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Hr Block 1040nr

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Hr block 1040nr 11. Hr block 1040nr   Your Rights as a Taxpayer Table of Contents Declaration of Taxpayer Rights Examinations, Appeals, Collections, and RefundsBy mail. Hr block 1040nr By interview. Hr block 1040nr Repeat examinations. Hr block 1040nr The first part of this chapter explains some of your most important rights as a taxpayer. Hr block 1040nr The second part explains the examination, appeal, collection, and refund processes. Hr block 1040nr Declaration of Taxpayer Rights Protection of your rights. Hr block 1040nr   IRS employees will explain and protect your rights as a taxpayer throughout your contact with us. Hr block 1040nr Privacy and confidentiality. Hr block 1040nr   The IRS will not disclose to anyone the information you give us, except as authorized by law. Hr block 1040nr You have the right to know why we are asking you for information, how we will use it, and what happens if you do not provide requested information. Hr block 1040nr Professional and courteous service. Hr block 1040nr   If you believe that an IRS employee has not treated you in a professional, fair, and courteous manner, you should tell that employee's supervisor. Hr block 1040nr If the supervisor's response is not satisfactory, you should write to the IRS director for your area or the center where you file your return. Hr block 1040nr Representation. Hr block 1040nr   You can either represent yourself or, with proper written authorization, have someone else represent you in your place. Hr block 1040nr Your representative must be a person allowed to practice before the IRS, such as an attorney, certified public accountant, or enrolled agent. Hr block 1040nr If you are in an interview and ask to consult such a person, then we must stop and reschedule the interview in most cases. Hr block 1040nr   You can have someone accompany you at an interview. Hr block 1040nr You can make sound recordings of any meetings with our examination, appeal, or collection personnel, provided you tell us in writing 10 days before the meeting. Hr block 1040nr Payment of only the correct amount of tax. Hr block 1040nr   You are responsible for paying only the correct amount of tax due under the law—no more, no less. Hr block 1040nr If you cannot pay all of your tax when it is due, you may be able to make monthly installment payments. Hr block 1040nr Help with unresolved tax problems. Hr block 1040nr   The Taxpayer Advocate Service can help you if you have tried unsuccessfully to resolve a problem with the IRS. Hr block 1040nr Your local Taxpayer Advocate can offer you special help if you have a significant hardship as a result of a tax problem. Hr block 1040nr For more information, call toll free 1-877-777-4778 (1-800-829-4059 for TTY/TDD) or write to the Taxpayer Advocate at the IRS office that last contacted you. Hr block 1040nr Appeals and judicial review. Hr block 1040nr   If you disagree with us about the amount of your tax liability or certain collection actions, you have the right to ask the Appeals Office to review your case. Hr block 1040nr You can also ask a court to review your case. Hr block 1040nr Relief from certain penalties and interest. Hr block 1040nr   The IRS will waive penalties when allowed by law if you can show you acted reasonably and in good faith or relied on the incorrect advice of an IRS employee. Hr block 1040nr We will waive interest that is the result of certain errors or delays caused by an IRS employee. Hr block 1040nr Examinations, Appeals, Collections, and Refunds Examinations (audits). Hr block 1040nr   We accept most taxpayers' returns as filed. Hr block 1040nr If we inquire about your return or select it for examination, it does not suggest that you are dishonest. Hr block 1040nr The inquiry or examination may or may not result in more tax. Hr block 1040nr We may close your case without change; or, you may receive a refund. Hr block 1040nr   The process of selecting a return for examination usually begins in one of two ways. Hr block 1040nr First, we use computer programs to identify returns that may have incorrect amounts. Hr block 1040nr These programs may be based on information returns, such as Forms 1099 and W-2, on studies of past examinations, or on certain issues identified by compliance projects. Hr block 1040nr Second, we use information from outside sources that indicates that a return may have incorrect amounts. Hr block 1040nr These sources may include newspapers, public records, and individuals. Hr block 1040nr If we determine that the information is accurate and reliable, we may use it to select a return for examination. Hr block 1040nr   Publication 556, Examination of Returns, Appeal Rights, and Claims for Refund, explains the rules and procedures that we follow in examinations. Hr block 1040nr The following sections give an overview of how we conduct examinations. Hr block 1040nr By mail. Hr block 1040nr   We handle many examinations and inquiries by mail. Hr block 1040nr We will send you a letter with either a request for more information or a reason why we believe a change to your return may be needed. Hr block 1040nr You can respond by mail or you can request a personal