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Irs 2. Irs   Roth IRAs Table of Contents What's New for 2013 What's New for 2014 Reminders Introduction What Is a Roth IRA? When Can a Roth IRA Be Opened? Can You Contribute to a Roth IRA?How Much Can Be Contributed? When Can You Make Contributions? What if You Contribute Too Much? Can You Move Amounts Into a Roth IRA?Conversions Rollover From Employer's Plan Into a Roth IRA Military Death Gratuities and Servicemembers' Group Life Insurance (SGLI) Payments Rollover From a Roth IRA Rollover of Exxon Valdez Settlement Income Rollover of Airline Payments Are Distributions Taxable?What Are Qualified Distributions? Additional Tax on Early Distributions Ordering Rules for Distributions How Do You Figure the Taxable Part? Must You Withdraw or Use Assets?Minimum distributions. Irs Recognizing Losses on Investments Distributions After Owner's Death What's New for 2013 Roth IRA contribution limit. Irs  If contributions on your behalf are made only to Roth IRAs, your contribution limit for 2013 will generally be the lesser of: $5,500, or Your taxable compensation for the year. Irs If you were age 50 or older before 2014 and contributions on your behalf were made only to Roth IRAs, your contribution limit for 2013 will generally be the lesser of: $6,500, or Your taxable compensation for the year. Irs However, if your modified adjusted gross income (AGI) is above a certain amount, your contribution limit may be reduced. Irs For more information, see How Much Can Be Contributed? under Can You Contribute to a Roth IRA? in this chapter. Irs Modified AGI limit for Roth IRA contributions increased. Irs  For 2013, your Roth IRA contribution limit is reduced (phased out) in the following situations. Irs Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $178,000. Irs You cannot make a Roth IRA contribution if your modified AGI is $188,000 or more. Irs Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2013 and your modified AGI is at least $112,000. Irs You cannot make a Roth IRA contribution if your modified AGI is $127,000 or more. Irs Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. Irs You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more. Irs See Can You Contribute to a Roth IRA? in this chapter. Irs Net Investment Income Tax. Irs  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 However, these distributions are taken into account when determining the modified adjusted gross income threshold. Irs Distributions from a nonqualified retirement plan are included in net investment income. Irs See Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions for more information. Irs What's New for 2014 Modified AGI limit for Roth IRA contributions increased. Irs  For 2014, your Roth IRA contribution limit is reduced (phased out) in the following situations. Irs Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $181,000. Irs You cannot make a Roth IRA contribution if your modified AGI is $191,000 or more. Irs Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2014 and your modified AGI is at least $114,000. Irs You cannot make a Roth IRA contribution if your modified AGI is $129,000 or more. Irs Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. Irs You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more. Irs Reminders Deemed IRAs. Irs  For plan years beginning after 2002, a qualified employer plan (retirement plan) can maintain a separate account or annuity under the plan (a deemed IRA) to receive voluntary employee contributions. Irs If the separate account or annuity otherwise meets the requirements of an IRA, it will be subject only to IRA rules. Irs An employee's account can be treated as a traditional IRA or a Roth IRA. Irs For this purpose, a “qualified employer plan” includes: A qualified pension, profit-sharing, or stock bonus plan (section 401(a) plan), A qualified employee annuity plan (section 403(a) plan), A tax-sheltered annuity plan (section 403(b) plan), and A deferred compensation plan (section 457 plan) maintained by a state, a political subdivision of a state, or an agency or instrumentality of a state or political subdivision of a state. Irs Designated Roth accounts. Irs  Designated Roth accounts are separate accounts under 401(k), 403(b), or 457(b) plans that accept elective deferrals that are referred to as Roth contributions. Irs These elective deferrals are included in your income, but qualified distributions from these accounts are not included in your income. Irs Designated Roth accounts are not IRAs and should not be confused with Roth IRAs. Irs Contributions, up to their respective limits, can be made to Roth IRAs and designated Roth accounts according to your eligibility to participate. Irs A contribution to one does not impact your eligibility to contribute to the other. Irs See Publication 575, for more information on designated Roth accounts. Irs Introduction Regardless of your age, you may be able to establish and make nondeductible contributions to an individual retirement plan called a Roth IRA. Irs Contributions not reported. Irs   You do not report Roth IRA contributions on your return. Irs What Is a Roth IRA? A Roth IRA is an individual retirement plan that, except as explained in this chapter, is subject to the rules that apply to a traditional IRA (defined next). Irs It can be either an account or an annuity. Irs Individual retirement accounts and annuities are described in chapter 1 under How Can a Traditional IRA Be Opened. Irs To be a Roth IRA, the account or annuity must be designated as a Roth IRA when it is opened. Irs A deemed IRA can be a Roth IRA, but neither a SEP IRA nor a SIMPLE IRA can be designated as a Roth IRA. Irs Unlike a traditional IRA, you cannot deduct contributions to a Roth IRA. Irs But, if you satisfy the requirements, qualified distributions (discussed later) are tax free. Irs Contributions can be made to your Roth IRA after you reach age 70½ and you can leave amounts in your Roth IRA as long as you live. Irs Traditional IRA. Irs   A traditional IRA is any IRA that is not a Roth IRA or SIMPLE IRA. Irs Traditional IRAs are discussed in chapter 1. Irs When Can a Roth IRA Be Opened? You can open a Roth IRA at any time. Irs However, the time for making contributions for any year is limited. Irs See When Can You Make Contributions , later under Can You Contribute to a Roth IRA. Irs Can You Contribute to a Roth IRA? Generally, you can contribute to a Roth IRA if you have taxable compensation (defined later) and your modified AGI (defined later) is less than: $188,000 for married filing jointly or qualifying widow(er), $127,000 for single, head of household, or married filing separately and you did not live with your spouse at any time during the year, and $10,000 for married filing separately and you lived with your spouse at any time during the year. Irs You may be able to claim a credit for contributions to your Roth IRA. Irs For more information, see chapter 4. Irs Is there an age limit for contributions?   Contributions can be made to your Roth IRA regardless of your age. Irs Can you contribute to a Roth IRA for your spouse?   You can contribute to a Roth IRA for your spouse provided the contributions satisfy the Kay Bailey Hutchison Spousal IRA limit discussed in chapter 1 under How Much Can Be Contributed, you file jointly, and your modified AGI is less than $188,000. Irs Compensation. Irs   Compensation includes wages, salaries, tips, professional fees, bonuses, and other amounts received for providing personal services. Irs It also includes commissions, self-employment income, nontaxable combat pay, military differential pay, and taxable alimony and separate maintenance payments. Irs For more information, see What Is Compensation? under Who Can Open a Traditional IRA? in chapter 1. Irs Modified AGI. Irs   Your modified AGI for Roth IRA purposes is your adjusted gross income (AGI) as shown on your return with some adjustments. Irs Use Worksheet 2-1 , later, to determine your modified AGI. Irs    Do not subtract conversion income when figuring your other AGI-based phaseouts and taxable income, such as your deduction for medical and dental expenses. Irs Subtract them from AGI only for the purpose of figuring your modified AGI for Roth IRA purposes. Irs How Much Can Be Contributed? The contribution limit for Roth IRAs generally depends on whether contributions are made only to Roth IRAs or to both traditional IRAs and Roth IRAs. Irs Worksheet 2-1. Irs Modified Adjusted Gross Income for Roth IRA Purposes Use this worksheet to figure your modified adjusted gross income for Roth IRA purposes. Irs 1. Irs Enter your adjusted gross income from Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37 1. Irs   2. Irs Enter any income resulting from the conversion of an IRA (other than a Roth IRA) to a Roth IRA (included on Form 1040, line 15b, Form 1040A, line 11b, or Form 1040NR, line 16b) and a rollover from a qualified retirement plan to a Roth IRA (included on Form 1040, line 16b, Form 1040A, line 12b, or Form 1040NR, line 17b) 2. Irs   3. Irs Subtract line 2 from line 1 3. Irs   4. Irs Enter any traditional IRA deduction from Form 1040, line 32; Form 1040A, line 17; or Form 1040NR, line 32 4. Irs   5. Irs Enter any student loan interest deduction from Form 1040, line 33; Form 1040A, line 18; or Form 1040NR, line 33 5. Irs   6. Irs Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 6. Irs   7. Irs Enter any domestic production activities deduction from Form 1040, line 35, or Form 1040NR, line 34 7. Irs   8. Irs Enter any foreign earned income exclusion and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 8. Irs   9. Irs Enter any foreign housing deduction from Form 2555, line 50 9. Irs   10. Irs Enter any excludable qualified savings bond interest from Form 8815, line 14 10. Irs   11. Irs Enter any excluded employer-provided adoption benefits from Form 8839, line 28 11. Irs   12. Irs Add the amounts on lines 3 through 11 12. Irs   13. Irs Enter: $188,000 if married filing jointly or qualifying widow(er), $10,000 if married filing separately and you lived with your spouse at any time during the year, or $127,000 for all others 13. Irs   Is the amount on line 12 more than the amount on line 13? If yes, see the note below. Irs  If no, the amount on line 12 is your modified adjusted gross income for Roth IRA purposes. Irs       Note. Irs If the amount on line 12 is more than the amount on line 13 and you have other income or loss items, such as social security income or passive activity losses, that are subject to AGI-based phaseouts, you can refigure your AGI solely for the purpose of figuring your modified AGI for Roth IRA purposes. Irs (If you receive social security benefits, use Worksheet 1 in Appendix B to refigure your AGI. Irs ) Then go to line 3 above in this Worksheet 2-1 to refigure your modified AGI. Irs If you do not have other income or loss items subject to AGI-based phaseouts, your modified adjusted gross income for Roth IRA purposes is the amount on line 12 above. Irs Roth IRAs only. Irs   If contributions are made only to Roth IRAs, your contribution limit generally is the lesser of: $5,500 ($6,500 if you are age 50 or older), or Your taxable compensation. Irs   However, if your modified AGI is above a certain amount, your contribution limit may be reduced, as explained later under Contribution limit reduced . Irs Roth IRAs and traditional IRAs. Irs   If contributions are made to both Roth IRAs and traditional IRAs established for your benefit, your contribution limit for Roth IRAs generally is the same as your limit would be if contributions were made only to Roth IRAs, but then reduced by all contributions for the year to all IRAs other than Roth IRAs. Irs Employer contributions under a SEP or SIMPLE IRA plan do not affect this limit. Irs   This means that your contribution limit is the lesser of: $5,500 ($6,500 if you are age 50 or older) minus all contributions (other than employer contributions under a SEP or SIMPLE IRA plan) for the year to all IRAs other than Roth IRAs, or Your taxable compensation minus all contributions (other than employer contributions under a SEP or SIMPLE IRA plan) for the year to all IRAs other than Roth IRAs. Irs   However, if your modified AGI is above a certain amount, your contribution limit may be reduced, as explained below under Contribution limit reduced . Irs   Simplified employee pensions (SEPs) are discussed in Publication 560. Irs Savings incentive match plans for employees (SIMPLEs) are discussed in chapter 3. Irs Repayment of reservist distributions. Irs   You can repay qualified reservist distributions even if the repayments would cause your total contributions to the Roth IRA to be more than the general limit on contributions. Irs However, the total repayments cannot be more than the amount of your distribution. Irs Note. Irs If you make repayments of qualified reservist distributions to a Roth IRA, increase your basis in the Roth IRA by the amount of the repayment. Irs For more information, see Qualified reservist repayments under How Much Can Be Contributed? in chapter 1. Irs Contribution limit reduced. Irs   If your modified AGI is above a certain amount, your contribution limit is gradually reduced. Irs Use Table 2-1, later, to determine if this reduction applies to you. Irs Table 2-1. Irs Effect of Modified AGI on Roth IRA Contribution This table shows whether your contribution to a Roth IRA is affected by the amount of your modified adjusted gross income (modified AGI). Irs IF you have taxable compensation and your filing status is . Irs . Irs . Irs AND your modified AGI is . Irs . Irs . Irs THEN . Irs . Irs . Irs married filing jointly or  qualifying widow(er) less than $178,000 you can contribute up to $5,500 ($6,500 if you are age 50 or older) as explained under How Much Can Be Contributed . Irs at least $178,000 but less than $188,000 the amount you can contribute is reduced as explained under Contribution limit reduced . Irs $188,000 or more you cannot contribute to a Roth IRA. Irs married filing separately and you lived with your spouse at any time during the year zero (-0-) you can contribute up to $5,500 ($6,500 if you are age 50 or older) as explained under How Much Can Be Contributed . Irs more than zero (-0-) but less than $10,000 the amount you can contribute is reduced as explained under Contribution limit reduced . Irs $10,000 or more you cannot contribute to a Roth IRA. Irs single, head of household,  or married filing separately and you did not live with your spouse at any time during the year less than $112,000 you can contribute up to $5,500 ($6,500 if you are age 50 or older) as explained under How Much Can Be Contributed . Irs at least $112,000 but less than $127,000 the amount you can contribute is reduced as explained under Contribution limit reduced . Irs $127,000 or more you cannot contribute to a Roth IRA. Irs Figuring the reduction. Irs   If the amount you can contribute must be reduced, use Worksheet 2-2, later, to figure your reduced contribution limit. Irs Worksheet 2-2. Irs Determining Your Reduced Roth IRA Contribution Limit Before using this worksheet, check Table 2-1, earlier, to determine whether or not your Roth IRA contribution limit is reduced. Irs If it is, use this worksheet to determine how much it is reduced. Irs 1. Irs Enter your modified AGI for Roth IRA purposes (Worksheet 2-1, line 12) 1. Irs   2. Irs Enter: $178,000 if filing a joint return or qualifying widow(er), $-0- if married filing a separate return and you lived with your spouse at any time in 2013, or $112,000 for all others 2. Irs   3. Irs Subtract line 2 from line 1 3. Irs   4. Irs Enter: $10,000 if filing a joint return or qualifying widow(er) or married filing a separate return and you lived with your spouse at any time during the year, or $15,000 for all others 4. Irs   5. Irs Divide line 3 by line 4 and enter the result as a decimal (rounded to at least three places). Irs If the result is 1. Irs 000 or more, enter 1. Irs 000 5. Irs   6. Irs Enter the lesser of: $5,500 ($6,500 if you are age 50 or older), or Your taxable compensation 6. Irs   7. Irs Multiply line 5 by line 6 7. Irs   8. Irs Subtract line 7 from line 6. Irs Round the result up to the nearest $10. Irs If the result is less than $200, enter $200 8. Irs   9. Irs Enter contributions for the year to other IRAs 9. Irs   10. Irs Subtract line 9 from line 6 10. Irs   11. Irs Enter the lesser of line 8 or line 10. Irs This is your reduced Roth IRA contribution limit 11. Irs      Round your reduced contribution limit up to the nearest $10. Irs If your reduced contribution limit is more than $0, but less than $200, increase the limit to $200. Irs Example. Irs You are a 45-year-old, single individual with taxable compensation of $113,000. Irs You want to make the maximum allowable contribution to your Roth IRA for 2013. Irs Your modified AGI for 2013 is $113,000. Irs You have not contributed to any traditional IRA, so the maximum contribution limit before the modified AGI reduction is $5,500. Irs You figure your reduced Roth IRA contribution of $5,140 as shown on Worksheet 2-2. Irs Example—Illustrated, later. Irs   Worksheet 