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Irs Form 1040ez 2012

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Irs Form 1040ez 2012

Irs form 1040ez 2012 Publication 939 - Main Content Table of Contents General Information Taxation of Periodic PaymentsInvestment in the Contract Expected Return Computation Under the General Rule How To Use Actuarial TablesUnisex Annuity Tables Special Elections Worksheets for Determining Taxable Annuity Actuarial Tables Requesting a Ruling on Taxation of Annuity How To Get Tax HelpLow Income Taxpayer Clinics General Information Some of the terms used in this publication are defined in the following paragraphs. Irs form 1040ez 2012 A pension is generally a series of payments made to you after you retire from work. Irs form 1040ez 2012 Pension payments are made regularly and are for past services with an employer. Irs form 1040ez 2012 An annuity is a series of payments under a contract. Irs form 1040ez 2012 You can buy the contract alone or you can buy it with the help of your employer. Irs form 1040ez 2012 Annuity payments are made regularly for more than one full year. Irs form 1040ez 2012 Note. Irs form 1040ez 2012 Distributions from pensions and annuities follow the same rules as outlined in this publication unless otherwise noted. Irs form 1040ez 2012 Types of pensions and annuities. Irs form 1040ez 2012   Particular types of pensions and annuities include: Fixed period annuities. Irs form 1040ez 2012 You receive definite amounts at regular intervals for a definite length of time. Irs form 1040ez 2012 Annuities for a single life. Irs form 1040ez 2012 You receive definite amounts at regular intervals for life. Irs form 1040ez 2012 The payments end at death. Irs form 1040ez 2012 Joint and survivor annuities. Irs form 1040ez 2012 The first annuitant receives a definite amount at regular intervals for life. Irs form 1040ez 2012 After he or she dies, a second annuitant receives a definite amount at regular intervals for life. Irs form 1040ez 2012 The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant. Irs form 1040ez 2012 Variable annuities. Irs form 1040ez 2012 You receive payments that may vary in amount for a definite length of time or for life. Irs form 1040ez 2012 The amounts you receive may depend upon such variables as profits earned by the pension or annuity funds or cost-of-living indexes. Irs form 1040ez 2012 Disability pensions. Irs form 1040ez 2012 You are under minimum retirement age and receive payments because you retired on disability. Irs form 1040ez 2012 If, at the time of your retirement, you were permanently and totally disabled, you may be eligible for the credit for the elderly or the disabled discussed in Publication 524. Irs form 1040ez 2012 If your annuity starting date is after November 18, 1996, the General Rule cannot be used for the following qualified plans. Irs form 1040ez 2012 A qualified employee plan is an employer's stock bonus, pension, or profit-sharing plan that is for the exclusive benefit of employees or their beneficiaries. Irs form 1040ez 2012 This plan must meet Internal Revenue Code requirements. Irs form 1040ez 2012 It qualifies for special tax benefits, including tax deferral for employer contributions and rollover distributions. Irs form 1040ez 2012 However, you must use the General Rule if you were 75 or over and the annuity payments are guaranteed for more than 5 years. Irs form 1040ez 2012 A qualified employee annuity is a retirement annuity purchased by an employer for an employee under a plan that meets Internal Revenue Code requirements. Irs form 1040ez 2012 A tax-sheltered annuity is a special annuity plan or contract purchased for an employee of a public school or tax-exempt organization. Irs form 1040ez 2012   The General Rule is used to figure the tax treatment of various types of pensions and annuities, including nonqualified employee plans. Irs form 1040ez 2012 A nonqualified employee plan is an employer's plan that does not meet Internal Revenue Code requirements. Irs form 1040ez 2012 It does not qualify for most of the tax benefits of a qualified plan. Irs form 1040ez 2012 Annuity worksheets. Irs form 1040ez 2012   The worksheets found near the end of the text of this publication may be useful to you in figuring the taxable part of your annuity. Irs form 1040ez 2012 Request for a ruling. Irs form 1040ez 2012   If you are unable to determine the income tax treatment of your pension or annuity, you may ask the Internal Revenue Service to figure the taxable part of your annuity payments. Irs form 1040ez 2012 This is treated as a request for a ruling. Irs form 1040ez 2012 See Requesting a Ruling on Taxation of Annuity near the end of this publication. Irs form 1040ez 2012 Withholding tax and estimated tax. Irs form 1040ez 2012   Your pension or annuity is subject to federal income tax withholding unless you choose not to have tax withheld. Irs form 1040ez 2012 If you choose not to have tax withheld from your pension or annuity, or if you do not have enough income tax withheld, you may have to make estimated tax payments. Irs form 1040ez 2012 Taxation of Periodic Payments This section explains how the periodic payments you receive under a pension or annuity plan are taxed under the General Rule. Irs form 1040ez 2012 Periodic payments are amounts paid at regular intervals (such as weekly, monthly, or yearly) for a period of time greater than one year (such as for 15 years or for life). Irs form 1040ez 2012 These payments are also known as amounts received as an annuity. Irs form 1040ez 2012 If you receive an amount from your plan that is a nonperiodic payment (amount not received as an annuity), see Taxation of Nonperiodic Payments in Publication 575. Irs form 1040ez 2012 In general, you can recover your net cost of the pension or annuity tax free over the period you are to receive the payments. Irs form 1040ez 2012 The amount of each payment that is more than the part that represents your net cost is taxable. Irs form 1040ez 2012 Under the General Rule, the part of each annuity payment that represents your net cost is in the same proportion that your investment in the contract is to your expected return. Irs form 1040ez 2012 These terms are explained in the following discussions. Irs form 1040ez 2012 Investment in the Contract In figuring how much of your pension or annuity is taxable under the General Rule, you must figure your investment in the contract. Irs form 1040ez 2012 First, find your net cost of the contract as of the annuity starting date (defined later). Irs form 1040ez 2012 To find this amount, you must first figure the total premiums, contributions, or other amounts paid. Irs form 1040ez 2012 This includes the amounts your employer contributed if you were required to include these amounts in income. Irs form 1040ez 2012 It also includes amounts you actually contributed (except amounts for health and accident benefits and deductible voluntary employee contributions). Irs form 1040ez 2012 From this total cost you subtract: Any refunded premiums, rebates, dividends, or unrepaid loans (any of which were not included in your income) that you received by the later of the annuity starting date or the date on which you received your first payment. Irs form 1040ez 2012 Any additional premiums paid for double indemnity or disability benefits. Irs form 1040ez 2012 Any other tax-free amounts you received under the contract or plan before the later of the dates in (1). Irs form 1040ez 2012 The annuity starting date   is the later of the first day of the first period for which you receive payment under the contract or the date on which the obligation under the contract becomes fixed. Irs form 1040ez 2012 Example. Irs form 1040ez 2012 On January 1 you completed all your payments required under an annuity contract providing for monthly payments starting on August 1, for the period beginning July 1. Irs form 1040ez 2012 The annuity starting date is July 1. Irs form 1040ez 2012 This is the date you use in figuring your investment in the contract and your expected return (discussed later). Irs form 1040ez 2012 Adjustments If any of the following items apply, adjust (add or subtract) your total cost to find your net cost. Irs form 1040ez 2012 Foreign employment. Irs form 1040ez 2012   If you worked abroad, your cost may include contributions by your employer to the retirement plan, but only if those contributions would be excludible from your gross income had they been paid directly to you as compensation. Irs form 1040ez 2012 The contributions that apply are: Contributions before 1963 by your employer, Contributions after 1962 by your employer if the contributions would be excludible from your gross income (without regard to the foreign earned income exclusion) had they been paid directly to you, or Contributions after 1996 by your employer on your behalf if you performed the services of a foreign missionary (a duly ordained, commissioned, or licensed minister of a church or a lay person) if the contributions would be excludible from your gross income had they been paid directly to you. Irs form 1040ez 2012 Foreign employment contributions while a nonresident alien. Irs form 1040ez 2012   In determining your cost, special rules apply if you are a U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 citizen or resident alien who received distributions from a plan to which contributions were made while you were a nonresident alien. Irs form 1040ez 2012 Your contributions and your employer's contributions are not included in your cost if the contributions: Were made based on compensation which was for services performed outside the United States which you were a nonresident alien, and Were not subject to income tax under the laws of the United States or any foreign country, but only if the contribution would have been subject to income tax if they had been paid as cash compensation when the services were performed. Irs form 1040ez 2012 Death benefit exclusion. Irs form 1040ez 2012   If you are the beneficiary of a deceased employee (or former employee), who died before August 21, 1996, you may qualify for a death benefit exclusion of up to $5,000. Irs form 1040ez 2012 The beneficiary of a deceased employee who died after August 20, 1996, will not qualify for the death benefit exclusion. Irs form 1040ez 2012 How to adjust your total cost. Irs form 1040ez 2012   If you are eligible, treat the amount of any allowable death benefit exclusion as additional cost paid by the employee. Irs form 1040ez 2012 Add it to the cost or unrecovered cost of the annuity at the annuity starting date. Irs form 1040ez 2012 See Example 3 under Computation Under General Rule for an illustration of the adjustment to the cost of the contract. Irs form 1040ez 2012 Net cost. Irs form 1040ez 2012   Your total cost plus certain adjustments and minus other amounts already recovered before the annuity starting date is your net cost. Irs form 1040ez 2012 This is the unrecovered investment in the contract as of the annuity starting date. Irs form 1040ez 2012 If your annuity starting date is after 1986, this is the maximum amount that you may recover tax free under the contract. Irs form 1040ez 2012 Refund feature. Irs form 1040ez 2012   Adjustment for the value of the refund feature is only applicable when you report your pension or annuity under the General Rule. Irs form 1040ez 2012 Your annuity contract has a refund feature if: The expected return ( discussed later) of an annuity depends entirely or partly on the life of one or more individuals, The contract provides that payments will be made to a beneficiary or the estate of an annuitant on or after the death of the annuitant if a stated amount or a stated number of payments has not been paid to the annuitant or annuitants before death, and The payments are a refund of the amount you paid for the annuity contract. Irs form 1040ez 2012   If your annuity has a refund feature, you must reduce your net cost of the contract by the value of the refund feature (figured using Table III or VII at the end of this publication, also see How To Use Actuarial Tables , later) to find the investment in the contract. Irs form 1040ez 2012 Zero value of refund feature. Irs form 1040ez 2012   For a joint and survivor annuity, the value of the refund feature is zero if: Both annuitants are age 74 or younger, The payments are guaranteed for less than 2½ years, and The survivor's annuity is at least 50% of the first annuitant's annuity. Irs form 1040ez 2012   For a single-life annuity without survivor benefit, the value of the refund feature is zero if: The payments are guaranteed for less than 2½ years, and The annuitant is: Age 57 or younger (if using the new (unisex) annuity tables), Age 42 or younger (if male and using the old annuity tables), or Age 47 or younger (if female and using the old annuity tables). Irs form 1040ez 2012   If you do not meet these requirements, you will have to figure the value of the refund feature, as explained in the following discussion. Irs form 1040ez 2012 Examples. Irs form 1040ez 2012 The first example shows how to figure the value of the refund feature when there is only one beneficiary. Irs form 1040ez 2012 Example 2 shows how to figure the value of the refund feature when the contract provides, in addition to a whole life annuity, one or more temporary life annuities for the lives of children. Irs form 1040ez 2012 