interview with an examiner. Hr block 1040nr If you mail us the requested information or provide an explanation, we may or may not agree with you, and we will explain the reasons for any changes. Hr block 1040nr Please do not hesitate to write to us about anything you do not understand. Hr block 1040nr By interview. Hr block 1040nr   If we notify you that we will conduct your examination through a personal interview, or you request such an interview, you have the right to ask that the examination take place at a reasonable time and place that is convenient for both you and the IRS. Hr block 1040nr If our examiner proposes any changes to your return, he or she will explain the reasons for the changes. Hr block 1040nr If you do not agree with these changes, you can meet with the examiner's supervisor. Hr block 1040nr Repeat examinations. Hr block 1040nr   If we examined your return for the same items in either of the 2 previous years and proposed no change to your tax liability, please contact us as soon as possible so we can see if we should discontinue the examination. Hr block 1040nr Appeals. Hr block 1040nr   If you do not agree with the examiner's proposed changes, you can appeal them to the Appeals Office of the IRS. Hr block 1040nr Most differences can be settled without expensive and time-consuming court trials. Hr block 1040nr Your appeal rights are explained in detail in both Publication 5, Your Appeal Rights and How To Prepare a Protest If You Don't Agree, and Publication 556, Examination of Returns, Appeal Rights, and Claims for Refund. Hr block 1040nr   If you do not wish to use the Appeals Office or disagree with its findings, you may be able to take your case to the U. Hr block 1040nr S. Hr block 1040nr Tax Court, U. Hr block 1040nr S. Hr block 1040nr Court of Federal Claims, or the U. Hr block 1040nr S. Hr block 1040nr District Court where you live. Hr block 1040nr If you take your case to court, the IRS will have the burden of proving certain facts if you kept adequate records to show your tax liability, cooperated with the IRS, and meet certain other conditions. Hr block 1040nr If the court agrees with you on most issues in your case and finds that our position was largely unjustified, you may be able to recover some of your administrative and litigation costs. Hr block 1040nr You will not be eligible to recover these costs unless you tried to resolve your case administratively, including going through the appeals system, and you gave us the information necessary to resolve the case. Hr block 1040nr Collections. Hr block 1040nr   Publication 594, The IRS Collection Process, explains your rights and responsibilities regarding payment of federal taxes. Hr block 1040nr It describes: What to do when you owe taxes. Hr block 1040nr It describes what to do if you get a tax bill and what to do if you think your bill is wrong. Hr block 1040nr It also covers making installment payments, delaying collection action, and submitting an offer in compromise. Hr block 1040nr IRS collection actions. Hr block 1040nr It covers liens, releasing a lien, levies, releasing a levy, seizures and sales, and release of property. Hr block 1040nr   Your collection appeal rights are explained in detail in Publication 1660, Collection Appeal Rights. Hr block 1040nr Innocent spouse relief. Hr block 1040nr   Generally, both you and your spouse are responsible, jointly and individually, for paying the full amount of any tax, interest, or penalties due on your joint return. Hr block 1040nr To seek relief from any liability related to your spouse (or former spouse), you must file a claim on Form 8857, Request for Innocent Spouse Relief. Hr block 1040nr In some cases, Form 8857 may need to be filed within 2 years of the date on which the IRS first attempted to collect the tax from you. Hr block 1040nr Do not file Form 8857 with your Form 1040. Hr block 1040nr For more information, see Publication 971, Innocent Spouse Relief, and Form 8857 or you can call the Innocent Spouse office toll-free at 1-855-851-2009. Hr block 1040nr Refunds. Hr block 1040nr   You can file a claim for refund if you think you paid too much tax. Hr block 1040nr You must generally file the claim within 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later. Hr block 1040nr The law generally provides for interest on your refund if it is not paid within 45 days of the date you filed your return or claim for refund. Hr block 1040nr Publication 556, Examination of Returns, Appeal Rights, and Claims for Refund, has more information on refunds. Hr block 1040nr   If you were due a refund but you did not file a return, you must file within 3 years from the date the return was due (including extensions) to get that refund. Hr block 1040nr Prev  Up  Next   Home   More Online Publications
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The American Recovery and Reinvestment Act of 2009: Information Center

Update May 31, 2013 — Some of the credits and other provisions described on this page, which either expired at the end of 2011 or were set to change or expire at the end of 2012, were extended by the American Taxpayer Relief Act of 2012 (ATRA). Updated information is noted, where applicable, on the web pages relating to these specific credits and other provisions.

