate return 803 Total $ 7,089 Lisa's percentage of total tax  ($6,286 ÷ $ 7,089) 88. How to fill out 1040x example 67% Lisa's part of tax on joint return ($6,484 × 88. How to fill out 1040x example 67%) $ 5,749 Form 2210. How to fill out 1040x example   In most cases, you do not need to file Form 2210. How to fill out 1040x example The IRS will figure the penalty for you and send you a bill. How to fill out 1040x example If you want us to figure the penalty for you, leave the penalty line on your return blank. How to fill out 1040x example Do not file Form 2210. How to fill out 1040x example   To determine if you should file Form 2210, see Part II of Form 2210. How to fill out 1040x example If you decide to figure your penalty, complete Part I, Part II, and either Part III or Part IV of the form and the Penalty Worksheet in the Instructions for Form 2210. How to fill out 1040x example If you use Form 2210, you cannot file Form 1040EZ. How to fill out 1040x example   On Form 1040, enter the amount of your penalty on line 77. How to fill out 1040x example If you owe tax on line 76, add the penalty to your tax due and show your total payment on line 76. How to fill out 1040x example If you are due a refund, subtract the penalty from the overpayment and enter the result on line 73. How to fill out 1040x example   On Form 1040A, enter the amount of your penalty on line 46. How to fill out 1040x example If you owe tax on line 45, add the penalty to your tax due and show your total payment on line 45. How to fill out 1040x example If you are due a refund, subtract the penalty from the overpayment and enter the result on line 42. How to fill out 1040x example Lowering or eliminating the penalty. How to fill out 1040x example    You may be able to lower or eliminate your penalty if you file Form 2210. How to fill out 1040x example You must file Form 2210 with your return if any of the following applies. How to fill out 1040x example You request a waiver. How to fill out 1040x example See Waiver of Penalty , later. How to fill out 1040x example You use the annualized income installment method. How to fill out 1040x example See the explanation of this method under Annualized Income Installment Method (Schedule AI) . How to fill out 1040x example You use your actual withholding for each payment period for estimated tax purposes. How to fill out 1040x example See Actual withholding method under Figuring Your Underpayment (Part IV, Section A). How to fill out 1040x example You base any of your required installments on the tax shown on your 2012 return and you filed or are filing a joint return for either 2012 or 2013, but not for both years. How to fill out 1040x example Exceptions Generally, you do not have to pay an underpayment penalty if either: Your total tax is less than $1,000, or You had no tax liability last year. How to fill out 1040x example Less Than $1,000 Due You do not owe a penalty if the total tax shown on your return minus the amount you paid through withholding (including excess social security and tier 1 railroad retirement (RRTA) tax withholding) is less than $1,000. How to fill out 1040x example Total tax for 2013. How to fill out 1040x example   For 2013, your total tax on Form 1040 is the amount on line 61 reduced by the following. How to fill out 1040x example    Unreported social security and Medicare tax or RRTA tax from Forms 4137 or 8919 (line 57). How to fill out 1040x example Any tax included on line 58 for excess contributions to IRAs, Archer MSAs, Coverdell education savings accounts, and health savings accounts, or any tax on excess accumulations in qualified retirement plans. How to fill out 1040x example The following write-ins on line 60: Uncollected social security and Medicare tax or RRTA tax on tips or group-term life insurance, Tax on excess golden parachute payments, Excise tax on insider stock compensation from an expatriated corporation, Look-back interest due under section 167(g), Look-back interest due under section 460(b), Recapture of federal mortgage subsidy, and Additional tax on advance payments of health coverage tax credit when not eligible. How to fill out 1040x example Any refundable credit amounts listed on lines 64a, 65, 66, 70, and any credit from Form 8885 included on line 71. How to fill out 1040x example   If you filed Form 1040A, your 2013 total tax is the amount on line 35 reduced by any refundable credits on lines 38a, 39, and 40. How to fill out 1040x example   If you filed Form 1040EZ, your 2013 total tax is the amount on line 10 reduced by the amount on line 8a. How to fill out 1040x example Note. How to fill out 1040x example When figuring the amount on line 60, include household employment taxes only if you had federal income tax withheld from your income or you would owe the penalty even if you did not include those taxes. How to fill out 1040x example Paid through withholding. How to fill out 1040x example    For 2013, the amount you paid through withholding on Form 1040 is the amount on line 62 plus any excess social security or tier 1 RRTA tax withholding on line 69. How to fill out 1040x example Add to that any write-in amount on line 72 identified as “Form 8689. How to fill out 1040x example ” On Form 1040A, the amount you paid through withholding is the amount on line 36 plus any excess social security or tier 1 RRTA tax withholding included on line 41. How to fill out 1040x example On Form 1040EZ, it is the amount on line 7. How to fill out 1040x example No Tax Liability Last Year You do not owe a penalty if you had no tax liability last year and you were a U. How to fill out 1040x example S. How to fill out 1040x example citizen or resident for the whole year. How to fill out 1040x example For this rule to apply, your tax year must have included all 12 months of the year. How to fill out 1040x example You had no tax liability for 2012 if your total tax was zero or you were not required to file an income tax return. How to fill out 1040x example Example. How to fill out 1040x example Ray, who is single and 22 years old, was unemployed for a few months during 2012. How to fill out 1040x example He earned $6,700 in wages before he was laid off, and he received $1,400 in unemployment compensation afterwards. How to fill out 1040x example He had no other income. How to fill out 1040x example Even though he had gross income of $8,100, he did not have to pay income tax because his gross income was less than the filing requirement for a single person under age 65 ($9,750 for 2012). How to fill out 1040x example He filed a return only to have his withheld income tax refunded to him. How to fill out 1040x example In 2013, Ray began regular work as an independent contractor. How to fill out 1040x example Ray made no estimated tax payments in 2013. How to fill out 1040x example Even though he did owe tax at the end of the year, Ray does not owe the underpayment penalty for 2013 because he had no tax liability in 2012. How to fill out 1040x example Total tax for 2012. How to fill out 1040x example   For 2012, your total tax on Form 1040 is the amount on line 61 reduced by the following. How to fill out 1040x example    Unreported social security and Medicare tax or RRTA tax from Forms 4137 or 8919 (line 57). How to fill out 1040x example Any tax included on line 58 for excess contributions to IRAs, Archer MSAs, Coverdell education savings accounts, and health savings accounts, or any tax on excess accumulations in qualified retirement plans. How to fill out 1040x example The following write-ins on line 60: Uncollected social security and Medicare tax or RRTA tax on tips or group-term life insurance, Tax on excess golden parachute payments, Excise tax on insider stock compensation from an expatriated corporation, Look-back interest due under section 167(g), Look-back interest due under section 460(b), Recapture of federal mortgage subsidy, and Additional tax on advance payments of health coverage tax credit when not eligible. How to fill out 1040x example Any refundable credit amounts listed on lines 64a, 65, 66, 70, and credits from Forms 8801 (line 27 only), and 8885 included on line 71. How to fill out 1040x example   If you filed Form 1040A, your 2012 total tax is the amount on line 35 reduced by any refundable credits on lines 38a, 39, and 40. How to fill out 1040x example   If you filed Form 1040EZ, your 2012 total tax is the amount on line 11 reduced by the amount on line 8a. How to fill out 1040x example Figuring Your Required Annual Payment (Part I) Figure your required annual payment in Part I of Form 2210, following the line-by-line instructions. How to fill out 1040x example If you rounded the entries on your tax return to whole dollars, you can round on Form 2210. How to fill out 1040x example Example. How to fill out 1040x example The tax on Lori Lane's 2012 return was $12,400. How to fill out 1040x example Her AGI was not more than $150,000 for either 2012 or 2013. How to fill out 1040x example The tax on her 2013 return (Form 1040, line 55) is $13,044. How to fill out 1040x example Line 56 (self-employment tax) is $8,902. How to fill out 1040x example Her 2013 total tax is $21,946. How to fill out 1040x example For 2013, Lori had $1,600 income tax withheld and made four equal estimated tax payments ($1,000 each). How to fill out 1040x example 90% of her 2013 tax is $19,751. How to fill out 1040x example Because she paid less than her 2012 tax ($12,400) and less than 90% of her 2013 tax ($19,751), and does not meet an exception, Lori knows that she owes a penalty for underpayment of estimated tax. How to fill out 1040x example The IRS will figure the penalty for Lori, but she decides to figure it herself on Form 2210 and pay it with her taxes when she files her tax return. How to fill out 1040x example Lori's required annual payment is $12,400 (100% of 2012 tax) because that is smaller than 90% of her 2013 tax. How to fill out 1040x example Different 2012 filing status. How to fill out 1040x example    If you file a separate return for 2013, but you filed a joint return with your spouse for 2012, see 2012 joint return and 2013 separate returns , earlier, to figure the amount to enter as your 2012 tax on line 8 of Form 2210. How to fill out 1040x example Short Method for Figuring the Penalty (Part III) You may be able to use the short method in Part III of Form 2210 to figure your penalty for underpayment of estimated tax. How to fill out 1040x example If you qualify to use this method, it will result in the same penalty amount as the regular method. How to fill out 1040x example However, either the annualized income installment method or the actual withholding method, explained later, may result in a smaller penalty. How to fill out 1040x example You can use the short method only if you meet one of the following requirements. How to fill out 1040x example You made no estimated tax payments for 2013 (it does not matter whether you had income tax withholding). How to fill out 1040x example You paid the same amount of estimated tax on each of the four payment due dates. How to fill out 1040x example If you do not meet either requirement, figure your penalty using the regular method in Part IV of Form 2210 and the Penalty Worksheet in the instructions. How to fill out 1040x example Note. How to fill out 1040x example If any payment was made before the due date, you can use the short method, but the penalty may be less if you use the regular method. How to fill out 1040x example However, if the payment was only a few days early, the difference is likely to be small. How to fill out 1040x example You cannot use the short method if any of the following apply. How to fill out 1040x example You made any estimated tax payments late. How to fill out 1040x example You checked box C or D in Part II of Form 2210. How to fill out 1040x example You are filing Form 1040NR or 1040NR-EZ and you did not receive wages as an employee subject to U. How to fill out 1040x example S. How to fill out 1040x example income tax withholding. How to fill out 1040x example If you use the short method, you cannot use the annualized income installment method to figure your underpayment for each payment period. How to fill out 1040x example Also, you cannot use your actual withholding during each period to figure your payments for each period. How to fill out 1040x example These methods, which may give you a smaller penalty amount, are explained under Figuring Your Underpayment (Part IV, Section A). How to fill out 1040x example Complete Part III of Form 2210 following the line-by-line instructions in the Instructions for Form 2210. How to fill out 1040x example Regular Method for Figuring the Penalty (Part IV) You can use the regular method in Part IV of Form 2210 to figure your penalty for underpayment of estimated tax if you paid one or more estimated tax payments earlier than the due date. How to fill out 1040x example You must use the regular method in Part IV of Form 2210 to figure your penalty for underpayment of estimated tax if any of the following apply to you. How to fill out 1040x example You paid one or more estimated tax