In both examples, the taxpayer elects to use Tables V through VIII. Irs form 1040ez 2012 If you need the value of the refund feature for a joint and survivor annuity, write to the Internal Revenue Service as explained under Requesting a Ruling on Taxation of Annuity near the end of this publication. Irs form 1040ez 2012 Example 1. Irs form 1040ez 2012 At age 65, Barbara bought for $21,053 an annuity with a refund feature. Irs form 1040ez 2012 She will get $100 a month for life. Irs form 1040ez 2012 Barbara's contract provides that if she does not live long enough to recover the full $21,053, similar payments will be made to her surviving beneficiary until a total of $21,053 has been paid under the contract. Irs form 1040ez 2012 In this case, the contract cost and the total guaranteed return are the same ($21,053). Irs form 1040ez 2012 Barbara's investment in the contract is figured as follows: Net cost $21,053 Amount to be received annually $1,200   Number of years for which payment is guaranteed ($21,053 divided by $1,200) 17. Irs form 1040ez 2012 54   Rounded to nearest whole number of years 18   Percentage from Actuarial Table VII for age 65 with 18 years of guaranteed payments 15%   Value of the refund feature (rounded to the nearest dollar)—15% of $21,053 3,158 Investment in the contract, adjusted for value of refund feature $17,895       If the total guaranteed return were less than the $21,053 net cost of the contract, Barbara would apply the appropriate percentage from the tables to the lesser amount. Irs form 1040ez 2012 For example, if the contract guaranteed the $100 monthly payments for 17 years to Barbara's estate or beneficiary if she were to die before receiving all the payments for that period, the total guaranteed return would be $20,400 ($100 × 12 × 17 years). Irs form 1040ez 2012 In this case, the value of the refund feature would be $2,856 (14% of $20,400) and Barbara's investment in the contract would be $18,197 ($21,053 minus $2,856) instead of $17,895. Irs form 1040ez 2012 Example 2. Irs form 1040ez 2012 John died while still employed. Irs form 1040ez 2012 His widow, Eleanor, age 48, receives $171 a month for the rest of her life. Irs form 1040ez 2012 John's son, Elmer, age 9, receives $50 a month until he reaches age 18. Irs form 1040ez 2012 John's contributions to the retirement fund totaled $7,559. Irs form 1040ez 2012 45, with interest on those contributions of $1,602. Irs form 1040ez 2012 53. Irs form 1040ez 2012 The guarantee or total refund feature of the contract is $9,161. Irs form 1040ez 2012 98 ($7,559. Irs form 1040ez 2012 45 plus $1,602. Irs form 1040ez 2012 53). Irs form 1040ez 2012 The adjustment in the investment in the contract is figured as follows: A) Expected return:*       1) Widow's expected return:         Annual annuity ($171 × 12) $2,052       Multiplied by factor from Table V         (nearest age 48) 34. Irs form 1040ez 2012 9 $71,614. Irs form 1040ez 2012 80   2) Child's expected return:         Annual annuity ($50 × 12) $600       Multiplied by factor from         Table VIII (nearest age 9         for term of 9 years) 9. Irs form 1040ez 2012 0 5,400. Irs form 1040ez 2012 00   3) Total expected return   $77,014. Irs form 1040ez 2012 80 B) Adjustment for refund feature:       1) Contributions (net cost) $7,559. Irs form 1040ez 2012 45   2) Guaranteed amount (contributions of $7,559. Irs form 1040ez 2012 45 plus interest of $1,602. Irs form 1040ez 2012 53) $9,161. Irs form 1040ez 2012 98   3) Minus: Expected return under child's (temporary life) annuity (A(2)) 5,400. Irs form 1040ez 2012 00   4) Net guaranteed amount $3,761. Irs form 1040ez 2012 98   5) Multiple from Table VII (nearest age 48 for 2 years duration (recovery of $3,761. Irs form 1040ez 2012 98 at $171 a month to nearest whole year)) 0%   6) Adjustment required for value of refund feature rounded to the nearest whole dollar  (0% × $3,761. Irs form 1040ez 2012 98, the smaller of B(3) or B(6)) 0 *Expected return is the total amount you and other eligible annuitants can expect to receive under the contract. Irs form 1040ez 2012 See the discussion of expected return, later in this publication. Irs form 1040ez 2012 Free IRS help. Irs form 1040ez 2012   If you need to request assistance to figure the value of the refund feature, see Requesting a Ruling on Taxation of Annuity near the end of this publication. Irs form 1040ez 2012 Expected Return Your expected return is the total amount you and other eligible annuitants can expect to receive under the contract. Irs form 1040ez 2012 The following discussions explain how to figure the expected return with each type of annuity. Irs form 1040ez 2012 A person's age, for purposes of figuring the expected return, is the age at the birthday nearest to the annuity starting date. Irs form 1040ez 2012 Fixed period annuity. Irs form 1040ez 2012   If you will get annuity payments for a fixed number of years, without regard to your life expectancy, you must figure your expected return based on that fixed number of years. Irs form 1040ez 2012 It is the total amount you will get beginning at the annuity starting date. Irs form 1040ez 2012 You will receive specific periodic payments for a definite period of time, such as a fixed number of months (but not less than 13). Irs form 1040ez 2012 To figure your expected return, multiply the fixed number of months for which payments are to be made by the amount of the payment specified for each period. Irs form 1040ez 2012 Single life annuity. Irs form 1040ez 2012   If you are to get annuity payments for the rest of your life, find your expected return as follows. Irs form 1040ez 2012 You must multiply the amount of the annual payment by a multiple based on your life expectancy as of the annuity starting date. Irs form 1040ez 2012 These multiples are set out in actuarial Tables I and V near the end of this publication (see How To Use Actuarial Tables , later). Irs form 1040ez 2012   You may need to adjust these multiples if the payments are made quarterly, semiannually, or annually. Irs form 1040ez 2012 See Adjustments to Tables I, II, V, VI, and VIA following Table I. Irs form 1040ez 2012 Example. Irs form 1040ez 2012 Henry bought an annuity contract that will give him an annuity of $500 a month for his life. Irs form 1040ez 2012 If at the annuity starting date Henry's nearest birthday is 66, the expected return is figured as follows: Annual payment ($500 × 12 months) $6,000 Multiple shown in Table V, age 66 × 19. Irs form 1040ez 2012 2 Expected return $115,200 If the payments were to be made to Henry quarterly and the first payment was made one full month after the annuity starting date, Henry would adjust the 19. Irs form 1040ez 2012 2 multiple by +. Irs form 1040ez 2012 1. Irs form 1040ez 2012 His expected return would then be $115,800 ($6,000 × 19. Irs form 1040ez 2012 3). Irs form 1040ez 2012 Annuity for shorter of life or specified period. Irs form 1040ez 2012   With this type of annuity, you are to get annuity payments either for the rest of your life or until the end of a specified period, whichever period is shorter. Irs form 1040ez 2012 To figure your expected return, multiply the amount of your annual payment by a multiple in Table IV or VIII for temporary life annuities. Irs form 1040ez 2012 Find the proper multiple based on your sex (if using Table IV), your age at the annuity starting date, and the nearest whole number of years in the specified period. Irs form 1040ez 2012 Example. Irs form 1040ez 2012 Harriet purchased an annuity this year that will pay her $200 each month for five years or until she dies, whichever period is shorter. Irs form 1040ez 2012 She was age 65 at her birthday nearest the annuity starting date. Irs form 1040ez 2012 She figures the expected return as follows: Annual payment ($200 × 12 months) $2,400 Multiple shown in Table VIII, age 65, 5-year term × 4. Irs form 1040ez 2012 9 Expected return $11,760 She uses Table VIII (not Table IV) because all her contributions were made after June 30, 1986. Irs form 1040ez 2012 See Special Elections, later. Irs form 1040ez 2012 Joint and survivor annuities. Irs form 1040ez 2012   If you have an annuity that pays you a periodic income for life and after your death provides an identical lifetime periodic income to your spouse (or some other person), you figure the expected return based on your combined life expectancies. Irs form 1040ez 2012 To figure the expected return, multiply the annual payment by a multiple in Table II or VI based on your joint life expectancies. Irs form 1040ez 2012 If your payments are made quarterly, semiannually, or annually, you may need to adjust these multiples. Irs form 1040ez 2012 See Adjustments to Tables I, II, V, VI, and VIA following Table I near the end of this publication. Irs form 1040ez 2012 Example. Irs form 1040ez 2012 John bought a joint and survivor annuity providing payments of $500 a month for his life, and, after his death, $500 a month for the remainder of his wife's life. Irs form 1040ez 2012 At John's annuity starting date, his age at his nearest birthday is 70 and his wife's at her nearest birthday is 67. Irs form 1040ez 2012 The expected return is figured as follows: Annual payment ($500 × 12 months) $6,000 Multiple shown in Table VI, ages 67 and 70 × 22. Irs form 1040ez 2012 0 Expected return $132,000 Different payments to survivor. Irs form 1040ez 2012   If your contract provides that payments to a survivor annuitant will be different from the amount you receive, you must use a computation which accounts for both the joint lives of the annuitants and the life of the survivor. Irs form 1040ez 2012 Example 1. Irs form 1040ez 2012 Gerald bought a contract providing for payments to him of $500 a month for life and, after his death, payments to his wife, Mary, of $350 a month for life. Irs form 1040ez 2012 If, at the annuity starting date, Gerald's nearest birthday is 70 and Mary's is 67, the expected return under the contract is figured as follows: Combined multiple for Gerald and Mary, ages 70 and 67 (from Table VI)   22. Irs form 1040ez 2012 0 Multiple for Gerald, age 70 (from Table V)   16. Irs form 1040ez 2012 0 Difference: Multiple applicable to Mary   6. Irs form 1040ez 2012 0 Gerald's annual payment ($500 × 12) $6,000   Gerald's multiple 16. Irs form 1040ez 2012 0   Gerald's expected return   $96,000 Mary's annual payment ($350 × 12) $4,200   Mary's multiple 6. Irs form 1040ez 2012 0   Mary's expected return   25,200 Total expected return under the contract   $121,200 Example 2. Irs form 1040ez 2012 Your husband died while still employed. Irs form 1040ez 2012 Under the terms of his employer's retirement plan, you are entitled to get an immediate annuity of $400 a month for the rest of your life or until you remarry. Irs form 1040ez 2012 Your daughters, Marie and Jean, are each entitled to immediate temporary life annuities of $150 a month until they reach age 18. Irs form 1040ez 2012 You were 50 years old at the annuity starting date. Irs form 1040ez 2012 Marie was 16 and Jean was 14. Irs form 1040ez 2012 Using the multiples shown in Tables V and VIII at the end of this publication, the total expected return on the annuity starting date is $169,680, figured as follows: Widow, age 50 (multiple from Table V—33. Irs form 1040ez 2012 1 × $4,800 annual payment) $158,880 Marie, age 16 for 2 years duration (multiple from Table VIII—2. Irs form 1040ez 2012 0 × $1,800 annual payment) 3,600 Jean, age 14 for 4 years duration (multiple from Table VIII—4. Irs form 1040ez 2012 0 × $1,800 annual payment) 7,200 Total expected return $169,680 No computation of expected return is made based on your husband's age at the date of death because he died before the annuity starting date. Irs form 1040ez 2012 Computation Under the General Rule Note. Irs form 1040ez 2012 Variable annuities use a different computation for determining the exclusion amounts. Irs form 1040ez 2012 See Variable annuities later. Irs form 1040ez 2012 Under the General Rule, you figure the taxable part of your annuity by using the following steps: Step 1. Irs form 1040ez 2012   Figure the amount of your investment in the contract, including any adjustments for the refund feature and the death benefit exclusion, if applicable. Irs form 1040ez 2012 See Death benefit exclusion , earlier. Irs form 1040ez 2012 Step 2. Irs form 1040ez 2012   Figure your expected return. Irs form 1040ez 2012 Step 3. Irs form 1040ez 2012   Divide Step 1 by Step 2 and round to three decimal places. Irs form 1040ez 2012 This will give you the exclusion percentage. Irs form 1040ez 2012 Step 4. Irs form 1040ez 2012   Multiply the exclusion percentage by the first regular periodic payment. Irs form 1040ez 2012 The result is the tax-free part of each pension or annuity payment. Irs form 1040ez 2012   The tax-free part remains the same even if the total payment increases due to variation in the annuity amount such as cost of living increases, or you outlive the life expectancy factor used. Irs form 1040ez 2012 However, if your annuity starting date is after 1986, the total amount of annuity income that is tax free over the years cannot exceed your net cost. Irs form 1040ez 2012   Each annuitant applies the same exclusion percentage to his or her initial payment called for in the contract. Irs form 1040ez 2012 Step 5. Irs form 1040ez 2012   Multiply the tax-free part of each payment (step 4) by the number of payments received