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Military H&r Block

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Military H&r Block

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

Learn about the Age Discrimination in Employment Act, the Older Americans Act, the Social Security Act, and more.

The Military H&r Block

Military h&r block 8. Military h&r block   Qualified Tuition Program (QTP) Table of Contents Introduction What Is a Qualified Tuition ProgramDesignated beneficiary. Military h&r block Half-time student. Military h&r block How Much Can You Contribute Are Distributions TaxableFiguring the Taxable Portion of a Distribution Additional Tax on Taxable Distributions Rollovers and Other TransfersRollovers Changing the Designated Beneficiary Introduction Qualified tuition programs (QTPs) are also called “529 plans. Military h&r block ” States may establish and maintain programs that allow you to either prepay or contribute to an account for paying a student's qualified education expenses at a postsecondary institution. Military h&r block Eligible educational institutions may establish and maintain programs that allow you to prepay a student's qualified education expenses. Military h&r block If you prepay tuition, the student (designated beneficiary) will be entitled to a waiver or a payment of qualified education expenses. Military h&r block You cannot deduct either payments or contributions to a QTP. Military h&r block For information on a specific QTP, you will need to contact the state agency or eligible educational institution that established and maintains it. Military h&r block What is the tax benefit of a QTP. Military h&r block   No tax is due on a distribution from a QTP unless the amount distributed is greater than the beneficiary's adjusted qualified education expenses. Military h&r block See Are Distributions Taxable , later, for more information. Military h&r block    Even if a QTP is used to finance a student's education, the student or the student's parents still may be eligible to claim the American opportunity credit or the lifetime learning credit. Military h&r block See Coordination With American Opportunity and Lifetime Learning Credits, later. Military h&r block What Is a Qualified Tuition Program A qualified tuition program is a program set up to allow you to either prepay, or contribute to an account established for paying, a student's qualified education expenses at an eligible educational institution. Military h&r block QTPs can be established and maintained by states (or agencies or instrumentalities of a state) and eligible educational institutions. Military h&r block The program must meet certain requirements. Military h&r block Your state government or the eligible educational institution in which you are interested can tell you whether or not they participate in a QTP. Military h&r block Qualified education expenses. Military h&r block   These are expenses related to enrollment or attendance at an Eligible educational institution (defined later). Military h&r block As shown in the following list, to be qualified, some of the expenses must be required by the institution and some must be incurred by students who are enrolled at least half-time. Military h&r block See Half-time student , later. Military h&r block The following expenses must be required for enrollment or attendance of a Designated beneficiary (defined later) at an eligible educational institution. Military h&r block Tuition and fees. Military h&r block Books, supplies, and equipment. Military h&r block Expenses for special needs services needed by a special needs beneficiary must be incurred in connection with enrollment or attendance at an eligible educational institution. Military h&r block Expenses for room and board must be incurred by students who are enrolled at least half-time. Military h&r block The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. Military h&r block The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. Military h&r block The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Military h&r block You will need to contact the eligible educational institution for qualified room and board costs. Military h&r block    For tax years after 2010, the purchase of computer technology or equipment is only a qualified education expense if the computer technology or equipment is required for enrollment or attendance at an eligible institution. Military h&r block Designated beneficiary. Military h&r block   The designated beneficiary is generally the student (or future student) for whom the QTP is intended to provide benefits. Military h&r block The designated beneficiary can be changed after participation in the QTP begins. Military h&r block If a state or local government or certain tax-exempt organizations purchase an interest in a QTP as part of a scholarship program, the designated beneficiary is the person who receives the interest as a scholarship. Military h&r block Half-time student. Military h&r block   A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic workload for the course of study the student is pursuing, as determined under the standards of the school where the student is enrolled. Military