2-2. Irs Example—Illustrated Before using this worksheet, check Table 2-1, earlier, to determine whether or not your Roth IRA contribution limit is reduced. Irs If it is, use this worksheet to determine how much it is reduced. Irs 1. Irs Enter your modified AGI for Roth IRA purposes (Worksheet 2-1, line 12) 1. Irs 113,000 2. Irs Enter: $178,000 if filing a joint return or qualifying widow(er), $-0- if married filing a separate return and you lived with your spouse at any time in 2013, or $112,000 for all others 2. Irs 112,000 3. Irs Subtract line 2 from line 1 3. Irs 1,000 4. Irs Enter: $10,000 if filing a joint return or qualifying widow(er) or married filing a separate return and you lived with your spouse at any time during the year, or $15,000 for all others 4. Irs 15,000 5. Irs Divide line 3 by line 4 and enter the result as a decimal (rounded to at least three places). Irs If the result is 1. Irs 000 or more, enter 1. Irs 000 5. Irs . Irs 067 6. Irs Enter the lesser of: $5,500 ($6,500 if you are age 50 or older), or Your taxable compensation 6. Irs 5,500 7. Irs Multiply line 5 by line 6 7. Irs 369 8. Irs Subtract line 7 from line 6. Irs Round the result up to the nearest $10. Irs If the result is less than $200, enter $200 8. Irs 5,140 9. Irs Enter contributions for the year to other IRAs 9. Irs 0 10. Irs Subtract line 9 from line 6 10. Irs 5,500 11. Irs Enter the lesser of line 8 or line 10. Irs This is your reduced Roth IRA contribution limit 11. Irs 5,140 When Can You Make Contributions? You can make contributions to a Roth IRA for a year at any time during the year or by the due date of your return for that year (not including extensions). Irs You can make contributions for 2013 by the due date (not including extensions) for filing your 2013 tax return. Irs This means that most people can make contributions for 2013 by April 15, 2014. Irs What if You Contribute Too Much? A 6% excise tax applies to any excess contribution to a Roth IRA. Irs Excess contributions. Irs   These are the contributions to your Roth IRAs for a year that equal the total of: Amounts contributed for the tax year to your Roth IRAs (other than amounts properly and timely rolled over from a Roth IRA or properly converted from a traditional IRA or rolled over from a qualified retirement plan, as described later) that are more than your contribution limit for the year (explained earlier under How Much Can Be Contributed? ), plus Any excess contributions for the preceding year, reduced by the total of: Any distributions out of your Roth IRAs for the year, plus Your contribution limit for the year minus your contributions to all your IRAs for the year. Irs Withdrawal of excess contributions. Irs   For purposes of determining excess contributions, any contribution that is withdrawn on or before the due date (including extensions) for filing your tax return for the year is treated as an amount not contributed. Irs This treatment only applies if any earnings on the contributions are also withdrawn. Irs The earnings are considered earned and received in the year the excess contribution was made. Irs   If you timely filed your 2013 tax return without withdrawing a contribution that you made in 2013, you can still have the contribution returned to you within 6 months of the due date of your 2013 tax return, excluding extensions. Irs If you do, file an amended return with “Filed pursuant to section 301. Irs 9100-2” written at the top. Irs Report any related earnings on the amended return and include an explanation of the withdrawal. Irs Make any other necessary changes on the amended return. Irs Applying excess contributions. Irs    If contributions to your Roth 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 Can You Move Amounts Into a Roth IRA? You may be able to convert amounts from either a traditional, SEP, or SIMPLE IRA into a Roth IRA. Irs You may be able to roll over amounts from a qualified retirement plan to a Roth IRA. Irs You may be able to recharacterize contributions made to one IRA as having been made directly to a different IRA. Irs You can roll amounts over from a designated Roth account or from one Roth IRA to another Roth IRA. Irs Conversions You can convert a traditional IRA to a Roth IRA. Irs The conversion is treated as a rollover, regardless of the conversion method used. Irs Most of the rules for rollovers, described in chapter 1 under Rollover From One IRA Into Another , apply to these rollovers. Irs However, the 1-year waiting period does not apply. Irs Conversion methods. Irs   You can convert amounts from a traditional IRA to a Roth IRA in any of the following three ways. Irs Rollover. Irs You can receive a distribution from a traditional IRA and roll it over (contribute it) to a Roth IRA within 60 days after the distribution. Irs Trustee-to-trustee transfer. Irs You can direct the trustee of the traditional IRA to transfer an amount from the traditional IRA to the trustee of the Roth IRA. Irs Same trustee transfer. Irs If the trustee of the traditional IRA also maintains the Roth IRA, you can direct the trustee to transfer an amount from the traditional IRA to the Roth IRA. Irs Same trustee. Irs   Conversions made with the same trustee can be made by redesignating the traditional IRA as a Roth IRA, rather than opening a new account or issuing a new contract. Irs Income. Irs   You must include in your gross income distributions from a traditional IRA that you would have had to include in income if you had not converted them into a Roth IRA. Irs These amounts are normally included in income on your return for the year that you converted them from a traditional IRA to a Roth IRA. Irs If you must include any amount in your gross income, you may have to increase your withholding or make estimated tax payments. Irs See Publication 505, Tax Withholding and Estimated Tax. Irs More information. Irs   For more information on conversions, see Converting From Any Traditional IRA Into a Roth IRA in chapter 1. Irs Rollover From Employer's Plan Into a Roth IRA You can roll over into a Roth IRA all or part of an eligible rollover distribution you receive from your (or your deceased spouse's): Employer's qualified pension, profit-sharing, or stock bonus plan (including a 401(k) plan); Annuity plan; Tax-sheltered annuity plan (section 403(b) plan); or Governmental deferred compensation plan (section 457 plan). Irs Any amount rolled over is subject to the same rules for converting a traditional IRA into a Roth IRA. Irs See Converting From Any Traditional IRA Into a Roth IRA in chapter 1. Irs Also, the rollover contribution must meet the rollover requirements that apply to the specific type of retirement plan. Irs Rollover methods. Irs   You can roll over amounts from a qualified retirement plan to a Roth IRA in one of the following ways. Irs Rollover. Irs You can receive a distribution from a qualified retirement plan and roll it over (contribute) to a Roth IRA within 60 days after the distribution. Irs Since the distribution is paid directly to you, the payer generally must withhold 20% of it. Irs Direct rollover option. Irs Your employer's qualified plan must give you the option to have any part of an eligible rollover distribution paid directly to a Roth IRA. Irs Generally, no tax is withheld from any part of the designated distribution that is directly paid to the trustee of the Roth IRA. Irs Rollover by nonspouse beneficiary. Irs   If you are a designated beneficiary (other than a surviving spouse) of a deceased employee, you can roll over all or part of an eligible rollover distribution from one of the types of plans listed above into a Roth IRA. Irs You must make the rollover by a direct trustee-to-trustee transfer into an inherited Roth IRA. Irs   You will determine your required minimum distributions in years after you make the rollover based on whether the employee died before his or her required beginning date for taking distributions from the plan. Irs For more information, see Distributions after the employee’s death under Tax on Excess Accumulation in Publication 575. Irs Income. Irs   You must include in your gross income distributions from a qualified retirement plan that you would have had to include in income if you had not rolled them over into a Roth IRA. Irs You do not include in gross income any part of a distribution from a qualified retirement plan that is a return of contributions (after-tax contributions) to the plan that were taxable to you when paid. Irs These amounts are normally included in income on your return for the year of the rollover from the qualified employer plan to a Roth IRA. Irs If you must include any amount in your gross income, you may have to increase your withholding or make estimated tax payments. Irs See Publication 505, Tax Withholding and Estimated Tax. Irs For more information on eligible rollover distributions from qualified retirement plans and withholding, see Rollover From Employer's Plan Into an IRA in chapter 1. Irs Military Death Gratuities and Servicemembers' Group Life Insurance (SGLI) Payments If you received a military death gratuity or SGLI payment with respect to a death from injury that occurred after October 6, 2001, you can contribute (roll over) all or part of the amount received to your Roth IRA. Irs The contribution is treated as a qualified rollover contribution. Irs The amount you can roll over to your Roth IRA cannot exceed the total amount that you received reduced by any part of that amount that was contributed to a Coverdell ESA or another Roth IRA. Irs Any military death gratuity or SGLI payment contributed to a Roth IRA is disregarded for purposes of the 1-year waiting period between rollovers. Irs The rollover must be completed before the end of the 1-year period beginning on the date you received the payment. Irs The amount contributed to your Roth IRA is treated as part of your cost basis (investment in the contract) in the Roth IRA that is not taxable when distributed. Irs Rollover From a Roth IRA You can withdraw, tax free, all or part of the assets from one Roth IRA if you contribute them within 60 days to another Roth IRA. Irs Most of the rules for rollovers, described in chapter 1 under Rollover From One IRA Into Another , apply to these rollovers. Irs However, rollovers from retirement plans other than Roth IRAs are disregarded for purposes of the 1-year waiting period between rollovers. Irs A rollover from a Roth IRA to an employer retirement plan is not allowed. Irs A rollover from a designated Roth account can only be made to another designated Roth account or to a Roth IRA. Irs If you roll over an amount from one Roth IRA to another Roth IRA, the 5-year period used to determine qualified distributions does not change. Irs The 5-year period begins with the first taxable year for which the contribution was made to the initial Roth IRA. Irs See What are Qualified Distributions , later. Irs Rollover of Exxon Valdez Settlement Income If you are a qualified taxpayer (defined in chapter 1, earlier) and you received qualified settlement income (defined in chapter 1, earlier), you can contribute all or part of the amount received to an eligible retirement plan which includes a Roth IRA. Irs The rules for contributing qualified settlement income to a Roth IRA are the same as the rules for contributing qualified settlement income to a traditional IRA with the following exception. Irs Qualified settlement income that is contributed to a Roth IRA, or to a designated Roth account, will be: Included in your taxable income for the year the qualified settlement income was received, and Treated as part of your cost basis (investment in the contract) in the Roth IRA that is not taxable when distributed. Irs For more information, see Rollover of Exxon Valdez Settlement Income in chapter 1. Irs Rollover of Airline Payments If you are a qualified airline employee (defined next), you may contribute any portion of an airline payment (defined below) you receive to a Roth IRA. Irs The contribution must be made within 180 days from the date you received the payment. Irs The contribution will be treated as a qualified rollover contribution. Irs The rollover contribution is included in income to the extent it would be included in income if it were not part of the rollover contribution. Irs Also, any reduction in the airline payment amount on account of employment taxes shall be disregarded when figuring the amount you can contribute to your Roth IRA. Irs Qualified airline employee. Irs    A current or former employee of a commercial airline carrier who was a participant in a qualified defined benefit plan maintained by the carrier which was terminated or became subject to restrictions under Section 402(b) of the Pension Protection Act of 2006. Irs These provisions also apply to surviving spouses of qualified airline employees. Irs Airline payment. Irs    An airline payment is any payment of money or other property that is paid to a qualified airline employee from a commercial airline carrier. Irs The payment also must be made both: Under the approval of an order of federal bankruptcy court in a case filed after September 11, 2001, and before January 1, 2007, and In respect of the qualified airline employee’s interest in a bankruptcy claim against the airline carrier, any note of the carrier (or amount paid in lieu of a note being issued), or any other fixed obligation of the carrier to pay a lump sum amount. Irs Any reduction in the airline payment amount on account of employment taxes shall be disregarded when figuring the amount you can roll over to your traditional IRA. Irs Also, an airline payment shall not include any amount payable on the basis of the airline carrier’s future earnings or profits. Irs Are Distributions Taxable? You do not include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s). Irs You also do not include distributions from your Roth IRA that you roll over tax free into another Roth IRA. Irs You may have to include part of other distributions in your income. Irs See Ordering Rules for Distributions , later. Irs Basis of distributed property. Irs   The basis of property distributed from a Roth IRA is its fair market value (FMV) on the date of distribution, whether or not the distribution is a qualified distribution. Irs Withdrawals of contributions by due date. Irs   If you withdraw contributions (including any net earnings on the contributions) by the due date of your return for the year in which you made the contribution, the contributions are treated as if you never made them. Irs If you have an extension of time to file your return, you can withdraw the contributions and earnings by the extended due date. Irs The withdrawal of contributions is tax free, but you must include the earnings on the contributions in income for the year in which you made the contributions. Irs What Are Qualified Distributions? A qualified distribution is any payment or distribution from your Roth IRA that meets the following requirements. Irs It is made after the 5-year period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for your benefit, and The payment or distribution is: Made on or after the date you reach age 59½, Made because you are disabled (defined earlier), Made to a beneficiary or to your estate after your death, or One that meets the requirements listed under First home under Exceptions in chapter 1 (up to a $10,000 lifetime limit). Irs Additional Tax on Early Distributions If you receive a distribution that is not a qualified distribution, you may have to pay the 10% additional tax on early distributions as explained in the following paragraphs. Irs Distributions of conversion and certain rollover contributions within 5-year period. Irs   If, within the 5-year period starting with the first day of your tax year in which you convert an amount from a traditional IRA or rollover an amount from a qualified retirement plan to a Roth IRA, you take a distribution from a Roth IRA, you may have to pay the 10% additional tax on early distributions. Irs You generally must pay the 10% additional tax on any amount attributable to the part of the amount converted or rolled over (the conversion or rollover contribution) that you had to include in income (recapture amount). Irs A separate 5-year period applies to each conversion and rollover. Irs See Ordering Rules for Distributions , later, to determine the recapture amount, if any. Irs   The 5-year period used for determining whether the 10% early distribution tax applies to a distribution from a conversion or rollover contribution is separately determined for each conversion and rollover, and is not necessarily the same as the 5-year period used for determining whether a distribution is a qualified distribution. Irs See What Are Qualified Distributions , earlier. Irs   For example, if a calendar-year taxpayer makes a conversion contribution on February 25, 2013, and makes a regular contribution for 2012 on the same date, the 5-year period for the conversion begins January 1, 2013, while the 5-year period for the regular contribution begins on January 1, 2012. Irs   Unless one of the exceptions listed later applies, you must pay the additional tax on the portion of the