Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

Need To File 2011 Tax Return

File Federal And State Taxes For FreeIrs 1040 Ez Form 2012Aarp Tax HelpE-file 1040ezWww Irs Gov 1040x FormTaxes For 2011File Amended Tax Return 2011 Online1040ez Tax Form 20111040ez Form BookletSenior Tax RebateSelf Employed TaxesFile 2010 Tax ReturnTax Forms 1040ez 2014Irs Form 1040ez Tax TablesEz Form 10401040ez Worksheet Line F1040ez Instructions 2014Free Irs Tax Filing OnlineFree State Taxes OnlineAmended Federal Tax Form2012 Income TaxAmending 2011 Tax Return1040ez Form 2011Can I File 1040nr OnlineFile Federal Taxes OnlineFile Tax Return For 2011Irs Gov 1040x FormTax Forms 2009Can You Efile A 1040xEz 1040 Form 2014How To File An Amended Tax Return For 2012File 2010 Taxes For FreeSenior TaxesAmmending TaxesEz Tax Form 2012Federal Tax Amendment FormIrsTax Forms For College StudentsTax Form 1040nrHow Do You Fill Out A 1040x Form

Need To File 2011 Tax Return

Need to file 2011 tax return 8. Need to file 2011 tax return   Qualified Tuition Program (QTP) Table of Contents Introduction What Is a Qualified Tuition ProgramDesignated beneficiary. Need to file 2011 tax return Half-time student. Need to file 2011 tax return 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. Need to file 2011 tax return ” 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. Need to file 2011 tax return Eligible educational institutions may establish and maintain programs that allow you to prepay a student's qualified education expenses. Need to file 2011 tax return If you prepay tuition, the student (designated beneficiary) will be entitled to a waiver or a payment of qualified education expenses. Need to file 2011 tax return You cannot deduct either payments or contributions to a QTP. Need to file 2011 tax return For information on a specific QTP, you will need to contact the state agency or eligible educational institution that established and maintains it. Need to file 2011 tax return What is the tax benefit of a QTP. Need to file 2011 tax return   No tax is due on a distribution from a QTP unless the amount distributed is greater than the beneficiary's adjusted qualified education expenses. Need to file 2011 tax return See Are Distributions Taxable , later, for more information. Need to file 2011 tax return    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. Need to file 2011 tax return See Coordination With American Opportunity and Lifetime Learning Credits, later. Need to file 2011 tax return 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. Need to file 2011 tax return QTPs can be established and maintained by states (or agencies or instrumentalities of a state) and eligible educational institutions. Need to file 2011 tax return The program must meet certain requirements. Need to file 2011 tax return Your state government or the eligible educational institution in which you are interested can tell you whether or not they participate in a QTP. Need to file 2011 tax return Qualified education expenses. Need to file 2011 tax return   These are expenses related to enrollment or attendance at an Eligible educational institution (defined later). Need to file 2011 tax return 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. Need to file 2011 tax return See Half-time student , later. Need to file 2011 tax return The following expenses must be required for enrollment or attendance of a Designated beneficiary (defined later) at an eligible educational institution. Need to file 2011 tax return Tuition and fees. Need to file 2011 tax return Books, supplies, and equipment. Need to file 2011 tax return 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. Need to file 2011 tax return Expenses for room and board must be incurred by students who are enrolled at least half-time. Need to file 2011 tax return The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. Need to file 2011 tax return 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. Need to file 2011 tax return The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Need to file 2011 tax return You will need to contact the eligible educational institution for qualified room and board costs. Need to file 2011 tax return    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. Need to file 2011 tax return Designated beneficiary. Need to file 2011 tax return   The designated beneficiary is generally the student (or future student) for whom the QTP is intended to provide benefits. Need to file 2011 tax return The designated beneficiary can be changed after participation in the QTP begins. Need to file 2011 tax return 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. Need to file 2011 tax return Half-time student. Need to file 2011 tax return   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. Need to file 2011 tax return Eligible educational institution. Need to file 2011 tax return   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. Need to file 2011 tax return S. Need to file 2011 tax return Department of Education. Need to file 2011 tax return It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Need to file 2011 tax return The educational institution should be able to tell you if it is an eligible educational institution. Need to file 2011 tax return   Certain educational institutions located outside the United States also participate in the U. Need to file 2011 tax return S. Need to file 2011 tax return Department of Education's Federal Student Aid (FSA) programs. Need to file 2011 tax return   