h&r block Eligible educational institution. Military h&r block   For purposes of a QTP, this is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Military h&r block S. Military h&r block Department of Education. Military h&r block It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Military h&r block The educational institution should be able to tell you if it is an eligible educational institution. Military h&r block   Certain educational institutions located outside the United States also participate in the U. Military h&r block S. Military h&r block Department of Education's Federal Student Aid (FSA) programs. Military h&r block   How Much Can You Contribute Contributions to a QTP on behalf of any beneficiary cannot be more than the amount necessary to provide for the qualified education expenses of the beneficiary. Military h&r block There are no income restrictions on the individual contributors. Military h&r block You can contribute to both a QTP and a Coverdell ESA in the same year for the same designated beneficiary. Military h&r block   Are Distributions Taxable The part of a distribution representing the amount paid or contributed to a QTP does not have to be included in income. Military h&r block This is a return of the investment in the plan. Military h&r block The designated beneficiary generally does not have to include in income any earnings distributed from a QTP if the total distribution is less than or equal to adjusted qualified education expenses (defined under Figuring the Taxable Portion of a Distribution , later). Military h&r block Earnings and return of investment. Military h&r block    You will receive a Form 1099-Q, from each of the programs from which you received a QTP distribution in 2013. Military h&r block The amount of your gross distribution (box 1) shown on each form will be divided between your earnings (box 2) and your basis, or return of investment (box 3). Military h&r block Form 1099-Q should be sent to you by January 31, 2014. Military h&r block Figuring the Taxable Portion of a Distribution To determine if total distributions for the year are more or less than the amount of qualified education expenses, you must compare the total of all QTP distributions for the tax year to the adjusted qualified education expenses. Military h&r block Adjusted qualified education expenses. Military h&r block   This amount is the total qualified education expenses reduced by any tax-free educational assistance. Military h&r block Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Military h&r block Taxable earnings. Military h&r block   Use the following steps to figure the taxable part. Military h&r block Multiply the total distributed earnings shown in box 2 of Form 1099-Q by a fraction. Military h&r block The numerator is the adjusted qualified education expenses paid during the year and the denominator is the total amount distributed during the year. Military h&r block Subtract the amount figured in (1) from the total distributed earnings. Military h&r block The result is the amount the beneficiary must include in income. Military h&r block Report it on Form 1040 or Form 1040NR, line 21. Military h&r block Example 1. Military h&r block In 2007, Sara Clarke's parents opened a savings account for her with a QTP maintained by their state government. Military h&r block Over the years they contributed $18,000 to the account. Military h&r block The total balance in the account was $27,000 on the date the distribution was made. Military h&r block In the summer of 2013, Sara enrolled in college and had $8,300 of qualified education expenses for the rest of the year. Military h&r block She paid her college expenses from the following sources. Military h&r block   Gift from parents $1,600     Partial tuition scholarship (tax-free) 3,100     QTP distribution 5,300           Before Sara can determine the taxable part of her QTP distribution, she must reduce her total qualified education expenses by any tax-free educational assistance. Military h&r block   Total qualified education expenses $8,300     Minus: Tax-free educational assistance −3,100     Equals: Adjusted qualified  education expenses (AQEE) $5,200   Since the remaining expenses ($5,200) are less than the QTP distribution, part of the earnings will be taxable. Military h&r block Sara's Form 1099-Q shows that $950 of the QTP distribution is earnings. Military h&r block Sara figures the taxable part of the distributed earnings as follows. Military h&r block   1. Military h&r block $950 (earnings) × $5,200 AQEE  $5,300 distribution           =$932 (tax-free earnings)     2. Military h&r block $950 (earnings)−$932 (tax-free earnings)     =$18 (taxable earnings)  Sara must include $18 in income (Form 1040, line 21) as distributed QTP earnings not used for adjusted qualified education expenses. Military h&r block Coordination With American Opportunity and Lifetime Learning Credits An American opportunity or lifetime learning credit (education credit) can be claimed in the same year the beneficiary takes a tax-free distribution from a QTP, as long as the same expenses are not used for both benefits. Military h&r block This means that after the beneficiary reduces