distribution attributable to the part of the conversion or rollover contribution that you had to include in income because of the conversion or rollover. Irs   You must pay the 10% additional tax in the year of the distribution, even if you had included the conversion or rollover contribution in an earlier year. Irs You also must pay the additional tax on any portion of the distribution attributable to earnings on contributions. Irs Other early distributions. Irs   Unless one of the exceptions listed below applies, you must pay the 10% additional tax on the taxable part of any distributions that are not qualified distributions. Irs Exceptions. Irs   You may not have to pay the 10% additional tax in the following situations. Irs You have reached age 59½. Irs You are totally and permanently disabled. Irs You are the beneficiary of a deceased IRA owner. Irs You use the distribution to buy, build, or rebuild a first home. Irs The distributions are part of a series of substantially equal payments. Irs You have unreimbursed medical expenses that are more than 10% (or 7. Irs 5% if you or your spouse was born before January 2, 1949) of your adjusted gross income (defined earlier) for the year. Irs You are paying medical insurance premiums during a period of unemployment. Irs The distributions are not more than your qualified higher education expenses. Irs The distribution is due to an IRS levy of the qualified plan. Irs The distribution is a qualified reservist distribution. Irs Most of these exceptions are discussed earlier in chapter 1 under Early Distributions . Irs Please click here for the text description of the image. Irs Is Roth Distributions a Qualified Distribution? Ordering Rules for Distributions If you receive a distribution from your Roth IRA that is not a qualified distribution, part of it may be taxable. Irs There is a set order in which contributions (including conversion contributions and rollover contributions from qualified retirement plans) and earnings are considered to be distributed from your Roth IRA. Irs For these purposes, disregard the withdrawal of excess contributions and the earnings on them (discussed earlier under What if You Contribute Too Much ). Irs Order the distributions as follows. Irs Regular contributions. Irs Conversion and rollover contributions, on a first-in, first-out basis (generally, total conversions and rollovers from the earliest year first). Irs See Aggregation (grouping and adding) rules, later. Irs Take these conversion and rollover contributions into account as follows: Taxable portion (the amount required to be included in gross income because of the conversion or rollover) first, and then the Nontaxable portion. Irs Earnings on contributions. Irs Disregard rollover contributions from other Roth IRAs for this purpose. Irs Aggregation (grouping and adding) rules. Irs   Determine the taxable amounts distributed (withdrawn), distributions, and contributions by grouping and adding them together as follows. Irs Add all distributions from all your Roth IRAs during the year together. Irs Add all regular contributions made for the year (including contributions made after the close of the year, but before the due date of your return) together. Irs Add this total to the total undistributed regular contributions made in prior years. Irs Add all conversion and rollover contributions made during the year together. Irs For purposes of the ordering rules, in the case of any conversion or rollover in which the conversion or rollover distribution is made in 2013 and the conversion or rollover contribution is made in 2014, treat the conversion or rollover contribution as contributed before any other conversion or rollover contributions made in 2014. Irs Add any recharacterized contributions that end up in a Roth IRA to the appropriate contribution group for the year that the original contribution would have been taken into account if it had been made directly to the Roth IRA. Irs   Disregard any recharacterized contribution that ends up in an IRA other than a Roth IRA for the purpose of grouping (aggregating) both contributions and distributions. Irs Also disregard any amount withdrawn to correct an excess contribution (including the earnings withdrawn) for this purpose. Irs Example. Irs On October 15, 2009, Justin converted all $80,000 in his traditional IRA to his Roth IRA. Irs His Forms 8606 from prior years show that $20,000 of the amount converted is his basis. Irs Justin included $60,000 ($80,000 − $20,000) in his gross income. Irs On February 23, 2013, Justin made a regular contribution of $5,000 to a Roth IRA. Irs On November 8, 2013, at age 60, Justin took a $7,000 distribution from his Roth IRA. Irs The first $5,000 of the distribution is a return of Justin's regular contribution and is not includible in his income. Irs The next $2,000 of the distribution is not includible in income because it was included previously. Irs Figuring your recapture amount. Irs   If you had an early distribution from your Roth IRAs in 2013, you must allocate the early distribution by using the Recapture Amount—Allocation Chart, later. Irs Recapture Amount—Allocation Chart Enter the amount from your 2013 Form 8606, line 19   Before you begin: You will need your prior year Form(s) 8606 and income tax return(s) if you entered an amount on any line(s) as indicated below. Irs   You will now allocate the amount you entered above (2013 Form 8606, line 19) in the order shown, to the amounts on the lines listed below (to the extent a prior year distribution was not allocable to the amount). Irs The maximum amount you can enter on each line below is the amount entered on the referenced lines of the form for that year. Irs Note. Irs Once you have allocated the full amount from your 2013 Form 8606, line 19, STOP. Irs See the Example , earlier. Irs Tax Year Your Form 2013 Form 8606, line 20   Form 8606, line 22   1998 Form 8606, line 16   Form 8606, line 15   1999 Form 8606, line 16   Form 8606, line 15   2000 Form 8606, line 16   Form 8606, line 15   2001 Form 8606, line 18   Form 8606, line 17   2002 Form 8606, line 18   Form 8606, line 17   2003 Form 8606, line 18   Form 8606, line 17   2004 Form 8606, line 18   Form 8606, line 17   2005 Form 8606, line 18   Form 8606, line 17   2006 Form 8606, line 18   Form 8606, line 17   2007 Form 8606, line 18   Form 8606, line 17   2008 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2009 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2010 Form 8606, lines 18 and 23   Form 8606, lines 17 and 22   2011 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2012 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2013 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2013 Form 8606, line 25       *Only include those amounts rolled over to a Roth IRA. Irs  **Only include any contributions (usually Form 1099-R, box 5) that were taxable to you when made and rolled over to a Roth IRA. Irs Amount to include on Form 5329, line 1. Irs   Include on line 1 of your 2013 Form 5329 the following four amounts from the Recapture Amount—Allocation Chart that you filled out. Irs The amount you allocated to line 20 of your 2013 Form 8606. Irs The amount(s) allocated to your 2009 through 2013 Forms 8606, line 18, and your 2010 Form 8606, line 23. Irs The amount(s) allocated to your 2009, 2011, 2012, and 2013 Forms 1040, line 16b; Forms 1040A, line 12b; and Forms 1040NR, line 17b. Irs The amount from your 2013 Form 8606, line 25. Irs   Also, include any amount you allocated to line 20 of your 2013 Form 8606 on your 2013 Form 5329, line 2, and enter exception number 09. Irs Example. Irs Ishmael, age 32, opened a Roth IRA in 2000. Irs He made the maximum contributions to it every year. Irs In addition, he made the following transactions into his Roth IRA. Irs In 2005, he converted $10,000 from his traditional IRA into his Roth IRA. Irs He filled out a 2005 Form 8606 and attached it with his 2005 Form 1040. Irs He entered $0 on line 17 of Form 8606 because he took a deduction for all the contributions to the traditional IRA, therefore he has no basis. Irs He entered $10,000 on line 18 of Form 8606. Irs In 2011, he rolled over the entire balance of his qualified retirement plan, $20,000, into a Roth IRA when he changed jobs. Irs He used a 2011 Form 1040 to file his taxes. Irs He entered $20,000 on line 16a of Form 1040 because that was the amount reported in box 1 of his 2011 Form 1099-R. Irs Box 5 of his 2011 Form 1099-R reported $0 since he did not make any after-tax contributions to the qualified retirement plan. Irs He entered $20,000 on line 16b of Form 1040 since that is the taxable amount that was rolled over in 2011. Irs The total balance in his Roth IRA as of January 1, 2013 was $105,000 ($50,000 in contributions from 2000 through 2012 + $10,000 from the 2005 conversion + $20,000 from the 2011 rollover + $25,000 from earnings). Irs He has not taken any early distribution from his Roth IRA before 2013. Irs In 2013, he made the maximum contribution of $5,500 to his Roth IRA. Irs In August of 2013, he took a $85,500 early distribution from his Roth IRA to use as a down payment on the purchase of his first home. Irs See his filled out Illustrated Recapture Amount—Allocation Chart, later, to see how he allocated the amounts from the above transactions. Irs Based on his allocation, he would enter $20,000 on his 2013 Form 5329, line 1 (see Amount to include on Form 5329, line 1 , above). Irs He should also report $10,000 on his 2013 Form 5329, line 2, and enter exception 09 since that amount is not subject to the 10% additional tax on early distributions. Irs Illustrated Recapture Amount—Allocation Chart Enter the amount from your 2013 Form 8606, line 19 $85,500 Before you begin: You will need your prior year Form(s) 8606 and income tax return(s) if you entered an amount on any line(s) as indicated below. Irs   You will now allocate the amount you entered above (2013 Form 8606, line 19) in the order shown, to the amounts on the lines listed below (to the extent a prior year distribution was not allocable to the amount). Irs The maximum amount you can enter on each line below is the amount entered on the referenced lines of the form for that year. Irs Note. Irs Once you have allocated the full amount from your 2013 Form 8606, line 19, STOP. Irs See the Example , earlier. Irs Tax Year Your Form 2013 Form 8606, line 20 $10,000 Form 8606, line 22 $55,500 1998 Form 8606, line 16   Form 8606, line 15   1999 Form 8606, line 16   Form 8606, line 15   2000 Form 8606, line 16   Form 8606, line 15   2001 Form 8606, line 18   Form 8606, line 17   2002 Form 8606, line 18   Form 8606, line 17   2003 Form 8606, line 18   Form 8606, line 17   2004 Form 8606, line 18   Form 8606, line 17   2005 Form 8606, line 18 $10,000 Form 8606, line 17 $-0- 2006 Form 8606, line 18   Form 8606, line 17   2007 Form 8606, line 18   Form 8606, line 17   2008 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2009 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2010 Form 8606, lines 18 and 23   Form 8606, lines 17 and 22   2011 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b* $10,000 Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2012 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2013 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2013 Form 8606, line 25       *Only include those amounts rolled over to a Roth IRA. Irs  **Only include any contributions (usually Form 1099-R, box 5) that were taxable to you when made and rolled over to a Roth IRA. Irs How Do You Figure the Taxable Part? To figure the taxable part of a distribution that is not a qualified distribution, complete Form 8606, Part III. Irs Must You Withdraw or Use Assets? You are not required to take distributions from your Roth IRA at any age. Irs The minimum distribution rules that apply to traditional IRAs do not apply to Roth IRAs while the owner is alive. Irs However, after the death of a Roth IRA owner, certain of the minimum distribution rules that apply to traditional IRAs also apply to Roth IRAs as explained later under Distributions After Owner's Death . Irs Minimum distributions. Irs   You cannot use your Roth IRA to satisfy minimum distribution requirements for your traditional IRA. Irs Nor can you use distributions from traditional IRAs for required distributions from Roth IRAs. Irs See Distributions to beneficiaries , later. Irs Recognizing Losses on Investments If you have a loss on your Roth IRA investment, you can recognize the loss on your income tax return, but only when all the amounts in all of your Roth IRA accounts have been distributed to you and the total distributions are less than your unrecovered basis. Irs Your basis is the total amount of contributions in your Roth IRAs. Irs You claim the loss as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit that applies to certain miscellaneous itemized deductions on Schedule A (Form 1040). Irs Any such losses are added back to taxable income for purposes of calculating the alternative minimum tax. Irs Distributions After Owner's Death If a Roth IRA owner dies, the minimum distribution rules that apply to traditional IRAs apply to Roth IRAs as though the Roth IRA owner died before his or her required beginning date. Irs See When Can You Withdraw or Use Assets? in chapter 1. Irs Distributions to beneficiaries. Irs   Generally, the entire interest in the Roth IRA must be distributed by the end of the fifth calendar year after the year of the owner's death unless the interest is payable to a designated beneficiary over the life or life expectancy of the designated beneficiary. Irs (See When Must You Withdraw Assets? (Required Minimum Distributions) in chapter 1. Irs )   If paid as an annuity, the entire interest must be payable over a period not greater than the designated beneficiary's life expectancy and distributions must begin before the end of the calendar year following the year of death. Irs Distributions from another Roth IRA cannot be substituted for these distributions unless the other Roth IRA was inherited from the same decedent. Irs   If the sole beneficiary is the spouse, he or she can either delay distributions until the decedent would have reached age 70½ or treat the Roth IRA as his or her own. Irs Combining with other Roth IRAs. Irs   A beneficiary can combine an inherited Roth IRA with another Roth IRA maintained by the beneficiary only if the beneficiary either: Inherited the other Roth IRA from the same decedent, or Was the spouse of the decedent and the sole beneficiary of the Roth IRA and elects to treat it as his or her own IRA. Irs Distributions that are not qualified distributions. Irs   If a distribution to a beneficiary is not a qualified distribution, it is generally includible in the beneficiary's gross income in the same manner as it would have been included in the owner's income had it been distributed to the IRA owner when he or she was alive. Irs   If the owner of a Roth IRA dies before the end of: The 5-year period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for the owner's benefit, or The 5-year period starting with the year of a conversion contribution from a traditional IRA or a rollover from a qualified retirement plan to a Roth IRA, each type of contribution is divided among multiple beneficiaries according to the pro-rata share of each. Irs See Ordering Rules for Distributions , earlier in this chapter under Are Distributions Taxable. Irs Example. Irs When Ms. Irs Hibbard died in 2013, her Roth IRA contained regular contributions of $4,000, a conversion contribution of $10,000 that was made in 2009, and earnings of $2,000. Irs No distributions had been made from her IRA. Irs She had no basis in the conversion contribution in 2009. Irs When she established this Roth IRA (her first) in 2009, she named each of her four children as equal beneficiaries. Irs Each child will receive one-fourth of each type of contribution and one-fourth of the earnings. Irs An immediate distribution of $4,000 to each child will be treated as $1,000 from regular contributions, $2,500 from conversion contributions, and $500 from earnings. Irs In this case, because the distributions are made before the end of the applicable 5-year period for a qualified distribution, each beneficiary includes $500 in income for 2013. Irs The 10% additional tax on early distributions does not apply because the distribution was made to the beneficiaries as a result of the death of the IRA owner. Irs If distributions from an inherited Roth IRA are less than the required minimum distribution for the year, discussed in chapter 1 under When Must You Withdraw Assets? (Required Minimum Distributions), you may have to pay a 50% excise tax for that year on the amount not distributed as required. Irs For the tax on excess accumulations (insufficient distributions), see Excess Accumulations (Insufficient Distributions) under What Acts Result in Penalties or Additional Taxes? in chapter 1. Irs If this applies to you, substitute “Roth IRA” for “traditional IRA” in that discussion. Irs Prev  Up  Next   Home   More Online Publications
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Understanding Your CP3219B Notice