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. Need to file 2011 tax return There are no income restrictions on the individual contributors. Need to file 2011 tax return You can contribute to both a QTP and a Coverdell ESA in the same year for the same designated beneficiary. Need to file 2011 tax return   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. Need to file 2011 tax return This is a return of the investment in the plan. Need to file 2011 tax return 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). Need to file 2011 tax return Earnings and return of investment. Need to file 2011 tax return    You will receive a Form 1099-Q, from each of the programs from which you received a QTP distribution in 2013. Need to file 2011 tax return 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). Need to file 2011 tax return Form 1099-Q should be sent to you by January 31, 2014. Need to file 2011 tax return 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. Need to file 2011 tax return Adjusted qualified education expenses. Need to file 2011 tax return   This amount is the total qualified education expenses reduced by any tax-free educational assistance. Need to file 2011 tax return 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. Need to file 2011 tax return Taxable earnings. Need to file 2011 tax return   Use the following steps to figure the taxable part. Need to file 2011 tax return Multiply the total distributed earnings shown in box 2 of Form 1099-Q by a fraction. Need to file 2011 tax return The numerator is the adjusted qualified education expenses paid during the year and the denominator is the total amount distributed during the year. Need to file 2011 tax return Subtract the amount figured in (1) from the total distributed earnings. Need to file 2011 tax return The result is the amount the beneficiary must include in income. Need to file 2011 tax return Report it on Form 1040 or Form 1040NR, line 21. Need to file 2011 tax return Example 1. Need to file 2011 tax return In 2007, Sara Clarke's parents opened a savings account for her with a QTP maintained by their state government. Need to file 2011 tax return Over the years they contributed $18,000 to the account. Need to file 2011 tax return The total balance in the account was $27,000 on the date the distribution was made. Need to file 2011 tax return In the summer of 2013, Sara enrolled in college and had $8,300 of qualified education expenses for the rest of the year. Need to file 2011 tax return She paid her college expenses from the following sources. Need to file 2011 tax return   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. Need to file 2011 tax return   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. Need to file 2011 tax return Sara's Form 1099-Q shows that $950 of the QTP distribution is earnings. Need to file 2011 tax return Sara figures the taxable part of the distributed earnings as follows. Need to file 2011 tax return   1. Need to file 2011 tax return $950 (earnings) × $5,200 AQEE  $5,300 distribution           =$932 (tax-free earnings)     2. Need to file 2011 tax return $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. Need to file 2011 tax return 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. Need to file 2011 tax return 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. Need to file 2011 tax return Example 2. Need to file 2011 tax return 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). Need to file 2011 tax return   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. Need to file 2011 tax return   1. Need to file 2011 tax return $950 (earnings) × $1,200 AQEE  $5,300 distribution           =$215 (tax-free earnings)     2. Need to file 2011 tax return $950 (earnings)−$215 (tax-free earnings)     =$735 (taxable earnings)       Sara must include $735 in income (Form 1040, line 21). Need to file 2011 tax return This represents distributed earnings not used for adjusted qualified education expenses. Need to file 2011 tax return 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. Need to file 2011 tax return For purposes of this allocation, disregard any qualified elementary and secondary education expenses. Need to file 2011 tax return Example 3. Need to file 2011 tax return 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. Need to file 2011 tax return In this case, Sara must allocate her $1,200 of adjusted qualified higher education expenses (AQHEE) between the two distributions. Need to file 2011 tax return   $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. Need to file 2011 tax return Note. Need to file 2011 tax return 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 . Need to file 2011 tax return Coordination With Tuition and Fees Deduction. Need to file 2011 tax return   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. Need to file 2011 tax return 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. Need to file 2011 tax return 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. Need to file 2011 tax return Your basis is the total amount of contributions to that QTP account. Need to file 2011 tax return 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. Need to file 2011 tax return If you have distributions from more than one QTP account during a year, you must combine the information (amount of distribution, basis, etc. Need to file 2011 tax return ) from all such accounts in order to determine your taxable earnings for the year. Need to file 2011 tax return By doing this, the loss from one QTP