Update Oct. 31, 2011 — Some of the credits and other provisions described on this page, which were to change or expire at the end of 2010, were extended by the Tax Relief and Job Creation Act of 2010. Additional updated information is noted, where applicable, on the web pages relating to these specific credits and other provisions.

Update July 6, 2010 — For those claiming the homebuyer credit, the deadline for closing (going to settlement) on home purchases was extended from June 30 to Sept. 30, 2010. 

Información en Español

Information for Individuals

Can you benefit from Recovery Act tax credits? Try the White House Tax Savings Tool to find out.

 Many of the Recovery Act provisions are geared toward individuals:

  • Education benefits. The American Opportunity Tax Credit and enhanced benefits for 529 college savings plans help families and students find ways to pay higher education expenses.

  • Earned Income Tax Credit. The EITC increased beginning in  2009.

  • Additional child tax credit. More families qualify for the ACTC starting in 2009.

  • Home energy efficiency and renewable energy incentives. See what you can do to reap tax rewards.

  • Increased Transportation Subsidy. Employer-provided benefits for transit and parking rose beginning in 2009.

  • Homebuyer Credit. Homebuyers who purchased by April 30, 2010, and settled by Sept. 30, 2010, may be eligible for a credit of up to $8,000. Documentation requirements apply. See the first-time homebuyer page for more.

  • COBRA. Workers who lost their jobs between Sept. 1, 2008, and May 31, 2010, may qualify for reduced COBRA health insurance premiums for up to 15 months.

  • Making Work Pay Tax Credit. This credit meant more take-home pay for many Americans in 2009 and 2010. Make sure enough tax is withheld from your pay with the help of the IRS withholding calculator. See Making Work Pay for more.

  • $250 for Social Security Recipients, Veterans and Railroad Retirees. The Economic Recovery Payment was paid by the Social Security Administration, Department of Veterans Affairs and the Railroad Retirement Board in 2009 or, in some cases, 2010. To verify whether you received it, call 1-866-234-2942 and select Option 1 or visit Did I Receive a 2010 Economic Recovery Payment? (no longer available) on this website.

  • Money Back for New Vehicles. Taxpayers who bought new cars and certain other new vehicles in 2009 can deduct the state and local sales taxes they paid as well as other taxes and fees they paid in states with no sales tax.

  • Up to $2,400 in Unemployment Benefits Tax Free in 2009. Individuals should check their tax withholding.

  • Health Coverage Tax Credit. This credit increased from 65 percent to 80 percent of qualified health insurance premiums, and more people are eligible.

Information for Businesses

The following Recovery Act provisions affect businesses:

 Related Items:

 


For information on the Administration's broader economic recovery program, visit

 