This Statutory Notice of Deficiency notifies you of the IRS’s intent to assess a tax deficiency and informs you of your right to petition the United States Tax Court to dispute the proposed adjustments.


What you need to do immediately

  • Review this notice and compare our changes to the information on your tax return. On previous notices we asked you to verify the income, credits, and deductions reported on your tax return because they’re different from the information we received from other sources. You didn't provide any further information to us.
  • If you agree with the changes, complete the Form 4089, Notice of Deficiency - Waiver, sign and return it in order to limit additional interest charges.
  • If you don't send a payment with Form 4089, we will send a bill for the amount due with any interest and applicable penalties.
  • Mail any additional information you have to us immediately. Attach this letter to your correspondence to help us identify your case. Keep a copy for your records. Our consideration won't extend the deadline to file a petition with the U.S Tax Court.
  • If you don’t agree with the changes you have the right to challenge the increase in tax by filing a petition with the U.S. Tax Court. You have 90 days (150 if the notice was addressed outside the United States) to file the petition. The Court can’t consider your case if the petition is filed late. You can download a petition form and rules from www.ustaxcourt.gov or contact:

  • Clerk of the U.S. Tax Court
    400 Second Street, NW
    Washington, DC 20217
    1-202-521-0700

You may want to

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

Answers to Common Questions

Is this a Bill?
No. It tells you of the IRS’s intention to assess a tax deficiency. It isn't an assessment of tax nor does it require you to make immediate payment. We haven’t charged any additional tax at this time.

Should I call with my response or mail it in?
If you want us to consider additional information, please contact us immediately. Our consideration won't extend the deadline to file a petition with the U.S Tax Court.


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


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


If you choose to petition the United States Tax Court, the application must be submitted in writing.

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

I need more time to find my records and go through them all. Will you allow me additional time to respond?
No. The time you have to petition the United States Tax Court can't be extended. It’s important that you respond to the Statutory Notice of Deficiency or petition the United States Tax Court (if you choose to) by the due date shown on the notice. If you don’t, we’ll assume the proposed changes are correct and assess the additional deficiency.

Do I have to pay the interest? Can you remove it?
The law requires us to charge interest on any tax that isn't paid by the return due date (Internal Revenue Code Section 6601). 

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

What should I do to avoid problems like this in the future?
Keep accurate payment information from banks and other payers to verify you've received all payment information for filing your return. Review the documents to be sure they show your most current address. Take the following actions when filing your tax return to avoid similar issues in the future:

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

How to get help

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

The Irs

Irs Publication 915 - Main Content Table of Contents Are Any of Your Benefits Taxable?Worksheet A. Irs Exemption from withholding. Irs How To Report Your Benefits How Much Is Taxable?Examples Lump-Sum ElectionExample Deductions Related to Your BenefitsRepayments More Than Gross Benefits Worksheets AppendixForm SSA-1099, Social Security Benefit Statement 2013 Form SSA-1042S, Social Security Benefit Statement 2013 (Nonresident Aliens) Form RRB-1099, Payments by the Railroad Retirement Board 2013 Form RRB-1042S, Payments by the Railroad Retirement Board 2013 (Nonresident Aliens) How To Get Tax HelpLow Income Taxpayer Clinics Are Any of Your Benefits Taxable? To find out whether any of your benefits shown on Forms SSA-1099 and RRB-1099 may be taxable, compare the base amount (explained later) for your filing status with the total of: One-half of your benefits, plus All your other income, including tax-exempt interest. Irs When making this comparison, do not reduce your other income by any exclusions for: Interest from qualified U. Irs S. Irs savings bonds, Employer-provided adoption benefits, Foreign earned income or foreign housing, or Income earned by bona fide residents of American Samoa or Puerto Rico. Irs Children's benefits. Irs   The rules in this publication apply to benefits received by children. Irs See Who is taxed , later. Irs The SSA issues Form SSA-1099 and Form SSA-1042S. Irs The RRB issues Form RRB-1099 and Form RRB-1042S. Irs These forms (tax statements) report the amounts paid and repaid, and taxes withheld for a tax year. Irs You may receive more than one of these forms for the same tax year. Irs See the Appendix at the end of this publication for more information. Irs Each original Form RRB-1099 or Form RRB-1042S is valid unless it has been corrected. Irs The RRB will issue a corrected Form RRB-1099 or Form RRB-1042S if there is an error in the original. Irs A corrected Form RRB-1099 or Form RRB-1042S is indicated as “CORRECTED” and replaces the corresponding original Form RRB-1099 or Form RRB-1042S. Irs You must use the latest corrected Form RRB-1099 or Form RRB-1042S you received and any original Form RRB-1099 or Form RRB-1042S that the RRB has not corrected when you determine what amounts to report on your tax return. Irs Figuring total income. Irs   To figure the total of one-half of your benefits plus your other income, use Worksheet A, discussed later. Irs If the total is more than your base amount, part of your benefits may be taxable. Irs   If you are married and file a joint return for 2013, you and your spouse must combine your incomes and your benefits to figure whether any of your combined benefits are taxable. Irs Even if your spouse did not receive any benefits, you must add your spouse's income to yours to figure whether any of your benefits are taxable. Irs If the only income you received during 2013 was your social security or the SSEB portion of tier 1 railroad retirement benefits, your benefits generally are not taxable and you probably do not have to file a return. Irs If you have income in addition to your benefits, you may have to file a return even if none of your benefits are taxable. Irs Base amount. Irs   Your base amount is: $25,000 if you are single, head of household, or qualifying widow(er), $25,000 if you are married filing separately and lived apart from your spouse for all of 2013, $32,000 if you are married filing jointly, or $-0- if you are married filing separately and lived with your spouse at any time during 2013. Irs Worksheet A. Irs   You can use Worksheet A to figure the amount of income to compare with your base amount. Irs This is a quick way to check whether some of your benefits may be taxable. Irs     Worksheet A. Irs A Quick Way To Check if Your Benefits May Be Taxable Keep for your records A. Irs Enter the amount from box 5 of all your Forms SSA-1099 and RRB-1099. Irs Include the full amount of any lump-sum benefit payments received in 2013, for 2013 and earlier years. Irs (If you received more than one form, combine the amounts from box 5 and enter the total. Irs ) A. Irs   Note. Irs If the amount on line A is zero or less, stop here; none of your benefits are taxable this year. Irs B. Irs Enter one-half of the amount on line A B. Irs   C. Irs Enter your taxable pensions, wages, interest, dividends, and other taxable income C. Irs   D. Irs Enter any tax-exempt interest income (such as interest on municipal bonds) plus any exclusions from income (listed earlier) D. Irs   E. Irs Add lines B, C, and D E. Irs   Note. Irs Compare the amount on line E to your base amount for your filing status. Irs If the amount on line E equals or is less than the base amount for your filing status, none of your benefits are taxable this year. Irs If the amount on line E is more than your base amount, some of your benefits may be taxable. Irs You need to complete Worksheet 1, shown later. Irs If none of your benefits are taxable, but you otherwise must file a tax return, see Benefits not taxable , later, under How To Report Your Benefits . Irs   Example. Irs You and your spouse (both over 65) are filing a joint return for 2013 and you both received social security benefits during the year. Irs In January 2014, you received a Form SSA-1099 showing net benefits of $7,500 in box 5. Irs Your spouse received a Form SSA-1099 showing net benefits of $3,500 in box 5. Irs You also received a taxable pension of $22,800 and interest income of $500. Irs You did not have any tax-exempt interest income. Irs Your benefits are not taxable for 2013 because your income, as figured in Worksheet A below, is not more than your base amount ($32,000) for married filing jointly. Irs   Even though none of your benefits are taxable, you must file a return for 2013 because your taxable gross income ($23,300) exceeds the minimum filing requirement amount for your filing status. Irs     Filled-in Worksheet A. Irs A Quick Way To Check if Your Benefits May Be Taxable Keep for your records A. Irs Enter the amount from box 5 of all your Forms SSA-1099 and RRB-1099. Irs Include the full amount of any lump-sum benefit payments received in 2013, for 2013 and earlier years. Irs (If you received more than one form, combine the amounts from box 5 and enter the total. Irs ) A. Irs $11,000 Note. Irs If the amount on line A is zero or less, stop here; none of your benefits are taxable this year. Irs B. Irs Enter one-half of the amount on line A B. Irs 5,500 C. Irs Enter your taxable pensions, wages, interest, dividends, and other taxable income C. Irs 23,300 D. Irs Enter any tax-exempt interest income (such as interest on municipal bonds) plus any exclusions from income (listed earlier) D. Irs -0- E. Irs Add lines B, C, and D E. Irs $28,800 Note. Irs Compare the amount on line E to your base amount for your filing status. Irs If the amount on line E equals or is less than the base amount for your filing status, none of your benefits are taxable this year. Irs If the amount on line E is more than your base amount, some of your benefits may be taxable. Irs You need to complete Worksheet 1, shown later. Irs If none of your benefits are taxable, but you otherwise must file a tax return, see Benefits not taxable , later, under How To Report Your Benefits . Irs   Who is taxed. Irs   Benefits are included in the taxable income (to the extent they are taxable) of the person who has the legal right to receive the benefits. Irs For example, if you and your child receive benefits, but the check for your child is made out in your name, you must use only your part of the benefits to see whether any benefits are taxable to you. Irs One-half of the part that belongs to your child must be added to your child's other income to see whether any of those benefits are taxable to your child. Irs Repayment of benefits. Irs   Any repayment of benefits you made during 2013 must be subtracted from the gross benefits you received in 2013. Irs It does not matter whether the repayment was for a benefit you received in 2013 or in an earlier year. Irs If you repaid more than the gross benefits you received in 2013, see Repayments More Than Gross Benefits , later. Irs   Your gross benefits are shown in box 3 of Form SSA-1099 or Form RRB-1099. Irs Your repayments are shown in box 4. Irs The amount in box 5 shows your net benefits for 2013 (box 3 minus box 4). Irs Use the amount in box 5 to figure whether any of your benefits are taxable. Irs Example. Irs In 2012, you received $3,000 in social security benefits, and in 2013 you received $2,700. Irs In March 2013, SSA notified you that you should have received only $2,500 in benefits in 2012. Irs During 2013, you repaid $500 to SSA. Irs The Form SSA-1099 you received for 2013 shows $2,700 in box 3 (gross amount) and $500 in box 4 (repayment). Irs The amount in box 5 shows your net benefits of $2,200 ($2,700 minus $500). Irs Tax withholding and estimated tax. Irs   You can choose to have federal income tax withheld from your social security benefits and/or the SSEB portion of your tier 1 railroad retirement benefits. Irs If you choose to do this, you must complete a Form W-4V, Voluntary Withholding Statement. Irs   If you do not choose to have income tax withheld, you may have to request additional withholding from other income or pay estimated tax during the year. Irs For details, see Publication 505, Tax Withholding and Estimated Tax, or the instructions for Form 1040-ES, Estimated Tax for Individuals. Irs U. Irs S. Irs citizens residing abroad. Irs   U. Irs S. Irs citizens who are residents of the following countries are exempt from U. Irs S. Irs tax on their benefits. Irs Canada. Irs Egypt. Irs Germany. Irs Ireland. Irs Israel. Irs Italy. Irs (You must also be a citizen of Italy for the exemption to apply. Irs ) Romania. Irs United Kingdom. Irs   The SSA will not withhold U. Irs S. Irs tax from your benefits if you are a U. Irs S. Irs citizen. Irs   The RRB will withhold U. Irs S. Irs tax from your benefits unless you file Form RRB-1001, Nonresident Questionnaire, with the RRB to provide citizenship and residency information. Irs If you do not file Form RRB-1001, the RRB will consider you a nonresident alien and withhold tax from your railroad retirement benefits at a 30% rate. Irs Contact the RRB to get this form. Irs Lawful permanent residents. Irs   For U. Irs S. Irs income tax purposes, lawful permanent residents (green card holders) are considered resident aliens until their lawful permanent resident status under the immigration laws is either taken away or is administratively or judicially determined to have been abandoned. Irs Social security benefits paid to a green card holder are not subject to 30% withholding. Irs If you are a green card holder and tax was withheld in error on your social security benefits because you have a foreign address, the withholding tax is refundable by the Social Security Administration (SSA) or the IRS. Irs SSA will refund taxes erroneously withheld if the refund can be processed during the same calendar year in which the tax was withheld. Irs If SSA cannot refund the taxes withheld, you must file a Form 1040 or 1040A with the Internal Revenue Service Center, Austin, TX 73301 to determine if you are entitled to a refund. Irs You must also attach the following information to your Form 1040 or 1040A: A copy of the Form SSA-1042S, Social Security Benefit Statement, A copy of the “green card,” and A signed declaration that includes the following statements:    “The SSA should not have withheld federal income tax from my social security benefits because I am a U. Irs S. Irs lawful permanent resident and my green card has been neither revoked nor administratively or judicially determined to have been abandoned. Irs I am filing a U. Irs S. Irs income tax return for the tax year as a resident alien reporting all of my worldwide income. Irs I have not claimed benefits for the tax year under an income tax treaty as a nonresident alien. Irs ” Nonresident aliens. Irs   A nonresident alien is an individual who is not a citizen or resident of the United States. Irs If you are a nonresident alien, the rules discussed in this publication do not apply to you. Irs Instead, 85% of your benefits are taxed at a 30% rate, unless exempt (or subject to a lower rate) by treaty. Irs You will receive a Form SSA-1042S or Form RRB-1042S showing the amount of your benefits. Irs These forms will also show the tax rate and the amount of tax withheld from your benefits. Irs   Under tax treaties with the following countries, residents of these countries are exempt from U. Irs S. Irs tax on their benefits. Irs Canada. Irs Egypt. Irs Germany. Irs Ireland. Irs Israel. Irs Italy. Irs Japan. Irs Romania. Irs United Kingdom. Irs   Under a treaty with India, benefits paid to individuals who are both residents and nationals of India are exempt from U. Irs S. Irs tax if the benefits are for services performed for the United States, its subdivisions, or local government authorities. Irs   If you are a resident of Switzerland, your total benefit amount will be taxed at a 15% rate. Irs   For more information on whether you are a nonresident alien, see Publication 519, U. Irs S. Irs Tax Guide for Aliens. Irs Exemption from withholding. Irs   If your social security benefits are exempt from tax because you are a resident of one of the treaty countries listed, the SSA will not withhold U. Irs S. Irs tax from your benefits. Irs   If your railroad retirement benefits are exempt from tax because you are a resident of one of the treaty countries listed, you can claim an exemption from withholding by filing Form RRB-1001 with the RRB. Irs Contact the RRB to get this form. Irs Canadian or German social security benefits paid to U. Irs S. Irs residents. Irs   Under income tax treaties with Canada and Germany, social security benefits paid by those countries to U. Irs S. Irs residents are treated for U. Irs S. Irs income tax purposes as if they were paid under the social security legislation of the United States. Irs If you receive social security benefits from Canada or Germany, include them on line 1 of Worksheet 1, shown later. Irs How To Report Your Benefits If part of your benefits are taxable, you must use Form 1040 or Form 1040A. Irs You cannot use Form 1040EZ. Irs Reporting on Form 1040. Irs   Report your net benefits (the total amount from box 5 of all your Forms SSA-1099 and Forms RRB-1099) on line 20a and the taxable part on line 20b. Irs If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on line 20a. Irs Reporting on Form 1040A. Irs   Report your net benefits (the total amount from box 5 of all your Forms SSA-1099 and Forms RRB-1099) on line 14a and the taxable part on line 14b. Irs If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on line 14a. Irs Benefits not taxable. Irs   If you are filing Form 1040EZ, do not report any benefits on your tax return. Irs If you are filing Form 1040 or Form 1040A, report your net benefits (the total amount from box 5 of all your Forms SSA-1099 and Forms RRB-1099) on Form 1040, line 20a, or Form 1040A, line 14a. Irs Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Irs