qualified education expenses by tax-free educational assistance, he or she must further reduce them by the expenses taken into account in determining the credit. Military h&r block Example 2. Military h&r block Assume the same facts as in Example 1 , except that Sara's parents claimed an American opportunity credit of $2,500 (based on $4,000 expenses). Military h&r block   Total qualified education expenses $8,300     Minus: Tax-free educational assistance −3,100     Minus: Expenses taken into account  in figuring American opportunity credit −4,000     Equals: Adjusted qualified  education expenses (AQEE) $1,200           The taxable part of the distribution is figured as follows. Military h&r block   1. Military h&r block $950 (earnings) × $1,200 AQEE  $5,300 distribution           =$215 (tax-free earnings)     2. Military h&r block $950 (earnings)−$215 (tax-free earnings)     =$735 (taxable earnings)       Sara must include $735 in income (Form 1040, line 21). Military h&r block This represents distributed earnings not used for adjusted qualified education expenses. Military h&r block Coordination With Coverdell ESA Distributions If a designated beneficiary receives distributions from both a QTP and a Coverdell ESA in the same year, and the total of these distributions is more than the beneficiary's adjusted qualified higher education expenses, the expenses must be allocated between the distributions. Military h&r block For purposes of this allocation, disregard any qualified elementary and secondary education expenses. Military h&r block Example 3. Military h&r block Assume the same facts as in Example 2 , except that instead of receiving a $5,300 distribution from her QTP, Sara received $4,600 from that account and $700 from her Coverdell ESA. Military h&r block In this case, Sara must allocate her $1,200 of adjusted qualified higher education expenses (AQHEE) between the two distributions. Military h&r block   $1,200 AQHEE × $700 ESA distribution  $5,300 total distribution = $158 AQHEE (ESA)     $1,200 AQHEE × $4,600 QTP distribution  $5,300 total distribution = $1,042 AQHEE (QTP)   Sara then figures the taxable portion of her Coverdell ESA distribution based on qualified higher education expenses of $158, and the taxable portion of her QTP distribution based on the other $1,042. Military h&r block Note. Military h&r block If you are required to allocate your expenses between Coverdell ESA and QTP distributions, and you have adjusted qualified elementary and secondary education expenses, see the examples in chapter 7, Coverdell Education Savings Account under Coordination With Qualified Tuition Program (QTP) Distributions . Military h&r block Coordination With Tuition and Fees Deduction. Military h&r block   A tuition and fees deduction can be claimed in the same year the beneficiary takes a tax-free distribution from a QTP, as long as the same expenses are not used for both benefits. Military h&r block Losses on QTP Investments If you have a loss on your investment in a QTP account, you may be able to take the loss on your income tax return. Military h&r block You can take the loss only when all amounts from that account have been distributed and the total distributions are less than your unrecovered basis. Military h&r block Your basis is the total amount of contributions to that QTP account. Military h&r block You claim the loss as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23 (Schedule A (Form 1040NR), line 9), subject to the 2%-of-adjusted-gross-income limit. Military h&r block If you have distributions from more than one QTP account during a year, you must combine the information (amount of distribution, basis, etc. Military h&r block ) from all such accounts in order to determine your taxable earnings for the year. Military h&r block By doing this, the loss from one QTP account reduces the distributed earnings (if any) from any other QTP accounts. Military h&r block Example 1. Military h&r block In 2013, Taylor received a final distribution of $1,000 from QTP #1. Military h&r block His unrecovered basis in that account before the distribution was $3,000. Military h&r block If Taylor itemizes his deductions, he can claim the $2,000 loss on Schedule A (Form 1040). Military h&r block Example 2. Military h&r block Assume the same facts as in Example 1 , except that Taylor also had a distribution of $9,000 from QTP #2, giving him total distributions for 2013 of $10,000. Military h&r block His total basis in these distributions was $4,500 ($3,000 for QTP #1 and $1,500 for QTP #2). Military h&r block Taylor's adjusted qualified education expenses for 2013 totaled $6,000. Military h&r block In order to figure his taxable earnings, Taylor combines the two accounts and determines his taxable earnings as follows. Military h&r block   1. Military h&r block $10,000 (total distribution)−$4,500 (basis portion of distribution)     = $5,500 (earnings included in distribution)   2. Military h&r block $5,500 (earnings) x $6,000 AQEE  $10,000 distribution           =$3,300 (tax-free earnings)     3. Military h&r block $5,500 (earnings)−$3,300 (tax-free earnings)     =$2,200 (taxable earnings)                 Taylor must include $2,200 in income on