payments on a date after the due date. How to fill out 1040x example You paid at least one, but less than four, installments of estimated tax. How to fill out 1040x example You paid estimated tax payments in un- equal amounts. How to fill out 1040x example You use the annualized income installment method to figure your underpayment for each payment period. How to fill out 1040x example You use your actual withholding during each payment period to figure your payments. How to fill out 1040x example Under the regular method, figure your underpayment for each payment period in Section A, then figure your penalty using the Penalty Worksheet in the Instructions for Form 2210. How to fill out 1040x example Enter the results on line 27 of Section B. How to fill out 1040x example Figuring Your Underpayment (Part IV, Section A) Figure your underpayment of estimated tax for each payment period in Section A following the line-by-line instructions in the Instructions for Form 2210. How to fill out 1040x example Complete lines 20 through 26 of the first column before going to line 20 of the next column. How to fill out 1040x example Required installments—line 18. How to fill out 1040x example   Your required payment for each payment period (line 18) is usually one-fourth of your required annual payment (Part I, line 9). How to fill out 1040x example This method—the regular method—is the one to use if you received your income evenly throughout the year. How to fill out 1040x example   However, if you did not receive your income evenly throughout the year, you may be able to lower or eliminate your penalty by figuring your underpayment using the annualized income installment method. How to fill out 1040x example First complete Schedule AI (Form 2210), then enter the amounts from line 25 of that schedule on line 18 of Form 2210, Part IV. How to fill out 1040x example See Annualized Income Installment Method (Schedule AI), later. How to fill out 1040x example Payments made—line 19. How to fill out 1040x example   Enter in each column the total of: Your estimated tax paid after the due date for the previous column and by the due date shown at the top of the column, and One-fourth of your withholding. How to fill out 1040x example For special rules for figuring your payments, see Form 2210 instructions for line 19. How to fill out 1040x example   If you file Form 1040, your withholding is the amount on line 62, plus any excess social security or tier 1 RRTA tax withholding on line 69. How to fill out 1040x example If you file Form 1040A, your withholding is the amount on line 36 plus any excess social security or tier 1 RRTA tax withholding included in line 41. How to fill out 1040x example Actual withholding method. How to fill out 1040x example    Instead of using one-fourth of your withholding for each quarter, you can choose to use the amounts actually withheld by each due date. How to fill out 1040x example You can make this choice separately for the tax withheld from your wages and for all other withholding. How to fill out 1040x example This includes any excess social security and tier 1 RRTA tax withheld. How to fill out 1040x example   Using your actual withholding may result in a smaller penalty if most of your withholding occurred early in the year. How to fill out 1040x example   If you use your actual withholding, you must check box D in Form 2210, Part II. How to fill out 1040x example Then complete Form 2210 using the regular method (Part IV) and file it with your return. How to fill out 1040x example Worksheet for Form 2210, Part IV, Section B—Figuring the Penalty Figure the amount of your penalty for Section B using the Penalty Worksheet in the Form 2210 instructions. How to fill out 1040x example The penalty is imposed on each underpayment amount shown on Form 2210, Section A, line 25, for the number of days that it remained unpaid. How to fill out 1040x example For 2013, there are four rate periods—April 16 through June 30, July 1 through September 30, October 1 through December 31, and January 1, 2014 through April 15, 2014. How to fill out 1040x example A 3% rate applies to all four periods. How to fill out 1040x example Payments. How to fill out 1040x example    Before completing the Penalty Worksheet, it may be helpful to make a list of the payments you made and income tax withheld after the due date (or the last day payments could be made on time) for the earliest payment period an underpayment occurred. How to fill out 1040x example For example, if you had an underpayment for the first payment period, list your payments after April 15, 2013. How to fill out 1040x example You can use the table in the Form 2210 instructions to make your list. How to fill out 1040x example Follow those instructions for listing income tax withheld and payments made with your return. How to fill out 1040x example Use the list to determine when each underpayment was paid. How to fill out 1040x example   If you mail your estimated tax payments, use the date of the U. How to fill out 1040x example S. How to fill out 1040x example postmark as the date of payment. How to fill out 1040x example Line 1b. How to fill out 1040x example   Apply the payments listed to underpayment balance in the first column until it is fully paid. How to fill out 1040x example Apply payments in the order made. How to fill out 1040x example Figuring the penalty. How to fill out 1040x example   If an underpayment was paid in two or more payments on different dates, you must figure the penalty separately for each payment. How to fill out 1040x example On line 3 of the Penalty Worksheet enter the number of days between the due date (line 2) and the date of each payment on line 1b. How to fill out 1040x example On line 4 figure the penalty for the amount of each payment applied on line 1b or the amount remaining unpaid. How to fill out 1040x example If no payments are applied, figure the penalty on the amount on line 1a. How to fill out 1040x example Aid for counting days. How to fill out 1040x example    Table 4-1 provides a simple method for counting the number of days between a due date and a payment date. How to fill out 1040x example Find the number for the date the payment was due by going across to the column of the month the payment was due and moving down the column to the due date. How to fill out 1040x example In the same manner, find the number for the date the payment was made. How to fill out 1040x example Subtract the due date “number” from the payment date “number. How to fill out 1040x example ”   For example, if a payment was due on June 15 (61), but was not paid until September 1 (139), the payment was 78 (139 – 61) days late. How to fill out 1040x example Table 4-1. How to fill out 1040x example Calendar To Determine the Number of Days a Payment Is Late Instructions. How to fill out 1040x example Use this table with Form 2210 if you are completing Part IV, Section B. How to fill out 1040x example First, find the number for the payment due date by going across to the column of the month the payment was due and moving down the column to the due date. How to fill out 1040x example Then, in the same manner, find the number for the date the payment was made. How to fill out 1040x example Finally, subtract the due date number from the payment date number. How to fill out 1040x example The result is the number of days the payment is late. How to fill out 1040x example Example. How to fill out 1040x example The payment due date is June 15 (61). How to fill out 1040x example The payment was made on November 4 (203). How to fill out 1040x example The payment is 142 days late (203 – 61). How to fill out 1040x example Tax Year 2013 Day of 2013 2013 2013 2013 2013 2013 2013 2013 2013 2014 2014 2014 2014 Month April May June July Aug. How to fill out 1040x example Sept. How to fill out 1040x example Oct. How to fill out 1040x example Nov. How to fill out 1040x example Dec. How to fill out 1040x example Jan. How to fill out 1040x example Feb. How to fill out 1040x example Mar. How to fill out 1040x example Apr. How to fill out 1040x example 1   16 47 77 108 139 169 200 230 261 292 320 351 2   17 48 78 109 140 170 201 231 262 293 321 352 3   18 49 79 110 141 171 202 232 263 294 322 353 4   19 50 80 111 142 172 203 233 264 295 323 354 5   20 51 81 112 143 173 204 234 265 296 324 355 6   21 52 82 113 144 174 205 235 266 297 325 356 7   22 53 83 114 145 175 206 236 267 298 326 357 8   23 54 84 115 146 176 207 237 268 299 327 358 9   24 55 85 116 147 177 208 238 269 300 328 359 10   25 56 86 117 148 178 209 239 270 301 329 360 11   26 57 87 118 149 179 210 240 271 302 330 361 12   27 58 88 119 150 180 211 241 272 303 331 362 13   28 59 89 120 151 181 212 242 273 304 332 363 14   29 60 90 121 152 182 213 243 274 305 333 364 15 0 30 61 91 122 153 183 214 244 275 306 334 365 16 1 31 62 92 123 154 184 215 245 276 307 335   17 2 32 63 93 124 155 185 216 246 277 308 336   18 3 33 64 94 125 156 186 217 247 278 309 337   19 4 34 65 95 126 157 187 218 248 279 310 338   20 5 35 66 96 127 158 188 219 249 280 311 339   21 6 36 67 97 128 159 189 220 250 281 312 340   22 7 37 68 98 129 160 190 221 251 282 313 341   23 8 38 69 99 130 161 191 222 252 283 314 342   24 9 39 70 100 131 162 192 223 253 284 315 343   25 10 40 71 101 132 163 193 224 254 285 316 344   26 11 41 72 102 133 164 194 225 255 286 317 345   27 12 42 73 103 134 165 195 226 256 287 318 346   28 13 43 74 104 135 166 196 227 257 288 319 347   29 14 44 75 105 136 167 197 228 258 289   348   30 15 45 76 106 137 168 198 229 259 290   349   31   46   107 138   199   260 291   350   Annualized Income Installment Method (Schedule AI) If you did not receive your income evenly throughout the year (for example, your income from a shop you operated at a marina was much larger in the summer than it was during the rest of the year), you may be able to lower or eliminate your penalty by figuring your underpayment using the annualized income installment method. How to fill out 1040x example Under this method, your required installment (Part IV, line 18) for one or more payment periods may be less than one-fourth of your required annual payment. How to fill out 1040x example To figure your underpayment using this method, complete Form 2210, Schedule AI. How to fill out 1040x example Schedule AI annualizes your tax at the end of each payment period based on your income, deductions, and other items relating to events that occurred from the beginning of the tax year through the end of the period. How to fill out 1040x example If you use the annualized income installment method, you must check box C in Part II of Form 2210. How to fill out 1040x example Also, you must attach Form 2210 and Schedule AI to your return. How to fill out 1040x example If you use Schedule AI for any payment due date, you must use it for all payment due dates. How to fill out 1040x example Completing Schedule AI. How to fill out 1040x example   Follow the Form 2210 instructions to complete Schedule AI. How to fill out 1040x example For each period shown on Schedule AI, figure your income and deductions based on your method of accounting. How to fill out 1040x example If you use the cash method of accounting (used by most people), include all income actually or constructively received during the period and all deductions actually paid during the period. How to fill out 1040x example Note. How to fill out 1040x example Each period includes amounts from the previous period(s). How to fill out 1040x example Period (a) includes items for January 1 through March 31. How to fill out 1040x example Period (b) includes items for January 1 through May 31. How to fill out 1040x example Period (c) includes items for January 1 through August 31. How to fill out 1040x example Period (d) includes items for the entire year. How to fill out 1040x example Farmers and Fishermen If you are a farmer or fisherman, the following special rules for underpayment of estimated tax apply to you. How to fill out 1040x example The penalty for underpaying your 2013 estimated tax will not apply if you file your return and pay all the tax due by March 3, 2014. How to fill out 1040x example If you are a fiscal year taxpayer, the penalty will not apply if you file your return and pay the tax due by the first day of the third month after the end of your tax year. How to fill out 1040x example Any penalty you owe for underpaying your 2013 estimated tax will be figured from one payment due date, January 15, 2014. How to fill out 1040x example The underpayment penalty for 2013 is figured on the difference between the amount of 2013 withholding plus estimated tax paid by the due date and the smaller of: 662/3% (rather than 90%) of your 2013 tax, or 100% of the tax shown on your 2012 return. How to fill out 1040x example Even if these special rules apply to you, you will not owe the penalty if you meet either of the two conditions discussed under Exceptions . How to fill out 1040x example See Who Must Pay Estimated Tax in chapter 2 for the definition of a farmer or fisherman who is eligible for these special rules. How to fill out 1040x example Form 