Page Last Reviewed or Updated: 26-Mar-2014

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Hr block 1040nr 3. Hr block 1040nr   SIMPLE Plans Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: SIMPLE IRA PlanWho Can Set Up a SIMPLE IRA Plan? Who Can Participate in a SIMPLE IRA Plan? How To Set Up a SIMPLE IRA Plan Notification Requirement Contribution Limits When To Deduct Contributions Where To Deduct Contributions Tax Treatment of Contributions Distributions (Withdrawals) More Information on SIMPLE IRA Plans SIMPLE 401(k) Plan Topics - This chapter discusses: SIMPLE IRA plan SIMPLE 401(k) plan Useful Items - You may want to see: Publications 590 Individual Retirement Arrangements (IRAs) 3998 Choosing A Retirement Solution for Your Small Business 4284 SIMPLE IRA Plan Checklist 4334 SIMPLE IRA Plans for Small Businesses Forms (and Instructions) W-2 Wage and Tax Statement 5304-SIMPLE Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)–Not for Use With a Designated Financial Institution 5305-SIMPLE Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)–for Use With a Designated Financial Institution 8880 Credit for Qualified Retirement Savings Contributions 8881 Credit for Small Employer Pension Plan Startup Costs A savings incentive match plan for employees (SIMPLE plan) is a written arrangement that provides you and your employees with a simplified way to make contributions to provide retirement income. Hr block 1040nr Under a SIMPLE plan, employees can choose to make salary reduction contributions to the plan rather than receiving these amounts as part of their regular pay. Hr block 1040nr In addition, you will contribute matching or nonelective contributions. Hr block 1040nr SIMPLE plans can only be maintained on a calendar-year basis. Hr block 1040nr A SIMPLE plan can be set up in either of the following ways. Hr block 1040nr Using SIMPLE IRAs (SIMPLE IRA plan). Hr block 1040nr As part of a 401(k) plan (SIMPLE 401(k) plan). Hr block 1040nr Many financial institutions will help you set up a SIMPLE plan. Hr block 1040nr SIMPLE IRA Plan A SIMPLE IRA plan is a retirement plan that uses SIMPLE IRAs for each eligible employee. Hr block 1040nr Under a SIMPLE IRA plan, a SIMPLE IRA must be set up for each eligible employee. Hr block 1040nr For the definition of an eligible employee, see Who Can Participate in a SIMPLE IRA Plan , later. Hr block 1040nr Who Can Set Up a SIMPLE IRA Plan? You can set up a SIMPLE IRA plan if you meet both the following requirements. Hr block 1040nr You meet the employee limit. Hr block 1040nr You do not maintain another qualified plan unless the other plan is for collective bargaining employees. Hr block 1040nr Employee limit. Hr block 1040nr   You can set up a SIMPLE IRA plan only if you had 100 or fewer employees who received $5,000 or more in compensation from you for the preceding year. Hr block 1040nr Under this rule, you must take into account all employees employed at any time during the calendar year regardless of whether they are eligible to participate. Hr block 1040nr Employees include self-employed individuals who received earned income and leased employees (defined in chapter 1). Hr block 1040nr   Once you set up a SIMPLE IRA plan, you must continue to meet the 100-employee limit each year you maintain the plan. Hr block 1040nr Grace period for employers who cease to meet the 100-employee limit. Hr block 1040nr   If you maintain the SIMPLE IRA plan for at least 1 year and you cease to meet the 100-employee limit in a later year, you will be treated as meeting it for the 2 calendar years immediately following the calendar year for which you last met it. Hr block 1040nr   A different rule applies if you do not meet the 100-employee limit because of an acquisition, disposition, or similar transaction. Hr block 1040nr Under this rule, the SIMPLE IRA plan will be treated as meeting the 100-employee limit for the year of the transaction and the 2 following years if both the following conditions are satisfied. Hr block 1040nr Coverage under the plan has not significantly changed during the grace period. Hr block 1040nr The SIMPLE IRA plan would have continued to qualify after the transaction if you had remained a separate employer. Hr block 1040nr    The grace period for acquisitions, dispositions, and similar transactions also applies if, because of these types of transactions, you do not meet the rules explained under Other qualified plan or Who Can Participate in a SIMPLE IRA Plan, below. Hr block 1040nr Other qualified plan. Hr block 1040nr   The SIMPLE IRA plan generally must be the only retirement plan to which you make contributions, or to which benefits accrue, for service in any year beginning with the year the SIMPLE IRA plan becomes effective. Hr block 1040nr Exception. Hr block 1040nr   If you maintain a qualified plan for collective bargaining employees, you are permitted to maintain a SIMPLE IRA plan for other employees. Hr block 1040nr Who Can Participate in a SIMPLE