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Irs Gov Form 1040

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Irs Gov Form 1040

Irs gov form 1040 3. Irs gov form 1040   Farm Income Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Schedule F (Form 1040) Sales of Farm ProductsSchedule F. Irs gov form 1040 Form 4797. Irs gov form 1040 Sales Caused by Weather-Related Conditions Rents (Including Crop Shares)Crop Shares Agricultural Program PaymentsCommodity Credit Corporation (CCC) Loans Conservation Reserve Program (CRP) Crop Insurance and Crop Disaster Payments Feed Assistance and Payments Cost-Sharing Exclusion (Improvements) Payments Under the Farm Security and Rural Investment Act of 2002 and Under the Food, Conservation, and Energy Act of 2008 Tobacco Quota Buyout Program Payments Other Payments Payment to More Than One Person Income From CooperativesPatronage Dividends Per-Unit Retain Certificates Cancellation of DebtGeneral Rule Exceptions Exclusions Income From Other SourcesSod. Irs gov form 1040 Granting the right to remove deposits. Irs gov form 1040 Income Averaging for FarmersElected Farm Income (EFI) How To Figure the Tax Effect on Other Tax Determinations Tax for Certain Children Who Have Unearned Income Alternative Minimum Tax (AMT) Schedule J Introduction You may receive income from many sources. Irs gov form 1040 You must report the income from all the different sources on your tax return, unless it is excluded by law. Irs gov form 1040 Where you report the income on your tax return depends on its source. Irs gov form 1040 This chapter discusses farm income you report on Schedule F (Form 1040), Profit or Loss From Farming. Irs gov form 1040 For information on where to report other income, see the Instructions for Form 1040, U. Irs gov form 1040 S. Irs gov form 1040 Individual Income Tax Return. Irs gov form 1040 Accounting method. Irs gov form 1040   The rules discussed in this chapter assume you use the cash method of accounting. Irs gov form 1040 Under the cash method, you generally include an item of income in gross income in the year you receive it. Irs gov form 1040 See Cash Method in chapter 2. Irs gov form 1040   If you use an accrual method of accounting, different rules may apply to your situation. Irs gov form 1040 See Accrual Method in chapter 2. Irs gov form 1040 Topics - This chapter discusses: Schedule F Sales of farm products Rents (including crop shares) Agricultural program payments Income from cooperatives Cancellation of debt Income from other sources Income averaging for farmers Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 550 Investment Income and Expenses 908 Bankruptcy Tax Guide 925 Passive Activity and At-Risk Rules 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Form (and Instructions) 982 Reduction of Tax Attributes Due to Discharge of Indebtedness Sch E (Form 1040) Supplemental Income and Loss Sch J (Form 1040) Income Averaging for Farmers and Fishermen 1099-G Certain Government Payments 1099-PATR Taxable Distributions Received From Cooperatives 4797 Sales of Business Property 4835 Farm Rental Income and Expenses See chapter 16 for information about getting publications and forms. Irs gov form 1040 Schedule F (Form 1040) Individuals, trusts, and partnerships report farm income on Schedule F (Form 1040), Profit or Loss From Farming. Irs gov form 1040 Use this schedule to figure the net profit or loss from regular farming operations. Irs gov form 1040 Income from farming reported on Schedule F includes amounts you receive from cultivating, operating, or managing a farm for gain or profit, either as owner or tenant. Irs gov form 1040 This includes income from operating a stock, dairy, poultry, fish, fruit, or truck farm and income from operating a plantation, ranch, range, or orchard. Irs gov form 1040 It also includes income from the sale of crop shares if you materially participate in producing the crop. Irs gov form 1040 See Rents (Including Crop Shares) , later. Irs gov form 1040 Income received from operating a nursery, which specializes in growing ornamental plants, is considered to be income from farming. Irs gov form 1040 Income reported on Schedule F does not include gains or losses from sales or other dispositions of the following farm assets. Irs gov form 1040 Land. Irs gov form 1040 Depreciable farm equipment. Irs gov form 1040 Buildings and structures. Irs gov form 1040 Livestock held for draft, breeding, sport, or dairy purposes. Irs gov form 1040 Gains and losses from most dispositions of farm assets are discussed in chapters 8 and 9. Irs gov form 1040 Gains and losses from casualties, thefts, and condemnations are discussed in chapter 11. Irs gov form 1040 Sales of Farm Products Where to report. Irs gov form 1040    Table 3-1 shows where to report the sale of farm products on your tax return. Irs gov form 1040 Schedule F. Irs gov form 1040   Amounts received from the sales of products you raised on your farm for sale (or bought for resale), such as livestock, produce, or grains, are reported on Schedule F. Irs gov form 1040 This includes money and the fair market value of any property or services you receive. Irs gov form 1040 When you sell farm products bought for resale, your profit or loss is the difference between your selling price (money plus the fair market value of any property) and your basis in the item (usually the cost). Irs gov form 1040 See chapter 6 for information on the basis of assets. Irs gov form 1040 You generally report these amounts on Schedule F for the year you receive payment. Irs gov form 1040 Example. Irs gov form 1040 In 2012, you bought 20 feeder calves for $11,000 for resale. Irs gov form 1040 You sold them in 2013 for $21,000. Irs gov form 1040 You report the $21,000 sales price on Schedule F, line 1b, subtract your $11,000 basis on line 1d, and report the resulting $10,000 profit on line 1e. Irs gov form 1040 Form 4797. Irs gov form 1040   Sales of livestock held for draft, breeding, sport, or dairy purposes may result in ordinary or capital gains or losses, depending on the circumstances. Irs gov form 1040 In either case, you should always report these sales on Form 4797 instead of Schedule F. Irs gov form 1040 See Livestock under Ordinary or Capital Gain or Loss in chapter 8. Irs gov form 1040 Animals you do not hold primarily for sale are considered business assets of your farm. Irs gov form 1040 Table 3-1. Irs gov form 1040 Where To Report Sales of Farm Products Item Sold Schedule F Form 4797 Farm products raised for sale X   Farm products bought for resale X   Farm assets not held primarily for sale, such as livestock held for draft, breeding, sport, or dairy purposes (bought or raised)   X Sale by agent. Irs gov form 1040   If your agent sells your farm products, you have constructive receipt of the income when your agent receives payment and you must include the net proceeds from the sale in gross income for the year the agent receives payment. Irs gov form 1040 This applies even if your agent pays you in a later year. Irs gov form 1040 For a discussion on constructive receipt of income, see Cash Method under Accounting Methods in chapter 2. Irs gov form 1040 Sales Caused by Weather-Related Conditions If you sell or exchange more livestock, including poultry, than you normally would in a year because of a drought, flood, or other weather-related condition, you may be able to postpone reporting the gain from the additional animals until the next year. Irs gov form 1040 You must meet all the following conditions to qualify. Irs gov form 1040 Your principal trade or business is farming. Irs gov form 1040 You use the cash method of accounting. Irs gov form 1040 You can show that, under your usual business practices, you would not have sold or exchanged the additional animals this year except for the weather-related condition. Irs gov form 1040 The weather-related condition caused an area to be designated as eligible for assistance by the federal government. Irs gov form 1040 Sales or exchanges made before an area became eligible for federal assistance qualify if the weather-related condition that caused the sale or exchange also caused the area to be designated as eligible for federal assistance. Irs gov form 1040 The designation can be made by the President, the Department of Agriculture (or any of its agencies), or by other federal departments or agencies. Irs gov form 1040 A weather-related sale or exchange of livestock (other than poultry) held for draft, breeding, or dairy purposes may be an involuntary conversion. Irs gov form 1040 See Other Involuntary Conversions in chapter 11. Irs gov form 1040 Usual business practice. Irs gov form 1040   You must determine the number of animals you would have sold had you followed your usual business practice in the absence of the weather-related condition. Irs gov form 1040 Do this by considering all the facts and circumstances, but do not take into account your sales in any earlier year for which you postponed the gain. Irs gov form 1040 If you have not yet established a usual business practice, rely on the usual business practices of similarly situated farmers in your general region. Irs gov form 1040 Connection with affected area. Irs gov form 1040   The livestock does not have to be raised or sold in an area affected by a weather-related condition for the postponement to apply. Irs gov form 1040 However, the sale must occur solely because of a weather-related condition that affected the water, grazing, or