during the year. Irs form 1040ez 2012 This will give you the tax-free part of the total payment for the year. Irs form 1040ez 2012    In the first year of your annuity, your first payment or part of your first payment may be for a fraction of the payment period. Irs form 1040ez 2012 This fractional amount is multiplied by your exclusion percentage to get the tax-free part. Irs form 1040ez 2012 Step 6. Irs form 1040ez 2012   Subtract the tax-free part from the total payment you received. Irs form 1040ez 2012 The rest is the taxable part of your pension or annuity. Irs form 1040ez 2012 Example 1. Irs form 1040ez 2012 You purchased an annuity with an investment in the contract of $10,800. Irs form 1040ez 2012 Under its terms, the annuity will pay you $100 a month for life. Irs form 1040ez 2012 The multiple for your age (age 65) is 20. Irs form 1040ez 2012 0 as shown in Table V. Irs form 1040ez 2012 Your expected return is $24,000 (20 × 12 × $100). Irs form 1040ez 2012 Your cost of $10,800, divided by your expected return of $24,000, equals 45. Irs form 1040ez 2012 0%. Irs form 1040ez 2012 This is the percentage you will not have to include in income. Irs form 1040ez 2012 Each year, until your net cost is recovered, $540 (45% of $1,200) will be tax free and you will include $660 ($1,200 − $540) in your income. Irs form 1040ez 2012 If you had received only six payments of $100 ($600) during the year, your exclusion would have been $270 (45% of $100 × 6 payments). Irs form 1040ez 2012 Example 2. Irs form 1040ez 2012 Gerald bought a joint and survivor annuity. Irs form 1040ez 2012 Gerald's investment in the contract is $62,712 and the expected return is $121,200. Irs form 1040ez 2012 The exclusion percentage is 51. Irs form 1040ez 2012 7% ($62,712 ÷ $121,200). Irs form 1040ez 2012 Gerald will receive $500 a month ($6,000 a year). Irs form 1040ez 2012 Each year, until his net cost is recovered, $3,102 (51. Irs form 1040ez 2012 7% of his total payments received of $6,000) will be tax free and $2,898 ($6,000 − $3,102) will be included in his income. Irs form 1040ez 2012 If Gerald dies, his wife will receive $350 a month ($4,200 a year). Irs form 1040ez 2012 If Gerald had not recovered all of his net cost before his death, his wife will use the same exclusion percentage (51. Irs form 1040ez 2012 7%). Irs form 1040ez 2012 Each year, until the entire net cost is recovered, his wife will receive $2,171. Irs form 1040ez 2012 40 (51. Irs form 1040ez 2012 7% of her payments received of $4,200) tax free. Irs form 1040ez 2012 She will include $2,028. Irs form 1040ez 2012 60 ($4,200 − $2,171. Irs form 1040ez 2012 40) in her income tax return. Irs form 1040ez 2012 Example 3. Irs form 1040ez 2012 Using the same facts as Example 2 under Different payments to survivor, you are to receive an annual annuity of $4,800 until you die or remarry. Irs form 1040ez 2012 Your two daughters each receive annual annuities of $1,800 until they reach age 18. Irs form 1040ez 2012 Your husband contributed $25,576 to the plan. Irs form 1040ez 2012 You are eligible for the $5,000 death benefit exclusion because your husband died before August 21, 1996. Irs form 1040ez 2012 Adjusted Investment in the Contract Contributions $25,576 Plus: Death benefit exclusion 5,000 Adjusted investment in the contract $30,576 The total expected return, as previously figured (in Example 2 under Different payments to survivor), is $169,680. Irs form 1040ez 2012 The exclusion percentage of 18. Irs form 1040ez 2012 0% ($30,576 ÷ $169,680) applies to the annuity payments you and each of your daughters receive. Irs form 1040ez 2012 Each full year $864 (18. Irs form 1040ez 2012 0% × $4,800) will be tax free to you, and you must include $3,936 in your income tax return. Irs form 1040ez 2012 Each year, until age 18, $324 (18. Irs form 1040ez 2012 0% × $1,800) of each of your daughters' payments will be tax free and each must include the balance, $1,476, as income on her own income tax return. Irs form 1040ez 2012 Part-year payments. Irs form 1040ez 2012   If you receive payments for only part of a year, apply the exclusion percentage to the first regular periodic payment, and multiply the result by the number of payments received during the year. Irs form 1040ez 2012   If you receive amounts during the year that represent 12 payments, one for each month in that year, and an amount that represents payments for months in a prior year, apply the exclusion percentage to the first regular periodic payment, and multiply the result by the number of payments the amounts received represent. Irs form 1040ez 2012 For instance, if you received amounts during the year that represent the 12 payments for that year plus an amount that represents three payments for a prior year, multiply that amount by the 15 (12 + 3) payments received that the year. Irs form 1040ez 2012   If you received a fractional payment, follow Step 5, discussed earlier. Irs form 1040ez 2012 This gives you the tax-free part of your total payment. Irs form 1040ez 2012 Example. Irs form 1040ez 2012 On September 28, Mary bought an annuity contract for $22,050 that will give her $125 a month for life, beginning October 30. Irs form 1040ez 2012 The applicable multiple from Table V is 23. Irs form 1040ez 2012 3 (age 61). Irs form 1040ez 2012 Her expected return is $34,950 ($125 × 12 × 23. Irs form 1040ez 2012 3). Irs form 1040ez 2012 Mary's investment in the contract of $22,050, divided by her expected return of $34,950, equals 63. Irs form 1040ez 2012 1%. Irs form 1040ez 2012 Each payment received will consist of 63. Irs form 1040ez 2012 1% return of cost and 36. Irs form 1040ez 2012 9% taxable income, until her net cost of the contract is fully recovered. Irs form 1040ez 2012 During the first year, Mary received three payments of $125, or $375, of which $236. Irs form 1040ez 2012 63 (63. Irs form 1040ez 2012 1% × $375) is a return of cost. Irs form 1040ez 2012 The remaining $138. Irs form 1040ez 2012 37 is included in income. Irs form 1040ez 2012 Increase in annuity payments. Irs form 1040ez 2012   The tax-free amount remains the same as the amount figured at the annuity starting date, even if the payment increases. Irs form 1040ez 2012 All increases in the installment payments are fully taxable. Irs form 1040ez 2012   However, if your annuity payments are scheduled to increase at a definite date in the future you must figure the expected return for that annuity using the method described in section 1. Irs form 1040ez 2012 72-5(a)(5) of the regulations. Irs form 1040ez 2012 Example. Irs form 1040ez 2012 Joe's wife died while she was still employed and, as her beneficiary, he began receiving an annuity of $147 per month. Irs form 1040ez 2012 In figuring the taxable part, Joe elects to use Tables V through VIII. Irs form 1040ez 2012 The cost of the contract was $7,938, consisting of the sum of his wife's net contributions, adjusted for any refund feature. Irs form 1040ez 2012 His expected return as of the annuity starting date is $35,280 (age 65, multiple of 20. Irs form 1040ez 2012 0 × $1,764 annual payment). Irs form 1040ez 2012 The exclusion percentage is $7,938 ÷ $35,280, or 22. Irs form 1040ez 2012 5%. Irs form 1040ez 2012 During the year he received 11 monthly payments of $147, or $1,617. Irs form 1040ez 2012 Of this amount, 22. Irs form 1040ez 2012 5% × $147 × 11 ($363. Irs form 1040ez 2012 83) is tax free as a return of cost and the balance of $1,253. Irs form 1040ez 2012 17 is taxable. Irs form 1040ez 2012 Later, because of a cost-of-living increase, his annuity payment was increased to $166 per month, or $1,992 a year (12 × $166). Irs form 1040ez 2012 The tax-free part is still only 22. Irs form 1040ez 2012 5% of the annuity payments as of the annuity starting date (22. Irs form 1040ez 2012 5% × $147 × 12 = $396. Irs form 1040ez 2012 90 for a full year). Irs form 1040ez 2012 The increase of $228 ($1,992 − $1,764 (12 × $147)) is fully taxable. Irs form 1040ez 2012 Variable annuities. Irs form 1040ez 2012   For variable annuity payments, figure the amount of each payment that is tax free by dividing your investment in the contract (adjusted for any refund feature) by the total number of periodic payments you expect to get under the contract. Irs form 1040ez 2012   If the annuity is for a definite period, you determine the total number of payments by multiplying the number of payments to be made each year by the number of years you will receive payments. Irs form 1040ez 2012 If the annuity is for life, you determine the total number of payments by using a multiple from the appropriate actuarial table. Irs form 1040ez 2012 Example. Irs form 1040ez 2012 Frank purchased a variable annuity at age 65. Irs form 1040ez 2012 The total cost of the contract was $12,000. Irs form 1040ez 2012 The annuity starting date is January 1 of the year of purchase. Irs form 1040ez 2012 His annuity will be paid, starting July 1, in variable annual installments for his life. Irs form 1040ez 2012 The tax-free amount of each payment, until he has recovered his cost of his contract, is: Investment in the contract $12,000 Number of expected annual payments (multiple for age 65 from Table V) 20 Tax-free amount of each payment ($12,000 ÷ 20) $600 If Frank's first payment is $920, he includes only $320 ($920 − $600) in his gross income. Irs form 1040ez 2012   If the tax-free amount for a year is more than the payments you receive in that year, you may choose, when you receive the next payment, to refigure the tax-free part. Irs form 1040ez 2012 Divide the amount of the periodic tax-free part that is more than the payment you received by the remaining number of payments you expect. Irs form 1040ez 2012 The result is added to the previously figured periodic tax-free part. Irs form 1040ez 2012 The sum is the amount of each future payment that will be tax free. Irs form 1040ez 2012 Example. Irs form 1040ez 2012 Using the facts of the previous example about Frank, assume that after Frank's $920 payment, he received $500 in the following year, and $1,200 in the year after that. Irs form 1040ez 2012 Frank does not pay tax on the $500 (second year) payment because $600 of each annual pension payment is tax free. Irs form 1040ez 2012 Since the $500 payment is less than the $600 annual tax-free amount, he may choose to refigure his tax-free part when he receives his $1,200 (third year) payment, as follows: Amount tax free in second year $600. Irs form 1040ez 2012 00 Amount received in second year 500. Irs form 1040ez 2012 00 Difference $100. Irs form 1040ez 2012 00 Number of remaining payments after the first 2 payments (age 67, from Table V) 18. Irs form 1040ez 2012 4 Amount to be added to previously determined annual tax-free part ($100 ÷ 18. Irs form 1040ez 2012 4) $5. Irs form 1040ez 2012 43 Revised annual tax-free part for third and later years ($600 + $5. Irs form 1040ez 2012 43) $605. Irs form 1040ez 2012 43 Amount taxable in third year ($1,200 − $605. Irs form 1040ez 2012 43) $594. Irs form 1040ez 2012 57 If you choose to refigure your tax-free amount,   you must file a statement with your income tax return stating that you are refiguring the tax-free amount in accordance with the rules of section 1. Irs form 1040ez 2012 72–4(d)(3) of the Income Tax Regulations. Irs form 1040ez 2012 The statement must also show the following information: The annuity starting date and your age on that date. Irs form 1040ez 2012 The first day of the first period for which you received an annuity payment in the current year. Irs form 1040ez 2012 Your investment in the contract as originally figured. Irs form 1040ez 2012 The total of all amounts received tax free under the annuity from the annuity starting date through the first day of the first period for which you received an annuity payment in the current tax year. Irs form 1040ez 2012 Exclusion Limits Your annuity starting date determines the total amount of annuity income that you can exclude from income over the years. Irs form 1040ez 2012 Exclusion limited to net cost. Irs form 1040ez 2012   If your annuity starting date is after 1986, the total amount of annuity income that you can exclude over the years as a return of your cost cannot exceed your net cost (figured without any reduction for a refund feature). Irs form 1040ez 2012 This is the unrecovered investment in the contract as of the annuity starting date. Irs form 1040ez 2012   If your annuity starting date is after July 1, 1986, any unrecovered net cost at your (or last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. Irs form 1040ez 2012 This deduction is not subject to the 2%-of-adjusted-gross-income limit. Irs form 1040ez 2012 Example 1. Irs form 1040ez 2012 Your annuity starting date is after 1986. Irs form 1040ez 2012 Your total cost is $12,500, and your net cost is $10,000, taking into account certain adjustments. Irs form 1040ez 2012 There is no refund feature. Irs form 1040ez 2012 Your monthly annuity payment is $833. Irs form 1040ez 2012 33. Irs form 1040ez 2012 Your exclusion ratio is 12% and you exclude $100 a month. Irs form 1040ez 2012 Your exclusion ends after 100 months, when you have excluded your net cost of $10,000. Irs form 1040ez 2012 Thereafter, your annuity payments are fully taxable. Irs form 1040ez 2012 Example 2. Irs form 1040ez 2012 The facts are the same as in Example 1, except that there is a refund feature, and you die after 5 years with no surviving annuitant. Irs