account reduces the distributed earnings (if any) from any other QTP accounts. Need to file 2011 tax return Example 1. Need to file 2011 tax return In 2013, Taylor received a final distribution of $1,000 from QTP #1. Need to file 2011 tax return His unrecovered basis in that account before the distribution was $3,000. Need to file 2011 tax return If Taylor itemizes his deductions, he can claim the $2,000 loss on Schedule A (Form 1040). Need to file 2011 tax return Example 2. Need to file 2011 tax return 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. Need to file 2011 tax return His total basis in these distributions was $4,500 ($3,000 for QTP #1 and $1,500 for QTP #2). Need to file 2011 tax return Taylor's adjusted qualified education expenses for 2013 totaled $6,000. Need to file 2011 tax return In order to figure his taxable earnings, Taylor combines the two accounts and determines his taxable earnings as follows. Need to file 2011 tax return   1. Need to file 2011 tax return $10,000 (total distribution)−$4,500 (basis portion of distribution)     = $5,500 (earnings included in distribution)   2. Need to file 2011 tax return $5,500 (earnings) x $6,000 AQEE  $10,000 distribution           =$3,300 (tax-free earnings)     3. Need to file 2011 tax return $5,500 (earnings)−$3,300 (tax-free earnings)     =$2,200 (taxable earnings)                 Taylor must include $2,200 in income on Form 1040, line 21. Need to file 2011 tax return Because Taylor's accounts must be combined, he cannot deduct his $2,000 loss (QTP #1) on Schedule A (Form 1040). Need to file 2011 tax return Instead, the $2,000 loss reduces the total earnings that were distributed, thereby reducing his taxable earnings. Need to file 2011 tax return 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. Need to file 2011 tax return Exceptions. Need to file 2011 tax return   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. Need to file 2011 tax return Made because the designated beneficiary is disabled. Need to file 2011 tax return 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. Need to file 2011 tax return 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. Need to file 2011 tax return 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. Need to file 2011 tax return Made on account of the attendance of the designated beneficiary at a U. Need to file 2011 tax return S. Need to file 2011 tax return military academy (such as the USNA at Annapolis). Need to file 2011 tax return 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. Need to file 2011 tax return S. Need to file 2011 tax return Code) attributable to such attendance. Need to file 2011 tax return 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. Need to file 2011 tax return ) Exception (3) applies only to the extent the distribution is not more than the scholarship, allowance, or payment. Need to file 2011 tax return Figuring the additional tax. Need to file 2011 tax return    Use Part II of Form 5329, to figure any additional tax. Need to file 2011 tax return Report the amount on Form 1040, line 58, or Form 1040NR, line 56. Need to file 2011 tax return Rollovers and Other Transfers Assets can be rolled over or transferred from one QTP to another. Need to file 2011 tax return In addition, the designated beneficiary can be changed without transferring accounts. Need to file 2011 tax return 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). Need to file 2011 tax return An amount is rolled over if it is paid to another QTP within 60 days after the date of the distribution. Need to file 2011 tax return Do not report qualifying rollovers (those that meet the above criteria) anywhere on Form 1040 or 1040NR. Need to file 2011 tax return These are not taxable distributions. Need to file 2011 tax return Members of the beneficiary's family. Need to file 2011 tax return   For these purposes, the beneficiary's family includes the beneficiary's spouse and the following other relatives of the beneficiary. Need to file 2011 tax return Son, daughter, stepchild, foster child, adopted child, or a descendant of any of them. Need to file 2011 tax return Brother, sister, stepbrother, or stepsister. Need to file 2011 tax return Father or mother or ancestor of either. Need to file 2011 tax return Stepfather or stepmother. Need to file 2011 tax return Son or daughter of a brother or sister. Need to file 2011 tax return Brother or sister of father or mother. Need to file 2011 tax return Son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. Need to file 2011 tax return The spouse of any individual listed above. Need to file 2011 tax return First cousin. Need to file 2011 tax return Example. Need to file 2011 tax return When Aaron graduated from college last year he had $5,000 left in his QTP. Need to file 2011 tax return He wanted to give this money to his younger brother, who was in junior high school. Need to file 2011 tax return 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. Need to file 2011 tax return 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. Need to file 2011 tax return 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. Need to file 2011 tax return See Members of the beneficiary's family , earlier. Need to file 2011 tax return Example. Need to file 2011 tax return Assume the same situation as in the last example. Need to file 2011 tax return 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. Need to file 2011 tax return Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Subscribe To Quick Alerts