other requirements of the livestock. Irs gov form 1040 This requirement generally will not be met if the costs of feed, water, or other requirements of the livestock affected by the weather-related condition are not substantial in relation to the total costs of holding the livestock. Irs gov form 1040 Classes of livestock. Irs gov form 1040   You must figure the amount to be postponed separately for each generic class of animals—for example, hogs, sheep, and cattle. Irs gov form 1040 Do not separate animals into classes based on age, sex, or breed. Irs gov form 1040 Amount to be postponed. Irs gov form 1040   Follow these steps to figure the amount of gain to be postponed for each class of animals. Irs gov form 1040 Divide the total income realized from the sale of all livestock in the class during the tax year by the total number of such livestock sold. Irs gov form 1040 For this purpose, do not treat any postponed gain from the previous year as income received from the sale of livestock. Irs gov form 1040 Multiply the result in (1) by the excess number of such livestock sold solely because of weather-related conditions. Irs gov form 1040 Example. Irs gov form 1040 You are a calendar year taxpayer and you normally sell 100 head of beef cattle a year. Irs gov form 1040 As a result of drought, you sold 135 head during 2012. Irs gov form 1040 You realized $70,200 from the sale. Irs gov form 1040 On August 9, 2012, as a result of drought, the affected area was declared a disaster area eligible for federal assistance. Irs gov form 1040 The income you can postpone until 2013 is $18,200 [($70,200 ÷ 135) × 35]. Irs gov form 1040 How to postpone gain. Irs gov form 1040   To postpone gain, attach a statement to your tax return for the year of the sale. Irs gov form 1040 The statement must include your name and address and give the following information for each class of livestock for which you are postponing gain. Irs gov form 1040 A statement that you are postponing gain under Internal Revenue Code (IRC) section 451(e). Irs gov form 1040 Evidence of the weather-related conditions that forced the early sale or exchange of the livestock and the date, if known, on which an area was designated as eligible for assistance by the federal government because of weather-related conditions. Irs gov form 1040 A statement explaining the relationship of the area affected by the weather-related condition to your early sale or exchange of the livestock. Irs gov form 1040 The number of animals sold in each of the 3 preceding years. Irs gov form 1040 The number of animals you would have sold in the tax year had you followed your normal business practice in the absence of weather-related conditions. Irs gov form 1040 The total number of animals sold and the number sold because of weather-related conditions during the tax year. Irs gov form 1040 A computation, as described above, of the income to be postponed for each class of livestock. Irs gov form 1040   Generally, you must file the statement and the return by the due date of the return, including extensions. Irs gov form 1040 However, for sales or exchanges treated as an involuntary conversion from weather-related sales of livestock in an area eligible for federal assistance (discussed in chapter 11), you can file this statement at any time during the replacement period. Irs gov form 1040 For other sales or exchanges, if you timely filed your return for the year without postponing gain, you can still postpone gain by filing an amended return within 6 months of the due date of the return (excluding extensions). Irs gov form 1040 Attach the statement to the amended return and write “Filed pursuant to section 301. Irs gov form 1040 9100-2” at the top of the amended return. Irs gov form 1040 File the amended return at the same address you filed the original return. Irs gov form 1040 Once you have filed the statement, you can cancel your postponement of gain only with the approval of the IRS. Irs gov form 1040 Rents (Including Crop Shares) The rent you receive for the use of your farmland is generally rental income, not farm income. Irs gov form 1040 However, if you materially participate in farming operations on the land, the rent is farm income. Irs gov form 1040 See Landlord Participation in Farming in chapter 12. Irs gov form 1040 Pasture income and rental. Irs gov form 1040   If you pasture someone else's livestock and take care of them for a fee, the income is from your farming business. Irs gov form 1040 You must enter it as Other income on Schedule F. Irs gov form 1040 If you simply rent your pasture for a flat cash amount without providing services, report the income as rent on Part I of Schedule E (Form 1040), Supplemental Income and Loss. Irs gov form 1040 Crop Shares You must include rent you receive in the form of crop shares in income in the year you convert the shares to money or the equivalent of money. Irs gov form 1040 It does not matter whether you use the cash method of accounting or an accrual method of accounting. Irs gov form 1040 If you materially participate in operating a farm from which you receive rent in the form of crop shares or livestock, the rental income is included in self-employment income. Irs gov form 1040 See Landlord Participation in Farming in chapter 12. Irs gov form 1040 Report the rental income on Schedule F. Irs gov form 1040 If you do not materially participate in operating the farm, report this income on Form 4835 and carry the net income or loss to Schedule E (Form 1040). Irs gov form 1040 The income is not included in self-employment income. Irs gov form 1040 Crop shares you use to feed livestock. Irs gov form 1040   Crop shares you receive as a landlord and feed to your livestock are considered converted to money when fed to the livestock. Irs gov form 1040 You must include the fair market value of the crop shares in income at that time. Irs gov form 1040 You are entitled to a business expense deduction for the livestock feed in the same amount and at the same time you include the fair market value of the crop share as rental income. Irs gov form 1040 Although these two transactions cancel each other for figuring adjusted gross income on Form 1040, they may be necessary to figure your self-employment tax. Irs gov form 1040 See  chapter 12. Irs gov form 1040 Crop shares you give to others (gift). Irs gov form 1040   Crop shares you receive as a landlord and give to others are considered converted to money when you make the gift. Irs gov form 1040 You must report the fair market value of the crop share as income, even though someone else receives payment for the crop share. Irs gov form 1040 Example. Irs gov form 1040 A tenant farmed part of your land under a crop-share arrangement. Irs gov form 1040 The tenant harvested and delivered the crop in your name to an elevator company. Irs gov form 1040 Before selling any of the crop, you instructed the elevator company to cancel your warehouse receipt and make out new warehouse receipts in equal amounts of the crop in the names of your children. Irs gov form 1040 They sell their crop shares in the following year and the elevator company makes payments directly to your children. Irs gov form 1040 In this situation, you are considered to have received rental income and then made a gift of that income. Irs gov form 1040 You must include the fair market value of the crop shares in your income for the tax year you gave the crop shares to your children. Irs gov form 1040 Crop share loss. Irs gov form 1040   If you are involved in a rental or crop-share lease arrangement, any loss from these activities may be subject to the limits under the passive loss rules. Irs gov form 1040 See Publication 925 for information on these rules. Irs gov form 1040 Agricultural Program Payments You must include in income most government payments, such as those for approved conservation practices, direct payments, and counter-cyclical payments, whether you receive them in cash, materials, services, or commodity certificates. Irs gov form 1040 However, you can exclude from income some payments you receive under certain cost-sharing conservation programs. Irs gov form 1040 See Cost-Sharing Exclusion (Improvements) , later. Irs gov form 1040 Report the agricultural program payment on the appropriate line of Schedule F, Part I. Irs gov form 1040 Report the full amount even if you return a government check for cancellation, refund any of the payment you receive, or the government collects all or part of the payment from you by reducing the amount of some other payment or Commodity Credit Corporation (CCC) loan. Irs gov form 1040 However, you can deduct the amount you refund or return or that reduces some other payment or loan to you. Irs gov form 1040 Claim the deduction on Schedule F for the year of repayment or reduction. Irs gov form 1040 Commodity Credit Corporation (CCC) Loans Generally, you do not report loans you receive as income. Irs gov form 1040 However, if you pledge part or all of your production to secure a CCC loan, you can treat the loan as if it were a sale of the crop and report the loan proceeds as income in the year you receive them. Irs gov form 1040 You do not need approval from the IRS to adopt this method of reporting CCC loans. Irs gov form 1040 Once you report a CCC loan as income for the year received, you generally must report all CCC loans in that year and later years in the same way. Irs gov form 1040 However, you can obtain for your tax year an