form 1040ez 2012 The adjustment for the refund feature is $1,000, so the investment in the contract is $9,000. Irs form 1040ez 2012 The exclusion ratio is 10. Irs form 1040ez 2012 8%, and your monthly exclusion is $90. Irs form 1040ez 2012 After 5 years (60 months), you have recovered tax free only $5,400 ($90 x 60). Irs form 1040ez 2012 An itemized deduction for the unrecovered net cost of $4,600 ($10,000 net cost minus $5,400) may be taken on your final income tax return. Irs form 1040ez 2012 Your unrecovered investment is determined without regard to the refund feature adjustment, discussed earlier, under Adjustments. Irs form 1040ez 2012 Exclusion not limited to net cost. Irs form 1040ez 2012   If your annuity starting date was before 1987, you could continue to take your monthly exclusion for as long as you receive your annuity. Irs form 1040ez 2012 If you choose a joint and survivor annuity, your survivor continues to take the survivor's exclusion figured as of the annuity starting date. Irs form 1040ez 2012 The total exclusion may be more than your investment in the contract. Irs form 1040ez 2012 How To Use Actuarial Tables In figuring, under the General Rule, the taxable part of your annuity payments that you are to get for the rest of your life (rather than for a fixed number of years), you must use one or more of the actuarial tables in this publication. Irs form 1040ez 2012 Unisex Annuity Tables Effective July 1, 1986, the Internal Revenue Service adopted new annuity Tables V through VIII, in which your sex is not considered when determining the applicable factor. Irs form 1040ez 2012 These tables correspond to the old Tables I through IV. Irs form 1040ez 2012 In general, Tables V through VIII must be used if you made contributions to the retirement plan after June 30, 1986. Irs form 1040ez 2012 If you made no contributions to the plan after June 30, 1986, generally you must use only Tables I through IV. Irs form 1040ez 2012 However, if you received an annuity payment after June 30, 1986, you may elect to use Tables V through VIII (see Annuity received after June 30, 1986, later). Irs form 1040ez 2012 Special Elections Although you generally must use Tables V through VIII if you made contributions to the retirement plan after June 30, 1986, and Tables I through IV if you made no contributions after June 30, 1986, you can make the following special elections to select which tables to use. Irs form 1040ez 2012 Contributions made both before July 1986 and after June 1986. Irs form 1040ez 2012   If you made contributions to the retirement plan both before July 1986 and after June 1986, you may elect to use Tables I through IV for the pre-July 1986 cost of the contract, and Tables V through VIII for the post-June 1986 cost. Irs form 1040ez 2012 (See the examples below. Irs form 1040ez 2012 )    Making the election. Irs form 1040ez 2012 Attach this statement to your income tax return for the first year in which you receive an annuity:    “I elect to apply the provisions of paragraph (d) of section 1. Irs form 1040ez 2012 72–6 of the Income Tax Regulations. Irs form 1040ez 2012 ”   The statement must also include your name, address, social security number, and the amount of the pre-July 1986 investment in the contract. Irs form 1040ez 2012   If your investment in the contract includes post-June 1986 contributions to the plan, and you do not make the election to use Tables I through IV and Tables V through VIII, then you can only use Tables V through VIII in figuring the taxable part of your annuity. Irs form 1040ez 2012 You must also use Tables V through VIII if you are unable or do not wish to determine the portions of your contributions which were made before July 1, 1986, and after June 30, 1986. Irs form 1040ez 2012    Advantages of election. Irs form 1040ez 2012 In general, a lesser amount of each annual annuity payment is taxable if you separately figure your exclusion ratio for pre-July 1986 and post-June 1986 contributions. Irs form 1040ez 2012    If you intend to make this election, save your records that substantiate your pre-July 1986 and post-June 1986 contributions. Irs form 1040ez 2012 If the death benefit exclusion applies (see discussion, earlier), you do not have to apportion it between the pre-July 1986 and the post-June 1986 investment in the contract. Irs form 1040ez 2012   The following examples illustrate the separate computations required if you elect to use Tables I through IV for your pre-July 1986 investment in the contract and Tables V through VIII for your post-June 1986 investment in the contract. Irs form 1040ez 2012 Example 1. Irs form 1040ez 2012 Bill, who is single, contributed $42,000 to the retirement plan and will receive an annual annuity of $24,000 for life. Irs form 1040ez 2012 Payment of the $42,000 contribution is guaranteed under a refund feature. Irs form 1040ez 2012 Bill is 55 years old as of the annuity starting date. Irs form 1040ez 2012 For figuring the taxable part of Bill's annuity, he chose to make separate computations for his pre-July 1986 investment in the contract of $41,300, and for his post-June 1986 investment in the contract of $700. Irs form 1040ez 2012       Pre- July 1986   Post- June 1986 A. Irs form 1040ez 2012 Adjustment for refund feature         1) Net cost $41,300   $700   2) Annual annuity—$24,000  ($41,300/$42,000 × $24,000) $23,600       ($700/$42,000 × $24,000)     $400   3) Guarantee under contract $41,300   $700   4) No. Irs form 1040ez 2012 of years payments  guaranteed (rounded), A(3) ÷ A(2) 2   2   5) Applicable percentage from  Tables III and VII 1%   0%   6) Adjustment for value of refund  feature, A(5) × smaller of A(1)  or A(3) $413   $0 B. Irs form 1040ez 2012 Investment in the contract         1) Net cost $41,300   $700   2) Minus: Amount in A(6) 413   0   3) Investment in the contract $40,887   $700 C. Irs form 1040ez 2012 Expected return         1) Annual annuity receivable $24,000   $24,000   2) Multiples from Tables I and V 21. Irs form 1040ez 2012 7   28. Irs form 1040ez 2012 6   3) Expected return, C(1) × C(2) $520,800   $686,400 D. Irs form 1040ez 2012 Tax-free part of annuity         1) Exclusion ratio as decimal,  B(3) ÷ C(3) . Irs form 1040ez 2012 079   . Irs form 1040ez 2012 001   2) Tax-free part, C(1) × D(1) $1,896   $24 The tax-free part of Bill's total annuity is $1,920 ($1,896 plus $24). Irs form 1040ez 2012 The taxable part of his annuity is $22,080 ($24,000 minus $1,920). Irs form 1040ez 2012 If the annuity starting date is after 1986, the exclusion over the years cannot exceed the net cost (figured without any reduction for a refund feature). Irs form 1040ez 2012 Example 2. Irs form 1040ez 2012 Al is age 62 at his nearest birthday to the annuity starting date. Irs form 1040ez 2012 Al's wife is age 60 at her nearest birthday to the annuity starting date. Irs form 1040ez 2012 The joint and survivor annuity pays $1,000 per month to Al for life, and $500 per month to Al's surviving wife after his death. Irs form 1040ez 2012 The pre-July 1986 investment in the contract is $53,100 and the post-June 1986 investment in the contract is $7,000. Irs form 1040ez 2012 Al makes the election described in Example 1 . Irs form 1040ez 2012 For purposes of this example, assume the refund feature adjustment is zero. Irs form 1040ez 2012 If an adjustment is required, IRS will figure the amount. Irs form 1040ez 2012 See Requesting a Ruling on Taxation of Annuity near the end of this publication. Irs form 1040ez 2012       Pre-  July 1986   Post-  June 1986 A. Irs form 1040ez 2012 Adjustment for refund feature         1) Net cost $53,100   $7,000   2) Annual annuity—$12,000  ($53,100/$60,100 × $12,000) $10,602       ($7,000/$60,100 × $12,000)     $1,398   3) Guaranteed under the contract $53,100   $7,000   4) Number of years guaranteed,  rounded, A(3) ÷ A(2) 5   5   5) Applicable percentages 0%   0%   6) Refund feature adjustment, A(5) × smaller of A(1) or A(3) 0   0 B. Irs form 1040ez 2012 Investment in the contract         1) Net cost $53,100   $7,000   2) Refund feature adjustment 0   0   3) Investment in the contract adjusted for refund feature $53,100   $7,000 C. Irs form 1040ez 2012 Expected return         1) Multiple for both annuitants from Tables II and VI 25. Irs form 1040ez 2012 4   28. Irs form 1040ez 2012 8   2) Multiple for first annuitant from Tables I and V 16. Irs form 1040ez 2012 9   22. Irs form 1040ez 2012 5   3) Multiple applicable to surviving annuitant, subtract C(2) from C(1) 8. Irs form 1040ez 2012 5   6. Irs form 1040ez 2012 3   4) Annual annuity to surviving annuitant $6,000   $6,000   5) Portion of expected return for surviving annuitant, C(4) × C(3) $51,000   $37,800   6) Annual annuity to first annuitant $12,000   $12,000   7) Plus: Portion of expected return for first annuitant, C(6) × C(2) $202,800   $270,000   8) Expected return for both annuitants, C(5) + C(7) $253,800   $307,800 D. Irs form 1040ez 2012 Tax-free part of annuity         1) Exclusion ratio as a decimal, B(3) ÷ C(8) . Irs form 1040ez 2012 209   . Irs form 1040ez 2012 023   2) Retiree's tax-free part of annuity, C(6) × D(1) $2,508   $276   3) Survivor's tax-free part of annuity, C(4) × D(1) $1,254   $138 The tax-free part of Al's total annuity is $2,784 ($2,508 + $276). Irs form 1040ez 2012 The taxable part of his annuity is $9,216 ($12,000 − $2,784). Irs form 1040ez 2012 The exclusion over the years cannot exceed the net cost of the contract (figured without any reduction for a refund feature) if the annuity starting date is after 1986. Irs form 1040ez 2012 After Al's death, his widow will apply the same exclusion percentages (20. Irs form 1040ez 2012 9% and 2. Irs form 1040ez 2012 3%) to her annual annuity of $6,000 to figure the tax-free part of her annuity. Irs form 1040ez 2012 Annuity received after June 30, 1986. Irs form 1040ez 2012   If you receive an annuity payment after June 30, 1986, (regardless of your annuity starting date), you may elect to treat the entire cost of the contract as post-June 1986 cost (even if you made no post-June 1986 contributions to the plan) and use Tables V through VIII. Irs form 1040ez 2012 Once made, you cannot revoke the election, which will apply to all payments during the year and in any later year. Irs form 1040ez 2012    Make the election by attaching the following statement to your income tax return. Irs form 1040ez 2012    “I elect, under section 1. Irs form 1040ez 2012 72–9 of the Income Tax Regulations, to treat my entire cost of the contract as a post-June 1986 cost of the plan. Irs form 1040ez 2012 ”   The statement must also include your name, address, and social security number. Irs form 1040ez 2012   You should also indicate you are making this election if you are unable or do not wish to determine the parts of your contributions which were made before July 1, 1986, and after June 30, 1986. Irs form 1040ez 2012 Disqualifying form of payment or settlement. Irs form 1040ez 2012   If your annuity starting date is after June 30, 1986, and the contract provides for a disqualifying form of payment or settlement, such as an option to receive a lump sum in full discharge of the obligation under the contract, the entire investment in the contract is treated as post-June 1986 investment in the contract. Irs form 1040ez 2012 See regulations section 1. Irs form 1040ez 2012 72–6(d)(3) for additional examples of disqualifying forms of payment or settlement. Irs form 1040ez 2012 You can find the Income Tax Regulations in many libraries and at Internal Revenue Service Offices. Irs form 1040ez 2012 Worksheets for Determining Taxable Annuity Worksheets I and II. Irs form 1040ez 2012   Worksheets I and II follow for determining your taxable annuity under Regulations Section 1. Irs form 1040ez 2012 72–6(d)(6) Election. Irs form 1040ez 2012 Worksheet I For Determining Taxable Annuity Under Regulations Section 1. Irs form 1040ez 2012 72-6(d)(6) Election For Single Annuitant With No Survivor Annuity               Pre-July 1986   Post-June 1986 A. Irs form 1040ez 2012   Refund Feature Adjustment             1)   Net cost (total cost less returned premiums, dividends, etc. Irs form 1040ez 2012 )             2)   Annual annuity allocation:                   Portion of net cost in A(1) x annual annuity                   Net cost             3)   Guaranteed under the contract             4)   Number of years guaranteed, rounded to whole years:                   A(3) divided by A(2)             5)   Applicable percentages* from Tables III and VII                   *If your annuity meets the three conditions listed in Zero value of refund feature in Investment in the Contract, earlier, both percentages are 0. Irs form 1040ez 2012 If not, the IRS will calculate the refund feature percentage. Irs form 1040ez 2012             6)   Refund feature adjustment:                   A(5) times lesser of A(1) or A(3)                             B. Irs form 1040ez 2012   Investment in the Contract             1)   Net cost:                   A(1)             2)   Refund feature adjustment:                   A(6)             3)   Investment in the contract adjusted for refund feature:                   B(1) minus B(2)                             C. Irs form 1040ez 2012   Expected Return             1)   Annual Annuity:                   12 times monthly annuity**             2)   Expected return multiples from Tables I and V             3)     Expected return:                   