2210-F. How to fill out 1040x example   Use Form 2210-F to figure any underpayment penalty. How to fill out 1040x example Do not attach it to your return unless you check a box in Part I. How to fill out 1040x example However, if none of the boxes apply to you and you owe a penalty, you do not need to attach Form 2210-F. How to fill out 1040x example Enter the amount from line 16 on Form 1040, line 77 and add the penalty to any balance due on your return or subtract it from your refund. How to fill out 1040x example Keep your filled-in Form 2210-F for your records. How to fill out 1040x example    If none of the boxes on Form 2210-F apply to you and you owe a penalty, the IRS can figure your penalty and send you a bill. How to fill out 1040x example Waiver of Penalty The IRS can waive the penalty for underpayment if either of the following applies. How to fill out 1040x example You did not make a payment because of a casualty, disaster, or other unusual circumstance and it would be inequitable to impose the penalty. How to fill out 1040x example You retired (after reaching age 62) or became disabled in 2012 or 2013 and both the following requirements are met. How to fill out 1040x example You had a reasonable cause for not making the payment. How to fill out 1040x example Your underpayment was not due to willful neglect. How to fill out 1040x example How to request a waiver. How to fill out 1040x example   To request a waiver, see the Instructions for Form 2210. How to fill out 1040x example Farmers and fishermen. How to fill out 1040x example   To request a waiver, see the Instructions for Form 2210-F. How to fill out 1040x example Federally declared disaster. How to fill out 1040x example   Certain estimated tax payment deadlines for taxpayers who reside or have a business in a federally declared disaster area are postponed for a period during and after the disaster. How to fill out 1040x example During the processing of your tax return, the IRS automatically identifies taxpayers located in a covered disaster area (by county or parish) and applies the appropriate penalty relief. How to fill out 1040x example Do not file Form 2210 or 2210-F if your underpayment was due to a federally declared disaster. How to fill out 1040x example If you still owe a penalty after the automatic waiver is applied, we will send you a bill. How to fill out 1040x example   Individuals, estates, and trusts not in a covered disaster area but whose books, records, or tax professionals' offices are in a covered area are also entitled to relief. How to fill out 1040x example Also eligible are relief workers affiliated with a recognized government or charitable organization assisting in the relief activities in a covered disaster area. How to fill out 1040x example If you meet either of these eligibility requirements, you must call the IRS disaster hotline at 1-866-562-5227 and identify yourself as eligible for this relief. How to fill out 1040x example   Details on the applicable disaster postponement period can be found at IRS. How to fill out 1040x example gov. How to fill out 1040x example Enter Tax Relief in Disaster Situations. How to fill out 1040x example Select the federally declared disaster that affected you. How to fill out 1040x example    Worksheet 4-1. How to fill out 1040x example 2013 Form 2210, Schedule AI—Line 12 Qualified Dividends and Capital Gain Tax Worksheet Note. How to fill out 1040x example To figure the annualized entries for lines 2, 3, and 5 below, multiply the expected amount for the period by the  annualization amount on line 2 of Schedule AI for the same period. How to fill out 1040x example                   1. How to fill out 1040x example Enter line 11 of your Schedule AI, or line 3 from Worksheet 4-2 1. How to fill out 1040x example       2. How to fill out 1040x example Enter your annualized qualified dividends for the period 2. How to fill out 1040x example           3. How to fill out 1040x example Are you filing Schedule D?               □ Yes. How to fill out 1040x example Enter the smaller of your annualized amount from line 15 or line 16 of Schedule D. How to fill out 1040x example If either line 15 or line 16 is blank or a loss, enter -0-. How to fill out 1040x example 3. How to fill out 1040x example             □ No. How to fill out 1040x example Enter your annualized capital gain distributions from Form 1040, line 13             4. How to fill out 1040x example Add lines 2 and 3   4. How to fill out 1040x example           5. How to fill out 1040x example If you are claiming investment interest expense on Form 4952, enter your annualized amount from line 4g of that form. How to fill out 1040x example Otherwise, enter -0-   5. How to fill out 1040x example           6. How to fill out 1040x example Subtract line 5 from line 4. How to fill out 1040x example If zero or less, enter -0- 6. How to fill out 1040x example       7. How to fill out 1040x example Subtract line 6 from line 1. How to fill out 1040x example If zero or less, enter -0- 7. How to fill out 1040x example       8. How to fill out 1040x example Enter: $36,900 if single or married filing separately, $73,800 if married filing jointly or qualifying widow(er), $49,400 if head of household. How to fill out 1040x example 8. How to fill out 1040x example       9. How to fill out 1040x example Enter the smaller of line 1 or line 8 9. How to fill out 1040x example       10. How to fill out 1040x example Enter the smaller of line 7 or line 9 10. How to fill out 1040x example       11. How to fill out 1040x example Subtract line 10 from line 9. How to fill out 1040x example This amount is taxed at 0% 11. How to fill out 1040x example       12. How to fill out 1040x example Enter the smaller of line 1 or line 6 12. How to fill out 1040x example       13. How to fill out 1040x example Enter the amount from line 11 13. How to fill out 1040x example       14. How to fill out 1040x example Subtract line 13 from line 12 14. How to fill out 1040x example       15. How to fill out 1040x example Multiply line 14 by 15% (. How to fill out 1040x example 15) 15. How to fill out 1040x example   16. How to fill out 1040x example Figure the tax on the amount on line 7. How to fill out 1040x example If the amount on line 7 is less than $100,000, use the Tax Table in the 2013 Form 1040 instructions to figure this tax. How to fill out 1040x example If the amount on line 7 is $100,000 or more, use the Tax Computation Worksheet in the 2013 Form 1040 instructions 16. How to fill out 1040x example   17. How to fill out 1040x example Add lines 15 and 16 17. How to fill out 1040x example   18. How to fill out 1040x example Figure the tax on the amount on line 1. How to fill out 1040x example If the amount on line 1 is less than $100,000, use the Tax Table in the 2013 Form 1040 instructions to figure this tax. How to fill out 1040x example If the amount on line 1 is $100,000 or more, use the Tax Computation Worksheet in the 2013 Form 1040 instructions 18. How to fill out 1040x example   19. How to fill out 1040x example Tax on all taxable income. How to fill out 1040x example Enter the smaller of line 17 or line 18. How to fill out 1040x example Also enter this amount on line 12 of Schedule AI in the appropriate column. How to fill out 1040x example However, if you are using this worksheet to figure the tax on the amount on line 3 of Worksheet 4-2, enter the amount from line 19 on Worksheet 4-2, line 4 19. How to fill out 1040x example   Worksheet 4-2. How to fill out 1040x example 2013 Form 2210, Schedule AI—Line 12 Foreign Earned Income Tax Worksheet Before you begin:If Schedule AI, line 11, is zero for the period, do not complete this worksheet. How to fill out 1040x example             1. How to fill out 1040x example Enter the amount from line 11 of Schedule AI for the period 1. How to fill out 1040x example   2. How to fill out 1040x example Enter the annualized amount* of foreign earned income and housing amount excluded or deducted (from  Form 2555, lines 45 and 50, or Form 2555-EZ, line 18) in figuring the amount entered for the period on line 1  of Schedule AI 2. How to fill out 1040x example   3. How to fill out 1040x example Add lines 1 and 2 3. How to fill out 1040x example   4. How to fill out 1040x example Tax on the amount on line 3. How to fill out 1040x example Use the Tax Table, Tax Computation Worksheet, Form 8615**, Qualified Dividends and Capital Gain Tax Worksheet***, or Schedule D Tax Worksheet***, whichever applies. How to fill out 1040x example See the 2013 Instructions for Form 1040, line 44, to find out which tax computation method to use. How to fill out 1040x example (Note. How to fill out 1040x example You do not have to use the same method for each period on Schedule AI. How to fill out 1040x example ) 4. How to fill out 1040x example   5. How to fill out 1040x example Tax on the amount on line 2. How to fill out 1040x example If the amount on line 2 is less than $100,000, use the Tax Table in the 2013 Form 1040 instructions to figure this tax. How to fill out 1040x example If the amount on line 7 is $100,000 or more, use the Tax Computation Worksheet in the 2013 Form 1040 instructions 5. How to fill out 1040x example   6. How to fill out 1040x example Subtract line 5 from line 4. How to fill out 1040x example Enter the result here and on line 12 of Schedule AI. How to fill out 1040x example If zero or less,  enter -0- 6. How to fill out 1040x example             * To figure the annualized amount for line 2, multiply the exclusion or deduction for the period by the annualization amount on line 2 of Schedule AI for the same period. How to fill out 1040x example     ** If you use Form 8615 to figure the tax on line 4 above, enter the amount from line 3 above on line 4 of Form 8615. How to fill out 1040x example If the child's parent files Form 2555 or 2555-EZ, enter the amounts from lines 3 and 4 of the parent's Foreign Earned Income Tax Worksheet on lines 6 and 10, respectively, of Form 8615. How to fill out 1040x example Complete the rest of Form 8615 according to its instructions. How to fill out 1040x example Then complete lines 5 and 6 above. How to fill out 1040x example     *** Enter the amount from line 3 above on line 1 of the Qualified Dividends and Capital Gain Tax Worksheet (or Worksheet 4-1 in this chapter) or the Schedule D Tax Worksheet, whichever worksheet you use to figure the tax on line 4 above. How to fill out 1040x example Complete that worksheet through line 6 (line 10 if you use the Schedule D Tax Worksheet). How to fill out 1040x example Next, determine if you have a capital gain excess. How to fill out 1040x example     Figuring capital gain excess. How to fill out 1040x example To find out if you have a capital gain excess for the appropriate period, subtract line 11 of Schedule AI from line 6 of Worksheet 4-1 or your Qualified Dividends and Capital Gain Tax Worksheet (line 10 of your Schedule D Tax Worksheet). How to fill out 1040x example If the result is more than zero, that amount is your capital gain excess. How to fill out 1040x example     No capital gain excess. How to fill out 1040x example If you do not have a capital gain excess, complete the rest of Worksheet 4-1, Qualified Dividends and Capital Gain Tax Worksheet, or the Schedule D Tax Worksheet according to the worksheet's instructions. How to fill out 1040x example Then complete lines 5 and 6 above. How to fill out 1040x example     Capital gain excess. How to fill out 1040x example If you have a capital gain excess, complete a second Worksheet 4-1, Qualified Dividends and Capital Gain Tax Worksheet, or Schedule D Tax Worksheet (whichever applies) as instructed above but in its entirety and with the following additional modifications. How to fill out 1040x example Then complete lines 5 and 6 above. How to fill out 1040x example     Make the modifications below only for purposes of filling out Worksheet 4-2 above. How to fill out 1040x example     a. How to fill out 1040x example Reduce (but not below zero) the amount you otherwise would enter on line 3 of your Worksheet 4-1, line 3 of your Qualified Dividends and Capital Gain Tax Worksheet, or line 9 of your Schedule D Tax Worksheet by your capital gain excess. How to fill out 1040x example     b. How to fill out 1040x example Reduce (but not below zero) the amount you otherwise would enter on line 2 of your Worksheet 4-1, line 2 of your Qualified Dividends and Capital Gain Tax Worksheet, or line 6 of your Schedule D Tax Worksheet by any of your capital gain excess not used in (a) above. How to fill out 1040x example     c. How to fill out 1040x example Reduce (but not below zero) the amount on your Schedule D (Form 1040), line 18, by your capital gain excess. How to fill out 1040x example     d. How to fill out 1040x example Include your capital gain excess as a loss on line 16 of your Unrecaptured Section 1250 Gain Worksheet in the 2013 Instructions for Schedule D (Form 1040). How to fill out 1040x example   Prev  Up  Next   Home   More Online Publications
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Understanding Your CP141C Notice