automatic consent to change your method of accounting for loans received from the CCC, from including the loan amount in gross income for the tax year in which the loan is received to treating the loan amount as a loan. Irs gov form 1040 For more information, see Part I of the Instructions for Form 3115 and Revenue Procedure 2008-52. Irs gov form 1040 Revenue Procedure 2008-52, 2008-36 I. Irs gov form 1040 R. Irs gov form 1040 B. Irs gov form 1040 587, is available at  www. Irs gov form 1040 irs. Irs gov form 1040 gov/irb/2008-36_IRB/ar09. Irs gov form 1040 html. Irs gov form 1040 You can request income tax withholding from CCC loan payments you receive. Irs gov form 1040 Use Form W-4V, Voluntary Withholding Request. Irs gov form 1040 See chapter 16 for information about ordering the form. Irs gov form 1040 To elect to report a CCC loan as income, include the loan proceeds as income on Schedule F, line 7a, for the year you receive it. Irs gov form 1040 Attach a statement to your return showing the details of the loan. Irs gov form 1040 You must file the statement and the return by the due date of the return, including extensions. Irs gov form 1040 If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Irs gov form 1040 Attach the statement to the amended return and write “Filed pursuant to section 301. Irs gov form 1040 9100-2” at the top of the return. Irs gov form 1040 File the amended return at the same address you filed the original return. Irs gov form 1040 When you make this election, the amount you report as income becomes your basis in the commodity. Irs gov form 1040 See chapter 6 for information on the basis of assets. Irs gov form 1040 If you later repay the loan, redeem the pledged commodity, and sell it, you report as income at the time of sale the sale proceeds minus your basis in the commodity. Irs gov form 1040 If the sale proceeds are less than your basis in the commodity, you can report the difference as a loss on Schedule F. Irs gov form 1040 If you forfeit the pledged crops to the CCC in full payment of the loan, the forfeiture is treated for tax purposes as a sale of the crops. Irs gov form 1040 If you did not report the loan proceeds as income for the year you received them, you must include them in your income for the year of the forfeiture. Irs gov form 1040 Form 1099-A. Irs gov form 1040   If you forfeit pledged crops to the CCC in full payment of a loan, you may receive a Form 1099-A, Acquisition or Abandonment of Secured Property. Irs gov form 1040 “CCC” should be shown in box 6. Irs gov form 1040 The amount of any CCC loan outstanding when you forfeited your commodity should also be indicated on the form. Irs gov form 1040 Market Gain Under the CCC nonrecourse marketing assistance loan program, your repayment amount for a loan secured by your pledge of an eligible commodity is generally based on the lower of the loan rate or the prevailing world market price for the commodity on the date of repayment. Irs gov form 1040 If you repay the loan when the world price is lower, the difference between that repayment amount and the original loan amount is market gain. Irs gov form 1040 Whether you use cash or CCC certificates to repay the loan, you will receive a Form 1099-G showing the market gain you realized. Irs gov form 1040 Market gain should be reported as follows. Irs gov form 1040 If you elected to include the CCC loan in income in the year you received it, do not include the market gain in income. Irs gov form 1040 However, adjust the basis of the commodity for the amount of the market gain. Irs gov form 1040 If you did not include the CCC loan in income in the year received, include the market gain in your income. Irs gov form 1040 The following examples show how to report market gain. Irs gov form 1040 Example 1. Irs gov form 1040 Mike Green is a cotton farmer. Irs gov form 1040 He uses the cash method of accounting and files his tax return on a calendar year basis. Irs gov form 1040 He has deducted all expenses incurred in producing the cotton and has a zero basis in the commodity. Irs gov form 1040 In 2012, Mike pledged 1,000 pounds of cotton as collateral for a CCC loan of $2,000 (a loan rate of $2. Irs gov form 1040 00 per pound). Irs gov form 1040 In 2013, he repaid the loan and redeemed the cotton for $1,500 when the world price was $1. Irs gov form 1040 50 per pound (lower than the loan amount). Irs gov form 1040 Later in 2013, he sold the cotton for $2,500. Irs gov form 1040 The market gain on the redemption was $. Irs gov form 1040 50 ($2. Irs gov form 1040 00 – $1. Irs gov form 1040 50) per pound. Irs gov form 1040 Mike realized total market gain of $500 ($. Irs gov form 1040 50 x 1,000 pounds). Irs gov form 1040 How he reports this market gain and figures his gain or loss from the sale of the cotton depends on whether he included CCC loans in income in 2012. Irs gov form 1040 Included CCC loan. Irs gov form 1040   Mike reported the $2,000 CCC loan as income for 2012 on Schedule F, line 1b, so he is treated as if he sold the cotton for $2,000 when he pledged it and repurchased the cotton for $1,500 when he redeemed it. Irs gov form 1040 The $500 market gain is not recognized on the redemption. Irs gov form 1040 He reports it for 2013 as an agricultural program payment on Schedule F, line 4a, but does not include it as a taxable amount on line 4b. Irs gov form 1040   Mike's basis in the cotton after he redeemed it was $1,500, which is the redemption (repurchase) price paid for the cotton. Irs gov form 1040 His gain from the sale is $1,000 ($2,500 – $1,500). Irs gov form 1040 He reports the $1,000 gain as income for 2013 on Schedule F, line 1b. Irs gov form 1040 Excluded CCC loan. Irs gov form 1040   Mike has income of $500 from market gain in 2013. Irs gov form 1040 He reports it on Schedule F, lines 4a and 4b. Irs gov form 1040 His basis in the cotton is zero, so his gain from its sale is $2,500. Irs gov form 1040 He reports the $2,500 gain as income for 2013 on Schedule F, line 1b. Irs gov form 1040 Example 2. Irs gov form 1040 The facts are the same as in Example 1 except that, instead of selling the cotton for $2,500 after redeeming it, Mike entered into an option-to-purchase contract with a cotton buyer before redeeming the cotton. Irs gov form 1040 Under that contract, Mike authorized the cotton buyer to pay the CCC loan on Mike's behalf. Irs gov form 1040 In 2013, the cotton buyer repaid the loan for $1,500 and immediately exercised his option, buying the cotton for $1,500. Irs gov form 1040 How Mike reports the $500 market gain on the redemption of the cotton and figures his gain or loss from its sale depends on whether he included CCC loans in income in 2012. Irs gov form 1040 Included CCC loan. Irs gov form 1040   As in Example 1, Mike is treated as though he sold the cotton for $2,000 when he pledged it and repurchased the cotton for $1,500 when the cotton buyer redeemed it for him. Irs gov form 1040 The $500 market gain is not recognized on the redemption. Irs gov form 1040 Mike reports it for 2013 as an agricultural program payment on Schedule F, line 4a, but does not include it as a taxable amount on line 4b. Irs gov form 1040   Also, as in Example 1, Mike's basis in the cotton when the cotton buyer redeemed it for him was $1,500. Irs gov form 1040 Mike has no gain or loss on its sale to the cotton buyer for that amount. Irs gov form 1040 Excluded CCC loan. Irs gov form 1040   As in Example 1, Mike has income of $500 from market gain in 2013. Irs gov form 1040 He reports it on Schedule F, lines 4a and 4b. Irs gov form 1040 His basis in the cotton is zero, so his gain from its sale is $1,500. Irs gov form 1040 He reports the $1,500 gain as income for 2013 on Schedule F, line 1b. Irs gov form 1040 Conservation Reserve Program (CRP) Under the Conservation Reserve Program (CRP), if you own or operate highly erodible or other specified cropland, you may enter into a long-term contract with the USDA, agreeing to convert to a less intensive use of that cropland. Irs gov form 1040 You must include the annual rental payments and any one-time incentive payment you receive under the program on Schedule F, lines 4a and 4b. Irs gov form 1040 Cost-share payments you receive may qualify for the cost-sharing exclusion. Irs gov form 1040 See Cost-Sharing Exclusion (Improvements) , later. Irs gov form 1040 CRP payments are reported to you on Form 1099-G. Irs gov form 1040 Individuals who are receiving Social Security retirement or disability benefits may exclude CRP payments when calculating self-employment tax. Irs gov form 1040 See the instructions for Schedule SE (Form 1040). Irs gov form 1040 Crop Insurance and Crop Disaster Payments You must include in income any crop insurance proceeds you receive as the result of physical crop damage or reduction of crop revenue, or both. Irs gov form 1040 You generally include them in the year you receive them. Irs gov form 1040 Treat as crop insurance proceeds the crop disaster payments you receive from the federal government as the result of destruction or damage to crops, or the inability to plant crops, because of drought, flood, or any other natural disaster. Irs gov form 1040 You can request income tax withholding from crop disaster payments you receive from the federal government. Irs gov form 1040 Use Form W-4V, Voluntary Withholding Request. Irs gov form 1040 See chapter 16 for information about ordering the form. Irs gov form 1040 Election to postpone reporting until the following