C(1) times C(2)                             D. Irs form 1040ez 2012   Tax-Free Part of Annuity             1)     Exclusion ratio, as a decimal rounded to 3 places:                   B(3) divided by C(3)             2)     Tax-free part of annuity:                   C(1) times D(1)             **If the annuity is not paid monthly, figure the amount to enter by using the total number of periodic payments for the year times the amount of the periodic payment. Irs form 1040ez 2012     Worksheet II For Determining Taxable Annuity Under Regulations Section 1. Irs form 1040ez 2012 72-6(d)(6) Election For Joint and Survivor Annuity               Pre-July 1986   Post-June 1986 A. Irs form 1040ez 2012   Refund Feature Adjustment             1)   Net cost (total cost less returned premiums, dividends, etc. Irs form 1040ez 2012 )             2)   Annual annuity allocation:                   Portion of net cost in A(1) x annual annuity                   Net cost             3)   Guaranteed under the contract             4)     Number of years guaranteed, rounded to whole years:                   A(3) divided by A(2)             5)   Applicable percentages*                   *If your annuity meets the three conditions listed in Zero value of refund feature in Investment in the Contract, earlier, both percentages are 0. Irs form 1040ez 2012 If not, the IRS will calculate the refund feature percentage. Irs form 1040ez 2012             6)   Refund feature adjustment:                   A(5) times lesser of A(1) or A(3)                             B. Irs form 1040ez 2012   Investment in the Contract             1)   Net cost:                   A(1)             2)   Refund feature adjustment:                   A(6)             3)   Investment in the contract adjusted for refund future:                   B(1) minus B(2)                             C. Irs form 1040ez 2012   Expected Return             1)   Multiples for both annuitants, Tables II and VI             2)   Multiple for retiree. Irs form 1040ez 2012 Tables I and VI             3)   Multiple for survivor:                   C(1) minus C(2)             4)   Annual annuity to survivor:                   12 times potential monthly rate for survivor**             5)   Expected return for survivor:                   C(3) times C(4)             6)   Annual annuity to retiree:                   12 times monthly rate for retiree**             7)   Expected return for retiree:                   C(2) times C(6)             8)   Total expected return:                   C(5) plus C(7)                             D. Irs form 1040ez 2012   Tax-Free Part of Annuity             1)   Exclusion ratio, as a decimal rounded to 3 places:                   B(3) divided by C(8)             2)   Retiree's tax-free part of annuity:                   C(6) times D(1)             3)   Survivor's tax-free part of annuity, if surviving after death of retiree:                   C(4) times D(1)             **If the annuity is not paid monthly, figure the amount to enter by using the total number of periodic payments for the year times the amount of the periodic payment. Irs form 1040ez 2012   Actuarial Tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial Tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial Tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. 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Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Please click here for the text description of the image. Irs form 1040ez 2012 Actuarial tables Requesting a Ruling on Taxation of Annuity If you are a retiree, or the survivor of an employee or retiree, you may ask the Internal Revenue Service to help you determine the taxation of your annuity. Irs form 1040ez 2012 If you make this request, you are asking for a ruling. Irs form 1040ez 2012 User fee. Irs form 1040ez 2012   Under the law in effect at the time this publication went to print, the IRS must charge a user fee for all ruling requests. Irs form 1040ez 2012 You should call the IRS for the proper fee. Irs form 1040ez 2012 A request solely for the value of the refund feature is not treated as a ruling request and requires no fee. Irs form 1040ez 2012 Send your request to:     Internal Revenue Service  Attention: EP Letter Rulings P. Irs form 1040ez 2012 O. Irs form 1040ez 2012 Box 27063 McPherson Station Washington, DC 20038 The user fee is allowed as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit. Irs form 1040ez 2012 When to make the request. Irs form 1040ez 2012   Please note that requests sent between February 1 and April 15 may experience some delay. Irs form 1040ez 2012 We process requests in the order received, and we will reply to your request as soon as we can process it. Irs form 1040ez 2012 If you do not receive your ruling by the required filing date, you may use Form 4868, Application for Automatic Extension of Time To File U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 Individual Income Tax Return, to get an extension of time to file. Irs form 1040ez 2012 Information you must furnish. Irs form 1040ez 2012   You must furnish the information listed below so the IRS can comply with your request. Irs form 1040ez 2012 Failure to furnish the information will result in a delay in processing your request. Irs form 1040ez 2012 Please send only copies of the following documents, as the IRS retains all material sent for its records: A letter explaining the question(s) you wish to have resolved or the information you need from the ruling. Irs form 1040ez 2012 Copies of any documents showing distributions, annuity rates, and annuity options available to you. Irs form 1040ez 2012 A copy of any Form 1099–R you received since your annuity began. Irs form 1040ez 2012 A statement indicating whether you have filed your return for the year for which you are making the request. Irs form 1040ez 2012 If you have requested an extension of time to file that return, please indicate the extension date. Irs form 1040ez 2012 Your daytime phone number. Irs form 1040ez 2012 Your current mailing address. Irs form 1040ez 2012 A power of attorney if someone other than you, an attorney, a certified public accountant, or an enrolled agent is signing this request. Irs form 1040ez 2012 Form 2848, Power of Attorney and Declaration of Representative, may be used for this purpose. Irs form 1040ez 2012 A completed Tax Information Sheet (or facsimile) shown on the next page. Irs form 1040ez 2012 Sign and date the Disclosure and Perjury Statement (or facsimile) at the end of the tax information sheet. Irs form 1040ez 2012 This statement must be signed by the retiree or the survivor annuitant. Irs form 1040ez 2012 It cannot be signed by a representative. Irs form 1040ez 2012 Tax Information Sheet Please click here for the text description of the image. Irs form 1040ez 2012 Tax Information Sheet Please click here for the text description of the image. Irs form 1040ez 2012 Tax Information Sheet (continued) How To Get Tax Help Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. Irs form 1040ez 2012 Free help with your tax return. Irs form 1040ez 2012   You can get free help preparing your return nationwide from IRS-certified volunteers. Irs form 1040ez 2012 The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. Irs form 1040ez 2012 The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Irs form 1040ez 2012 Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Irs form 1040ez 2012 In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. Irs form 1040ez 2012 To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. Irs form 1040ez 2012 gov, download the IRS2Go app, or call 1-800-906-9887. Irs form 1040ez 2012   As part of the TCE program, AARP offers the Tax-Aide counseling program. Irs form 1040ez 2012 To find the nearest AARP Tax-Aide site, visit AARP's website at www. Irs form 1040ez 2012 aarp. Irs form 1040ez 2012 org/money/taxaide or call 1-888-227-7669. Irs form 1040ez 2012 For more information on these programs, go to IRS. Irs form 1040ez 2012 gov and enter “VITA” in the search box. Irs form 1040ez 2012 Internet. Irs form 1040ez 2012    IRS. Irs form 1040ez 2012 gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. Irs form 1040ez 2012 Download the free IRS2Go app from the iTunes app store or from Google Play. Irs form 1040ez 2012 Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. Irs form 1040ez 2012 Check the status of your 2013 refund with the Where's My Refund? application on IRS. Irs form 1040ez 2012 gov or download the IRS2Go app and select the Refund Status option. Irs form 1040ez 2012 The IRS issues more than 9 out of 10 refunds in less than 21 days. Irs form 1040ez 2012 Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. Irs form 1040ez 2012 You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. Irs form 1040ez 2012 The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Irs form 1040ez 2012 Use the Interactive Tax Assistant (ITA) to research your tax questions. Irs form 1040ez 2012 No need to wait on the phone or stand in line. Irs form 1040ez 2012 The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. Irs form 1040ez 2012 When you reach the response screen, you can print the entire interview and the final response for your records. Irs form 1040ez 2012 New subject areas are added on a regular basis. Irs form 1040ez 2012  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. Irs form 1040ez 2012 gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. Irs form 1040ez 2012 You can use the IRS Tax Map, to search publications and instructions by topic or keyword. Irs form 1040ez 2012 The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. Irs form 1040ez 2012 When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. Irs form 1040ez 2012 Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. Irs form 1040ez 2012 You can also ask the IRS to mail a return or an account transcript to you. Irs form 1040ez 2012 Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. Irs form 1040ez 2012 gov or by calling 1-800-908-9946. Irs form 1040ez 2012 Tax return and tax account transcripts are generally available for the current year and the past three years. Irs form 1040ez 2012 Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. Irs form 1040ez 2012 Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. Irs form 1040ez 2012 If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. Irs form 1040ez 2012 Check the status of your amended return using Where's My Amended Return? Go to IRS. Irs form 1040ez 2012 gov and enter Where's My Amended Return? in the search box. Irs form 1040ez 2012 You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. Irs form 1040ez 2012 It can take up to 3 weeks from the date you mailed it to show up in our system. Irs form 1040ez 2012 Make a payment using one of several safe and convenient electronic payment options available on IRS. Irs form 1040ez 2012 gov. Irs form 1040ez 2012 Select the Payment tab on the front page of IRS. Irs form 1040ez 2012 gov for more information. Irs form 1040ez 2012 Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. Irs form 1040ez 2012 Figure your income tax withholding with the IRS Withholding Calculator on IRS. Irs form 1040ez 2012 gov. Irs form 1040ez 2012 Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. Irs form 1040ez 2012 Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. Irs form 1040ez 2012 gov. Irs form 1040ez 2012 Request an Electronic Filing PIN by going to IRS. Irs form 1040ez 2012 gov and entering Electronic Filing PIN in the search box. Irs form 1040ez 2012 Download forms, instructions and publications, including accessible versions for people with disabilities. Irs form 1040ez 2012 Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. Irs form 1040ez 2012 gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. Irs form 1040ez 2012 An employee can answer questions about your tax account or help you set up a payment plan. Irs form 1040ez 2012 Before you visit, check the Office Locator on IRS. Irs form 1040ez 2012 gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. Irs form 1040ez 2012 If you have a special need, such as a disability, you can request an appointment. Irs form 1040ez 2012 Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. Irs form 1040ez 2012 Apply for an Employer Identification Number (EIN). Irs form 1040ez 2012 Go to IRS. Irs form 1040ez 2012 gov and enter Apply for an EIN in the search box. Irs form 1040ez 2012 Read the Internal Revenue Code, regulations, or other official guidance. Irs form 1040ez 2012 Read Internal Revenue Bulletins. Irs form 1040ez 2012 Sign up to receive local and national tax news and more by email. Irs form 1040ez 2012 Just click on “subscriptions” above the search box on IRS. Irs form 1040ez 2012 gov and choose from a variety of options. Irs form 1040ez 2012    Phone. Irs form 1040ez 2012 You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. Irs form 1040ez 2012 Download the free IRS2Go app from the iTunes app store or from Google Play. Irs form 1040ez 2012 Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. Irs form 1040ez 2012 gov, or download the IRS2Go app. Irs form 1040ez 2012 Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Irs form 1040ez 2012 The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Irs form 1040ez 2012 Mos
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Understanding Your CP2030 Notice