If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Irs How Much Is Taxable? If part of your benefits are taxable, how much is taxable depends on the total amount of your benefits and other income. Irs Generally, the higher that total amount, the greater the taxable part of your benefits. Irs Maximum taxable part. Irs   Generally, up to 50% of your benefits will be taxable. Irs However, up to 85% of your benefits can be taxable if either of the following situations applies to you. Irs The total of one-half of your benefits and all your other income is more than $34,000 ($44,000 if you are married filing jointly). Irs You are married filing separately and lived with your spouse at any time during 2013. Irs Which worksheet to use. Irs   A worksheet you can use to figure your taxable benefits is in the instructions for your Form 1040 or 1040A. Irs You can use either that worksheet or Worksheet 1 in this publication, unless any of the following situations applies to you. Irs You contributed to a traditional individual retirement arrangement (IRA) and you or your spouse is covered by a retirement plan at work. Irs In this situation you must use the special worksheets in Appendix B of Publication 590 to figure both your IRA deduction and your taxable benefits. Irs Situation (1) does not apply and you take an exclusion for interest from qualified U. Irs S. Irs savings bonds (Form 8815), for adoption benefits (Form 8839), for foreign earned income or housing (Form 2555 or Form 2555-EZ), or for income earned in American Samoa (Form 4563) or Puerto Rico by bona fide residents. Irs In this situation, you must use Worksheet 1 in this publication to figure your taxable benefits. Irs You received a lump-sum payment for an earlier year. Irs In this situation, also complete Worksheet 2 or 3 and Worksheet 4 in this publication. Irs See Lump-Sum Election , later. Irs Examples A few examples you can use as a guide to figure the taxable part of your benefits follow. Irs Filled-in Worksheet 1. Irs Figuring Your Taxable Benefits Before you begin: If you are married filing separately and you lived apart from your spouse for all of 2013, enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Irs Do not use this worksheet if you repaid benefits in 2013 and your total repayments (box 4 of Forms SSA-1099 and RRB-1099) were more than your gross benefits for 2013 (box 3 of Forms SSA-1099 and RRB-1099). Irs None of your benefits are taxable for 2013. Irs For more information, see Repayments More Than Gross Benefits . Irs If you are filing Form 8815, Exclusion of Interest From Series EE and I U. Irs S. Irs Savings Bonds Issued After 1989, do not include the amount from line 8a of Form 1040 or Form 1040A on line 3 of this worksheet. Irs Instead, include the amount from Schedule B (Form 1040A or 1040), line 2. Irs 1. Irs Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Irs Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a 1. Irs $5,980         2. Irs Enter one-half of line 1 2. Irs 2,990     3. Irs Combine the amounts from: Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21 Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 3. Irs 28,990     4. Irs Enter the amount, if any, from Form 1040 or 1040A, line 8b 4. Irs -0-     5. Irs Enter the total of any exclusions/adjustments for: Adoption benefits (Form 8839, line 28), Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico 5. Irs -0-     6. Irs Combine lines 2, 3, 4, and 5 6. Irs 31,980     7. Irs Form 1040 filers: Enter the amounts from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36. Irs  Form 1040A filers: Enter the amounts from Form 1040A, lines 16 and 17 7. Irs -0-     8. Irs Is the amount on line 7 less than the amount on line 6?             No. Irs None of your social security benefits are taxable. Irs Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Irs             Yes. Irs Subtract line 7 from line 6 8. Irs 31,980     9. Irs If you are:  Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000 9. Irs 25,000       Note. Irs If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (. Irs 85) and enter the result on line 17. Irs Then go to line 18. Irs         10. Irs Is the amount on line 9 less than the amount on line 8?             No. Irs None of your benefits are taxable. Irs Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. Irs If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a. Irs             Yes. Irs Subtract line 9 from line 8 10. Irs 6,980     11. Irs Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013 11. Irs 9,000     12. Irs Subtract line 11 from line 10. Irs If zero or less, enter -0- 12. Irs -0-     13. Irs Enter the smaller of line 10 or line 11 13. Irs 6,980     14. Irs Enter one-half of line 13 14. Irs 3,490     15. Irs Enter the smaller of line 2 or line 14 15. Irs 2,990     16. Irs Multiply line 12 by 85% (. Irs 85). Irs If line 12 is zero, enter -0- 16. Irs -0-     17. Irs Add lines 15 and 16 17. Irs 2,990     18. Irs Multiply line 1 by 85% (. Irs 85) 18. Irs 5,083     19. Irs Taxable benefits. Irs Enter the smaller of line 17 or line 18. Irs Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b 19. Irs $2,990       If you received a lump-sum payment in 2013 that was for an earlier year, also complete Worksheet 2 or 3 and Worksheet 4 to see if you can report a lower taxable benefit. Irs         Example 1. Irs George White is single and files Form 1040 for 2013. Irs In addition to receiving social security payments, he received a fully taxable pension of $18,600, wages from a part-time job of $9,400, and taxable interest income of $990, for a total of $28,990. Irs He received a Form SSA-1099 in January 2014 that shows his net social security benefits of $5,980 in box 5. Irs   To figure his taxable benefits, George completes Worksheet 1, shown below. Irs On line 20a of his Form 1040, George enters his net benefits of $5,980. Irs On line 20b, he enters his taxable benefits of $2,990. Irs Example 2. Irs Ray and Alice Hopkins file a joint return on Form 1040A for 2013. Irs Ray is retired and received a fully taxable pension of $15,500. Irs He also received social security benefits and his Form SSA-1099 for 2013 shows net benefits of $5,600 in box 5. Irs Alice worked during the year and had wages of $14,000. Irs She made a deductible payment to her IRA account of $1,000. Irs Ray and Alice have two savings accounts with a total of $250 in taxable interest income. Irs They complete Worksheet 1, entering $29,750 ($15,500 + $14,000 + $250) on line 3. Irs They find none of Ray's social security benefits are taxable. Irs On Form 1040A, they enter $5,600 on line 14a and -0- on line 14b. Irs Filled-in Worksheet 1. Irs Figuring Your Taxable Benefits Before you begin: If you are married filing separately and you lived apart from your spouse for all of 2013, enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Irs Do not use this worksheet if you repaid benefits in 2013 and your total repayments (box 4 of Forms SSA-1099 and RRB-1099) were more than your gross benefits for 2013 (box 3 of Forms SSA-1099 and RRB-1099). Irs None of your benefits are taxable for 2013. Irs For more information, see Repayments More Than Gross Benefits . Irs If you are filing Form 8815, Exclusion of Interest From Series EE and I U. Irs S. Irs Savings Bonds Issued After 1989, do not include the amount from line 8a of Form 1040 or Form 1040A on line 3 of this worksheet. Irs Instead, include the amount from Schedule B (Form 1040A or 1040), line 2. Irs 1. Irs Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Irs Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a 1. Irs $5,600         2. Irs Enter one-half of line 1 2. Irs 2,800     3. Irs Combine the amounts from: Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21 Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 3. Irs 29,750     4. Irs Enter the amount, if any, from Form 1040 or 1040A, line 8b 4. Irs -0-     5. Irs Enter the total of any exclusions/adjustments for: Adoption benefits (Form 8839, line 28), Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico 5. Irs -0-     6. Irs Combine lines 2, 3, 4, and 5 6. Irs 32,550     7. Irs Form 1040 filers: Enter the amounts from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36. Irs  Form 1040A filers: Enter the amounts from Form 1040A, lines 16 and 17 7. Irs 1,000     8. Irs Is the amount on line 7 less than the amount on line 6?             No. Irs None of your social security benefits are taxable. Irs Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Irs             Yes. Irs Subtract line 7 from line 6 8. Irs 31,550     9. Irs If you are:  Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000 9. Irs 32,000       Note. Irs If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (. Irs 85) and enter the result on line 17. Irs Then go to line 18. Irs         10. Irs Is the amount on line 9 less than the amount on line 8?             No. Irs None of your benefits are taxable. Irs Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. Irs If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a. Irs             Yes. Irs Subtract line 9 from line 8 10. Irs       11. Irs Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013 11. Irs       12. Irs Subtract line 11 from line 10. Irs If zero or less, enter -0- 12. Irs       13. Irs Enter the smaller of line 10 or line 11 13. Irs       14. Irs Enter one-half of line 13 14. Irs       15. Irs Enter the smaller of line 2 or line 14 15. Irs       16. Irs Multiply line 12 by 85% (. Irs 85). Irs If line 12 is zero, enter -0- 16. Irs       17. Irs Add lines 15 and 16 17. Irs       18. Irs Multiply line 1 by 85% (. Irs 85) 18. Irs       19. Irs Taxable benefits. Irs Enter the smaller of line 17 or line 18. Irs Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b 19. Irs         If you received a lump-sum payment in 2013 that was for an earlier year, also complete Worksheet 2 or 3 and Worksheet 4 to see if you can report a lower taxable benefit. Irs         Example 3. Irs Joe and Betty Johnson file a joint return on Form 1040 for 2013. Irs Joe is a retired railroad worker and in 2013 received the social security equivalent benefit (SSEB) portion of tier 1 railroad retirement benefits. Irs Joe's Form RRB-1099 shows $10,000 in box 5. Irs Betty is a retired government worker and received a fully taxable pension of $38,000. Irs They had $2,300 in taxable interest income plus interest of $200 on a qualified U. Irs S. Irs savings bond. Irs The savings bond interest qualified for the exclusion. Irs They figure their taxable benefits by completing Worksheet 1 below. Irs Because they have qualified U. Irs S. Irs savings bond interest, they follow the note at the beginning of the worksheet and use the amount from line 2 of their Schedule B (Form 1040A or 1040) on line 3 of the worksheet instead of the amount from line 8a of their Form 1040. Irs On line 3 of the worksheet, they enter $40,500 ($38,000 + $2,500). Irs More than 50% of Joe's net benefits are taxable because the income on line 8 of the worksheet ($45,500) is more than $44,000. Irs (See Maximum taxable part under How Much Is Taxable earlier. Irs ) Joe and Betty enter $10,000 on Form 1040, line 20a, and $6,275 on Form 1040, line 20b. Irs Filled-in Worksheet 1. Irs Figuring Your Taxable Benefits Before you begin: If you are married filing separately and you lived apart from your spouse for all of 2013, enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Irs Do not use this worksheet if you repaid benefits in 2013 and your total repayments (box 4 of Forms SSA-1099 and RRB-1099) were more than your gross benefits for 2013 (box 3 of Forms SSA-1099 and RRB-1099). Irs None of your benefits are taxable for 2013. Irs For more information, see Repayments More Than Gross Benefits . Irs If you are filing Form 8815, Exclusion of Interest From Series EE and I U. Irs S. Irs Savings Bonds Issued After 1989, do not include the amount from line 8a of Form 1040 or Form 1040A on line 3 of this worksheet. Irs Instead, include the amount from Schedule B (Form 1040A or 1040), line 2. Irs 1. Irs Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Irs Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a 1. Irs $10,000         2. Irs Enter one-half of line 1 2. Irs 5,000     3. Irs Combine the amounts from: Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21 Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 3. Irs 40,500     4. Irs Enter the amount, if any, from Form 1040 or 1040A, line 8b 4. Irs -0-     5. Irs Enter the total of any exclusions/adjustments for: Adoption benefits (Form 8839, line 28), Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico 5. Irs -0-     6. Irs Combine lines 2, 3, 4, and 5 6. Irs 45,500     7. Irs Form 1040 filers: Enter the amounts from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36. Irs  Form 1040A filers: Enter the amounts from Form 1040A, lines 16 and 17 7. Irs -0-     8. Irs Is the amount on line 7 less than the amount on line 6?             No. Irs None of your social security benefits are taxable. Irs Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Irs             Yes. Irs Subtract line 7 from line 6 8. Irs 45,500     9. Irs If you are:  Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000 9. Irs 32,000       Note. Irs If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (. Irs 85) and enter the result on line 17. Irs Then go to line 18. Irs         10. Irs Is the amount on line 9 less than the amount on line 8?             No. Irs None of your benefits are taxable. Irs Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. Irs If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a. Irs             Yes. Irs Subtract line 9 from line 8 10. Irs 13,500     11. Irs Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013 11. Irs 12,000     12. Irs Subtract line 11 from line 10. Irs If zero or less, enter -0- 12. Irs 1,500     13. Irs Enter the smaller of line 10 or line 11 13. Irs 12,000     14. Irs Enter one-half of line 13 14. Irs 6,000     15. Irs Enter the smaller of line 2 or line 14 15. Irs 5,000     16. Irs Multiply line 12 by 85% (. Irs 85). Irs If line 12 is zero, enter -0- 16. Irs 1,275     17. Irs Add lines 15 and 16 17. Irs 6,275     18. Irs Multiply line 1 by 85% (. Irs 85) 18. Irs 8,500     19. Irs Taxable benefits. Irs Enter the smaller of line 17 or line 18. Irs Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b 19. Irs $6,275       If you received a lump-sum payment in 2013 that was for an earlier year, also complete Worksheet 2 or 3 and Worksheet 4 to see if you can report a lower taxable benefit. Irs         Filled-in Worksheet 1. Irs Figuring Your Taxable Benefits Before you begin: If you are married filing separately and you lived apart from your spouse for all of 2013, enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Irs Do not use this worksheet if you repaid benefits in 2013 and your total repayments (box 4 of Forms SSA-1099 and RRB-1099) were more than your gross benefits for 2013 (box 3 of Forms SSA-1099 and RRB-1099). Irs None of your benefits are taxable for 2013. Irs For more information, see Repayments More Than Gross Benefits . Irs If you are filing Form 8815, Exclusion of Interest From Series EE and I U. Irs S. Irs Savings Bonds Issued After 1989, do not include the amount from line 8a of Form 1040 or Form 1040A on line 3 of this worksheet. Irs Instead, include the amount from Schedule B (Form 1040A or 1040), line 2. Irs 1. Irs Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Irs Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a 1. Irs $4,000         2. Irs Enter one-half of line 1 2. Irs 2,000     3. Irs Combine the amounts from: Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21 Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 3. Irs 8,000     4. Irs Enter the amount, if any, from Form 1040 or 1040A, line 8b 4. Irs -0-     5. Irs Enter the total of any exclusions/adjustments for: Adoption benefits (Form 8839, line 28), Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico 5. Irs -0-     6. Irs Combine lines 2, 3, 4, and 5 6. Irs 10,000     7. Irs Form 1040 filers: Enter the amounts from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36. Irs  Form 1040A filers: Enter the amounts from Form 1040A, lines 16 and 17 7. Irs -0-     8. Irs Is the amount on line 7 less than the amount on line 6?             