You are receiving this notice because you did not respond to a previous request for missing or incomplete information on your return and your return is late.


What you need to do

  • Send the incomplete/missing information described in the “About your return” section on the notice.
  • Include the contact voucher at the end of the notice.
  • Send the amount due to avoid interest charges.

You may want to

  • If the reason your return was incomplete was beyond your control, send us a signed explanation with any supporting documentation.

Answers to Common Questions

Q. What if I disagree with the penalty?

A. Send a written statement with any supporting documentation to the address on the notice.

 

Page Last Reviewed or Updated: 21-Jan-2014

Printable samples of this notice (PDF)

 

 

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
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  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The How To Fill Out 1040x Example

How to fill out 1040x example 4. How to fill out 1040x example   Qualified Plans Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Kinds of PlansDefined Contribution Plan Defined Benefit Plan Qualification RulesEarly retirement. How to fill out 1040x example Loan secured by benefits. How to fill out 1040x example Waiver of survivor benefits. How to fill out 1040x example Waiver of 30-day waiting period before annuity starting date. How to fill out 1040x example Involuntary cash-out of benefits not more than dollar limit. How to fill out 1040x example Exception for certain loans. How to fill out 1040x example Exception for QDRO. How to fill out 1040x example SIMPLE and safe harbor 401(k) plan exception. How to fill out 1040x example Setting Up a Qualified PlanAdopting a Written Plan Investing Plan Assets Minimum Funding RequirementDue dates. How to fill out 1040x example Installment percentage. How to fill out 1040x example Extended period for making contributions. How to fill out 1040x example ContributionsEmployer Contributions Employee Contributions When Contributions Are Considered Made Employer DeductionDeduction Limits Deduction Limit for Self-Employed Individuals Where To Deduct Contributions Carryover of Excess Contributions Excise Tax for Nondeductible (Excess) Contributions Elective Deferrals (401(k) Plans)Limit on Elective Deferrals Automatic Enrollment Treatment of Excess Deferrals Qualified Roth Contribution ProgramElective Deferrals Qualified Distributions Reporting Requirements DistributionsRequired Distributions Distributions From 401(k) Plans Tax Treatment of Distributions Tax on Early Distributions Tax on Excess Benefits Excise Tax on Reversion of Plan Assets Notification of Significant Benefit Accrual Reduction Prohibited TransactionsTax on Prohibited Transactions Reporting RequirementsOne-participant plan. How to fill out 1040x example Caution: Form 5500-EZ not required. How to fill out 1040x example Form 5500. How to fill out 1040x example Electronic filing of Forms 5500 and 5500-SF. How to fill out 1040x example Topics - This chapter discusses: Kinds of plans Qualification rules Setting up a qualified plan Minimum funding requirement Contributions Employer deduction Elective deferrals (401(k) plans) Qualified Roth contribution program Distributions Prohibited transactions Reporting requirements Useful Items - You may want to see: Publications 575 Pension and Annuity Income 590 Individual Retirement Arrangements (IRAs) 3066 Have you had your Check-up this year? for Retirement Plans 3998 Choosing A Retirement Solution for Your Small Business 4222 401(k) Plans for Small Businesses 4530 Designated Roth Accounts under a 401(k), 403(b), or governmental 457(b) plans 4531 401(k) Plan Checklist 4674 Automatic Enrollment 401(k) Plans for Small Businesses 4806 Profit Sharing Plans for Small Businesses Forms (and Instructions) www. How to fill out 1040x example dol. How to fill out 1040x example gov/ebsa/pdf/2013-5500. How to fill out 1040x example pdf www. How to fill out 1040x example dol. How to fill out 1040x example gov/ebsa/pdf/2013-5500-SF. How to fill out 1040x example pdf W-2 Wage and Tax Statement Schedule K-1 (Form 1065) Partner's Share of Income, Deductions, Credits, etc. How to fill out 1040x example 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. How to fill out 1040x example 1040 U. How to fill out 1040x example S. How to fill out 1040x example Individual Income Tax Return Schedule C (Form 1040) Profit or Loss From Business Schedule F (Form 1040) Profit or Loss From Farming 5300 Application for Determination for Employee Benefit Plan 5310 Application for Determination for Terminating Plan 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts 5330 Return of Excise Taxes Related to Employee Benefit Plans 5500 Annual Return/Report of Employee Benefit Plan. How to fill out 1040x example For copies of this form, go to: 5500-EZ Annual Return of One-Participant (Owners and Their Spouses) Retirement Plan 5500-SF Short Form Annual Return/Report of Small Employee Benefit Plan. How to fill out 1040x example For copies of this form, go to: 8717 User Fee for Employee Plan Determination Letter Request 8880 Credit for Qualified Retirement Savings Contributions 8881 Credit for Small Employer Pension Plan Startup Costs 8955-SSA Annual Registration Statement Identifying Separated Participants With Deferred Vested Benefits These qualified retirement plans set up by self-employed individuals are sometimes called Keogh or H. How to fill out 1040x example R. How to fill out 1040x example 10 plans. How to fill out 1040x example A sole proprietor or a partnership can set up one of these plans. How to fill out 1040x example A common-law employee or a partner cannot set up one of these plans. How to fill out 1040x example The plans described here can also be set up and maintained by employers that are corporations. How to fill out 1040x example All the rules discussed here apply to corporations except where specifically limited to the self-employed. How to fill out 1040x example The plan must be for the exclusive benefit of employees or their beneficiaries. How to fill out 1040x example These qualified plans can include coverage for a self-employed individual. How to fill out 1040x example As an employer, you can usually deduct, subject to limits, contributions you make to a qualified plan, including those made for your own retirement. How to fill out 1040x example The contributions (and earnings and gains on them) are generally tax free until distributed by the plan. How to fill out 1040x example Kinds of Plans There are two basic kinds of qualified plans—defined contribution plans and defined benefit plans—and different rules apply to each. How to fill out 1040x example You can have more than one qualified plan, but your contributions to all the plans must not total more than the overall limits discussed under Contributions and Employer Deduction, later. How to fill out 1040x example Defined Contribution Plan A defined contribution plan provides an individual account for each participant in the plan. How to fill out 1040x example It provides benefits to a participant largely based on the amount contributed to that participant's account. How to fill out 1040x example Benefits are also affected by any income, expenses, gains, losses, and forfeitures of other accounts that may be allocated to an account. How to fill out 1040x example A defined contribution plan can be either a profit-sharing plan or a money purchase pension plan. How to fill out 1040x example Profit-sharing plan. How to fill out 1040x example   Although it is called a “profit-sharing plan,” you do not actually have to make a business profit for the year in order to make a contribution (except for yourself if you are self-employed as discussed under Self-employed Individual, later). How to fill out 1040x example A profit-sharing plan can be set up to allow for discretionary employer contributions, meaning the amount contributed each year to the plan is not fixed. How to fill out 1040x example An employer may even make no contribution to the plan for a given year. How to fill out 1040x example   The plan must provide a definite formula for allocating the contribution among the participants and for distributing the accumulated funds to the employees after they reach a certain age, after a fixed number of years, or upon certain other occurrences. How to fill out 1040x example   In general, you can be more flexible in making contributions to a profit-sharing plan than to a money purchase pension plan (discussed next) or a defined benefit plan (discussed later). How to fill out 1040x example Money purchase pension plan. How to fill out 1040x example   Contributions to a money purchase pension plan are fixed and are not based on your business profits. How to fill out 1040x example For example, if the plan requires that contributions be 10% of the participants' compensation without regard to whether you have profits (or the self-employed person has earned income), the plan is a money purchase pension plan. How to fill out 1040x example This applies even though the compensation of a self-employed individual as a participant is based on earned income derived from business profits. How to fill out 1040x example Defined Benefit Plan A defined benefit plan is any plan that is not a defined contribution plan. How to fill out 1040x example Contributions to a defined benefit plan are based on what is needed to provide definitely determinable benefits to plan participants. How to fill out 1040x example Actuarial assumptions and computations are required to figure these contributions. How to fill out 1040x example Generally, you will need continuing professional help to have a defined benefit plan. How to fill out 1040x example Qualification Rules To qualify for the tax benefits available to qualified plans, a plan must meet certain requirements (qualification rules) of the tax law. How to fill out 1040x example Generally, unless you write your own plan, the financial institution that provided your plan will take the continuing responsibility for meeting qualification rules that are later changed. How to fill out 1040x example The following is a brief overview of important qualification rules that generally have not yet been discussed. How to fill out 1040x example It is not intended to be all-inclusive. How to fill out 1040x example See Setting Up a Qualified Plan , later. How to fill out 1040x example Generally, the following qualification rules also apply to a SIMPLE 401(k) retirement plan. How to fill out 1040x example A SIMPLE 401(k) plan is, however, not subject to the top-heavy plan rules and nondiscrimination rules if the plan satisfies the provisions discussed in chapter 3 under SIMPLE 401(k) Plan. How to fill out 1040x example Plan assets must not be diverted. How to fill out 1040x example   Your plan must make it impossible for its assets to be used for, or diverted to, purposes other than the benefit of employees and their beneficiaries. How to fill out 1040x example As a general rule, the assets cannot be diverted to the employer. How to fill out 1040x example Minimum coverage requirement must be met. How to fill out 1040x example   To be a qualified plan, a defined benefit plan must benefit at least the lesser of the following. How to fill out 1040x example 50 employees, or The greater of: 40% of all employees, or Two employees. How to fill out 1040x example If there is only one employee, the plan must benefit that employee. How to fill out 1040x example Contributions or benefits must not discriminate. How to fill out 1040x example   Under the plan, contributions or benefits to be provided must not discriminate in favor of highly compensated employees. How to fill out 1040x example Contributions and benefits must not be more than certain limits. How to fill out 1040x example   Your plan must not provide for contributions or benefits that are more than certain limits. How to fill out 1040x example The limits apply to the annual contributions and other additions to the account of a participant in a defined contribution plan and to the annual benefit payable to a participant in a defined benefit plan. How to fill out 1040x example These limits are discussed later in this chapter under Contributions. How to fill out 1040x example Minimum vesting standard must be met. How to fill out 1040x example   Your plan must satisfy certain requirements regarding when benefits vest. How to fill out 1040x example A benefit is vested (you have a fixed right to it) when it becomes nonforfeitable. How to fill out 1040x example A benefit is nonforfeitable if it cannot be lost upon the happening, or failure to happen, of any event. How to fill out 1040x example Special rules apply to forfeited benefit amounts. How to fill out 1040x example In defined contribution plans, forfeitures can be allocated to the accounts of remaining participants in a nondiscriminatory way, or they can be used to reduce your contributions. How to fill out 1040x example   Forfeitures under a defined benefit plan cannot be used to increase the benefits any employee would otherwise receive under the plan. How to fill out 1040x example Forfeitures must be used instead to reduce employer contributions. How to fill out 1040x example Participation. How to fill out 1040x example   In general, an employee must be allowed to participate in your plan if he or she meets both the following requirements. How to fill out 1040x example Has reached age 21. How to fill out 1040x example Has at least 1 year of service (2 years if the plan is not a 401(k) plan and provides that after not more than 2 years of service the employee has a nonforfeitable right to all his or her accrued benefit). How to fill out 1040x example A plan cannot exclude an employee because he or she has reached a specified age. How to fill out 1040x example Leased employee. How to fill out 1040x example   A leased employee, defined in chapter 1, who performs services for you (recipient of the services) is treated as your employee for certain plan qualification rules. How to fill out 1040x example These rules include those in all the following areas. How to fill out 1040x example Nondiscrimination in coverage, contributions, and benefits. How to fill out 1040x example Minimum age and service requirements. How to fill out 1040x example Vesting. How to fill out 1040x example Limits on contributions and benefits. How to fill out 1040x example Top-heavy plan requirements. How to fill out 1040x example Contributions or benefits provided by the leasing organization for services performed for you are treated as provided by you. How to fill out 1040x example Benefit payment must begin when required. How to fill out 1040x example   Your plan must provide that, unless the participant chooses otherwise, the payment of benefits to the participant must begin within 60 days after the close of the latest of the following periods. How to fill out 1040x example The plan year in which the participant reaches the earlier of age 65 or the normal retirement age specified in the plan. How to fill out 1040x example The plan year in which the 10th anniversary of the year in which the participant began participating in the plan occurs. How to fill out 1040x example The plan year in which the participant separates from service. How to fill out 1040x example Early retirement. How to fill out 1040x example   Your plan can provide for payment of retirement benefits before the normal retirement age. How to fill out 1040x example If your plan offers an early retirement benefit, a participant who separates from service before satisfying the early retirement age requirement is entitled to that benefit if he or she meets both the following requirements. How to fill out 1040x example Satisfies the service requirement for the early retirement benefit. How to fill out 1040x example Separates from service with a nonforfeitable right to an accrued benefit. How to fill out 1040x example The benefit, which may be actuarially reduced, is payable when the early retirement age requirement is met. How to fill out 1040x example Required minimum distributions. How to fill out 1040x example   Special rules require minimum annual distributions from qualified plans, generally beginning after age  70½. How to fill out 1040x example See Required Distributions , under Distributions, later. How to fill out 1040x example Survivor benefits. How to fill out 1040x example   Defined benefit and money purchase pension plans must provide automatic survivor benefits in both the following forms. How to fill out 1040x example A qualified joint and survivor annuity for a vested participant who does not die before the annuity starting date. How to fill out 1040x example A qualified pre-retirement survivor annuity for a vested participant who dies before the annuity starting date and who has a surviving