QuickAlerts sends e-file messages, within seconds, to keep Tax Professionals up to date on the events that affect e-file Transmitters, Authorized e-file Providers and e-file Software Developers during the filing season and beyond.

What could be easier than a "one-time subscription" to receive important e-file information, continuously, until you unsubscribe?

Four QuickAlerts categories provide the e-file information that is certain to enhance your filing season.  These categories are found on the Subscription Screen.
 

  • Alerts – Processing delays, Programming issues, Changes to any filing season procedure, Error Code and and Business Rule information
  • Technical – Schema information, Software testing (PATS and ATS) 
  • General Notifications – Seminars, Conferences, e-file publication changes.
  • General IRS e-file Service Center Messages – IRS e-file program updates, General information, Service Center maintenance schedules, IRS e-file Help Desk phone numbers and more

Choose the categories that suit your needs, then sit back, relax, and let the filing season news come to you through the convenience of email.  Never miss another important event.  Be informed of what you need to know, when you need to know it.

More information on Quick Alerts Subscribe / Unsubscribe

Page Last Reviewed or Updated: 13-Mar-2014

The Need To File 2011 Tax Return

Need to file 2011 tax return 3. Need to file 2011 tax return   SIMPLE Plans Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: SIMPLE IRA PlanWho Can Set Up a SIMPLE IRA Plan? Who Can Participate in a SIMPLE IRA Plan? How To Set Up a SIMPLE IRA Plan Notification Requirement Contribution Limits When To Deduct Contributions Where To Deduct Contributions Tax Treatment of Contributions Distributions (Withdrawals) More Information on SIMPLE IRA Plans SIMPLE 401(k) Plan Topics - This chapter discusses: SIMPLE IRA plan SIMPLE 401(k) plan Useful Items - You may want to see: Publications 590 Individual Retirement Arrangements (IRAs) 3998 Choosing A Retirement Solution for Your Small Business 4284 SIMPLE IRA Plan Checklist 4334 SIMPLE IRA Plans for Small Businesses Forms (and Instructions) W-2 Wage and Tax Statement 5304-SIMPLE Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)–Not for Use With a Designated Financial Institution 5305-SIMPLE Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)–for Use With a Designated Financial Institution 8880 Credit for Qualified Retirement Savings Contributions 8881 Credit for Small Employer Pension Plan Startup Costs A savings incentive match plan for employees (SIMPLE plan) is a written arrangement that provides you and your employees with a simplified way to make contributions to provide retirement income. Need to file 2011 tax return Under a SIMPLE plan, employees can choose to make salary reduction contributions to the plan rather than receiving these amounts as part of their regular pay. Need to file 2011 tax return In addition, you will contribute matching or nonelective contributions. Need to file 2011 tax return SIMPLE plans can only be maintained on a calendar-year basis. Need to file 2011 tax return A SIMPLE plan can be set up in either of the following ways. Need to file 2011 tax return Using SIMPLE IRAs (SIMPLE IRA plan). Need to file 2011 tax return As part of a 401(k) plan (SIMPLE 401(k) plan). Need to file 2011 tax return Many financial institutions will help you set up a SIMPLE plan. Need to file 2011 tax return SIMPLE IRA Plan A SIMPLE IRA plan is a retirement plan that uses SIMPLE IRAs for each eligible employee. Need to file 2011 tax return Under a SIMPLE IRA plan, a SIMPLE IRA must be set up for each eligible employee. Need to file 2011 tax return For the definition of an eligible employee, see Who Can Participate in a SIMPLE IRA Plan , later. Need to file 2011 tax return Who Can Set Up a SIMPLE IRA Plan? You can set up a SIMPLE IRA plan if you meet both the following requirements. Need to file 2011 tax return You meet the employee limit. Need to file 2011 tax return You do not maintain another qualified plan unless the other plan is for collective bargaining employees. Need to file 2011 tax return Employee limit. Need to file 2011 tax return   You can set up a SIMPLE IRA plan only if you had 100 or fewer employees who received $5,000 or more in compensation from you for the preceding year. Need to file 2011 tax return Under this rule, you must take into account all employees employed at any time during the calendar year regardless of whether they are eligible to participate. Need to file 2011 tax return Employees include self-employed individuals who received earned income and leased employees (defined in chapter 1). Need to file 2011 tax return   Once you set up a SIMPLE IRA plan, you must