We are proposing changes in income, credits, and deductions reported on your U.S. Corporation Income Tax Return. We compared your information with items reported to us by banks, businesses and other payers.


What you need to do

  • Compare the information in the two columns - "Shown on return" and "Reported to IRS by others". Did you receive the income? If you received the income, was it reported on your tax return? IRS employees search the tax return to locate all income, but they may be unable to determine the source if some items are combined.
  • If it wasn't reported on your tax return, you don't need to file an amended return to report the income. Simply check the box indicating that you agree with all changes, sign and date the CP 2030 response page and return it with your check or money order made payable to the United States Treasury.
  • If you agree with the increase, but you can't pay the entire balance due, you may be able to request a payment plan. If you didn't report the income for another reason, please explain.
  • If you don't agree with the increase, check the box indicating that you don’t agree with some or all of the changes on the CP 2030 response page and return it with a signed statement explaining each item of discrepancy. If applicable, attach copies of documents to support the entries on the original return.

You may want to…

  • Send us the name, address and taxpayer identification number of the other party that received the income if it isn't yours.
  • Notify the payers to correct their records to show the name and taxpayer identification number of the person or business who actually received the income, so future reports to us are accurate.

Answers to Common Questions

Is this a bill?

No. We're asking you to verify the income, credits, and deductions reported on your tax return because they're different from the information we received from other sources. The CP 2030 is only a proposal that offers you an opportunity to disagree, partially agree, or agree with the proposed changes. We haven't charged any additional tax at this time.

Why did it take you so long to contact us about this?

Tax years generally end on Dec. 31, but we don't receive information from banks, businesses, and other payers until much later. Once we receive all the tax returns and payer information, we compare the information you reported with the information third party payers provided to us. It can take 8 months or more to complete this review.

Should I call with my response or mail it in?