Form 1040, line 21. Military h&r block Because Taylor's accounts must be combined, he cannot deduct his $2,000 loss (QTP #1) on Schedule A (Form 1040). Military h&r block Instead, the $2,000 loss reduces the total earnings that were distributed, thereby reducing his taxable earnings. Military h&r block Additional Tax on Taxable Distributions Generally, if you receive a taxable distribution, you also must pay a 10% additional tax on the amount included in income. Military h&r block Exceptions. Military h&r block   The 10% additional tax does not apply to distributions: Paid to a beneficiary (or to the estate of the designated beneficiary) on or after the death of the designated beneficiary. Military h&r block Made because the designated beneficiary is disabled. Military h&r block A person is considered to be disabled if he or she shows proof that he or she cannot do any substantial gainful activity because of his or her physical or mental condition. Military h&r block A physician must determine that his or her condition can be expected to result in death or to be of long-continued and indefinite duration. Military h&r block Included in income because the designated beneficiary received: A tax-free scholarship or fellowship (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), or Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Military h&r block Made on account of the attendance of the designated beneficiary at a U. Military h&r block S. Military h&r block military academy (such as the USNA at Annapolis). Military h&r block This exception applies only to the extent that the amount of the distribution does not exceed the costs of advanced education (as defined in section 2005(d)(3) of title 10 of the U. Military h&r block S. Military h&r block Code) attributable to such attendance. Military h&r block Included in income only because the qualified education expenses were taken into account in determining the American opportunity or lifetime learning credit (see Coordination With American Opportunity and Lifetime Learning Credits , earlier. Military h&r block ) Exception (3) applies only to the extent the distribution is not more than the scholarship, allowance, or payment. Military h&r block Figuring the additional tax. Military h&r block    Use Part II of Form 5329, to figure any additional tax. Military h&r block Report the amount on Form 1040, line 58, or Form 1040NR, line 56. Military h&r block Rollovers and Other Transfers Assets can be rolled over or transferred from one QTP to another. Military h&r block In addition, the designated beneficiary can be changed without transferring accounts. Military h&r block Rollovers Any amount distributed from a QTP is not taxable if it is rolled over to another QTP for the benefit of the same beneficiary or for the benefit of a member of the beneficiary's family (including the beneficiary's spouse). Military h&r block An amount is rolled over if it is paid to another QTP within 60 days after the date of the distribution. Military h&r block Do not report qualifying rollovers (those that meet the above criteria) anywhere on Form 1040 or 1040NR. Military h&r block These are not taxable distributions. Military h&r block Members of the beneficiary's family. Military h&r block   For these purposes, the beneficiary's family includes the beneficiary's spouse and the following other relatives of the beneficiary. Military h&r block Son, daughter, stepchild, foster child, adopted child, or a descendant of any of them. Military h&r block Brother, sister, stepbrother, or stepsister. Military h&r block Father or mother or ancestor of either. Military h&r block Stepfather or stepmother. Military h&r block Son or daughter of a brother or sister. Military h&r block Brother or sister of father or mother. Military h&r block Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. Military h&r block The spouse of any individual listed above. Military h&r block First cousin. Military h&r block Example. Military h&r block When Aaron graduated from college last year he had $5,000 left in his QTP. Military h&r block He wanted to give this money to his younger brother, who was in junior high school. Military h&r block In order to avoid paying tax on the distribution of the amount remaining in his account, Aaron contributed the same amount to his brother's QTP within 60 days of the distribution. Military h&r block If the rollover is to another QTP for the same beneficiary, only one rollover is allowed within 12 months of a previous transfer to any QTP for that designated beneficiary. Military h&r block Changing the Designated Beneficiary There are no income tax consequences if the designated beneficiary of an account is changed to a member of the beneficiary's family. Military h&r block See Members of the beneficiary's family , earlier. Military h&r block Example. Military h&r block Assume the same situation as in the last example. Military h&r block Instead of closing his QTP and paying the distribution into his brother's QTP, Aaron could have instructed the trustee of his account to simply change the name of the beneficiary on his account to that of his brother. Military h&r block Prev  Up  Next   Home   More Online Publications