IRA Plan? Eligible employee. Hr block 1040nr   Any employee who received at least $5,000 in compensation during any 2 years preceding the current calendar year and is reasonably expected to receive at least $5,000 during the current calendar year is eligible to participate. Hr block 1040nr The term “employee” includes a self-employed individual who received earned income. Hr block 1040nr   You can use less restrictive eligibility requirements (but not more restrictive ones) by eliminating or reducing the prior year compensation requirements, the current year compensation requirements, or both. Hr block 1040nr For example, you can allow participation for employees who received at least $3,000 in compensation during any preceding calendar year. Hr block 1040nr However, you cannot impose any other conditions for participating in a SIMPLE IRA plan. Hr block 1040nr Excludable employees. Hr block 1040nr   The following employees do not need to be covered under a SIMPLE IRA plan. Hr block 1040nr Employees who are covered by a union agreement and whose retirement benefits were bargained for in good faith by the employees' union and you. Hr block 1040nr Nonresident alien employees who have received no U. Hr block 1040nr S. Hr block 1040nr source wages, salaries, or other personal services compensation from you. Hr block 1040nr Compensation. Hr block 1040nr   Compensation for employees is the total wages, tips, and other compensation from the employer subject to federal income tax withholding and the amounts paid for domestic service in a private home, local college club, or local chapter of a college fraternity or sorority. Hr block 1040nr Compensation also includes the employee's salary reduction contributions made under this plan and, if applicable, elective deferrals under a section 401(k) plan, a SARSEP, or a section 403(b) annuity contract and compensation deferred under a section 457 plan required to be reported by the employer on Form W-2. Hr block 1040nr If you are self-employed, compensation is your net earnings from self-employment (line 4 of Short Schedule SE or line 6 of Long Schedule SE (Form 1040)) before subtracting any contributions made to the SIMPLE IRA plan for yourself. Hr block 1040nr How To Set Up a SIMPLE IRA Plan You can use Form 5304-SIMPLE or Form 5305-SIMPLE to set up a SIMPLE IRA plan. Hr block 1040nr Each form is a model savings incentive match plan for employees (SIMPLE) plan document. Hr block 1040nr Which form you use depends on whether you select a financial institution or your employees select the institution that will receive the contributions. Hr block 1040nr Use Form 5304-SIMPLE if you allow each plan participant to select the financial institution for receiving his or her SIMPLE IRA plan contributions. Hr block 1040nr Use Form 5305-SIMPLE if you require that all contributions under the SIMPLE IRA plan be deposited initially at a designated financial institution. Hr block 1040nr The SIMPLE IRA plan is adopted when you have completed all appropriate boxes and blanks on the form and you (and the designated financial institution, if any) have signed it. Hr block 1040nr Keep the original form. Hr block 1040nr Do not file it with the IRS. Hr block 1040nr Other uses of the forms. Hr block 1040nr   If you set up a SIMPLE IRA plan using Form 5304-SIMPLE or Form 5305-SIMPLE, you can use the form to satisfy other requirements, including the following. Hr block 1040nr Meeting employer notification requirements for the SIMPLE IRA plan. Hr block 1040nr Form 5304-SIMPLE and Form 5305-SIMPLE contain a Model Notification to Eligible Employees that provides the necessary information to the employee. Hr block 1040nr Maintaining the SIMPLE IRA plan records and proving you set up a SIMPLE IRA plan for employees. Hr block 1040nr Deadline for setting up a SIMPLE IRA plan. Hr block 1040nr   You can set up a SIMPLE IRA plan effective on any date from January 1 through October 1 of a year, provided you did not previously maintain a SIMPLE IRA plan. Hr block 1040nr This requirement does not apply if you are a new employer that comes into existence after October 1 of the year the SIMPLE IRA plan is set up and you set up a SIMPLE IRA plan as soon as administratively feasible after your business comes into existence. Hr block 1040nr If you previously maintained a SIMPLE IRA plan, you can set up a SIMPLE IRA plan effective only on January 1 of a year. Hr block 1040nr A SIMPLE IRA plan cannot have an effective date that is before the date you actually adopt the plan. Hr block 1040nr Setting up a SIMPLE IRA. Hr block 1040nr   SIMPLE IRAs are the individual retirement accounts or annuities into which the contributions are deposited. Hr block 1040nr A SIMPLE IRA must be set up for each eligible employee. Hr block 1040nr Forms 5305-S, SIMPLE Individual Retirement Trust Account, and 5305-SA, SIMPLE Individual Retirement Custodial Account, are model trust and custodial account documents the participant and the trustee (or