No. Irs None of your social security benefits are taxable. Irs Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Irs             Yes. Irs Subtract line 7 from line 6 8. Irs 10,000     9. Irs If you are:  Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000 9. Irs         Note. Irs If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (. Irs 85) and enter the result on line 17. Irs Then go to line 18. Irs         10. Irs Is the amount on line 9 less than the amount on line 8?             No. Irs None of your benefits are taxable. Irs Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. Irs If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a. Irs             Yes. Irs Subtract line 9 from line 8 10. Irs       11. Irs Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013 11. Irs       12. Irs Subtract line 11 from line 10. Irs If zero or less, enter -0- 12. Irs       13. Irs Enter the smaller of line 10 or line 11 13. Irs       14. Irs Enter one-half of line 13 14. Irs       15. Irs Enter the smaller of line 2 or line 14 15. Irs       16. Irs Multiply line 12 by 85% (. Irs 85). Irs If line 12 is zero, enter -0- 16. Irs       17. Irs Add lines 15 and 16 17. Irs 8,500     18. Irs Multiply line 1 by 85% (. Irs 85) 18. Irs 3,400     19. Irs Taxable benefits. Irs Enter the smaller of line 17 or line 18. Irs Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b 19. Irs $3,400       If you received a lump-sum payment in 2013 that was for an earlier year, also complete Worksheet 2 or 3 and Worksheet 4 to see if you can report a lower taxable benefit. Irs         Example 4. Irs Bill and Eileen Jones are married and live together, but file separate Form 1040 returns for 2013. Irs Bill earned $8,000 during 2013. Irs The only other income he had for the year was $4,000 net social security benefits (box 5 of his Form SSA-1099). Irs Bill figures his taxable benefits by completing Worksheet 1 below. Irs He must include 85% of his social security benefits in his taxable income because he is married filing separately and lived with his spouse during 2013. Irs See How Much Is Taxable earlier. Irs Bill enters $4,000 on his Form 1040, line 20a, and $3,400 on Form 1040, line 20b. Irs Lump-Sum Election You must include the taxable part of a lump-sum (retroactive) payment of benefits received in 2013 in your 2013 income, even if the payment includes benefits for an earlier year. Irs This type of lump-sum benefit payment should not be confused with the lump-sum death benefit that both the SSA and RRB pay to many of their beneficiaries. Irs No part of the lump-sum death benefit is subject to tax. Irs Generally, you use your 2013 income to figure the taxable part of the total benefits received in 2013. Irs However, you may be able to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year. Irs You can elect this method if it lowers your taxable benefits. Irs Under the lump-sum election method, you refigure the taxable part of all your benefits for the earlier year (including the lump-sum payment) using that year's income. Irs Then you subtract any taxable benefits for that year that you previously reported. Irs The remainder is the taxable part of the lump-sum payment. Irs Add it to the taxable part of your benefits for 2013 (figured without the lump-sum payment for the earlier year). Irs Because the earlier year's taxable benefits are included in your 2013 income, no adjustment is made to the earlier year's return. Irs Do not file an amended return for the earlier year. Irs Will the lump-sum election method lower your taxable benefits?   To find out, take the following steps. Irs Complete Worksheet 1 in this publication. Irs Complete Worksheet 2 and Worksheet 3 as appropriate. Irs Use Worksheet 2 if your lump-sum payment was for a year after 1993. Irs Use Worksheet 3 if it was for 1993 or an earlier year. Irs Complete a separate Worksheet 2 or Worksheet 3 for each earlier year for which you received the lump-sum payment. Irs Complete Worksheet 4. Irs Compare the taxable benefits on line 19 of Worksheet 1 with the taxable benefits on line 21 of Worksheet 4. Irs If the taxable benefits on Worksheet 4 are lower than the taxable benefits on Worksheet 1, you can elect to report the lower amount on your return. Irs Making the election. Irs   If you elect to report your taxable benefits under the lump-sum election method, follow the instructions at the bottom of Worksheet 4. Irs Do not attach the completed worksheets to your return. Irs Keep them with your records. Irs    Once you elect this method of figuring the taxable part of a lump-sum payment, you can revoke your election only with the consent of the IRS. Irs Lump-sum payment reported on Form SSA-1099 or RRB-1099. Irs   If you received a lump-sum payment in 2013 that includes benefits for one or more earlier years after 1983, it will be included in box 3 of either Form SSA-1099 or Form RRB-1099. Irs That part of any lump-sum payment for years before 1984 is not taxed and will not be shown on the form. Irs The form will also show the year (or years) the payment is for. Irs However, Form RRB-1099 will not show a breakdown by year (or years) of any lump-sum payment for years before 2011. Irs You must contact the RRB for a breakdown by year for any amount shown in box 9. Irs Example Jane Jackson is single. Irs In 2012 she applied for social security disability benefits but was told she was ineligible. Irs She appealed the decision and won. Irs In 2013, she received a lump-sum payment of $6,000, of which $2,000 was for 2012 and $4,000 was for 2013. Irs Jane also received $5,000 in social security benefits in 2013, so her total benefits in 2013 were $11,000. Irs Jane's other income for 2012 and 2013 is as follows. Irs   Income 2012 2013     Wages $20,000 $ 3,500     Interest income 2,000 2,500     Dividend income 1,000 1,500     Fully taxable pension   18,000     Total $23,000 $25,500   To see if the lump-sum election method results in lower taxable benefits, she completes Worksheets 1, 2, and 4 from this publication. Irs She does not need to complete Worksheet 3 because her lump-sum payment was for years after 1993. Irs Jane completes Worksheet 1 to find the amount of her taxable benefits for 2013 under the regular method. Irs She completes Worksheet 2 to find the taxable part of the lump-sum payment for 2012 under the lump-sum election method. Irs She completes Worksheet 4 to decide if the lump-sum election method will lower her taxable benefits. Irs After completing the worksheets, Jane compares the amounts from Worksheet 4, line 21, and Worksheet 1, line 19. Irs Because the amount on Worksheet 4 is smaller, she chooses to use the lump-sum election method. Irs To do this, she prints “LSE” to the left of Form 1040, line 20a. Irs She then enters $11,000 on Form 1040, line 20a, and her taxable benefits of $2,500 on line 20b. Irs Jane's filled-in worksheets (1, 2, and 4) follow. Irs Jane Jackson's Filled-in Worksheet 1. Irs Figuring Your Taxable Benefits Before you begin: If you are married filing separately and you lived apart from your spouse for all of 2013, enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Irs Do not use this worksheet if you repaid benefits in 2013 and your total repayments (box 4 of Forms SSA-1099 and RRB-1099) were more than your gross benefits for 2013 (box 3 of Forms SSA-1099 and RRB-1099). Irs None of your benefits are taxable for 2013. Irs For more information, see Repayments More Than Gross Benefits . Irs If you are filing Form 8815, Exclusion of Interest From Series EE and I U. Irs S. Irs Savings Bonds Issued After 1989, do not include the amount from line 8a of Form 1040 or Form 1040A on line 3 of this worksheet. Irs Instead, include the amount from Schedule B (Form 1040A or 1040), line 2. Irs 1. Irs Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Irs Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a 1. Irs $11,000         2. Irs Enter one-half of line 1 2. Irs 5,500     3. Irs Combine the amounts from: Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21 Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 3. Irs 25,500     4. Irs Enter the amount, if any, from Form 1040 or 1040A, line 8b 4. Irs -0-     5. Irs Enter the total of any exclusions/adjustments for: Adoption benefits (Form 8839, line 28), Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico 5. Irs -0-     6. Irs Combine lines 2, 3, 4, and 5 6. Irs 31,000     7. Irs Form 1040 filers: Enter the amounts from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36. Irs  Form 1040A filers: Enter the amounts from Form 1040A, lines 16 and 17 7. Irs -0-     8. Irs Is the amount on line 7 less than the amount on line 6?             No. Irs None of your social security benefits are taxable. Irs Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Irs             Yes. Irs Subtract line 7 from line 6 8. Irs 31,000     9. Irs If you are:  Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000 9. Irs 25,000       Note. Irs If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (. Irs 85) and enter the result on line 17. Irs Then go to line 18. Irs         10. Irs Is the amount on line 9 less than the amount on line 8?             No. Irs None of your benefits are taxable. Irs Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. Irs If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a. Irs             Yes. Irs Subtract line 9 from line 8 10. Irs 6,000     11. Irs Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013 11. Irs 9,000     12. Irs Subtract line 11 from line 10. Irs If zero or less, enter -0- 12. Irs -0-     13. Irs Enter the smaller of line 10 or line 11 13. Irs 6,000     14. Irs Enter one-half of line 13 14. Irs 3,000     15. Irs Enter the smaller of line 2 or line 14 15. Irs 3,000     16. Irs Multiply line 12 by 85% (. Irs 85). Irs If line 12 is zero, enter -0- 16. Irs -0-     17. Irs Add lines 15 and 16 17. Irs 3,000     18. Irs Multiply line 1 by 85% (. Irs 85) 18. Irs 9,350     19. Irs Taxable benefits. Irs Enter the smaller of line 17 or line 18. Irs Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b 19. Irs $3,000       If you received a lump-sum payment in 2013 that was for an earlier year, also complete Worksheet 2 or 3 and Worksheet 4 to see if you can report a lower taxable benefit. Irs         Jane Jackson's Filled-in Worksheet 2. Irs Figure Your Additional Taxable Benefits (From a Lump-Sum Payment for a Year After 1993)     Enter earlier year 2012 1. Irs Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099 for the earlier year, plus the lump-sum payment for the earlier year received after that year 1. Irs $2,000           Note. Irs If line 1 is zero or less, skip lines 2 through 20 and enter -0- on line 21. Irs Otherwise, go on to line 2. Irs             2. Irs Enter one-half of line 1 2. Irs 1,000   3. Irs Enter your adjusted gross income for the earlier year 3. Irs 23,000   4. Irs Enter the total of any exclusions/adjustments you claimed in the earlier year for: Adoption benefits (Form 8839) Qualified U. Irs S. Irs savings bond interest (Form 8815) Student loan interest (Form 1040, page 1, or Form 1040A, page 1) Tuition and fees (Form 1040, page 1, or Form 1040A, page 1) Domestic production activities (for 2005 through 2012) (Form 1040, page 1) Foreign earned income or housing (Form 2555 or Form 2555-EZ) Certain income of bona fide residents of American Samoa (Form 4563) or Puerto Rico 4. Irs -0-   5. Irs Enter any tax-exempt interest received in the earlier year 5. Irs -0-   6. Irs Add lines 2 through 5 6. Irs 24,000   7. Irs Enter your taxable benefits for the earlier year that you previously reported 7. Irs -0-   8. Irs Subtract line 7 from line 6 8. Irs 24,000   9. Irs If, for the earlier year, you were:     Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), married filing separately and you lived apart from your spouse for all of the earlier year, enter $25,000 9. Irs 25,000     Note. Irs If you were married filing separately and you lived with your spouse at any time during the earlier year, skip lines 9 through 16; multiply line 8 by 85% (. Irs 85) and enter the result on line 17. Irs Then go to line 18. Irs         10. Irs Is the amount on line 8 more than the amount on line 9?       