continue to meet the 100-employee limit each year you maintain the plan. Need to file 2011 tax return Grace period for employers who cease to meet the 100-employee limit. Need to file 2011 tax return   If you maintain the SIMPLE IRA plan for at least 1 year and you cease to meet the 100-employee limit in a later year, you will be treated as meeting it for the 2 calendar years immediately following the calendar year for which you last met it. Need to file 2011 tax return   A different rule applies if you do not meet the 100-employee limit because of an acquisition, disposition, or similar transaction. Need to file 2011 tax return Under this rule, the SIMPLE IRA plan will be treated as meeting the 100-employee limit for the year of the transaction and the 2 following years if both the following conditions are satisfied. Need to file 2011 tax return Coverage under the plan has not significantly changed during the grace period. Need to file 2011 tax return The SIMPLE IRA plan would have continued to qualify after the transaction if you had remained a separate employer. Need to file 2011 tax return    The grace period for acquisitions, dispositions, and similar transactions also applies if, because of these types of transactions, you do not meet the rules explained under Other qualified plan or Who Can Participate in a SIMPLE IRA Plan, below. Need to file 2011 tax return Other qualified plan. Need to file 2011 tax return   The SIMPLE IRA plan generally must be the only retirement plan to which you make contributions, or to which benefits accrue, for service in any year beginning with the year the SIMPLE IRA plan becomes effective. Need to file 2011 tax return Exception. Need to file 2011 tax return   If you maintain a qualified plan for collective bargaining employees, you are permitted to maintain a SIMPLE IRA plan for other employees. Need to file 2011 tax return Who Can Participate in a SIMPLE IRA Plan? Eligible employee. Need to file 2011 tax return   Any employee who received at least $5,000 in compensation during any 2 years preceding the current calendar year and is reasonably expected to receive at least $5,000 during the current calendar year is eligible to participate. Need to file 2011 tax return The term “employee” includes a self-employed individual who received earned income. Need to file 2011 tax return   You can use less restrictive eligibility requirements (but not more restrictive ones) by eliminating or reducing the prior year compensation requirements, the current year compensation requirements, or both. Need to file 2011 tax return For example, you can allow participation for employees who received at least $3,000 in compensation during any preceding calendar year. Need to file 2011 tax return However, you cannot impose any other conditions for participating in a SIMPLE IRA plan. Need to file 2011 tax return Excludable employees. Need to file 2011 tax return   The following employees do not need to be covered under a SIMPLE IRA plan. Need to file 2011 tax return Employees who are covered by a union agreement and whose retirement benefits were bargained for in good faith by the employees' union and you. Need to file 2011 tax return Nonresident alien employees who have received no U. Need to file 2011 tax return S. Need to file 2011 tax return source wages, salaries, or other personal services compensation from you. Need to file 2011 tax return Compensation. Need to file 2011 tax return   Compensation for employees is the total wages, tips, and other compensation from the employer subject to federal income tax withholding and the amounts paid for domestic service in a private home, local college club, or local chapter of a college fraternity or sorority. Need to file 2011 tax return Compensation also includes the employee's salary reduction contributions made under this plan and, if applicable, elective deferrals under a section 401(k) plan, a SARSEP, or a section 403(b) annuity contract and compensation deferred under a section 457 plan required to be reported by the employer on Form W-2. Need to file 2011 tax return If you are self-employed, compensation is your net earnings from self-employment (line 4 of Short Schedule SE or line 6 of Long Schedule SE (Form 1040)) before subtracting any contributions made to the SIMPLE IRA plan for yourself. Need to file 2011 tax return How To Set Up a SIMPLE IRA Plan You can use Form 5304-SIMPLE or Form 5305-SIMPLE to set up a SIMPLE IRA plan. Need to file 2011 tax return Each form is a model savings incentive match plan for employees (SIMPLE) plan document. Need to file 2011 tax return Which form you use depends on whether you select a financial institution or your employees select the institution that will receive the contributions. Need to