year. Irs gov form 1040   You can postpone reporting some or all crop insurance proceeds as income until the year following the year the physical damage occurred if you meet all the following conditions. Irs gov form 1040 You use the cash method of accounting. Irs gov form 1040 You receive the crop insurance proceeds in the same tax year the crops are damaged. Irs gov form 1040 You can show that under your normal business practice you would have included income from the damaged crops in any tax year following the year the damage occurred. Irs gov form 1040   Deferral is not permitted for proceeds received from revenue insurance policies. Irs gov form 1040   To postpone reporting some or all crop insurance proceeds received in 2013, report the amount you received on Schedule F, line 6a, but do not include it as a taxable amount on line 6b. Irs gov form 1040 Check the box on line 8c and attach a statement to your tax return. Irs gov form 1040 The statement must include your name and address and contain the following information. Irs gov form 1040 A statement that you are making an election under IRC section 451(d) and Regulations section 1. Irs gov form 1040 451-6. Irs gov form 1040 The specific crop or crops physically destroyed or damaged. Irs gov form 1040 A statement that under your normal business practice you would have included income from some or all of the destroyed or damaged crops in gross income for a tax year following the year the crops were destroyed or damaged. Irs gov form 1040 The cause of the physical destruction or damage and the date or dates it occurred. Irs gov form 1040 The total payments you received from insurance carriers, itemized for each specific crop, and the date you received each payment. Irs gov form 1040 The name of each insurance carrier from whom you received payments. Irs gov form 1040   One election covers all crops representing a single trade or business. Irs gov form 1040 If you have more than one farming business, make a separate election for each one. Irs gov form 1040 For example, if you operate two separate farms on which you grow different crops and you keep separate books for each farm, you should make two separate elections to postpone reporting insurance proceeds you receive for crops grown on each of your farms. Irs gov form 1040   An election is binding for the year unless the IRS approves your request to change it. Irs gov form 1040 To request IRS approval to change your election, write to the IRS at the following address giving your name, address, identification number, the year you made the election, and your reasons for wanting to change it. Irs gov form 1040 Ogden Submission Processing Center P. Irs gov form 1040 O. Irs gov form 1040 Box 9941 Ogden, UT 84409 Feed Assistance and Payments The Disaster Assistance Act of 1988 authorizes programs to provide feed assistance, reimbursement payments, and other benefits to qualifying livestock producers if the Secretary of Agriculture determines that, because of a natural disaster, a livestock emergency exists. Irs gov form 1040 These programs include partial reimbursement for the cost of purchased feed and for certain transportation expenses. Irs gov form 1040 They also include the donation or sale at a below-market price of feed owned by the Commodity Credit Corporation. Irs gov form 1040 Include in income: The market value of donated feed, The difference between the market value and the price you paid for feed you buy at below-market prices, and Any cost reimbursement you receive. Irs gov form 1040 You must include these benefits in income in the year you receive them. Irs gov form 1040 You cannot postpone reporting them under the rules explained earlier for weather-related sales of livestock or crop insurance proceeds. Irs gov form 1040 Report the benefits on Schedule F, Part I, as agricultural program payments. Irs gov form 1040 You can usually take a current deduction for the same amount as a feed expense. Irs gov form 1040 Cost-Sharing Exclusion (Improvements) You can exclude from your income part or all of a payment you receive under certain federal or state cost-sharing conservation, reclamation, and restoration programs. Irs gov form 1040 A payment is any economic benefit you get as a result of an improvement. Irs gov form 1040 However, this exclusion applies only to that part of a payment that meets all three of the following tests. Irs gov form 1040 It was for a capital expense. Irs gov form 1040 You cannot exclude any part of a payment for an expense you can deduct in the year you pay or incur it. Irs gov form 1040 You must include the payment for a deductible expense in income, and you can take any offsetting deduction. Irs gov form 1040 See chapter 5 for information on deducting soil and water conservation expenses. Irs gov form 1040 It does not substantially increase your annual income from the property for which it is made. Irs gov form 1040 An increase in annual income is substantial if it is more than the greater of the following amounts. Irs gov form 1040 10% of the average annual income derived from the affected property before receiving the improvement. Irs gov form 1040 $2. Irs gov form 1040 50 times the number of affected acres. Irs gov form 1040 The Secretary of Agriculture certified that the payment was primarily made for conserving soil and water resources, protecting or restoring the environment, improving forests, or providing a habitat for wildlife. Irs gov form 1040 Qualifying programs. Irs gov form 1040   If the three tests listed above are met, you can exclude part or all of the payments from the following programs. Irs gov form 1040 The rural clean water program authorized by the Federal Water Pollution Control Act. Irs gov form 1040 The rural abandoned mine program authorized by the Surface Mining Control and Reclamation Act of 1977. Irs gov form 1040 The water bank program authorized by the Water Bank Act. Irs gov form 1040 The emergency conservation measures program authorized by title IV of the Agricultural Credit Act of 1978. Irs gov form 1040 The agricultural conservation program authorized by the Soil Conservation and Domestic Allotment Act. Irs gov form 1040 The great plains conservation program authorized by the Soil Conservation and Domestic Policy Act. Irs gov form 1040 The resource conservation and development program authorized by the Bankhead-Jones Farm Tenant Act and by the Soil Conservation and Domestic Allotment Act. Irs gov form 1040 Certain small watershed programs, listed later. Irs gov form 1040 Any program of a state, possession of the United States, a political subdivision of any of these, or of the District of Columbia under which payments are made to individuals primarily for conserving soil, protecting or restoring the environment, improving forests, or providing a habitat for wildlife. Irs gov form 1040 Several state programs have been approved. Irs gov form 1040 For information about the status of those programs, contact the state offices of the Farm Service Agency (FSA) and the Natural Resources and Conservation Service (NRCS). Irs gov form 1040 Small watershed programs. Irs gov form 1040   If the three tests listed earlier are met, you can exclude part or all of the payments you receive under the following programs for improvements made in connection with a watershed. Irs gov form 1040 The programs under the Watershed Protection and Flood Prevention Act. Irs gov form 1040 The flood prevention projects under the Flood Control Act of 1944. Irs gov form 1040 The Emergency Watershed Protection Program under the Flood Control Act of 1950. Irs gov form 1040 Certain programs under the Colorado River Basin Salinity Control Act. Irs gov form 1040 The Wetlands Reserve Program authorized by the Food Security Act of 1985, the Federal Agriculture Improvement and Reform Act of 1996 and the Farm Security and Rural Investment Act of 2002. Irs gov form 1040 The Environmental Quality Incentives Program (EQIP) authorized by the Federal Agriculture Improvement and Reform Act of 1996. Irs gov form 1040 The Wildlife Habitat Incentives Program (WHIP) authorized by the Federal Agriculture Improvement and Reform Act of 1996. Irs gov form 1040 The Soil and Water Conservation Assistance Program authorized by the Agricultural Risk Protection Act of 2000. Irs gov form 1040 The Agricultural Management Assistance Program authorized by the Agricultural Risk Protection Act of 2000. Irs gov form 1040 The Conservation Reserve Program authorized by the Food Security Act of 1985 and the Federal Agriculture Improvement and Reform Act of 1996. Irs gov form 1040 The Forest Land Enhancement Program authorized under the Farm Security and Rural Investment Act of 2002. Irs gov form 1040 The Conservation Security Program authorized by the Food Security Act of 1985. Irs gov form 1040 The Forest Health Protection Program (FHPP) authorized by the Cooperative Forestry Assistance Act of 1978. Irs gov form 1040 Income realized. Irs gov form 1040   The gross income you realize upon getting an improvement under these cost-sharing programs is the value of the improvement reduced by the sum of the excludable portion and your share of the cost of the improvement (if any). Irs gov form 1040 Value of the improvement. Irs gov form 1040   You determine the value of the improvement by multiplying its fair market value (defined in chapter 6) by a fraction. Irs gov form 1040 The numerator of the fraction is the total cost of the improvement (all amounts paid either