spouse. How to fill out 1040x example   The automatic survivor benefit also applies to any participant under a profit-sharing plan unless all the following conditions are met. How to fill out 1040x example The participant does not choose benefits in the form of a life annuity. How to fill out 1040x example The plan pays the full vested account balance to the participant's surviving spouse (or other beneficiary if the surviving spouse consents or if there is no surviving spouse) if the participant dies. How to fill out 1040x example The plan is not a direct or indirect transferee of a plan that must provide automatic survivor benefits. How to fill out 1040x example Loan secured by benefits. How to fill out 1040x example   If automatic survivor benefits are required for a spouse under a plan, he or she must consent to a loan that uses as security the accrued benefits in the plan. How to fill out 1040x example Waiver of survivor benefits. How to fill out 1040x example   Each plan participant may be permitted to waive the joint and survivor annuity or the pre-retirement survivor annuity (or both), but only if the participant has the written consent of the spouse. How to fill out 1040x example The plan also must allow the participant to withdraw the waiver. How to fill out 1040x example The spouse's consent must be witnessed by a plan representative or notary public. How to fill out 1040x example Waiver of 30-day waiting period before annuity starting date. How to fill out 1040x example    A plan may permit a participant to waive (with spousal consent) the 30-day minimum waiting period after a written explanation of the terms and conditions of a joint and survivor annuity is provided to each participant. How to fill out 1040x example   The waiver is allowed only if the distribution begins more than 7 days after the written explanation is provided. How to fill out 1040x example Involuntary cash-out of benefits not more than dollar limit. How to fill out 1040x example   A plan may provide for the immediate distribution of the participant's benefit under the plan if the present value of the benefit is not greater than $5,000. How to fill out 1040x example   However, the distribution cannot be made after the annuity starting date unless the participant and the spouse or surviving spouse of a participant who died (if automatic survivor benefits are required for a spouse under the plan) consents in writing to the distribution. How to fill out 1040x example If the present value is greater than $5,000, the plan must have the written consent of the participant and the spouse or surviving spouse (if automatic survivor benefits are required for a spouse under the plan) for any immediate distribution of the benefit. How to fill out 1040x example   Benefits attributable to rollover contributions and earnings on them can be ignored in determining the present value of these benefits. How to fill out 1040x example   A plan must provide for the automatic rollover of any cash-out distribution of more than $1,000 to an individual retirement account or annuity, unless the participant chooses otherwise. How to fill out 1040x example A section 402(f) notice must be sent prior to an involuntary cash-out of an eligible rollover distribution. How to fill out 1040x example See Section 402(f) Notice under Distributions, later, for more details. How to fill out 1040x example Consolidation, merger, or transfer of assets or liabilities. How to fill out 1040x example   Your plan must provide that, in the case of any merger or consolidation with, or transfer of assets or liabilities to, any other plan, each participant would (if the plan then terminated) receive a benefit equal to or more than the benefit he or she would have been entitled to just before the merger, etc. How to fill out 1040x example (if the plan had then terminated). How to fill out 1040x example Benefits must not be assigned or alienated. How to fill out 1040x example   Your plan must provide that a participant's or beneficiary's benefits under the plan cannot be taken away by any legal or equitable proceeding except as provided below or pursuant to certain judgements or settlements against the participant for violations of plan rules. How to fill out 1040x example Exception for certain loans. How to fill out 1040x example   A loan from the plan (not from a third party) to a participant or beneficiary is not treated as an assignment or alienation if the loan is secured by the participant's accrued nonforfeitable benefit and is exempt from the tax on prohibited transactions under section 4975(d)(1) or would be exempt if the participant were a disqualified person. How to fill out 1040x example A disqualified person is defined later in this chapter under Prohibited Transactions. How to fill out 1040x example Exception for QDRO. How to fill out 1040x example   Compliance with a QDRO (qualified domestic relations order) does not result in a prohibited assignment or alienation of benefits. How to fill out 1040x example   Payments to an alternate payee under a QDRO before the participant attains age 59½ are not subject to the 10% additional tax that would otherwise apply under certain circumstances. How to fill out 1040x example Benefits distributed to an alternate payee under a QDRO can be rolled over tax free to an individual retirement account or to an individual retirement annuity. How to fill out 1040x example No benefit reduction for social security increases. How to fill out 1040x example   Your plan must not permit a benefit reduction for a post-separation increase in the social security benefit level or wage base for any participant or beneficiary who is receiving benefits under your plan, or who is separated from service and has nonforfeitable rights to benefits. How to fill out 1040x example This rule also applies to plans supplementing the benefits provided by other federal or state laws. How to fill out 1040x example Elective deferrals must be limited. How to fill out 1040x example   If your plan provides for elective deferrals, it must limit those deferrals to the amount in effect for that particular year. How to fill out 1040x example See Limit on Elective Deferrals later in this chapter. How to fill out 1040x example Top-heavy plan requirements. How to fill out 1040x example   A top-heavy plan is one that mainly favors partners, sole proprietors, and other key employees. How to fill out 1040x example   A plan is top-heavy for a plan year if, for the preceding plan year, the total value of accrued benefits or account balances of key employees is more than 60% of the total value of accrued benefits or account balances of all employees. How to fill out 1040x example Additional requirements apply to a top-heavy plan primarily to provide minimum benefits or contributions for non-key employees covered by the plan. How to fill out 1040x example   Most qualified plans, whether or not top-heavy, must contain provisions that meet the top-heavy requirements and will take effect in plan years in which the plans are top-heavy. How to fill out 1040x example These qualification requirements for top-heavy plans are explained in section 416 and its regulations. How to fill out 1040x example SIMPLE and safe harbor 401(k) plan exception. How to fill out 1040x example   The top-heavy plan requirements do not apply to SIMPLE 401(k) plans, discussed earlier in chapter 3, or to safe harbor 401(k) plans that consist solely of safe harbor contributions, discussed later in this chapter. How to fill out 1040x example QACAs (discussed later) also are not subject to top-heavy requirements. How to fill out 1040x example Setting Up a Qualified Plan There are two basic steps in setting up a qualified plan. How to fill out 1040x example First you adopt a written plan. How to fill out 1040x example Then you invest the plan assets. How to fill out 1040x example You, the employer, are responsible for setting up and maintaining the plan. How to fill out 1040x example If you are self-employed, it is not necessary to have employees besides yourself to sponsor and set up a qualified plan. How to fill out 1040x example If you have employees, see Participation, under Qualification Rules, earlier. How to fill out 1040x example Set-up deadline. How to fill out 1040x example   To take a deduction for contributions for a tax year, your plan must be set up (adopted) by the last day of that year (December 31 for calendar-year employers). How to fill out 1040x example Credit for startup costs. How to fill out 1040x example   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a qualified plan that first became effective in 2013. How to fill out 1040x example For more information, see Credit for startup costs under Reminders, earlier. How to fill out 1040x example Adopting a Written Plan You must adopt a written plan. How to fill out 1040x example The plan can be an IRS-approved master or prototype plan offered by a sponsoring organization. How to fill out 1040x example Or it can be an individually designed plan. How to fill out 1040x example Written plan requirement. How to fill out 1040x example   To qualify, the plan you set up must be in writing and must be communicated to your employees. How to fill out 1040x example The plan's provisions must be stated in the plan. How to fill out 1040x example It is not sufficient for the plan to merely refer to a requirement of the Internal Revenue Code. How to fill out 1040x example Master or prototype plans. How to fill out 1040x example   Most qualified plans follow a standard form of plan (a master or prototype plan) approved by the IRS. How to fill out 1040x example Master and prototype plans are plans made available by plan providers for adoption by employers (including self-employed individuals). How to fill out 1040x example Under a master plan, a single trust or custodial account is established, as part of the plan, for the joint use of all adopting employers. How to fill out 1040x example Under a prototype plan, a separate trust or custodial account is established for each employer. How to fill out 1040x example Plan providers. How to fill out 1040x example   The following organizations generally can provide IRS-approved master or prototype plans. How to fill out 1040x example Banks (including some savings and loan associations and federally insured credit unions). How to fill out 1040x example Trade or professional organizations. How to fill out 1040x example Insurance companies. How to fill out 1040x example Mutual funds. How to fill out 1040x example Individually designed plan. How to fill out 1040x example   If you prefer, you can set up an individually designed plan to meet specific needs. How to fill out 1040x example Although advance IRS approval is not required, you can apply for approval by paying a fee and requesting a determination letter. How to fill out 1040x example You may need professional help for this. How to fill out 1040x example See Rev. How to fill out 1040x example Proc. How to fill out 1040x example 2014-6, 2014-1 I. How to fill out 1040x example R. How to fill out 1040x example B. How to fill out 1040x example 198, available at www. How to fill out 1040x example irs. How to fill out 1040x example gov/irb/2014-1_IRB/ar10. How to fill out 1040x example html, as annually updated, that may help you decide whether to apply for approval. How to fill out 1040x example Internal Revenue Bulletins are available on the IRS website at IRS. How to fill out 1040x example gov They are also available at most IRS offices and at certain libraries. How to fill out 1040x example User fee. How to fill out 1040x example   The fee mentioned earlier for requesting a determination letter does not apply to employers who have 100 or fewer employees who received at least $5,000 of compensation from the employer for the preceding year. How to fill out 1040x example At least one of them must be a non-highly compensated employee participating in the plan. How to fill out 1040x example The fee does not apply to requests made by the later of the following dates. How to fill out 1040x example The end of the 5th plan year the plan is in effect. How to fill out 1040x example The end of any remedial amendment period for the plan that begins within the first 5 plan years. How to fill out 1040x example The request cannot be made by the sponsor of a prototype or similar plan the sponsor intends to market to participating employers. How to fill out 1040x example   For more information about whether the user fee applies, see Rev. How to fill out 1040x example Proc. How to fill out 1040x example 2014-8, 2014-1 I. How to fill out 1040x example R. How to fill out 1040x example B. How to fill out 1040x example 242, available at www. How to fill out 1040x example irs. How to fill out 1040x example gov/irb/2014-1_IRB/ar12. How to fill out 1040x example html, as may be annually updated; Notice 2003-49, 2003-32 I. How to fill out 1040x example R. How to fill out 1040x example B. How to fill out 1040x example 294, available at www. How to fill out 1040x example irs. How to fill out 1040x example gov/irb/2003-32_IRB/ar13. How to fill out 1040x example html; and Notice 2011-86, 2011-45 I. How to fill out 1040x example R. How to fill out 1040x example B. How to fill out 1040x example 698, available at www. How to fill out 1040x example irs. How to fill out 1040x example gov/irb/2011-45_IRB/ar11. How to fill out 1040x example html. How to fill out 1040x example Investing Plan Assets In setting up a qualified plan, you arrange how the plan's funds will be used to build its assets. How to fill out 1040x example You can establish a trust or custodial account to invest the funds. How to fill out 1040x example You, the trust, or the custodial account can buy an annuity contract from an insurance company. How to fill out 1040x example Life insurance can be included only if it is incidental to the retirement benefits. How to fill out 1040x example You set up a trust by a legal instrument (written document). How to fill out 1040x example You may need professional help to do this. How to fill out 1040x example You can set up a custodial account with a bank, savings and loan association, credit union, or other person who can act as the plan trustee. How to fill out 1040x example You do not need a trust or custodial account, although you can have one, to invest the plan's funds in annuity contracts or face-amount certificates. How to fill out 1040x example If anyone other than a trustee holds them, however, the contracts or certificates must state they are not transferable. How to fill out 1040x example Other plan requirements. How to fill out 1040x example   For information on other important plan requirements, see Qualification Rules , earlier in this chapter. How to fill out 1040x example Minimum Funding Requirement In general, if your plan is a money purchase pension plan or a defined benefit plan, you must actually pay enough into the plan to satisfy the minimum funding standard for each year. How to fill out 1040x example Determining the amount needed to satisfy the minimum funding standard for a defined benefit plan is complicated, and you should seek professional help in order to meet these contribution requirements. How to fill out 1040x example For information on this funding requirement, see section 412 and its regulations. How to fill out 1040x example Quarterly installments of required contributions. How to fill out 1040x example   If your plan is a defined benefit plan subject to the minimum funding requirements, you generally must make quarterly installment payments of the required contributions. How to fill out 1040x example If you do not pay the full installments timely, you may have to pay interest on any underpayment for the period of the underpayment. How to fill out 1040x example Due dates. How to fill out 1040x example   The due dates for the installments are 15 days after the end of each quarter. How to fill out 1040x example For a calendar-year plan, the installments are due April 15, July 15, October 15, and January 15 (of the following year). How to fill out 1040x example Installment percentage. How to fill out 1040x example   Each quarterly installment must be 25% of the required annual payment. How to fill out 1040x example Extended period for making contributions. How to fill out 1040x example   Additional contributions required to satisfy the minimum funding requirement for a plan year will be considered timely if made by 8½ months after the end of that year. How to fill out 1040x example Contributions A qualified plan is generally funded by your contributions. How to fill out 1040x example However, employees participating in the plan may be permitted to make contributions, and you may be permitted to make contributions on your own behalf. How to fill out 1040x example See Employee Contributions and Elective Deferrals later. How to fill out 1040x example