If you have a simple response, such as directing us to a specific line on your original return where you reported the income, you can call a Customer Service Representative and provide the information. A toll-free number is listed in the top right hand corner of the notice.

A written response may be required if the issue is more involved, especially if you disagree with some of the proposed changes. You may want to mail copies of payer information documents such as Form(s) 1099 or Schedule(s) K-1. Include any other letters or documents that support your position. You should submit a written statement to fully explain any unusual tax situations.

I need more time to find my records and go through them all. Will you allow me additional time to respond?

Your response is due by the date shown on the notice or we'll use the proposed changes to continue processing the case. If you need more time to research your records, you can call the toll-free number at the top of your notice to request a 30 day extension. We may also provide additional time to respond if you have unusual circumstances. Additional interest and any applicable penalties will accrue on the account during the period of the extension if the tax increase is correct.

Do I have to pay the interest? Can you remove it?

The law requires us to charge interest on any tax that isn't paid by the return due date (Internal Revenue Code Section 6601).

The law doesn't permit us to reduce or remove interest for reasonable cause. However, in limited circumstances we may waive penalties. If you believe you qualify for penalty removal, you should include related information in your response.

What should I do to avoid problems like this in the future?

Keep accurate payment information from banks and other payers to verify you've received all payment information for filing your return. Review the documents to be sure they show your most current address.

Take the following actions when filing your tax return to avoid similar issues in the future:

  • Report specific income type on the correct line on the Form 1120, U.S. Corporation Income Tax Return. For example, rental income should be claimed on Form 1120, line 6 (Gross Rents). For additional information, please see the reporting instructions for Form 1120.
  • If you report income on a line not traditionally reserved for that type of income, provide a statement indicating where the income was reported. For example, your business is related to investment activity and you're reporting all interest income (including amounts reported to the IRS on Form 1099-INT, Interest Income) with your gross receipts on Form 1120, line 1.
  • Always attach a statement identifying the source of the amount reported on Form 1120, line 10 (Other Income).
  • Provide an attached statement explaining your percentage of gross proceeds (ex; reported to us on Form 1099-MISC) that you would be liable to claim on your tax return.
  • Generally, if you receive a Form 1099 for amounts that actually belong to another person, you are considered a nominee recipient. You must file a Form 1099 with the IRS (the same type of Form 1099 you received) for each of the other owners showing the amounts applicable to each.
Page Last Reviewed or Updated: 28-Feb-2014