by you or by the government for the improvement) reduced by the sum of the following items. Irs gov form 1040 Any government payments under a program not listed earlier. Irs gov form 1040 Any part of a government payment under a program listed earlier that the Secretary of Agriculture has not certified as primarily for conservation. Irs gov form 1040 Any government payment to you for rent or for your services. Irs gov form 1040 The denominator of the fraction is the total cost of the improvement. Irs gov form 1040 Excludable portion. Irs gov form 1040   The excludable portion is the present fair market value of the right to receive annual income from the affected acreage of the greater of the following amounts. Irs gov form 1040 10% of the prior average annual income from the affected acreage. Irs gov form 1040 The prior average annual income is the average of the gross receipts from the affected acreage for the last 3 tax years before the tax year in which you started to install the improvement. Irs gov form 1040 $2. Irs gov form 1040 50 times the number of affected acres. Irs gov form 1040 The calculation of present fair market value of the right to receive annual income is too complex to discuss in this publication. Irs gov form 1040 You may need to consult your tax advisor for assistance. Irs gov form 1040 Example. Irs gov form 1040 One hundred acres of your land was reclaimed under a rural abandoned mine program contract with the Natural Resources Conservation Service of the USDA. Irs gov form 1040 The total cost of the improvement was $500,000. Irs gov form 1040 The USDA paid $490,000. Irs gov form 1040 You paid $10,000. Irs gov form 1040 The value of the cost-sharing improvement is $15,000. Irs gov form 1040 The present fair market value of the right to receive the annual income described in (1) above is $1,380, and the present fair market value of the right to receive the annual income described in (2) is $1,550. Irs gov form 1040 The excludable portion is the greater amount, $1,550. Irs gov form 1040 You figure the amount to include in gross income as follows: Value of cost-sharing improvement $15,000 Minus: Your share $10,000     Excludable portion 1,550 11,550 Amount included in income $ 3,450 Effects of the exclusion. Irs gov form 1040   When you figure the basis of property you acquire or improve using cost-sharing payments excluded from income, subtract the excluded payments from your capital costs. Irs gov form 1040 Any payment excluded from income is not part of your basis. Irs gov form 1040 In the example above, the increase in basis is $500,000 – $490,000 + $3,450 = $13,450. Irs gov form 1040   In addition, you cannot take depreciation, amortization, or depletion deductions for the part of the cost of the property for which you receive cost-sharing payments you exclude from income. Irs gov form 1040 How to report the exclusion. Irs gov form 1040   Attach a statement to your tax return (or amended return) for the tax year you receive the last government payment for the improvement. Irs gov form 1040 The statement must include the following information. Irs gov form 1040 The dollar amount of the cost funded by the government payment. Irs gov form 1040 The value of the improvement. Irs gov form 1040 The amount you are excluding. Irs gov form 1040   Report the total cost-sharing payments you receive on Schedule F, line 4a, and the taxable amount on line 4b. Irs gov form 1040 Recapture. Irs gov form 1040   If you dispose of the property within 20 years after you received the excluded payments, you must treat as ordinary income part or all of the cost-sharing payments you excluded. Irs gov form 1040 In the above example, if the 100 acres were sold within 20 years of the exclusion for a gain of $2,000, $1,550 of that amount would be included in ordinary income. Irs gov form 1040 You must report the recapture on Form 4797. Irs gov form 1040 See Section 1255 property under Other Gains in chapter 9. Irs gov form 1040 Electing not to exclude payments. Irs gov form 1040   You can elect not to exclude all or part of any payments you receive under these programs. Irs gov form 1040 If you make this election for all of these payments, none of the above restrictions and rules apply. Irs gov form 1040 You must make this election by the due date, including extensions, for filing your return. Irs gov form 1040 In the example above, an election not to exclude payments results in $5,000 included in income and a $15,000 increase in basis. Irs gov form 1040 If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Irs gov form 1040 Write “Filed pursuant to section 301. Irs gov form 1040 9100-2” at the top of the amended return and file it at the same address you filed the original return. Irs gov form 1040 Payments Under the Farm Security and Rural Investment Act of 2002 and Under the Food, Conservation, and Energy Act of 2008 The Farm Security and Rural Investment Act of 2002 created two new types of payments—direct and counter-cyclical payments. Irs gov form 1040 You must include these payments on Schedule F, lines 4a and 4b. Irs gov form 1040 The Food, Conservation, and Energy Act of 2008 provides for direct and counter-cyclical payments (DCP) as well as Average Crop Revenue Election (ACRE) payments. Irs gov form 1040 You must include these payments on Schedule F, lines 6a and 6b. Irs gov form 1040 The American Taxpayer Relief Act of 2012, enacted on January 2, 2013, amends the Food, Conservation, and Energy Act of 2008 and provided a one-year extension for these payments. Irs gov form 1040 Tobacco Quota Buyout Program Payments The Fair and Equitable Tobacco Reform Act of 2004, title VI of the American Jobs Creation Act of 2004, terminated the tobacco marketing quota program and the tobacco price support program. Irs gov form 1040 As a result, the USDA offered to enter into contracts with eligible tobacco quota holders and growers to provide compensation for the lost value of the quotas and related price support. Irs gov form 1040 If you are an eligible tobacco quota holder, your contract entitles you to receive total payments of $7 per pound of quota in 10 equal annual payments in fiscal years 2005 through 2014. Irs gov form 1040 If you are an eligible tobacco grower, your contract entitles you to receive total payments of up to $3 per pound of quota in 10 equal annual payments in fiscal years 2005 through 2014. Irs gov form 1040 Tobacco Quota Holders Contract payments you receive are considered proceeds from a sale of your tobacco quota as of the date on which you and the USDA enter into the contract. Irs gov form 1040 Your taxable gain or loss is the total amount received for your quota reduced by any amount treated as interest (discussed below), over your adjusted basis. Irs gov form 1040 The gain or loss is capital or ordinary depending on how you used the quota. Irs gov form 1040 See Capital or ordinary gain or loss , later. Irs gov form 1040 Report the entire gain on your income tax return for the tax year that includes the date you entered into the contract if you elect not to use the installment method. Irs gov form 1040 Adjusted basis. Irs gov form 1040   The adjusted basis of your quota is determined differently depending on how you obtained the quota. Irs gov form 1040 The basis of a quota derived from an original grant by the federal government is zero. Irs gov form 1040 The basis of a purchased quota is the purchase price. Irs gov form 1040 The basis of a quota received as a gift is generally the same as the donor's basis. Irs gov form 1040 However, under certain circumstances, the basis is increased by the amount of gift taxes paid. Irs gov form 1040 If the basis is greater than the fair market value of the quota at the time of the gift, the basis for determining loss is the fair market value. Irs gov form 1040 The basis of an inherited quota is generally the fair market value of the quota at the time of the decedent's death. Irs gov form 1040 Reduction of basis. Irs gov form 1040   You are required to reduce the basis of your tobacco quota by the following amounts. Irs gov form 1040 Deductions you took for amortization, depletion, or depreciation. Irs gov form 1040 Amounts you previously deducted as a loss because of a reduction in the number of pounds of tobacco allowable under the quota. Irs gov form 1040 The entire cost of a purchased quota you deducted in an earlier year (which reduces your basis to zero). Irs gov form 1040 Amount treated as interest. Irs gov form 1040   You must reduce your tobacco quota buyout program payment by the amount treated as interest. Irs gov form 1040 The interest is reportable as ordinary income. Irs gov form 1040 If payments total $3,000 or less, your total quota buyout program payment does not include any amount treated as interest and you are not required to reduce the total payment you receive. Irs gov form 1040   In all other cases, a portion of each payment may be treated as interest for federal tax purposes. Irs gov form 1040 You may be required to reduce your total quota buyout program payment before you calculate your gain or loss. Irs gov form 1040 For more information, see Notice 2005-57, 2005-32 I. Irs gov form 1040 R. Irs gov form 1040 B. Irs gov form 1040 267, available at www. Irs gov form 1040 irs. Irs gov form 1040 gov/irb/2005-32_IRB/ar13. Irs gov form 1040 html. Irs gov form 1040 Installment method. Irs gov form 1040   You may use the installment method to report a gain if you receive at least one payment