Contributions deadline. How to fill out 1040x example   You can make deductible contributions for a tax year up to the due date of your return (plus extensions) for that year. How to fill out 1040x example Self-employed individual. How to fill out 1040x example   You can make contributions on behalf of yourself only if you have net earnings (compensation) from self-employment in the trade or business for which the plan was set up. How to fill out 1040x example Your net earnings must be from your personal services, not from your investments. How to fill out 1040x example If you have a net loss from self-employment, you cannot make contributions for yourself for the year, even if you can contribute for common-law employees based on their compensation. How to fill out 1040x example Employer Contributions There are certain limits on the contributions and other annual additions you can make each year for plan participants. How to fill out 1040x example There are also limits on the amount you can deduct. How to fill out 1040x example See Deduction Limits , later. How to fill out 1040x example Limits on Contributions and Benefits Your plan must provide that contributions or benefits cannot exceed certain limits. How to fill out 1040x example The limits differ depending on whether your plan is a defined contribution plan or a defined benefit plan. How to fill out 1040x example Defined benefit plan. How to fill out 1040x example   For 2013, the annual benefit for a participant under a defined benefit plan cannot exceed the lesser of the following amounts. How to fill out 1040x example 100% of the participant's average compensation for his or her highest 3 consecutive calendar years. How to fill out 1040x example $205,000 ($210,000 for 2014). How to fill out 1040x example Defined contribution plan. How to fill out 1040x example   For 2013, a defined contribution plan's annual contributions and other additions (excluding earnings) to the account of a participant cannot exceed the lesser of the following amounts. How to fill out 1040x example 100% of the participant's compensation. How to fill out 1040x example $51,000 ($52,000 for 2014). How to fill out 1040x example   Catch-up contributions (discussed later under Limit on Elective Deferrals) are not subject to the above limit. How to fill out 1040x example Employee Contributions Participants may be permitted to make nondeductible contributions to a plan in addition to your contributions. How to fill out 1040x example Even though these employee contributions are not deductible, the earnings on them are tax free until distributed in later years. How to fill out 1040x example Also, these contributions must satisfy the actual contribution percentage (ACP) test of section 401(m)(2), a nondiscrimination test that applies to employee contributions and matching contributions. How to fill out 1040x example See Regulations sections 1. How to fill out 1040x example 401(k)-2 and 1. How to fill out 1040x example 401(m)-2 for further guidance relating to the nondiscrimination rules under sections 401(k) and 401(m). How to fill out 1040x example When Contributions Are Considered Made You generally apply your plan contributions to the year in which you make them. How to fill out 1040x example But you can apply them to the previous year if all the following requirements are met. How to fill out 1040x example You make them by the due date of your tax return for the previous year (plus extensions). How to fill out 1040x example The plan was established by the end of the previous year. How to fill out 1040x example The plan treats the contributions as though it had received them on the last day of the previous year. How to fill out 1040x example You do either of the following. How to fill out 1040x example You specify in writing to the plan administrator or trustee that the contributions apply to the previous year. How to fill out 1040x example You deduct the contributions on your tax return for the previous year. How to fill out 1040x example A partnership shows contributions for partners on Form 1065. How to fill out 1040x example Employer's promissory note. How to fill out 1040x example   Your promissory note made out to the plan is not a payment that qualifies for the deduction. How to fill out 1040x example Also, issuing this note is a prohibited transaction subject to tax. How to fill out 1040x example See Prohibited Transactions , later. How to fill out 1040x example Employer Deduction You can usually deduct, subject to limits, contributions you make to a qualified plan, including those made for your own retirement. How to fill out 1040x example The contributions (and earnings and gains on them) are generally tax free until distributed by the plan. How to fill out 1040x example Deduction Limits The deduction limit for your contributions to a qualified plan depends on the kind of plan you have. How to fill out 1040x example Defined contribution plans. How to fill out 1040x example   The deduction for contributions to a defined contribution plan (profit-sharing plan or money purchase pension plan) cannot be more than 25% of the compensation paid (or accrued) during the year to your eligible employees participating in the plan. How to fill out 1040x example If you are self-employed, you must reduce this limit in figuring the deduction for contributions you make for your own account. How to fill out 1040x example See Deduction Limit for Self-Employed Individuals , later. How to fill out 1040x example   When figuring the deduction limit, the following rules apply. How to fill out 1040x example Elective deferrals (discussed later) are not subject to the limit. How to fill out 1040x example Compensation includes elective deferrals. How to fill out 1040x example The maximum compensation that can be taken into account for each employee in 2013 is $255,000 ($260,000 for 2014). How to fill out 1040x example Defined benefit plans. How to fill out 1040x example   The deduction for contributions to a defined benefit plan is based on actuarial assumptions and computations. How to fill out 1040x example Consequently, an actuary must figure your deduction limit. How to fill out 1040x example    In figuring the deduction for contributions, you cannot take into account any contributions or benefits that are more than the limits discussed earlier under Limits on Contributions and Benefits, earlier. How to fill out 1040x example Table 4–1. How to fill out 1040x example Carryover of Excess Contributions Illustrated—Profit-Sharing Plan (000's omitted) Year Participants' compensation Participants' share of required contribution (10% of annual profit) Deductible  limit for current year (25% of compensation) Contribution Excess contribution carryover used1 Total  deduction including carryovers Excess contribution carryover available at end of year 2010 $1,000 $100 $250 $100 $ 0 $100 $ 0 2011 400 165 100 165 0 100 65 2012 500 100 125 100 25 125 40 2013 600 100 150 100 40 140 0  1There were no carryovers from years before 2010. How to fill out 1040x example Deduction Limit for Self-Employed Individuals If you make contributions for yourself, you need to make a special computation to figure your maximum deduction for these contributions. How to fill out 1040x example Compensation is your net earnings from self-employment, defined in chapter 1. How to fill out 1040x example This definition takes into account both the following items. How to fill out 1040x example The deduction for the deductible part of your self-employment tax. How to fill out 1040x example The deduction for contributions on your behalf to the plan. How to fill out 1040x example The deduction for your own contributions and your net earnings depend on each other. How to fill out 1040x example For this reason, you determine the deduction for your own contributions indirectly by reducing the contribution rate called for in your plan. How to fill out 1040x example To do this, use either the Rate Table for Self-Employed or the Rate Worksheet for Self-Employed in chapter 5. How to fill out 1040x example Then figure your maximum deduction by using the Deduction Worksheet for Self-Employed in chapter 5. How to fill out 1040x example Where To Deduct Contributions Deduct the contributions you make for your common-law employees on your tax return. How to fill out 1040x example For example, sole proprietors deduct them on Schedule C (Form 1040) or Schedule F (Form 1040); partnerships deduct them on Form 1065; and corporations deduct them on Form 1120, or Form 1120S. How to fill out 1040x example Sole proprietors and partners deduct contributions for themselves on line 28 of Form 1040. How to fill out 1040x example (If you are a partner, contributions for yourself are shown on the Schedule K-1 (Form 1065) you get from the partnership. How to fill out 1040x example ) Carryover of Excess Contributions If you contribute more to the plans than you can deduct for the year, you can carry over and deduct the difference in later years, combined with your contributions for those years. How to fill out 1040x example Your combined deduction in a later year is limited to 25% of the participating employees' compensation for that year. How to fill out 1040x example For purposes of this limit, a SEP is treated as a profit-sharing (defined contribution) plan. How to fill out 1040x example However, this percentage limit must be reduced to figure your maximum deduction for contributions you make for yourself. How to fill out 1040x example See Deduction Limit for Self-Employed Individuals, earlier. How to fill out 1040x example The amount you carry over and deduct may be subject to the excise tax discussed next. How to fill out 1040x example Table 4-1, earlier, illustrates the carryover of excess contributions to a profit-sharing plan. How to fill out 1040x example Excise Tax for Nondeductible (Excess) Contributions If you contribute more than your deduction limit to a retirement plan, you have made nondeductible contributions and you may be liable for an excise tax. How to fill out 1040x example In general, a 10% excise tax applies to nondeductible contributions made to qualified pension and profit-sharing plans and to SEPs. How to fill out 1040x example Special rule for self-employed individuals. How to fill out 1040x example   The 10% excise tax does not apply to any contribution made to meet the minimum funding requirements in a money purchase pension plan or a defined benefit plan. How to fill out 1040x example Even if that contribution is more than your earned income from the trade or business for which the plan is set up, the difference is not subject to this excise tax. How to fill out 1040x example See Minimum Funding Requirement , earlier. How to fill out 1040x example Reporting the tax. How to fill out 1040x example   You must report the tax on your nondeductible contributions on Form 5330. How to fill out 1040x example Form 5330 includes a computation of the tax. How to fill out 1040x example See the separate instructions for completing the form. How to fill out 1040x example Elective Deferrals (401(k) Plans) Your qualified plan can include a cash or deferred arrangement under which participants can choose to have you contribute part of their before-tax compensation to the plan rather than receive the compensation in cash. How to fill out 1040x example A plan with this type of arrangement is popularly known as a “401(k) plan. How to fill out 1040x example ” (As a self-employed individual participating in the plan, you can contribute part of your before-tax net earnings from the business. How to fill out 1040x example ) This contribution is called an “elective deferral” because participants choose (elect) to defer receipt of the money. How to fill out 1040x example In general, a qualified plan can include a cash or deferred arrangement only if the qualified plan is one of the following plans. How to fill out 1040x example A profit-sharing plan. How to fill out 1040x example A money purchase pension plan in existence on June 27, 1974, that included a salary reduction arrangement on that date. How to fill out 1040x example Partnership. How to fill out 1040x example   A partnership can have a 401(k) plan. How to fill out 1040x example Restriction on conditions of participation. How to fill out 1040x example   The plan cannot require, as a condition of participation, that an employee complete more than 1 year of service. How to fill out 1040x example Matching contributions. How to fill out 1040x example   If your plan permits, you can make matching contributions for an employee who makes an elective deferral to your 401(k) plan. How to fill out 1040x example For example, the plan might provide that you will contribute 50 cents for each dollar your participating employees choose to defer under your 401(k) plan. How to fill out 1040x example Matching contributions are generally subject to the ACP test discussed earlier under Employee Contributions. How to fill out 1040x example Nonelective contributions. How to fill out 1040x example   You can also make contributions (other than matching contributions) for your participating employees without giving them the choice to take cash instead. How to fill out 1040x example These are called nonelective contributions. How to fill out 1040x example Employee compensation limit. How to fill out 1040x example   No more than $255,000 of the employee's compensation can be taken into account when figuring contributions other than elective deferrals in 2013. How to fill out 1040x example This limit is $260,000 in 2014. How to fill out 1040x example SIMPLE 401(k) plan. How to fill out 1040x example   If you had 100 or fewer employees who earned $5,000 or more in compensation during the preceding year, you may be able to set up a SIMPLE 401(k) plan. How to fill out 1040x example A SIMPLE 401(k) plan is not subject to the nondiscrimination and top-heavy plan requirements discussed earlier under Qualification Rules. How to fill out 1040x example For details about SIMPLE 401(k) plans, see SIMPLE 401(k) Plan in chapter 3. How to fill out 1040x example Distributions. How to fill out 1040x example   Certain rules apply to distributions from 401(k) plans. How to fill out 1040x example See Distributions From 401(k) Plans , later. How to fill out 1040x example Limit on Elective Deferrals There is a limit on the amount an employee can defer each year under these plans. How to fill out 1040x example This limit applies without regard to community property laws. How to fill out 1040x example Your plan must provide that your employees cannot defer more than the limit that applies for a particular year. How to fill out 1040x example For 2013 and 2014, the basic limit on elective deferrals is $17,500. How to fill out 1040x example This limit applies to all salary reduction contributions and elective deferrals. How to fill out 1040x example If, in conjunction with other plans, the deferral limit is exceeded, the difference is included in the employee's gross income. How to fill out 1040x example Catch-up contributions. How to fill out 1040x example   A 401(k) plan can permit participants who are age 50 or over at the end of the calendar year to also make catch-up contributions. How to fill out 1040x example The catch-up contribution limit for 2013 and 2014 is $5,500. How to fill out 1040x example Elective deferrals are not treated as catch-up contributions for 2013 until they exceed the $17,500 limit, the actual deferral percentage (ADP) test limit of section 401(k)(3), or the plan limit (if any). How to fill out 1040x example However, the catch-up contribution a participant can make for a year cannot exceed the lesser of the following amounts. How to fill out 1040x example The catch-up contribution limit. How to fill out 1040x example The excess of the participant's compensation over the elective deferrals that are not catch-up contributions. How to fill out 1040x example Treatment of contributions. How to fill out 1040x example   Your contributions to your own 401(k) plan are generally deductible by you for the year they are contributed to the plan. How to fill out 1040x example Matching or nonelective contributions made to the plan are also deductible by you in the year of contribution. How to fill out 1040x example Your employees' elective deferrals other than designated Roth contributions are tax free until distributed from the plan. How to fill out 1040x example Elective deferrals are included in wages for social security, Medicare, and federal unemployment (FUTA) tax. How to fill out 1040x example Forfeiture. How to fill out 1040x example   Employees have a nonforfeitable right at all times to their accrued benefit attributable to elective deferrals. How to fill out 1040x example Reporting on Form W-2. How to fill out 1040x example   Do not include elective deferrals in the “Wages, tips, other compensation” box of Form W-2. How to fill