file 2011 tax return Use Form 5304-SIMPLE if you allow each plan participant to select the financial institution for receiving his or her SIMPLE IRA plan contributions. Need to file 2011 tax return Use Form 5305-SIMPLE if you require that all contributions under the SIMPLE IRA plan be deposited initially at a designated financial institution. Need to file 2011 tax return The SIMPLE IRA plan is adopted when you have completed all appropriate boxes and blanks on the form and you (and the designated financial institution, if any) have signed it. Need to file 2011 tax return Keep the original form. Need to file 2011 tax return Do not file it with the IRS. Need to file 2011 tax return Other uses of the forms. Need to file 2011 tax return   If you set up a SIMPLE IRA plan using Form 5304-SIMPLE or Form 5305-SIMPLE, you can use the form to satisfy other requirements, including the following. Need to file 2011 tax return Meeting employer notification requirements for the SIMPLE IRA plan. Need to file 2011 tax return Form 5304-SIMPLE and Form 5305-SIMPLE contain a Model Notification to Eligible Employees that provides the necessary information to the employee. Need to file 2011 tax return Maintaining the SIMPLE IRA plan records and proving you set up a SIMPLE IRA plan for employees. Need to file 2011 tax return Deadline for setting up a SIMPLE IRA plan. Need to file 2011 tax return   You can set up a SIMPLE IRA plan effective on any date from January 1 through October 1 of a year, provided you did not previously maintain a SIMPLE IRA plan. Need to file 2011 tax return This requirement does not apply if you are a new employer that comes into existence after October 1 of the year the SIMPLE IRA plan is set up and you set up a SIMPLE IRA plan as soon as administratively feasible after your business comes into existence. Need to file 2011 tax return If you previously maintained a SIMPLE IRA plan, you can set up a SIMPLE IRA plan effective only on January 1 of a year. Need to file 2011 tax return A SIMPLE IRA plan cannot have an effective date that is before the date you actually adopt the plan. Need to file 2011 tax return Setting up a SIMPLE IRA. Need to file 2011 tax return   SIMPLE IRAs are the individual retirement accounts or annuities into which the contributions are deposited. Need to file 2011 tax return A SIMPLE IRA must be set up for each eligible employee. Need to file 2011 tax return Forms 5305-S, SIMPLE Individual Retirement Trust Account, and 5305-SA, SIMPLE Individual Retirement Custodial Account, are model trust and custodial account documents the participant and the trustee (or custodian) can use for this purpose. Need to file 2011 tax return   A SIMPLE IRA cannot be a Roth IRA. Need to file 2011 tax return Contributions to a SIMPLE IRA will not affect the amount an individual can contribute to a Roth or traditional IRA. Need to file 2011 tax return Deadline for setting up a SIMPLE IRA. Need to file 2011 tax return   A SIMPLE IRA must be set up for an employee before the first date by which a contribution is required to be deposited into the employee's IRA. Need to file 2011 tax return See Time limits for contributing funds , later, under Contribution Limits. Need to file 2011 tax return Credit for startup costs. Need to file 2011 tax return   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SIMPLE IRA plan that first became effective in 2013. Need to file 2011 tax return For more information, see Credit for startup costs under Reminders, earlier. Need to file 2011 tax return Notification Requirement If you adopt a SIMPLE IRA plan, you must notify each employee of the following information before the beginning of the election period. Need to file 2011 tax return The employee's opportunity to make or change a salary reduction choice under a SIMPLE IRA plan. Need to file 2011 tax return Your decision to make either matching contributions or nonelective contributions (discussed later). Need to file 2011 tax return A summary description provided by the financial institution. Need to file 2011 tax return Written notice that his or her balance can be transferred without cost or penalty if they use a designated financial institution. Need to file 2011 tax return Election period. Need to file 2011 tax return   The election period is generally the 60-day period immediately preceding January 1 of a calendar year (November 2 to December 31 of the preceding calendar year). Need to file 2011 tax return However, the dates of this period are modified if you set up a SIMPLE IRA plan in mid-year (for example, on July 1) or if the 60-day period falls before the first day an employee becomes eligible to participate in the SIMPLE IRA plan. Need to file 2011 tax return   A SIMPLE IRA plan can provide longer