after the close of your tax year. Irs gov form 1040 Under the installment method, a portion of the gain is taken into account in each year in which a payment is received. Irs gov form 1040 See chapter 10 for more information. Irs gov form 1040 Capital or ordinary gain or loss. Irs gov form 1040   Whether your gain or loss is ordinary or capital depends on how you used the quota. Irs gov form 1040 Quota used in the trade or business of farming. Irs gov form 1040   If you used the quota in the trade or business of farming and you held it for more than one year, you report the transaction as a section 1231 transaction on Form 4797. Irs gov form 1040 See Section 1231 transactions in the Instructions for Form 4797 for detailed information on reporting section 1231 transactions. Irs gov form 1040 Quota held for investment. Irs gov form 1040   If you held the quota for investment purposes, any gain or loss is capital gain or loss. Irs gov form 1040 The same result also applies if you held the quota for the production of income, though not connected with a trade or business. Irs gov form 1040 Gain treated as ordinary income. Irs gov form 1040   If you previously deducted any of the following items, some or all of the capital gain must be recharacterized and reported as ordinary income. Irs gov form 1040 Any resulting capital gain is taxed as ordinary income up to the amount previously deducted. Irs gov form 1040 The cost of acquiring a quota. Irs gov form 1040 Amounts for amortization, depletion, or depreciation. Irs gov form 1040 Amounts to reflect a reduction in the quota pounds. Irs gov form 1040   You should include the ordinary income on your return for the tax year even if you use the installment method to report the remainder of the gain. Irs gov form 1040 Self-employment income. Irs gov form 1040   The tobacco quota buyout payments are not self-employment income. Irs gov form 1040 Income averaging for farmers. Irs gov form 1040   The gain or loss resulting from the quota payments does not qualify for income averaging. Irs gov form 1040 A tobacco quota is considered an interest in land. Irs gov form 1040 Income averaging is not available for gain or loss arising from the sale or other disposition of land. Irs gov form 1040 Involuntary conversion. Irs gov form 1040   The buyout of the tobacco quota is not an involuntary conversion. Irs gov form 1040 Form 1099-S. Irs gov form 1040   A tobacco quota is considered an interest in land, so the USDA will generally report the total amount you receive under a contract on Form 1099-S, Proceeds From Real Estate Transactions, if the amount is $600 or more. Irs gov form 1040 The USDA will generally report any portion of a payment treated as interest of $600 or more to you on Form 1099-INT, Interest Income, for the year in which the payment is made. Irs gov form 1040 Like-kind exchange of quota. Irs gov form 1040   You may postpone reporting the gain or loss from tobacco quota buyout payments by entering into a like-kind exchange if you comply with the requirements of section 1031 and the regulations thereunder. Irs gov form 1040 See Notice 2005-57 for more information. Irs gov form 1040 Tobacco Growers Contract payments you receive are determined by reference to the amount of quota under which you produced (or planted) quota tobacco during the 2002, 2003, and 2004 tobacco marketing years and are prorated based on the number of years that you produced (or planted) quota tobacco during those years. Irs gov form 1040 Taxation of payments to tobacco growers. Irs gov form 1040   Payments to growers replace ordinary income that would have been earned had the tobacco marketing quota and price support programs continued. Irs gov form 1040 Individuals will generally report the payments as an Agricultural program payment on Schedule F. Irs gov form 1040 If you are a landowner who does not materially participate in the operation or management of the farm and are receiving the grower payment because your farm rental income is based on the tobacco grown by a tenant, the grower payment should be reported on Form 4835. Irs gov form 1040 Self-employment income. Irs gov form 1040   Payments to growers generally represent self-employment income. Irs gov form 1040 If the grower is an individual carrying on a trade or business and deriving income (other than farm rental income properly reported on Form 4835) from that trade or business, the payments are net earnings from self-employment. Irs gov form 1040 Income averaging for farmers. Irs gov form 1040   Payments to growers who are individuals qualify for farm income averaging. Irs gov form 1040 Form 1099-G. Irs gov form 1040   If the amount received in a taxable year is $600 or more, the amount will generally be reported by the USDA on a Form 1099-G. Irs gov form 1040 Other Payments You must include most other government program payments in income. Irs gov form 1040 Fertilizer and Lime Include in income the value of fertilizer or lime you receive under a government program. Irs gov form 1040 How to claim the offsetting deduction is explained under Fertilizer and Lime in chapter 4. Irs gov form 1040 Improvements If government payments are based on improvements, such as a pollution control facility, you must include them in income. Irs gov form 1040 You must also capitalize the full cost of the improvement. Irs gov form 1040 Since you have included the payments in income, they do not reduce your basis. Irs gov form 1040 However, see Cost-Sharing Exclusion (Improvements) , earlier, for additional information. Irs gov form 1040 National Tobacco Growers' Settlement Trust Fund Payments If you are a producer, landowner, or tobacco quota owner who receives money from the National Tobacco Growers' Settlement Trust Fund, you must report those payments as income. Irs gov form 1040 You should receive a Form 1099-MISC, Miscellaneous Income, that shows the payment amount. Irs gov form 1040 If you produce a tobacco crop, report the payments as income from farming on your Schedule F. Irs gov form 1040 If you are a landowner or tobacco quota owner who leases tobacco-related property but you do not produce the crop, report the payments as farm rental income on Form 4835. Irs gov form 1040 Payment to More Than One Person The USDA reports program payments to the IRS. Irs gov form 1040 It reports a program payment intended for more than one person as having been paid to the person whose identification number is on record for that payment (payee of record). Irs gov form 1040 If you, as the payee of record, receive a program payment belonging to someone else, such as your landlord, the amount belonging to the other person is a nominee distribution. Irs gov form 1040 You should file Form 1099-G to report the identity of the actual recipient to the IRS. Irs gov form 1040 You should also give this information to the recipient. Irs gov form 1040 You can avoid the inconvenience of unnecessary inquiries about the identity of the recipient if you file this form. Irs gov form 1040 Report the total amount reported to you as the payee of record on Schedule F, line 4a or 6a. Irs gov form 1040 However, do not report as a taxable amount on line 4b or 6b any amount belonging to someone else. Irs gov form 1040 See chapter 16 for information about ordering Form 1099-G. Irs gov form 1040 Income From Cooperatives If you buy farm supplies through a cooperative, you may receive income from the cooperative in the form of patronage dividends (refunds). Irs gov form 1040 If you sell your farm products through a cooperative, you may receive either patronage dividends or a per-unit retain certificate, explained later, from the cooperative. Irs gov form 1040 Form 1099-PATR. Irs gov form 1040   The cooperative will report the income to you on Form 1099-PATR or a similar form and send a copy to the IRS. Irs gov form 1040 Form 1099-PATR may also show an alternative minimum tax adjustment that you must include on Form 6251, Alternative Minimum Tax—Individuals, if you are required to file the form. Irs gov form 1040 For information on the alternative minimum tax, see the Instructions for Form 6251. Irs gov form 1040 Patronage Dividends You generally report patronage dividends as income on Schedule F, lines 3a and 3b, for the tax year you receive them. Irs gov form 1040 They include the following items. Irs gov form 1040 Money paid as a patronage dividend, including cash advances received (for example, from a marketing cooperative). Irs gov form 1040 The stated dollar value of qualified written notices of allocation. Irs gov form 1040 The fair market value of other property. Irs gov form 1040 Do not report as income on line 3b any patronage dividends you receive from expenditures that were not deductible, such as buying personal or family items, capital assets, or depreciable property. Irs gov form 1040 You must reduce the cost or other basis of these items by the amount of such patronage dividends received. Irs gov form 1040 Personal items include fuel purchased for personal use, basic local telephone service, and personal long distance calls. Irs gov form 1040 If you cannot determine what the dividend is for, report it as income on lines 3a and 3b. Irs gov form 1040 Qualified written notice of allocation. Irs gov form 1040   If you receive a qualified written notice of allocation as part of a patronage dividend, you must generally include its stated dollar value in your income on Schedule F, lines 3a and 3b, in the year you receive it. Irs gov