out 1040x example You must, however, include them in the “Social security wages” and “Medicare wages and tips” boxes. How to fill out 1040x example You must also include them in box 12. How to fill out 1040x example Mark the “Retirement plan” checkbox in box 13. How to fill out 1040x example For more information, see the Form W-2 instructions. How to fill out 1040x example Automatic Enrollment Your 401(k) plan can have an automatic enrollment feature. How to fill out 1040x example Under this feature, you can automatically reduce an employee's pay by a fixed percentage and contribute that amount to the 401(k) plan on his or her behalf unless the employee affirmatively chooses not to have his or her pay reduced or chooses to have it reduced by a different percentage. How to fill out 1040x example These contributions are elective deferrals. How to fill out 1040x example An automatic enrollment feature will encourage employees' saving for retirement and will help your plan pass nondiscrimination testing (if applicable). How to fill out 1040x example For more information, see Publication 4674, Automatic Enrollment 401(k) Plans for Small Businesses. How to fill out 1040x example Eligible automatic contribution arrangement. How to fill out 1040x example   Under an eligible automatic contribution arrangement (EACA), a participant is treated as having elected to have the employer make contributions in an amount equal to a uniform percentage of compensation. How to fill out 1040x example This automatic election will remain in place until the participant specifically elects not to have such deferral percentage made (or elects a different percentage). How to fill out 1040x example There is no required deferral percentage. How to fill out 1040x example Withdrawals. How to fill out 1040x example   Under an EACA, you may allow participants to withdraw their automatic contributions to the plan if certain conditions are met. How to fill out 1040x example The participant must elect the withdrawal no later than 90 days after the date of the first elective contributions under the EACA. How to fill out 1040x example The participant must withdraw the entire amount of EACA default contributions, including any earnings thereon. How to fill out 1040x example   If the plan allows withdrawals under the EACA, the amount of the withdrawal other than the amount of any designated Roth contributions must be included in the employee's gross income for the tax year in which the distribution is made. How to fill out 1040x example The additional 10% tax on early distributions will not apply to the distribution. How to fill out 1040x example Notice requirement. How to fill out 1040x example   Under an EACA, employees must be given written notice of the terms of the EACA within a reasonable period of time before each plan year. How to fill out 1040x example The notice must be written in a manner calculated to be understood by the average employee and be sufficiently accurate and comprehensive in order to apprise the employee of his or her rights and obligations under the EACA. How to fill out 1040x example The notice must include an explanation of the employee's right to elect not to have elective contributions made on his or her behalf, or to elect a different percentage, and the employee must be given a reasonable period of time after receipt of the notice before the first elective contribution is made. How to fill out 1040x example The notice also must explain how contributions will be invested in the absence of an investment election by the employee. How to fill out 1040x example Qualified automatic contribution arrangement. How to fill out 1040x example    A qualified automatic contribution arrangement (QACA) is a type of safe harbor plan. How to fill out 1040x example It contains an automatic enrollment feature, and mandatory employer contributions are required. How to fill out 1040x example If your plan includes a QACA, it will not be subject to the ADP test (discussed later) nor the top-heavy requirements (discussed earlier). How to fill out 1040x example Additionally, your plan will not be subject to the actual contribution percentage (ACP) test if certain additional requirements are met. How to fill out 1040x example Under a QACA, each employee who is eligible to participate in the plan will be treated as having elected to make elective deferral contributions equal to a certain default percentage of compensation. How to fill out 1040x example In order to not have default elective deferrals made, an employee must make an affirmative election specifying a deferral percentage (including zero, if desired). How to fill out 1040x example If an employee does not make an affirmative election, the default deferral percentage must meet the following conditions. How to fill out 1040x example It must be applied uniformly. How to fill out 1040x example It must not exceed 10%. How to fill out 1040x example It must be at least 3% in the first plan year it applies to an employee and through the end of the following year. How to fill out 1040x example It must increase to at least 4% in the following plan year. How to fill out 1040x example It must increase to at least 5% in the following plan year. How to fill out 1040x example It must increase to at least 6% in subsequent plan years. How to fill out 1040x example Matching or nonelective contributions. How to fill out 1040x example   Under the terms of the QACA, you must make either matching or nonelective contributions according to the following terms. How to fill out 1040x example Matching contributions. How to fill out 1040x example You must make matching contributions on behalf of each non-highly compensated employee in the following amounts. How to fill out 1040x example An amount equal to 100% of elective deferrals, up to 1% of compensation. How to fill out 1040x example An amount equal to 50% of elective deferrals, from 1% up to 6% of compensation. How to fill out 1040x example Other formulas may be used as long as they are at least as favorable to non-highly compensated employees. How to fill out 1040x example The rate of matching contributions for highly compensated employees, including yourself, must not exceed the rates for non-highly compensated employees. How to fill out 1040x example Nonelective contributions. How to fill out 1040x example You must make nonelective contributions on behalf of every non-highly compensated employee eligible to participate in the plan, regardless of whether they elected to participate, in an amount equal to at least 3% of their compensation. How to fill out 1040x example Vesting requirements. How to fill out 1040x example   All accrued benefits attributed to matching or nonelective contributions under the QACA must be 100% vested for all employees who complete 2 years of service. How to fill out 1040x example These contributions are subject to special withdrawal restrictions, discussed later. How to fill out 1040x example Notice requirements. How to fill out 1040x example   Each employee eligible to participate in the QACA must receive written notice of their rights and obligations under the QACA, within a reasonable period before each plan year. How to fill out 1040x example The notice must be written in a manner calculated to be understood by the average employee, and it must be accurate and comprehensive. How to fill out 1040x example The notice must explain their right to elect not to have elective contributions made on their behalf, or to have contributions made at a different percentage than the default percentage. How to fill out 1040x example Additionally, the notice must explain how contributions will be invested in the absence of any investment election by the employee. How to fill out 1040x example The employee must have a reasonable period of time after receiving the notice to make such contribution and investment elections prior to the first contributions under the QACA. How to fill out 1040x example Treatment of Excess Deferrals If the total of an employee's deferrals is more than the limit for 2013, the employee can have the difference (called an excess deferral) paid out of any of the plans that permit these distributions. How to fill out 1040x example He or she must notify the plan by April 15, 2014 (or an earlier date specified in the plan), of the amount to be paid from each plan. How to fill out 1040x example The plan must then pay the employee that amount, plus earnings on the amount through the end of 2013, by April 15, 2014. How to fill out 1040x example Excess withdrawn by April 15. How to fill out 1040x example   If the employee takes out the excess deferral by April 15, 2014, it is not reported again by including it in the employee's gross income for 2014. How to fill out 1040x example However, any income earned in 2013 on the excess deferral taken out is taxable in the tax year in which it is taken out. How to fill out 1040x example The distribution is not subject to the additional 10% tax on early distributions. How to fill out 1040x example   If the employee takes out part of the excess deferral and the income on it, the distribution is treated as made proportionately from the excess deferral and the income. How to fill out 1040x example   Even if the employee takes out the excess deferral by April 15, the amount will be considered for purposes of nondiscrimination testing requirements of the plan, unless the distributed amount is for a non-highly compensated employee who participates in only one employer's 401(k) plan or plans. How to fill out 1040x example Excess not withdrawn by April 15. How to fill out 1040x example   If the employee does not take out the excess deferral by April 15, 2014, the excess, though taxable in 2013, is not included in the employee's cost basis in figuring the taxable amount of any eventual distributions under the plan. How to fill out 1040x example In effect, an excess deferral left in the plan is taxed twice, once when contributed and again when distributed. How to fill out 1040x example Also, if the employee's excess deferral is allowed to stay in the plan and the employee participates in no other employer's plan, the plan can be disqualified. How to fill out 1040x example Reporting corrective distributions on Form 1099-R. How to fill out 1040x example   Report corrective distributions of excess deferrals (including any earnings) on Form 1099-R. How to fill out 1040x example For specific information about reporting corrective distributions, see the Instructions for Forms 1099-R and 5498. How to fill out 1040x example Tax on excess contributions of highly compensated employees. How to fill out 1040x example   The law provides tests to detect discrimination in a plan. How to fill out 1040x example If tests, such as the actual deferral percentage test (ADP test) (see section 401(k)(3)) and the actual contribution percentage test (ACP test) (see section 401(m)(2)), show that contributions for highly compensated employees are more than the test limits for these contributions, the employer may have to pay a 10% excise tax. How to fill out 1040x example Report the tax on Form 5330. How to fill out 1040x example The ADP test does not apply to a safe harbor 401(k) plan (discussed next) nor to a QACA. How to fill out 1040x example Also, the ACP test does not apply to these plans if certain additional requirements are met. How to fill out 1040x example   The tax for the year is 10% of the excess contributions for the plan year ending in your tax year. How to fill out 1040x example Excess contributions are elective deferrals, employee contributions, or employer matching or nonelective contributions that are more than the amount permitted under the ADP test or the ACP test. How to fill out 1040x example   See Regulations sections 1. How to fill out 1040x example 401(k)-2 and 1. How to fill out 1040x example 401(m)-2 for further guidance relating to the nondiscrimination rules under sections 401(k) and 401(m). How to fill out 1040x example    If the plan fails the ADP or ACP testing, and the failure is not corrected by the end of the next plan year, the plan can be disqualified. How to fill out 1040x example Safe harbor 401(k) plan. How to fill out 1040x example If you meet the requirements for a safe harbor 401(k) plan, you do not have to satisfy the ADP test, nor the ACP test, if certain additional requirements are met. How to fill out 1040x example For your plan to be a safe harbor plan, you must meet the following conditions. How to fill out 1040x example Matching or nonelective contributions. How to fill out 1040x example You must make matching or nonelective contributions according to one of the following formulas. How to fill out 1040x example Matching contributions. How to fill out 1040x example You must make matching contributions according to the following rules. How to fill out 1040x example You must contribute an amount equal to 100% of each non-highly compensated employee's elective deferrals, up to 3% of compensation. How to fill out 1040x example You must contribute an amount equal to 50% of each non-highly compensated employee's elective deferrals, from 3% up to 5% of compensation. How to fill out 1040x example The rate of matching contributions for highly compensated employees, including yourself, must not exceed the rates for non-highly compensated employees. How to fill out 1040x example Nonelective contributions. How to fill out 1040x example You must make nonelective contributions, without regard to whether the employee made elective deferrals, on behalf of all non-highly compensated employees eligible to participate in the plan, equal to at least 3% of the employee's compensation. How to fill out 1040x example These mandatory matching and nonelective contributions must be immediately 100% vested and are subject to special withdrawal restrictions. How to fill out 1040x example Notice requirement. How to fill out 1040x example You must give eligible employees written notice of their rights and obligations with regard to contributions under the plan, within a reasonable period before the plan year. How to fill out 1040x example The other requirements for a 401(k) plan, including withdrawal and vesting rules, must also be met for your plan to qualify as a safe harbor 401(k) plan. How to fill out 1040x example Qualified Roth Contribution Program Under this program an eligible employee can designate all or a portion of his or her elective deferrals as after-tax Roth contributions. How to fill out 1040x example Elective deferrals designated as Roth contributions must be maintained in a separate Roth account. How to fill out 1040x example However, unlike other elective deferrals, designated Roth contributions are not excluded from employees' gross income, but qualified distributions from a Roth account are excluded from employees' gross income. How to fill out 1040x example Elective Deferrals Under a qualified Roth contribution program, the amount of elective deferrals that an employee may designate as a Roth contribution is limited to the maximum amount of elective deferrals excludable from gross income for the year (for 2013 and 2014, $17,500 if under age 50 and $23,000 if age 50 or over) less the total amount of the employee's elective deferrals not designated as Roth contributions. How to fill out 1040x example Designated Roth deferrals are treated the same as pre-tax elective deferrals for most purposes, including: The annual individual elective deferral limit (total of all designated Roth contributions and traditional, pre-tax elective deferrals) of $17,500 for 2013 and 2014, with an additional $5,500 if age 50 or over for 2013 and 2014, Determining the maximum employee and employer annual contributions of the lesser of 100% of compensation or $51,000 for 2013 ($52,000 for 2014), Nondiscrimination testing, Required distributions, and Elective deferrals not taken into account for purposes of deduction limits. How to fill out 1040x example Qualified Distributions A qualified distribution is a distribution that is made after the employee's nonexclusion period and: On or after the employee attains age   59½, On account of the employee's being disabled, or On or after the employee's death. How to fill out 1040x example An employee's nonexclusion period for a plan is the 5-tax-year period beginning with the earlier of the following tax years. How to fill out 1040x example The first tax year in which the employee made a contribution to his or her Roth account in the plan, or If a rollover contribution was made to the employee's designated Roth account from a designated Roth account previously established for the employee under another plan, then the first tax year the employee made a designated Roth contribution to the previously established account. How to fill out 1040x example Rollover. How to fill out 1040x example   Beginning September 28, 2010, a rollover from another account can