How to get help

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

The Irs Form 1040ez 2012

Irs form 1040ez 2012 Publication 597 - Main Content Table of Contents Application of Treaty Personal Services Pensions, Annuities, Social Security, and AlimonyRoth IRAs. Irs form 1040ez 2012 Tax-deferred plans. Irs form 1040ez 2012 Investment Income From Canadian Sources Other Income Charitable ContributionsQualified charities. Irs form 1040ez 2012 Income Tax Credits Competent Authority Assistance How To Get Tax HelpText of Treaty U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 Taxation Canadian Taxation Application of Treaty The benefits of the income tax treaty are generally provided on the basis of residence for income tax purposes. Irs form 1040ez 2012 That is, a person who is recognized as a resident of the United States who has income from Canada, will often pay less income tax to Canada on that income than if no treaty was in effect. Irs form 1040ez 2012 Article IV provides definitions of residents of Canada and the United States, and provides specific criteria for applying the treaty in cases where a taxpayer is considered by both countries to be a resident. Irs form 1040ez 2012 Saving clause. Irs form 1040ez 2012   In most instances, a treaty does not affect the right of a country to tax its own residents (including those who are U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 citizens) or of the United States to tax its residents or citizens (including U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 citizens who are residents of the foreign country). Irs form 1040ez 2012 This provision is known as the “saving clause. Irs form 1040ez 2012 ”   For example, an individual who is a U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 citizen and a resident of Canada may have dividend income from a U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 corporation. Irs form 1040ez 2012 The treaty provides a maximum rate of 15% on dividends received by a resident of Canada from sources in the United States. Irs form 1040ez 2012 Even though a resident of Canada, the individual is a U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 citizen and the saving clause overrides the treaty article that limits the U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 tax to 15%. Irs form 1040ez 2012    Exceptions to the saving clause can be found in Article XXIX, paragraph 3. Irs form 1040ez 2012 Treaty-based position. Irs form 1040ez 2012   If you take the position that any U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 tax is overruled or otherwise reduced by a U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 treaty (a treaty-based position), you generally must disclose that position on Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), and attach it to your return. Irs form 1040ez 2012 Personal Services A U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 citizen or resident who is temporarily present in Canada during the tax year is exempt from Canadian income taxes on pay for services performed, or remittances received from the United States, if the citizen or resident qualifies under one of the treaty exemption provisions set out below. Irs form 1040ez 2012 Income from employment (Article XV). Irs form 1040ez 2012   Income U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 residents receive for the performance of dependent personal services in Canada (except as public entertainers) is exempt from Canadian tax if it is not more than $10,000 in Canadian currency for the year. Irs form 1040ez 2012 If it is more than $10,000 for the year, it is exempt only if: The residents are present in Canada for no more than 183 days in any 12-month period beginning or ending in the year concerned, and The income is not paid by, or on behalf of, a Canadian resident and is not borne by a permanent establishment in Canada. Irs form 1040ez 2012    Whether there is a permanent establishment in Canada is determined by the rules set forth in Article V. Irs form 1040ez 2012 Example. Irs form 1040ez 2012 You are a U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 resident employed under an 8-month contract with a Canadian firm to install equipment in their Montreal plant. Irs form 1040ez 2012 During the calendar year you were physically present in Canada for 179 days and were paid $16,500 (Canadian) for your services. Irs form 1040ez 2012 Although you were in Canada for not more than 183 days during the year, your income is not exempt from Canadian income tax because it was paid by a Canadian resident and was more than $10,000 (Canadian) for the year. Irs form 1040ez 2012 Pay received by a U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 resident for work regularly done in more than one country as an employee on a ship, aircraft, motor vehicle, or train operated by a U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 resident is exempt from Canadian tax. Irs form 1040ez 2012 Income from self-employment (Article VII). Irs form 1040ez 2012   Income from services performed (other than those performed as an employee) are taxed in Canada if they are attributable to a permanent establishment in Canada. Irs form 1040ez 2012 This income is treated as business profits, and deductions similar to those allowed under U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 law are allowable. Irs form 1040ez 2012   If you carry on (or have carried on) business in both Canada and the United States, the business profits are attributable to each country based on the profits that the permanent establishment might be expected to make if it were a distinct and separate person engaged in the same or similar activities. Irs form 1040ez 2012 The business profits attributable to the permanent establishment include only those profits derived from assets used, risks assumed, and activities performed by the permanent establishment. Irs form 1040ez 2012   You may be considered to have a permanent establishment if you meet certain conditions. Irs form 1040ez 2012 For more information, see Article V (Permanent Establishment) and Article VII (Business Profits). Irs form 1040ez 2012 Public entertainers (Article XVI). Irs form 1040ez 2012   The provisions under income from employment or income from self-employment do not apply to public entertainers (such as theater, motion picture, radio, or television artistes, musicians, or athletes) from the United States who receive more than $15,000 in gross receipts in Canadian currency, including reimbursed expenses, from their entertainment activities in Canada during the calendar year. Irs form 1040ez 2012 However, this provision for public entertainers does not apply (and the other provisions will apply) to athletes participating in team sports in leagues with regularly scheduled games in both the United States and Canada. Irs form 1040ez 2012 Compensation paid by the U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 Government (Article XIX). Irs form 1040ez 2012   Wages, salaries, and similar income (other than pensions) paid to a U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 citizen by the United States or any of its agencies, instrumentalities, or political subdivisions for discharging governmental functions are exempt from Canadian income tax. Irs form 1040ez 2012   The exemption does not apply to pay for services performed in connection with any trade or business carried on for profit by the United States, or any of its agencies, instrumentalities, or political subdivisions. Irs form 1040ez 2012 Students and apprentices (Article XX). Irs form 1040ez 2012   A full-time student, apprentice, or business trainee who is in Canada to study or acquire business experience is exempt from Canadian income tax on remittances received from any source outside Canada for maintenance, education, or training. Irs form 1040ez 2012 The recipient must be or must have been a U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 resident immediately before visiting Canada. Irs form 1040ez 2012   An apprentice or business trainee can claim this exemption only for a period of one year from the date the individual first arrived in Canada for the purpose of training. Irs form 1040ez 2012 Pensions, Annuities, Social Security, and Alimony Under Article XVIII, pensions and annuities from Canadian sources paid to U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 residents are subject to tax by Canada, but the tax is limited to 15% of the gross amount (if a periodic pension payment) or of the taxable amount (if an annuity). Irs form 1040ez 2012 Canadian pensions and annuities paid to U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 residents may be taxed by the United States, but the amount of any pension included in income for U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 tax purposes may not be more than the amount that would be included in income in Canada if the recipient were a Canadian resident. Irs form 1040ez 2012 Pensions. Irs form 1040ez 2012   A pension includes any payment under a pension or other retirement arrangement, Armed Forces retirement pay, war veterans pensions and allowances, and payments under a sickness, accident, or disability plan. Irs form 1040ez 2012 It includes pensions paid by private employers and the government for services rendered. Irs form 1040ez 2012   Pensions also include payments from individual retirement arrangements (IRAs) in the United States, registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) in Canada. Irs form 1040ez 2012   Pensions do not include social security benefits. Irs form 1040ez 2012 Roth IRAs. Irs form 1040ez 2012   A distribution from a Roth IRA is exempt from Canadian tax to the extent it would be exempt from U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 tax if paid to a U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 resident. Irs form 1040ez 2012 In addition, you may elect to defer any tax in Canada on income accrued within the Roth IRA but not distributed by the Roth IRA. Irs form 1040ez 2012 However, you cannot defer tax on any accruals due to contributions made after you become a Canadian resident. Irs form 1040ez 2012 Tax-deferred plans. Irs form 1040ez 2012   Generally, income that accrues in a Canadian RRSP or RRIF is subject to U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 tax, even if it is not distributed. Irs form 1040ez 2012 However, a U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 citizen or resident can elect to defer U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 tax on income from the plan until the income is distributed. Irs form 1040ez 2012 Form 8891 is used to make the election. Irs form 1040ez 2012 Annuities. Irs form 1040ez 2012    An annuity is a stated sum payable periodically at stated times, during life, or during a specified number of years, under an obligation to make the payments in return for adequate and full consideration (other than services rendered). Irs form 1040ez 2012 Annuities do not include: Non-periodic payments, or An annuity the cost of which was deductible for tax purposes. Irs form 1040ez 2012 Special rules. Irs form 1040ez 2012    Special rules apply to pensions and annuities with respect to: Short-term assignments, Cross-border commuters, and Individuals who participate in a Canadian qualifying plan. Irs form 1040ez 2012 Generally, distributions in such cases are deemed to be earned in the country in which the plan is established, without regard to where the services were rendered. Irs form 1040ez 2012 Social security benefits. Irs form 1040ez 2012   U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 social security benefits paid to a resident of Canada are taxed in Canada as if they were benefits under the Canada Pension Plan, except that 15% of the amount of the benefit is exempt from Canadian tax. Irs form 1040ez 2012 Alimony. Irs form 1040ez 2012   Alimony and similar amounts (including child support payments) from Canadian sources paid to U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 residents are exempt from Canadian tax. Irs form 1040ez 2012 For purposes of U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 tax, these amounts are excluded from income to the same extent they would be excluded from income in Canada if the recipient was a Canadian resident. Irs form 1040ez 2012 Investment Income From Canadian Sources The treaty provides beneficial treatment for certain items of Canadian source income that result from an investment of capital. Irs form 1040ez 2012 Dividends (Article X). Irs form 1040ez 2012   For Canadian source dividends received by U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 residents, the Canadian income tax generally may not be more than 15%. Irs form 1040ez 2012   A 5% rate applies to intercorporate dividends paid from a subsidiary to a parent corporation owning at least 10% of the subsidiary's voting stock. Irs form 1040ez 2012 However, a 10% rate applies if the payer of the dividend is a nonresident-owned Canadian investment corporation. Irs form 1040ez 2012   These rates do not apply if the owner of the dividends carries on, or has carried on, a business in Canada through a permanent establishment and the holding on which the income is paid is effectively connected with that permanent establishment. Irs form 1040ez 2012 Interest (Article XI). Irs form 1040ez 2012   Generally, Canadian source interest received by U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 residents is exempt from Canadian income tax. Irs form 1040ez 2012   The exemption does not apply if the owner of the interest carries on, or has carried on, a business in Canada through a permanent establishment and the debt on which the income is paid is effectively connected with that permanent establishment. Irs form 1040ez 2012 Gains from the sale of property (Article XIII). Irs form 1040ez 2012   Generally, gains from the sale of personal property by a U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 resident having no permanent establishment in Canada are exempt from Canadian income tax. Irs form 1040ez 2012 However, the exemption from Canadian tax does not apply to gains realized by U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 residents on Canadian real property, and on personal property belonging to a permanent establishment in Canada. Irs form 1040ez 2012   If the property subject to Canadian tax is a capital asset and was owned by the U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 resident on September 26, 1980, not as part of the business property of a permanent establishment in Canada, generally the taxable gain is limited to the appreciation after 1984. Irs form 1040ez 2012 Royalties (Article XII). Irs form 1040ez 2012   The following are exempt from Canadian tax: Copyright royalties and other like payments for the production or reproduction of any literary, dramatic, musical, or artistic work (other than payments for motion pictures and works on film, videotape, or other means of reproduction for use in connection with television, which may be taxed at 10%), Payments for the use of, or the right to use, computer software, Payments for the use of, or the right to use, any patent or any information concerning industrial, commercial, or scientific experience (but not within a rental or franchise agreement), and Payments for broadcasting as agreed to in an exchange of notes between the countries. Irs form 1040ez 2012   This rate or exemption does not apply if the owner of the royalties carries on, or has carried on, a business in Canada through a permanent establishment and the right or property on which the income is paid is effectively connected with that permanent establishment. Irs form 1040ez 2012   This exemption (or lower rate) does not apply to royalties to explore for or to exploit mineral deposits, timber, and other natural resources. Irs form 1040ez 2012 Other Income Generally, Canadian source income that is not specifically mentioned in the treaty, may be taxed by Canada. Irs form 1040ez 2012 Gambling losses. Irs form 1040ez 2012   Canadian residents may deduct gambling losses in the U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 against gambling winnings in the U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 in the same manner as a U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 resident. Irs form 1040ez 2012 Charitable Contributions United States income tax return. Irs form 1040ez 2012   Under Article XXI, you may deduct contributions to certain qualified Canadian charitable organizations on your United States income tax return. Irs form 1040ez 2012 Besides being subject to the overall limits applicable to all your charitable contributions under U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 tax law, your charitable contributions to Canadian organizations (other than contributions to a college or university at which you or a member of your family is or was enrolled) are subject to the U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 percentage limits on charitable contributions, applied to your Canadian source income. Irs form 1040ez 2012 If your return does not include gross income from Canadian sources, charitable contributions to Canadian organizations are generally not deductible. Irs form 1040ez 2012 Example. Irs form 1040ez 2012 You are a U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 citizen living in Canada. Irs form 1040ez 2012 You have both U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 and Canadian source income. Irs form 1040ez 2012 During your tax year, you contribute to Canadian organizations that would qualify as charitable organizations under U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 tax law if they were U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 organizations. Irs form 1040ez 2012 To figure the maximum amount of the contribution to Canadian organizations that you can deduct on your U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 income tax return, multiply your adjusted gross income from Canadian sources by the percentage limit that applies to contributions under U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 income tax law. Irs form 1040ez 2012 Then include this amount on your return along with all your domestic charitable contributions, subject to the appropriate percentage limit required for contributions under U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 income tax law. Irs form 1040ez 2012 The appropriate percentage limit for U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 tax purposes is applied to your total adjusted gross income from all sources. Irs form 1040ez 2012 Qualified charities. Irs form 1040ez 2012   These Canadian organizations must meet the qualifications that a U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 charitable organization must meet under U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 tax law. Irs form 1040ez 2012 Usually an organization will notify you if it qualifies. Irs form 1040ez 2012 For further information on charitable contributions and the U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 percentage limits, see Publication 526, Charitable Contributions. Irs form 1040ez 2012 Canadian income tax return. Irs form 1040ez 2012   Under certain conditions, contributions to qualified U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 charitable organizations may also be claimed on your Canadian income tax return if you are a Canadian resident. Irs form 1040ez 2012 Income Tax Credits The treaty contains a credit provision (Article XXIV) for the elimination of double taxation. Irs form 1040ez 2012 In general, the United States and Canada both allow a credit against their income tax for the income tax paid to the other country on income from sources in that other country. Irs form 1040ez 2012 For detailed discussions of the U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 income tax treatment of tax paid to foreign countries, see Publication 514, Foreign Tax Credit for Individuals. Irs form 1040ez 2012 See paragraphs (4) and (5) of Article XXIV for certain provisions that affect the computation of the credit allowed by the United States for Canadian income taxes paid by U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 citizens residing in Canada. Irs form 1040ez 2012 Competent Authority Assistance Under Article XXVI, a U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 citizen or resident may request assistance from the U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 competent authority when the actions of Canada, the United States, or both, potentially result in double taxation or taxation contrary to the treaty. Irs form 1040ez 2012 The U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 competent authority may then consult with the Canadian competent authority to determine if the double taxation or denial of treaty benefits in question can be avoided. Irs form 1040ez 2012 If the competent authorities are not able to reach agreement in a case, binding arbitration proceedings may apply. Irs form 1040ez 2012 It is important that your request for competent authority assistance be made as soon as you have been notified by either Canada or the United States of proposed adjustments that would result in denial of treaty benefits or in double taxation. Irs form 1040ez 2012 This is so that implementation of any agreement reached by the competent authorities is not barred by administrative, legal, or procedural barriers. Irs form 1040ez 2012 For information that you should include with your request for competent authority assistance, see Revenue Procedure 2006-54, 2006-49 IRB 1035, available at www. Irs form 1040ez 2012 irs. Irs form 1040ez 2012 gov/irb/2006-49_IRB/ar13. Irs form 1040ez 2012 html. Irs form 1040ez 2012 The request should be addressed to:  Deputy Commissioner (International) Large Business and International Division Attn: Office of Tax Treaty  Internal Revenue Service 1111 Constitution Ave. Irs form 1040ez 2012 , NW Routing: MA3-322A Washington, D. Irs form 1040ez 2012 C. Irs form 1040ez 2012 20024 In addition to a timely request for assistance, you should take the following measures: File a timely protective claim for credit or refund of U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 taxes on Form 1040X, Form 1120X, or amended Form 1041, whichever is appropriate. Irs form 1040ez 2012 This will, among other things, give you the benefit of a foreign tax credit in case you do not qualify for the treaty benefit in question. Irs form 1040ez 2012 For figuring this credit, attach either Form 1116, Foreign Tax Credit (Individual, Estate, or Trust), or Form 1118, Foreign Tax Credit — Corporations, as appropriate. Irs form 1040ez 2012 Attach your protective claim to your request for competent authority assistance. Irs form 1040ez 2012 Take appropriate action under Canadian procedures to avoid the lapse or termination of your right of appeal under Canadian income tax law. Irs form 1040ez 2012 How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS and the Canada Revenue Agency in several ways. Irs form 1040ez 2012 Text of Treaty You can get the text of the U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 —Canada income tax treaty from: Superintendent of Documents U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 Government Printing Office P. Irs form 1040ez 2012 O. Irs form 1040ez 2012 Box 371954 Pittsburgh, PA 15250-7954 The treaty can also be found on the Internet at IRS. Irs form 1040ez 2012 gov. Irs form 1040ez 2012 U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 Taxation During the filing season, the IRS conducts a taxpayer assistance program in Canada. Irs form 1040ez 2012 To find out if IRS personnel will be in your area, you should contact the consular office at the nearest U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 Embassy or consulate. Irs form 1040ez 2012 Mail. Irs form 1040ez 2012 For answers to technical or account questions, you can write to:   Internal Revenue Service International Section Philadelphia, PA 19255-0525 Phone. Irs form 1040ez 2012 You can call the IRS for help at (267) 941-1000 (not a toll-free call). Irs form 1040ez 2012 Canadian Taxation You can get information on Canadian taxation from the Canada Revenue Agency. Irs form 1040ez 2012 The International Tax Services Office can be contacted on 1-800-267-5177 (from anywhere in Canada and the U. Irs form 1040ez 2012 S. Irs form 1040ez 2012 ) or on the Internet at www. Irs form 1040ez 2012 cra-arc. Irs form 1040ez 2012 gc. Irs form 1040ez 2012 ca. 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