form 1040 A written notice of allocation is qualified if at least 20% of the patronage dividend is paid in money or by qualified check and either of the following conditions is met. Irs gov form 1040 The notice must be redeemable in cash for at least 90 days after it is issued, and you must have received a written notice of your right of redemption at the same time as the written notice of allocation. Irs gov form 1040 You must have agreed to include the stated dollar value in income in the year you receive the notice by doing one of the following. Irs gov form 1040 Signing and giving a written agreement to the cooperative. Irs gov form 1040 Getting or keeping membership in the cooperative after it adopted a bylaw providing that membership constitutes agreement. Irs gov form 1040 The cooperative must notify you in writing of this bylaw and give you a copy. Irs gov form 1040 Endorsing and cashing a qualified check paid as part of the same patronage dividend. Irs gov form 1040 You must cash the check by the 90th day after the close of the payment period for the cooperative's tax year for which the patronage dividend was paid. Irs gov form 1040 Qualified check. Irs gov form 1040   A qualified check is any instrument that is redeemable in money and meets both of the following requirements. Irs gov form 1040 It is part of a patronage dividend that also includes a qualified written notice of allocation for which you met condition 2(c), above. Irs gov form 1040 It is imprinted with a statement that endorsing and cashing it constitutes the payee's consent to include in income the stated dollar value of any written notices of allocation paid as part of the same patronage dividend. Irs gov form 1040 Loss on redemption. Irs gov form 1040   You can deduct on Schedule F, Part II, any loss incurred on the redemption of a qualified written notice of allocation you received in the ordinary course of your farming business. Irs gov form 1040 The loss is the difference between the stated dollar amount of the qualified written notice you included in income and the amount you received when you redeemed it. Irs gov form 1040 Nonqualified notice of allocation. Irs gov form 1040   Do not include the stated dollar value of any nonqualified notice of allocation in income when you receive it. Irs gov form 1040 Your basis in the notice is zero. Irs gov form 1040 You must include in income for the tax year of disposition any amount you receive from its sale, redemption, or other disposition. Irs gov form 1040 Report that amount, up to the stated dollar value of the notice, on Schedule F, lines 3a and 3b. Irs gov form 1040 However, do not include that amount in your income if the notice resulted from buying or selling capital assets or depreciable property or from buying personal items, as explained in the following discussions. Irs gov form 1040   If the amount you receive is more than the stated dollar value of the notice, report the excess as the type of income it represents. Irs gov form 1040 For example, if it represents interest income, report it on your return as interest. Irs gov form 1040 Buying or selling capital assets or depreciable property. Irs gov form 1040   Do not include in income patronage dividends from buying capital assets or depreciable property used in your business. Irs gov form 1040 You must, however, reduce the basis of these assets by the dividends. Irs gov form 1040 This reduction is taken into account as of the first day of the tax year in which the dividends are received. Irs gov form 1040 If the dividends are more than your unrecovered basis, reduce the unrecovered basis to zero and include the difference on Schedule F, line 3a, for the tax year you receive them. Irs gov form 1040   This rule and the exceptions explained below also apply to amounts you receive from the sale, redemption, or other disposition of a nonqualified notice of allocation that resulted from buying or selling capital assets or depreciable property. Irs gov form 1040 Example. Irs gov form 1040 On July 1, 2012, Mr. Irs gov form 1040 Brown, a patron of a cooperative association, bought a machine for his dairy farm business from the association for $2,900. Irs gov form 1040 The machine has a life of 7 years under MACRS (as provided in the Table of Class Lives and Recovery Periods in Appendix B of Publication 946, Depreciation and Amortization). Irs gov form 1040 Mr. Irs gov form 1040 Brown files his return on a calendar year basis. Irs gov form 1040 For 2012, he claimed a depreciation deduction of $311, using the 10. Irs gov form 1040 71% depreciation rate from the 150% declining balance, half-year convention table (shown in Table A-14 in Appendix A of Publication 946). Irs gov form 1040 On July 2, 2013, the cooperative association paid Mr. Irs gov form 1040 Brown a $300 cash patronage dividend for buying the machine. Irs gov form 1040 Mr. Irs gov form 1040 Brown adjusts the basis of the machine and figures his depreciation deduction for 2013 (and later years) as follows. Irs gov form 1040 Cost of machine on July 1, 2012 $2,900 Minus: 2012 depreciation $311     2013 cash dividend 300 611 Adjusted basis for  depreciation for 2013: $2,289 Depreciation rate: 1 ÷ 6½ (remaining recovery period as of 1/1/2012) = 15. Irs gov form 1040 38% × 1. Irs gov form 1040 5 = 23. Irs gov form 1040 07% Depreciation deduction for 2013 ($2,289 × 23. Irs gov form 1040 07%) $528 Exceptions. Irs gov form 1040   If the dividends are for buying or selling capital assets or depreciable property you did not own at any time during the year you received the dividends, you must include them on Schedule F, lines 3a and 3b, unless one of the following rules applies. Irs gov form 1040 If the dividends relate to a capital asset you held for more than 1 year for which a loss was or would have been deductible, treat them as gain from the sale or exchange of a capital asset held for more than 1 year. Irs gov form 1040 If the dividends relate to a capital asset for which a loss was not or would not have been deductible, do not report them as income (ordinary or capital gain). Irs gov form 1040   If the dividends are for selling capital assets or depreciable property during the year you received the dividends, treat them as an additional amount received on the sale. Irs gov form 1040 Personal purchases. Irs gov form 1040   Because you cannot deduct the cost of personal, living, or family items, such as supplies, equipment, or services not related to the production of farm income, you can omit from the taxable amount of patronage dividends on Schedule F, line 3b, any dividends from buying those items (and you must reduce the cost or other basis of those items by the amount of the dividends). Irs gov form 1040 This rule also applies to amounts you receive from the sale, redemption, or other disposition of a nonqualified written notice of allocation resulting from these purchases. Irs gov form 1040 Per-Unit Retain Certificates A per-unit retain certificate is any written notice that shows the stated dollar amount of a per-unit retain allocation made to you by the cooperative. Irs gov form 1040 A per-unit retain allocation is an amount paid to patrons for products sold for them that is fixed without regard to the net earnings of the cooperative. Irs gov form 1040 These allocations can be paid in money, other property, or qualified certificates. Irs gov form 1040 Per-unit retain certificates issued by a cooperative generally receive the same tax treatment as patronage dividends, discussed earlier. Irs gov form 1040 Qualified certificates. Irs gov form 1040   Qualified per-unit retain certificates are those issued to patrons who have agreed to include the stated dollar amount of these certificates in income in the year of receipt. Irs gov form 1040 The agreement may be made in writing or by getting or keeping membership in a cooperative whose bylaws or charter states that membership constitutes agreement. Irs gov form 1040 If you receive qualified per-unit retain certificates, include the stated dollar amount of the certificates in income on Schedule F, lines 3a and 3b, for the tax year you receive them. Irs gov form 1040 Nonqualified certificates. Irs gov form 1040   Do not include the stated dollar value of a nonqualified per-unit retain certificate in income when you receive it. Irs gov form 1040 Your basis in the certificate is zero. Irs gov form 1040 You must include in income any amount you receive from its sale, redemption, or other disposition. Irs gov form 1040 Report the amount you receive from the disposition as ordinary income on Schedule F, lines 3a and 3b, for the tax year of disposition. Irs gov form 1040 Cancellation of Debt This section explains the general rule for including canceled debt in income and the exceptions to the general rule. Irs gov form 1040 For more information on canceled debt, see Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Irs gov form 1040 General Rule Generally, if your debt is canceled or forgiven, other than as a gift or bequest to you, you must include the canceled amount in gross income for tax purposes. Irs gov form 1040 Discharge of qualified farm indebtedness (defined below) is one of the exceptions to the general rule. Irs gov form 1040 It is excluded from taxable income (see Exclusions , later). Irs gov form 1040 Report the canceled amount on Schedule F, line 8, if you incurred the debt in your farming business. Irs gov form 1040 If the debt is a nonbusiness debt, report the canceled