custodian) can use for this purpose. Hr block 1040nr   A SIMPLE IRA cannot be a Roth IRA. Hr block 1040nr Contributions to a SIMPLE IRA will not affect the amount an individual can contribute to a Roth or traditional IRA. Hr block 1040nr Deadline for setting up a SIMPLE IRA. Hr block 1040nr   A SIMPLE IRA must be set up for an employee before the first date by which a contribution is required to be deposited into the employee's IRA. Hr block 1040nr See Time limits for contributing funds , later, under Contribution Limits. Hr block 1040nr Credit for startup costs. Hr block 1040nr   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SIMPLE IRA plan that first became effective in 2013. Hr block 1040nr For more information, see Credit for startup costs under Reminders, earlier. Hr block 1040nr Notification Requirement If you adopt a SIMPLE IRA plan, you must notify each employee of the following information before the beginning of the election period. Hr block 1040nr The employee's opportunity to make or change a salary reduction choice under a SIMPLE IRA plan. Hr block 1040nr Your decision to make either matching contributions or nonelective contributions (discussed later). Hr block 1040nr A summary description provided by the financial institution. Hr block 1040nr Written notice that his or her balance can be transferred without cost or penalty if they use a designated financial institution. Hr block 1040nr Election period. Hr block 1040nr   The election period is generally the 60-day period immediately preceding January 1 of a calendar year (November 2 to December 31 of the preceding calendar year). Hr block 1040nr However, the dates of this period are modified if you set up a SIMPLE IRA plan in mid-year (for example, on July 1) or if the 60-day period falls before the first day an employee becomes eligible to participate in the SIMPLE IRA plan. Hr block 1040nr   A SIMPLE IRA plan can provide longer periods for permitting employees to enter into salary reduction agreements or to modify prior agreements. Hr block 1040nr For example, a SIMPLE IRA plan can provide a 90-day election period instead of the 60-day period. Hr block 1040nr Similarly, in addition to the 60-day period, a SIMPLE IRA plan can provide quarterly election periods during the 30 days before each calendar quarter, other than the first quarter of each year. Hr block 1040nr Contribution Limits Contributions are made up of salary reduction contributions and employer contributions. Hr block 1040nr You, as the employer, must make either matching contributions or nonelective contributions, defined later. Hr block 1040nr No other contributions can be made to the SIMPLE IRA plan. Hr block 1040nr These contributions, which you can deduct, must be made timely. Hr block 1040nr See Time limits for contributing funds , later. Hr block 1040nr Salary reduction contributions. Hr block 1040nr   The amount the employee chooses to have you contribute to a SIMPLE IRA on his or her behalf cannot be more than $12,000 for 2013 and 2014. Hr block 1040nr These contributions must be expressed as a percentage of the employee's compensation unless you permit the employee to express them as a specific dollar amount. Hr block 1040nr You cannot place restrictions on the contribution amount (such as limiting the contribution percentage), except to comply with the $12,000 limit. Hr block 1040nr   If you or an employee participates in any other qualified plan during the year and you or your employee have salary reduction contributions (elective deferrals) under those plans, the salary reduction contributions under a SIMPLE IRA plan also count toward the overall annual limit ($17,500 for 2013 and 2014) on exclusion of salary reduction contributions and other elective deferrals. Hr block 1040nr Catch-up contributions. Hr block 1040nr   A SIMPLE IRA plan can permit participants who are age 50 or over at the end of the calendar year to also make catch-up contributions. Hr block 1040nr The catch-up contribution limit for 2013 and 2014 for SIMPLE IRA plans is $2,500. Hr block 1040nr Salary reduction contributions are not treated as catch-up contributions for 2013 or 2014 until they exceed $12,000. Hr block 1040nr However, the catch-up contribution a participant can make for a year cannot exceed the lesser of the following amounts. Hr block 1040nr The catch-up contribution limit. Hr block 1040nr The excess of the participant's compensation over the salary reduction contributions that are not catch-up contributions. Hr block 1040nr Employer matching contributions. Hr block 1040nr   You are generally required to match each employee's salary reduction contributions on a dollar-for-dollar basis up to 3% of the employee's compensation. Hr block 1040nr This requirement does not apply if you make nonelective contributions as discussed later. Hr block 1040nr Example. Hr block 1040nr In 2013, your employee, John Rose, earned $25,000 and chose to defer 5% of his salary. Hr block 1040nr Your net earnings from