No. Irs Skip lines 10 through 20 and enter -0- on line 21. Irs       Yes. Irs Subtract line 9 from line 8 10. Irs     11. Irs Enter $12,000 if married filing jointly for the earlier year; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of the earlier year 11. Irs     12. Irs Subtract line 11 from line 10. Irs If zero or less, enter -0- 12. Irs     13. Irs Enter the smaller of line 10 or line 11 13. Irs     14. Irs Enter one-half of line 13 14. Irs     15. Irs Enter the smaller of line 2 or line 14 15. Irs     16. Irs Multiply line 12 by 85% (. Irs 85). Irs If line 12 is zero, enter -0- 16. Irs     17. Irs Add lines 15 and 16 17. Irs     18. Irs Multiply line 1 by 85% (. Irs 85) 18. Irs     19. Irs Refigured taxable benefits. Irs Enter the smaller of line 17 or line 18 19. Irs     20. Irs Enter your taxable benefits for the earlier year (or as refigured due to a previous lump-sum payment for the year) 20. Irs     21. Irs Additional taxable benefits. Irs Subtract line 20 from line 19. Irs Also enter this amount on Worksheet 4, line 20 21. Irs -0-     Do not file an amended return for this earlier year. Irs Complete a separate Worksheet 2 or Worksheet 3 for each earlier year for which you received a lump-sum payment in 2013. Irs   Jane Jackson's Filled-in Worksheet 4. Irs Figure Your Taxable Benefits Under the Lump-Sum Election Method (Use With Worksheet 2 or 3)     Complete Worksheet 1 and Worksheets 2 and 3 as appropriate before completing this worksheet. Irs 1. Irs Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099 for 2013, minus the lump-sum payment for years before 2013 1. Irs $9,000         Note. Irs If line 1 is zero or less, skip lines 2 through 18, enter -0- on line 19 and go to line 20. Irs Otherwise, go on to line 2. Irs           2. Irs Enter one-half of line 1 2. Irs 4,500   3. Irs Enter the amount from Worksheet 1, line 3 3. Irs 25,500   4. Irs Enter the amount from Worksheet 1, line 4 4. Irs -0-   5. Irs Enter the amount from Worksheet 1, line 5 5. Irs -0-   6. Irs Combine lines 2, 3, 4, and 5 6. Irs 30,000   7. Irs Enter the amount from Worksheet 1, line 7 7. Irs -0-   8. Irs Subtract line 7 from line 6 8. Irs 30,000   9. Irs Enter the amount from Worksheet 1, line 9. Irs But if you are married filing separately and lived with your spouse at any time during 2013, skip lines 9 through 16; multiply line 8 by 85% (. Irs 85) and enter the result on line 17. Irs Then, go to line 18 9. Irs 25,000   10. Irs Is the amount on line 8 more than the amount on line 9? No. Irs Skip lines 10 through 18, enter -0- on line 19, and go to line 20. Irs  Yes. Irs Subtract line 9 from line 8 10. Irs 5,000   11. Irs Enter the amount from Worksheet 1, line 11 11. Irs 9,000   12. Irs Subtract line 11 from line 10. Irs If zero or less, enter -0- 12. Irs -0-   13. Irs Enter the smaller of line 10 or line 11 13. Irs 5,000   14. Irs Enter one-half of line 13 14. Irs 2,500   15. Irs Enter the smaller of line 2 or line 14 15. Irs 2,500   16. Irs Multiply line 12 by 85% (. Irs 85). Irs If line 12 is zero, enter -0- 16. Irs -0-   17. Irs Add lines 15 and 16 17. Irs 2,500   18. Irs Multiply line 1 by 85% (. Irs 85) 18. Irs 7,650   19. Irs Enter the smaller of line 17 or line 18 19. Irs 2,500   20. Irs Enter the total of the amounts from Worksheet 2, line 21, and Worksheet 3, line 14, for all earlier years for which the lump-sum payment was received 20. Irs -0-   21. Irs Taxable benefits under lump-sum election method. Irs Add lines 19 and 20 21. Irs $2,500   Next. Irs Is line 21 above smaller than Worksheet 1, line 19? No. Irs Do not use this method to figure your taxable benefits. Irs Follow the instructions on Worksheet 1 to report your benefits. Irs  Yes. Irs You can elect to report your taxable benefits under this method. Irs To elect this method:     Enter “LSE” to the left of Form 1040, line 20a, or Form 1040A, line 14a. Irs If line 21 above is zero, follow the instructions in line 10 for “No” on Worksheet 1. Irs Otherwise: Enter the amount from Worksheet 1, line 1, on Form 1040, line 20a, or on Form 1040A, line 14a. Irs Enter the amount from line 21 above on Form 1040, line 20b, or on Form 1040A, line 14b. Irs If you are married filing separately and you lived apart from your spouse for all of 2013, enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Irs   Deductions Related to Your Benefits You may be entitled to deduct certain amounts related to the benefits you receive. Irs Disability payments. Irs   You may have received disability payments from your employer or an insurance company that you included as income on your tax return in an earlier year. Irs If you received a lump-sum payment from SSA or RRB, and you had to repay the employer or insurance company for the disability payments, you can take an itemized deduction for the part of the payments you included in gross income in the earlier year. Irs If the amount you repay is more than $3,000, you may be able to claim a tax credit instead. Irs Claim the deduction or credit in the same way explained under Repayment of benefits received in an earlier year in the section Repayments More Than Gross Benefits , later. Irs Legal expenses. Irs   You can usually deduct legal expenses that you pay or incur to produce or collect taxable income or in connection with the determination, collection, or refund of any tax. Irs   Legal expenses for collecting the taxable part of your benefits are deductible as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. Irs Repayments More Than Gross Benefits In some situations, your Form SSA-1099 or Form RRB-1099 will show that the total benefits you repaid (box 4) are more than the gross benefits (box 3) you received. Irs If this occurred, your net benefits in box 5 will be a negative figure (a figure in parentheses) and none of your benefits will be taxable. Irs Do not use Worksheet 1 in this case. Irs If you receive more than one form, a negative figure in box 5 of one form is used to offset a positive figure in box 5 of another form for that same year. Irs If you have any questions about this negative figure, contact your local SSA office or your local RRB field office. Irs Joint return. Irs   If you and your spouse file a joint return, and your Form SSA-1099 or RRB-1099 has a negative figure in box 5, but your spouse's does not, subtract the amount in box 5 of your form from the amount in box 5 of your spouse's form. Irs You do this to get your net benefits when figuring if your combined benefits are taxable. Irs Example. Irs John and Mary file a joint return for 2013. Irs John received Form SSA-1099 showing $3,000 in box 5. Irs Mary also received Form SSA-1099 and the amount in box 5 was ($500). Irs John and Mary will use $2,500 ($3,000 minus $500) as the amount of their net benefits when figuring if any of their combined benefits are taxable. Irs Repayment of benefits received in an earlier year. Irs   If the total amount shown in box 5 of all of your Forms SSA-1099 and RRB-1099 is a negative figure, you can take an itemized deduction for the part of this negative figure that represents benefits you included in gross income in an earlier year. Irs Deduction $3,000 or less. Irs   If this deduction is $3,000 or less, it is subject to the 2%-of-adjusted-gross-income limit that applies to certain miscellaneous itemized deductions. Irs Claim it on Schedule A (Form 1040), line 23. Irs Deduction more than $3,000. Irs   If this deduction is more than $3,000, you should figure your tax two ways: Figure your tax for 2013 with the itemized deduction included on Schedule A, line 28. Irs Figure your tax for 2013 in the following steps: Figure the tax without the itemized deduction included on Schedule A, line 28. Irs For each year after 1983 for which part of the negative figure represents a repayment of benefits, refigure your taxable benefits as if your total benefits for the year were reduced by that part of the negative figure. Irs Then refigure the tax for that year. Irs Subtract the total of the refigured tax amounts in (b) from the total of your actual tax amounts. Irs Subtract the result in (c) from the result in (a). Irs   Compare the tax figured in methods (1) and (2). Irs Your tax for 2013 is the smaller of the two amounts. Irs If method (1) results in less tax, take the itemized deduction on Schedule A (Form 1040), line 28. Irs If method (2) results in less tax, claim a credit for the amount from step 2(c) above on Form 1040, line 71. Irs Check box d and enter “I. Irs R. Irs C. Irs 1341” in the space next to that box. Irs If both methods produce the same tax, deduct the repayment on Schedule A (Form 1040), line 28. Irs Worksheets Blank Worksheets 1 through 4 are provided in this section: Worksheet 1, Figuring Your Taxable Benefits; Worksheet 2, Figure Your Additional Taxable Benefits (From a Lump-Sum Payment for a Year After 1993); Worksheet 3, Figure Your Additional Taxable Benefits (From a Lump-Sum Payment for a Year Before 1994); Worksheet 4, Figure Your Taxable Benefits Under the Lump-Sum Election Method (Use With Worksheet 2 or 3). Irs Worksheet 1. Irs Figuring Your Taxable Benefits Before you begin: If you are married filing separately and you lived apart from your spouse for all of 2013, enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Irs Do not use this worksheet if you repaid benefits in 2013 and your total repayments (box 4 of Forms SSA-1099 and RRB-1099) were more than your gross benefits for 2013 (box 3 of Forms SSA-1099 and RRB-1099). Irs None of your benefits are taxable for 2013. Irs For more information, see Repayments More Than Gross Benefits . Irs If you are filing Form 8815, Exclusion of Interest From Series EE and I U. Irs S. Irs Savings Bonds Issued After 1989, do not include the amount from line 8a of Form 1040 or Form 1040A on line 3 of this worksheet. Irs Instead, include the amount from Schedule B (Form 1040A or 1040), line 2. Irs 1. Irs Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Irs Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a 1. Irs           2. Irs Enter one-half of line 1 2. Irs       3. Irs Combine the amounts from: Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21 Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 3. Irs       4. Irs Enter the amount, if any, from Form 1040 or 1040A, line 8b 4. Irs       5. Irs Enter the total of any exclusions/adjustments for: Adoption benefits (Form 8839, line 28), Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico 5. Irs       6. Irs Combine lines 2, 3, 4, and 5 6. Irs       7. Irs Form 1040 filers: Enter the amounts from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36. Irs  Form 1040A filers: Enter the amounts from Form 1040A, lines 16 and 17 7. Irs       8. Irs Is the amount on line 7 less than the amount on line 6?             No. Irs None of your social security benefits are taxable. Irs Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Irs             Yes. Irs Subtract line 7 from line 6 8. Irs       9. Irs If you are:  Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000 9. Irs         Note. Irs If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (. Irs 85) and enter the result on line 17. Irs Then go to line 18. Irs         10. Irs Is the amount on line 9 less than the amount on line 8?             No. Irs None of your benefits are taxable. Irs Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. Irs If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a. Irs             Yes. Irs Subtract line 9 from line 8 10. Irs       11. Irs Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013 11. Irs       12. Irs Subtract line 11 from line 10. Irs If zero or less, enter -0- 12. Irs       13. Irs Enter the smaller of line 10 or line 11 13. Irs       14. Irs Enter one-half of line 13 14. Irs       15. Irs Enter the smaller of line 2 or line 14 15. Irs       16. Irs Multiply line 12 by 85% (. Irs 85). Irs If line 12 is zero, enter -0- 16. Irs       17. Irs Add lines 15 and 16 17. Irs       18. Irs Multiply line 1 by 85% (. Irs 85) 18. Irs       19. Irs Taxable benefits. Irs Enter the smaller of line 17 or line 18. Irs Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b 19. Irs         If you received a lump-sum payment in 2013 that was for an earlier year, also complete Worksheet 2 or 3 and Worksheet 4 to see if you can report a lower taxable benefit. Irs         Worksheet 2. Irs Figure Your Additional Taxable Benefits (From a Lump-Sum Payment for a Year After 1993)     Enter earlier year 1. Irs Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099 for the earlier year, plus the lump-sum payment for the earlier year received after that year 1. Irs             Note. Irs If line 1 is zero or less, skip lines 2 through 20 and enter -0- on line 21. Irs Otherwise, go on to line 2. Irs             2. Irs Enter one-half of line 1 2. Irs     3. Irs Enter your adjusted gross income for the earlier year 3. Irs     4. Irs Enter the total of any exclusions/adjustments you claimed in the earlier year for: Adoption benefits (Form 8839) Qualified U. Irs S. Irs savings bond interest (Form 8815) Student loan interest (Form 1040, page 1, or Form 1040A, page 1) Tuition and fees (Form 1040, page 1, or Form 1040A, page 1) Domestic production activities (for 2005 through 2012) (Form 1040, page 1) Foreign earned income or housing (Form 2555 or Form 2555-EZ) Certain income of bona fide residents of American Samoa (Form 4563) or Puerto Rico 4. Irs     5. Irs Enter any tax-exempt interest received in the earlier year 5. Irs     6. Irs Add lines 2 through 5 6. Irs     7. Irs Enter your taxable benefits for the earlier year that you previously reported 7. Irs     8. Irs Subtract line 7 from line 6 8. Irs     9. Irs If, for the earlier year, you were:     Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), married filing separately and you lived apart from your spouse for all of the earlier year, enter $25,000 9. Irs       Note. Irs If you were married filing separately and you lived with your spouse at any time during the earlier year, skip lines 9 through 16; multiply line 8 by 85% (. Irs 85) and enter the result on line 17. Irs Then go to line 18. Irs         10. Irs Is the amount on line 8 more than the amount on line 9?       No. Irs Skip lines 10 through 20 and enter -0- on line 21. Irs       Yes. Irs Subtract line 9 from line 8 10. Irs     11. Irs Enter $12,000 if married filing jointly for the earlier year; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of the earlier year 11. Irs     12. Irs Subtract line 11 from line 10. Irs If zero or less, enter -0- 12. Irs     13. Irs Enter the smaller of line 10 or line 11 13. Irs     14. Irs Enter one-half of line 13 14. Irs     15. Irs Enter the smaller of line 2 or line 14 15. Irs     16. Irs Multiply line 12 by 85% (. Irs 85). Irs If line 12 is zero, enter -0- 16. Irs     17. Irs Add lines 15 and 16 17. Irs     18. Irs Multiply line 1 by 85% (. Irs 85) 18. Irs     19. Irs Refigured taxable benefits. Irs Enter the smaller of line 17 or line 18 19. Irs     20. Irs Enter your taxable benefits for the earlier year (or as refigured due to a previous lump-sum payment for the year) 20. Irs     21. Irs Additional taxable benefits. Irs Subtract line 20 from line 19. Irs Also enter this amount on Worksheet 4, line 20 21. Irs       Do not file an amended return for this earlier year. Irs Complete a separate Worksheet 2 or Worksheet 3 for each earlier year for which you received a lump-sum payment in 2013. Irs   Worksheet 3. Irs Figure Your Additional Taxable Benefits (From a Lump-Sum Payment for a Year Before 1994) Enter earlier year 1. Irs Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099 for the earlier year, plus the lump-sum payment for the earlier year received after that year 1. Irs           Note. Irs If line 1 is zero or less, skip lines 2 through 13 and enter -0- on line 14. Irs Otherwise, go on to line 2. Irs           2. Irs Enter one-half of line 1 2. Irs     3. Irs Enter your adjusted gross income for the earlier year 3. Irs     4. Irs Enter the total of any exclusions/adjustments you claimed in the earlier year for: Qualified U. Irs S. Irs savings bond interest (Form 8815) Foreign earned income or housing (Form 2555 or Form 2555-EZ) Certain income of bona fide residents of American Samoa (Form 4563) or Puerto Rico 4. Irs     5. Irs Enter any tax-exempt interest received in the earlier year 5. Irs     6. Irs Add lines 2 through 5 6. Irs     7. Irs Enter your taxable benefits for the earlier year that you previously reported 7. Irs     8. Irs Subtract line 7 from line 6 8. Irs     9. Irs Enter $25,000 ($32,000 if married filing jointly for the earlier year; $-0- if married filing separately for the earlier year and you lived with your spouse at any time during the earlier year) 9. Irs     10. Irs Is the amount on line 8 more than the amount on line 9? No. Irs Skip lines 10 through 13 and enter -0- on line 14. Irs  Yes. Irs Subtract line 9 from line 8. Irs 10. Irs     11. Irs Enter one-half of line 10 11. Irs     12. Irs Refigured taxable benefits. Irs Enter the smaller of line 2 or line 11 12. Irs     13. Irs Enter your taxable benefits for the earlier year (or as refigured due to a previous