amount as other income on Form 1040, line 21. Irs gov form 1040 Election to defer income from discharge of indebtedness. Irs gov form 1040   You can elect to defer income from a discharge of business indebtedness that occurred after 2008 and before 2011. Irs gov form 1040 Generally, if the election is made, the deferred income is included in gross income ratably over a 5-year period beginning in 2014 (for calendar year taxpayers) and the exclusions listed below do not apply. Irs gov form 1040 See IRC section 108(i) and Publication 4681 for details. Irs gov form 1040 Form 1099-C. Irs gov form 1040   If a federal agency, financial institution, credit union, finance company, or credit card company cancels or forgives your debt of $600 or more, you will receive a Form 1099-C, Cancellation of Debt. Irs gov form 1040 The amount of debt canceled is shown in box 2. Irs gov form 1040 Exceptions The following discussion covers some exceptions to the general rule for canceled debt. Irs gov form 1040 These exceptions apply before the exclusions discussed below. Irs gov form 1040 Price reduced after purchase. Irs gov form 1040   If your purchase of property was financed by the seller and the seller reduces the amount of the debt at a time when you are not insolvent and the reduction does not occur in a chapter 11 bankruptcy case, the amount of the debt reduction will be treated as a reduction in the purchase price of the property. Irs gov form 1040 Reduce your basis in the property by the amount of the reduction in the debt. Irs gov form 1040 The rules that apply to bankruptcy and insolvency are explained below under Exclusions . Irs gov form 1040 Deductible debt. Irs gov form 1040   You do not realize income from a canceled debt to the extent the payment of the debt would have been a deductible expense. Irs gov form 1040 This exception applies before the price reduction exception discussed above and the bankruptcy and insolvency exclusions discussed next. Irs gov form 1040 Example. Irs gov form 1040 You get accounting services for your farm on credit. Irs gov form 1040 Later, you have trouble paying your farm debts, but you are not bankrupt or insolvent. Irs gov form 1040 Your accountant forgives part of the amount you owe for the accounting services. Irs gov form 1040 How you treat the canceled debt depends on your method of accounting. Irs gov form 1040 Cash method — You do not include the canceled debt in income because payment of the debt would have been deductible as a business expense. Irs gov form 1040 Accrual method — You include the canceled debt in income because the expense was deductible when you incurred the debt. Irs gov form 1040 Exclusions Do not include canceled debt in income in the following situations. Irs gov form 1040 The cancellation takes place in a bankruptcy case under title 11 of the U. Irs gov form 1040 S. Irs gov form 1040 Code. Irs gov form 1040 The cancellation takes place when you are insolvent. Irs gov form 1040 The canceled debt is a qualified farm debt. Irs gov form 1040 The canceled debt is a qualified real property business debt (in the case of a taxpayer other than a C corporation). Irs gov form 1040 See Publication 334, Tax Guide for Small Business, chapter 5. Irs gov form 1040 The canceled debt is qualified principal residence indebtedness which is discharged after 2006 and before 2014. Irs gov form 1040 The exclusions do not apply in the following situations: If a canceled debt is excluded from income because it takes place in a bankruptcy case, the exclusions in situations (2), (3), (4), and (5) do not apply. Irs gov form 1040 If a canceled debt is excluded from income because it takes place when you are insolvent, the exclusions in situations (3) and (4) do not apply to the extent you are insolvent. Irs gov form 1040 If a canceled debt is excluded from income because it is qualified principal residence indebtedness, the exclusion in situation (2) does not apply unless you elect to apply situation (2) instead of the exclusion for qualified principal residence indebtedness. Irs gov form 1040 See Form 982 , later, for information on how to claim an exclusion for a canceled debt. Irs gov form 1040 Debt. Irs gov form 1040   For this discussion, debt includes any debt for which you are liable or that attaches to property you hold. Irs gov form 1040 Bankruptcy and Insolvency You can exclude a canceled debt from income if you are bankrupt or to the extent you are insolvent. Irs gov form 1040 Bankruptcy. Irs gov form 1040   A bankruptcy case is a case under title 11 of the U. Irs gov form 1040 S. Irs gov form 1040 Code if you are under the jurisdiction of the court and the cancellation of the debt is granted by the court or is the result of a plan approved by the court. Irs gov form 1040   Do not include debt canceled in a bankruptcy case in your income in the year it is canceled. Irs gov form 1040 Instead, you must use the amount canceled to reduce your tax attributes, explained below under Reduction of tax attributes . Irs gov form 1040 Insolvency. Irs gov form 1040   You are insolvent to the extent your liabilities are more than the fair market value of your assets immediately before the cancellation of debt. Irs gov form 1040   You can exclude canceled debt from gross income up to the amount by which you are insolvent. Irs gov form 1040 If the canceled debt is more than this amount and the debt qualifies, you can apply the rules for qualified farm debt or qualified real property business debt to the difference. Irs gov form 1040 Otherwise, you include the difference in gross income. Irs gov form 1040 Use the amount excluded because of insolvency to reduce any tax attributes, as explained below under Reduction of tax attributes . Irs gov form 1040 You must reduce the tax attributes under the insolvency rules before applying the rules for qualified farm debt or for qualified real property business debt. Irs gov form 1040 Example. Irs gov form 1040 You had a $15,000 debt that was not qualified principal residence debt canceled outside of bankruptcy. Irs gov form 1040 Immediately before the cancellation, your liabilities totaled $80,000 and your assets totaled $75,000. Irs gov form 1040 Since your liabilities were more than your assets, you were insolvent to the extent of $5,000 ($80,000 − $75,000). Irs gov form 1040 You can exclude this amount from income. Irs gov form 1040 The remaining canceled debt ($10,000) may be subject to the qualified farm debt or qualified real property business debt rules. Irs gov form 1040 If not, you must include it in income. Irs gov form 1040 Reduction of tax attributes. Irs gov form 1040   If you exclude canceled debt from income in a bankruptcy case or during insolvency, you must use the excluded debt to reduce certain tax attributes. Irs gov form 1040 Order of reduction. Irs gov form 1040   You must use the excluded canceled debt to reduce the following tax attributes in the order listed unless you elect to reduce the basis of depreciable property first, as explained later. Irs gov form 1040 Net operating loss (NOL). Irs gov form 1040 Reduce any NOL for the tax year of the debt cancellation, and then any NOL carryover to that year. Irs gov form 1040 Reduce the NOL or NOL carryover one dollar for each dollar of excluded canceled debt. Irs gov form 1040 General business credit carryover. Irs gov form 1040 Reduce the credit carryover to or from the tax year of the debt cancellation. Irs gov form 1040 Reduce the carryover 331/3 cents for each dollar of excluded canceled debt. Irs gov form 1040 Minimum tax credit. Irs gov form 1040 Reduce the minimum tax credit available at the beginning of the tax year following the tax year of the debt cancellation. Irs gov form 1040 Reduce the credit 331/3 cents for each dollar of excluded canceled debt. Irs gov form 1040 Capital loss. Irs gov form 1040 Reduce any net capital loss for the tax year of the debt cancellation, and then any capital loss carryover to that year. Irs gov form 1040 Reduce the capital loss or loss carryover one dollar for each dollar of excluded canceled debt. Irs gov form 1040 Basis. Irs gov form 1040 Reduce the basis of the property you hold at the beginning of the tax year following the tax year of the debt cancellation in the following order. Irs gov form 1040 Real property (except inventory) used in your trade or business or held for investment that secured the canceled debt. Irs gov form 1040 Personal property (except inventory and accounts and notes receivable) used in your trade or business or held for investment that secured the canceled debt. Irs gov form 1040 Other property (except inventory and accounts and notes receivable) used in your trade or business or held for investment. Irs gov form 1040 Inventory and accounts and notes receivable. Irs gov form 1040 Other property. Irs gov form 1040 Reduce the basis one dollar for each dollar of excluded canceled debt. Irs gov form 1040 However, the reduction cannot be more than the total basis of property and the amount of money you hold immediately after the debt cancellation minus your total liabilities immediately after the cancellation. Irs gov form 1040 For allocation rules that apply to basis reductions for multiple canceled debts, see Regulations section 1. Irs gov form 1040 1017-1(b)(2). Irs gov form 1040 Also see Electing to reduce the basis of depreciable property
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The Irs Gov Form 1040

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