self-employment are $40,000, and you choose to contribute 10% of your earnings to your SIMPLE IRA. Hr block 1040nr You make 3% matching contributions. Hr block 1040nr The total contribution you make for John is $2,000, figured as follows. Hr block 1040nr Salary reduction contributions ($25,000 × . Hr block 1040nr 05) $1,250 Employer matching contribution ($25,000 × . Hr block 1040nr 03) 750 Total contributions $2,000     The total contribution you make for yourself is $5,200, figured as follows. Hr block 1040nr Salary reduction contributions ($40,000 × . Hr block 1040nr 10) $4,000 Employer matching contribution ($40,000 × . Hr block 1040nr 03) 1,200 Total contributions $5,200 Lower percentage. Hr block 1040nr   If you choose a matching contribution less than 3%, the percentage must be at least 1%. Hr block 1040nr You must notify the employees of the lower match within a reasonable period of time before the 60-day election period (discussed earlier) for the calendar year. Hr block 1040nr You cannot choose a percentage less than 3% for more than 2 years during the 5-year period that ends with (and includes) the year for which the choice is effective. Hr block 1040nr Nonelective contributions. Hr block 1040nr   Instead of matching contributions, you can choose to make nonelective contributions of 2% of compensation on behalf of each eligible employee who has at least $5,000 (or some lower amount you select) of compensation from you for the year. Hr block 1040nr If you make this choice, you must make nonelective contributions whether or not the employee chooses to make salary reduction contributions. Hr block 1040nr Only $255,000 of the employee's compensation can be taken into account to figure the contribution limit in 2013 ($260,000 in 2014). Hr block 1040nr   If you choose this 2% contribution formula, you must notify the employees within a reasonable period of time before the 60-day election period (discussed earlier) for the calendar year. Hr block 1040nr Example 1. Hr block 1040nr In 2013, your employee, Jane Wood, earned $36,000 and chose to have you contribute 10% of her salary. Hr block 1040nr Your net earnings from self-employment are $50,000, and you choose to contribute 10% of your earnings to your SIMPLE IRA. Hr block 1040nr You make a 2% nonelective contribution. Hr block 1040nr Both of you are under age 50. Hr block 1040nr The total contribution you make for Jane is $4,320, figured as follows. Hr block 1040nr Salary reduction contributions ($36,000 × . Hr block 1040nr 10) $3,600 2% nonelective contributions ($36,000 × . Hr block 1040nr 02) 720 Total contributions $4,320     The total contribution you make for yourself is $6,000, figured as follows. Hr block 1040nr Salary reduction contributions ($50,000 × . Hr block 1040nr 10) $5,000 2% nonelective contributions ($50,000 × . Hr block 1040nr 02) 1,000 Total contributions $6,000 Example 2. Hr block 1040nr Using the same facts as in Example 1, above, the maximum contribution you make for Jane or for yourself if you each earned $75,000 is $13,500, figured as follows. Hr block 1040nr Salary reduction contributions (maximum amount allowed) $12,000 2% nonelective contributions ($75,000 × . Hr block 1040nr 02) 1,500 Total contributions $13,500 Time limits for contributing funds. Hr block 1040nr   You must make the salary reduction contributions to the SIMPLE IRA within 30 days after the end of the month in which the amounts would otherwise have been payable to the employee in cash. Hr block 1040nr You must make matching contributions or nonelective contributions by the due date (including extensions) for filing your federal income tax return for the year. Hr block 1040nr Certain plans subject to Department of Labor rules may have an earlier due date for salary reduction contributions. Hr block 1040nr When To Deduct Contributions You can deduct SIMPLE IRA contributions in the tax year within which the calendar year for which contributions were made ends. Hr block 1040nr You can deduct contributions for a particular tax year if they are made for that tax year and are made by the due date (including extensions) of your federal income tax return for that year. Hr block 1040nr Example 1. Hr block 1040nr Your tax year is the fiscal year ending June 30. Hr block 1040nr Contributions under a SIMPLE IRA plan for the calendar year 2013 (including contributions made in 2013 before July 1, 2013) are deductible in the tax year ending June 30, 2014. Hr block 1040nr Example 2. Hr block 1040nr You are a sole proprietor whose tax year is the calendar year. Hr block 1040nr Contributions under a SIMPLE IRA plan for the calendar year 2013 (including contributions made in 2014 by April 15, 2014) are deductible in the 2013 tax year. Hr block 1040nr Where To Deduct Contributions Deduct the contributions you make for your common-law employees on your tax return. Hr block 1040nr 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. Hr block 1040nr Sole proprietors and partners deduct contributions