be made to a designated Roth account in the same plan. How to fill out 1040x example For additional information on these in-plan Roth rollovers, see Notice 2010-84, 2010-51 I. How to fill out 1040x example R. How to fill out 1040x example B. How to fill out 1040x example 872, available at www. How to fill out 1040x example irs. How to fill out 1040x example gov/irb/2010-51_IRB/ar11. How to fill out 1040x example html, and Notice 2013-74. How to fill out 1040x example A distribution from a designated Roth account can only be rolled over to another designated Roth account or a Roth IRA. How to fill out 1040x example Rollover amounts do not apply toward the annual deferral limit. How to fill out 1040x example Reporting Requirements You must report a contribution to a Roth account on Form W-2 and a distribution from a Roth account on Form 1099-R. How to fill out 1040x example See the Form W-2 and 1099-R instructions for detailed information. How to fill out 1040x example Distributions Amounts paid to plan participants from a qualified plan are called distributions. How to fill out 1040x example Distributions may be nonperiodic, such as lump-sum distributions, or periodic, such as annuity payments. How to fill out 1040x example Also, certain loans may be treated as distributions. How to fill out 1040x example See Loans Treated as Distributions in Publication 575. How to fill out 1040x example Required Distributions A qualified plan must provide that each participant will either: Receive his or her entire interest (benefits) in the plan by the required beginning date (defined later), or Begin receiving regular periodic distributions by the required beginning date in annual amounts calculated to distribute the participant's entire interest (benefits) over his or her life expectancy or over the joint life expectancy of the participant and the designated beneficiary (or over a shorter period). How to fill out 1040x example These distribution rules apply individually to each qualified plan. How to fill out 1040x example You cannot satisfy the requirement for one plan by taking a distribution from another. How to fill out 1040x example The plan must provide that these rules override any inconsistent distribution options previously offered. How to fill out 1040x example Minimum distribution. How to fill out 1040x example   If the account balance of a qualified plan participant is to be distributed (other than as an annuity), the plan administrator must figure the minimum amount required to be distributed each distribution calendar year. How to fill out 1040x example This minimum is figured by dividing the account balance by the applicable life expectancy. How to fill out 1040x example The plan administrator can use the life expectancy tables in Appendix C of Publication 590 for this purpose. How to fill out 1040x example For more information on figuring the minimum distribution, see Tax on Excess Accumulation in Publication 575. How to fill out 1040x example Required beginning date. How to fill out 1040x example   Generally, each participant must receive his or her entire benefits in the plan or begin to receive periodic distributions of benefits from the plan by the required beginning date. How to fill out 1040x example   A participant must begin to receive distributions from his or her qualified retirement plan by April 1 of the first year after the later of the following years. How to fill out 1040x example Calendar year in which he or she reaches age 70½. How to fill out 1040x example Calendar year in which he or she retires from employment with the employer maintaining the plan. How to fill out 1040x example However, the plan may require the participant to begin receiving distributions by April 1 of the year after the participant reaches age 70½ even if the participant has not retired. How to fill out 1040x example   If the participant is a 5% owner of the employer maintaining the plan, the participant must begin receiving distributions by April 1 of the first year after the calendar year in which the participant reached age 70½. How to fill out 1040x example For more information, see Tax on Excess Accumulation in Publication 575. How to fill out 1040x example Distributions after the starting year. How to fill out 1040x example   The distribution required to be made by April 1 is treated as a distribution for the starting year. How to fill out 1040x example (The starting year is the year in which the participant meets (1) or (2) above, whichever applies. How to fill out 1040x example ) After the starting year, the participant must receive the required distribution for each year by December 31 of that year. How to fill out 1040x example If no distribution is made in the starting year, required distributions for 2 years must be made in the next year (one by April 1 and one by December 31). How to fill out 1040x example Distributions after participant's death. How to fill out 1040x example   See Publication 575 for the special rules covering distributions made after the death of a participant. How to fill out 1040x example Distributions From 401(k) Plans Generally, distributions cannot be made until one of the following occurs. How to fill out 1040x example The employee retires, dies, becomes disabled, or otherwise severs employment. How to fill out 1040x example The plan ends and no other defined contribution plan is established or continued. How to fill out 1040x example In the case of a 401(k) plan that is part of a profit-sharing plan, the employee reaches age 59½ or suffers financial hardship. How to fill out 1040x example For the rules on hardship distributions, including the limits on them, see Regulations section 1. How to fill out 1040x example 401(k)-1(d). How to fill out 1040x example The employee becomes eligible for a qualified reservist distribution (defined next). How to fill out 1040x example Certain distributions listed above may be subject to the tax on early distributions discussed later. How to fill out 1040x example Qualified reservist distributions. How to fill out 1040x example   A qualified reservist distribution is a distribution from an IRA or an elective deferral account made after September 11, 2001, to a military reservist or a member of the National Guard who has been called to active duty for at least 180 days or for an indefinite period. How to fill out 1040x example All or part of a qualified reservist distribution can be recontributed to an IRA. How to fill out 1040x example The additional 10% tax on early distributions does not apply to a qualified reservist distribution. How to fill out 1040x example Tax Treatment of Distributions Distributions from a qualified plan minus a prorated part of any cost basis are subject to income tax in the year they are distributed. How to fill out 1040x example Since most recipients have no cost basis, a distribution is generally fully taxable. How to fill out 1040x example An exception is a distribution that is properly rolled over as discussed under Rollover, next. How to fill out 1040x example The tax treatment of distributions depends on whether they are made periodically over several years or life (periodic distributions) or are nonperiodic distributions. How to fill out 1040x example See Taxation of Periodic Payments and Taxation of Nonperiodic Payments in Publication 575 for a detailed description of how distributions are taxed, including the 10-year tax option or capital gain treatment of a lump-sum distribution. How to fill out 1040x example Note. How to fill out 1040x example A recipient of a distribution from a designated Roth account will have a cost basis since designated Roth contributions are made on an after-tax basis. How to fill out 1040x example Also, a distribution from a designated Roth account is entirely tax-free if certain conditions are met. How to fill out 1040x example See Qualified distributions under Qualified Roth Contribution Program, earlier. How to fill out 1040x example Rollover. How to fill out 1040x example   The recipient of an eligible rollover distribution from a qualified plan can defer the tax on it by rolling it over into a traditional IRA or another eligible retirement plan. How to fill out 1040x example However, it may be subject to withholding as discussed under Withholding requirement, later. How to fill out 1040x example A rollover can also be made to a Roth IRA, in which case, any previously untaxed amounts are includible in gross income unless the rollover is from a designated Roth account. How to fill out 1040x example Eligible rollover distribution. How to fill out 1040x example   This is a distribution of all or any part of an employee's balance in a qualified retirement plan that is not any of the following. How to fill out 1040x example A required minimum distribution. How to fill out 1040x example See Required Distributions , earlier. How to fill out 1040x example Any of a series of substantially equal payments made at least once a year over any of the following periods. How to fill out 1040x example The employee's life or life expectancy. How to fill out 1040x example The joint lives or life expectancies of the employee and beneficiary. How to fill out 1040x example A period of 10 years or longer. How to fill out 1040x example A hardship distribution. How to fill out 1040x example The portion of a distribution that represents the return of an employee's nondeductible contributions to the plan. How to fill out 1040x example See Employee Contributions , earlier, and Rollover of nontaxable amounts, next. How to fill out 1040x example Loans treated as distributions. How to fill out 1040x example Dividends on employer securities. How to fill out 1040x example The cost of any life insurance coverage provided under a qualified retirement plan. How to fill out 1040x example Similar items designated by the IRS in published guidance. How to fill out 1040x example See, for example, the Instructions for Forms 1099-R and 5498. How to fill out 1040x example Rollover of nontaxable amounts. How to fill out 1040x example   You may be able to roll over the nontaxable part of a distribution to another qualified retirement plan or a section 403(b) plan, or to an IRA. How to fill out 1040x example If the rollover is to a qualified retirement plan or a section 403(b) plan that separately accounts for the taxable and nontaxable parts of the rollover, the transfer must be made through a direct (trustee-to-trustee) rollover. How to fill out 1040x example If the rollover is to an IRA, the transfer can be made by any rollover method. How to fill out 1040x example Note. How to fill out 1040x example A distribution from a designated Roth account can be rolled over to another designated Roth account or to a Roth IRA. How to fill out 1040x example If the rollover is to a Roth IRA, it can be rolled over by any rollover method, but if the rollover is to another designated Roth account, it must be rolled over directly (trustee-to-trustee). How to fill out 1040x example More information. How to fill out 1040x example   For more information about rollovers, see Rollovers in Pubs. How to fill out 1040x example 575 and 590. How to fill out 1040x example Withholding requirement. How to fill out 1040x example   If, during a year, a qualified plan pays to a participant one or more eligible rollover distributions (defined earlier) that are reasonably expected to total $200 or more, the payor must withhold 20% of the taxable portion of each distribution for federal income tax. How to fill out 1040x example Exceptions. How to fill out 1040x example   If, instead of having the distribution paid to him or her, the participant chooses to have the plan pay it directly to an IRA or another eligible retirement plan (a direct rollover), no withholding is required. How to fill out 1040x example   If the distribution is not an eligible rollover distribution, defined earlier, the 20% withholding requirement does not apply. How to fill out 1040x example Other withholding rules apply to distributions that are not eligible rollover distributions, such as long-term periodic distributions and required distributions (periodic or nonperiodic). How to fill out 1040x example However, the participant can choose not to have tax withheld from these distributions. How to fill out 1040x example If the participant does not make this choice, the following withholding rules apply. How to fill out 1040x example For periodic distributions, withholding is based on their treatment as wages. How to fill out 1040x example For nonperiodic distributions, 10% of the taxable part is withheld. How to fill out 1040x example Estimated tax payments. How to fill out 1040x example   If no income tax is withheld or not enough tax is withheld, the recipient of a distribution may have to make estimated tax payments. How to fill out 1040x example For more information, see Withholding Tax and Estimated Tax in Publication 575. How to fill out 1040x example Section 402(f) Notice. How to fill out 1040x example   If a distribution is an eligible rollover distribution, as defined earlier, you must provide a written notice to the recipient that explains the following rules regarding such distributions. How to fill out 1040x example That the distribution may be directly transferred to an eligible retirement plan and information about which distributions are eligible for this direct transfer. How to fill out 1040x example That tax will be withheld from the distribution if it is not directly transferred to an eligible retirement plan. How to fill out 1040x example That the distribution will not be subject to tax if transferred to an eligible retirement plan within 60 days after the date the recipient receives the distribution. How to fill out 1040x example Certain other rules that may be applicable. How to fill out 1040x example   Notice 2009-68, 2009-39 I. How to fill out 1040x example R. How to fill out 1040x example B. How to fill out 1040x example 423, available at www. How to fill out 1040x example irs. How to fill out 1040x example gov/irb/2009-39_IRB/ar14. How to fill out 1040x example html, contains two updated safe harbor section 402(f) notices that plan administrators may provide recipients of eligible rollover distributions. How to fill out 1040x example If the plan allows in-plan Roth rollovers, the 402(f) notice must be amended to reflect this. How to fill out 1040x example Notice 2010-84 contains guidance on how to modify a 402(f) notice for in-plan Roth rollovers. How to fill out 1040x example Timing of notice. How to fill out 1040x example   The notice generally must be provided no less than 30 days and no more than 180 days before the date of a distribution. How to fill out 1040x example Method of notice. How to fill out 1040x example   The written notice must be provided individually to each distributee of an eligible rollover distribution. How to fill out 1040x example Posting of the notice is not sufficient. How to fill out 1040x example However, the written requirement may be satisfied through the use of electronic media if certain additional conditions are met. How to fill out 1040x example See Regulations section 1. How to fill out 1040x example 401(a)-21. How to fill out 1040x example Tax on failure to give notice. How to fill out 1040x example   Failure to give a 402(f) notice will result in a tax of $100 for each failure, with a total not exceeding $50,000 per calendar year. How to fill out 1040x example The tax will not be imposed if it is shown that such failure is due to reasonable cause and not to willful neglect. How to fill out 1040x example Tax on Early Distributions If a distribution is made to an employee under the plan before he or she reaches age 59½, the employee may have to pay a 10% additional tax on the distribution. How to fill out 1040x example This tax applies to the amount received that the employee must include in income. How to fill out 1040x example Exceptions. How to fill out 1040x example   The 10% tax will not apply if distributions before age 59½ are made in any of the following circumstances. How to fill out 1040x example Made to a beneficiary (or to the estate of the employee) on or after the death of the employee. How to fill out 1040x example Made due to the employee having a qualifying disability. How to fill out 1040x example Made as part of a series of substantially equal periodic payments beginning after separation from service and made at least annually for the life or life expectancy of the employee or the joint lives or life expectancies of the employee and his or her designated beneficiary. How to fill out 1040x example (The payments under this exception, except in the case of death or disability, must continue for at least 5 years or until the employee reaches age 59½, whichever is the longer period. How to fill out 1040x example ) Made to an employee after separation from service if the separation occurred during o