for themselves on line 28 of Form 1040. Hr block 1040nr (If you are a partner, contributions for yourself are shown on the Schedule K-1 (Form 1065) you receive from the partnership. Hr block 1040nr ) Tax Treatment of Contributions You can deduct your contributions and your employees can exclude these contributions from their gross income. Hr block 1040nr SIMPLE IRA plan contributions are not subject to federal income tax withholding. Hr block 1040nr However, salary reduction contributions are subject to social security, Medicare, and federal unemployment (FUTA) taxes. Hr block 1040nr Matching and nonelective contributions are not subject to these taxes. Hr block 1040nr Reporting on Form W-2. Hr block 1040nr   Do not include SIMPLE IRA plan contributions in the “Wages, tips, other compensation” box of Form W-2. Hr block 1040nr You must, however, include them in the “Social security wages” and “Medicare wages and tips” boxes. Hr block 1040nr You must also include them in box 12. Hr block 1040nr Mark the “Retirement plan” checkbox in box 13. Hr block 1040nr For more information, see the Form W-2 instructions. Hr block 1040nr Distributions (Withdrawals) Distributions from a SIMPLE IRA are subject to IRA rules and generally are includible in income for the year received. Hr block 1040nr Tax-free rollovers can be made from one SIMPLE IRA into another SIMPLE IRA. Hr block 1040nr However, a rollover from a SIMPLE IRA to a non-SIMPLE IRA can be made tax free only after a 2-year participation in the SIMPLE IRA plan. Hr block 1040nr Generally, you or your employee must begin to receive distributions from a SIMPLE IRA by April 1 of the first year after the calendar year in which you or your employee reaches age 70½. Hr block 1040nr Early withdrawals generally are subject to a 10% additional tax. Hr block 1040nr However, the additional tax is increased to 25% if funds are withdrawn within 2 years of beginning participation. Hr block 1040nr More information. Hr block 1040nr   See Publication 590 for information about IRA rules, including those on the tax treatment of distributions, rollovers, required distributions, and income tax withholding. Hr block 1040nr More Information on SIMPLE IRA Plans If you need help to set up or maintain a SIMPLE IRA plan, go to the IRS website and search SIMPLE IRA Plan. Hr block 1040nr SIMPLE 401(k) Plan You can adopt a SIMPLE plan as part of a 401(k) plan if you meet the 100-employee limit as discussed earlier under SIMPLE IRA Plan. Hr block 1040nr A SIMPLE 401(k) plan is a qualified retirement plan and generally must satisfy the rules discussed under Qualification Rules in chapter 4, including the required distribution rules. Hr block 1040nr However, a SIMPLE 401(k) plan is not subject to the nondiscrimination and top-heavy rules discussed in chapter 4 if the plan meets the conditions listed below. Hr block 1040nr Under the plan, an employee can choose to have you make salary reduction contributions for the year to a trust in an amount expressed as a percentage of the employee's compensation, but not more than $12,000 for 2013 and 2014. Hr block 1040nr If permitted under the plan, an employee who is age 50 or over can also make a catch-up contribution of up to $2,500 for 2013 and 2014. Hr block 1040nr See Catch-up contributions , earlier under Contribution Limits. Hr block 1040nr You must make either: Matching contributions up to 3% of compensation for the year, or Nonelective contributions of 2% of compensation on behalf of each eligible employee who has at least $5,000 of compensation from you for the year. Hr block 1040nr No other contributions can be made to the trust. Hr block 1040nr No contributions are made, and no benefits accrue, for services during the year under any other qualified retirement plan sponsored by you on behalf of any employee eligible to participate in the SIMPLE 401(k) plan. Hr block 1040nr The employee's rights to any contributions are nonforfeitable. Hr block 1040nr No more than $255,000 of the employee's compensation can be taken into account in figuring matching contributions and nonelective contributions in 2013 ($260,000 in 2014). Hr block 1040nr Compensation is defined earlier in this chapter. Hr block 1040nr Employee notification. Hr block 1040nr   The notification requirement that applies to SIMPLE IRA plans also applies to SIMPLE 401(k) plans. Hr block 1040nr See Notification Requirement in this chapter. Hr block 1040nr Credit for startup costs. Hr block 1040nr   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SIMPLE 401(k) plan that first became effective in 2013. Hr block 1040nr For more information, see Credit for startup costs under Reminders, earlier. Hr block 1040nr Note on Forms. Hr block 1040nr   Please note that Forms 5304-SIMPLE and 5305-SIMPLE can not be used to establish a SIMPLE 401(k) plan. Hr block 1040nr To set up a SIMPLE 401(k) plan, see Adopting a Written Plan in chapter 4. Hr block 1040nr Prev  Up  Next   Home   More Online Publications