periods for permitting employees to enter into salary reduction agreements or to modify prior agreements. Need to file 2011 tax return For example, a SIMPLE IRA plan can provide a 90-day election period instead of the 60-day period. Need to file 2011 tax return Similarly, in addition to the 60-day period, a SIMPLE IRA plan can provide quarterly election periods during the 30 days before each calendar quarter, other than the first quarter of each year. Need to file 2011 tax return Contribution Limits Contributions are made up of salary reduction contributions and employer contributions. Need to file 2011 tax return You, as the employer, must make either matching contributions or nonelective contributions, defined later. Need to file 2011 tax return No other contributions can be made to the SIMPLE IRA plan. Need to file 2011 tax return These contributions, which you can deduct, must be made timely. Need to file 2011 tax return See Time limits for contributing funds , later. Need to file 2011 tax return Salary reduction contributions. Need to file 2011 tax return   The amount the employee chooses to have you contribute to a SIMPLE IRA on his or her behalf cannot be more than $12,000 for 2013 and 2014. Need to file 2011 tax return These contributions must be expressed as a percentage of the employee's compensation unless you permit the employee to express them as a specific dollar amount. Need to file 2011 tax return You cannot place restrictions on the contribution amount (such as limiting the contribution percentage), except to comply with the $12,000 limit. Need to file 2011 tax return   If you or an employee participates in any other qualified plan during the year and you or your employee have salary reduction contributions (elective deferrals) under those plans, the salary reduction contributions under a SIMPLE IRA plan also count toward the overall annual limit ($17,500 for 2013 and 2014) on exclusion of salary reduction contributions and other elective deferrals. Need to file 2011 tax return Catch-up contributions. Need to file 2011 tax return   A SIMPLE IRA plan can permit participants who are age 50 or over at the end of the calendar year to also make catch-up contributions. Need to file 2011 tax return The catch-up contribution limit for 2013 and 2014 for SIMPLE IRA plans is $2,500. Need to file 2011 tax return Salary reduction contributions are not treated as catch-up contributions for 2013 or 2014 until they exceed $12,000. Need to file 2011 tax return However, the catch-up contribution a participant can make for a year cannot exceed the lesser of the following amounts. Need to file 2011 tax return The catch-up contribution limit. Need to file 2011 tax return The excess of the participant's compensation over the salary reduction contributions that are not catch-up contributions. Need to file 2011 tax return Employer matching contributions. Need to file 2011 tax return   You are generally required to match each employee's salary reduction contributions on a dollar-for-dollar basis up to 3% of the employee's compensation. Need to file 2011 tax return This requirement does not apply if you make nonelective contributions as discussed later. Need to file 2011 tax return Example. Need to file 2011 tax return In 2013, your employee, John Rose, earned $25,000 and chose to defer 5% of his salary. Need to file 2011 tax return Your net earnings from self-employment are $40,000, and you choose to contribute 10% of your earnings to your SIMPLE IRA. Need to file 2011 tax return You make 3% matching contributions. Need to file 2011 tax return The total contribution you make for John is $2,000, figured as follows. Need to file 2011 tax return Salary reduction contributions ($25,000 × . Need to file 2011 tax return 05) $1,250 Employer matching contribution ($25,000 × . Need to file 2011 tax return 03) 750 Total contributions $2,000     The total contribution you make for yourself is $5,200, figured as follows. Need to file 2011 tax return Salary reduction contributions ($40,000 × . Need to file 2011 tax return 10) $4,000 Employer matching contribution ($40,000 × . Need to file 2011 tax return 03) 1,200 Total contributions $5,200 Lower percentage. Need to file 2011 tax return   If you choose a matching contribution less than 3%, the percentage must be at least 1%. Need to file 2011 tax return You must notify the employees of the lower match within a reasonable period of time before the 60-day election period (discussed earlier) for the calendar year. Need to file 2011 tax return You cannot choose a percentage less than 3% for more than 2 years during the 5-year period that ends with (and includes) the year for which the choice is effective. Need to file 2011 tax return Nonelective contributions. Need to file 2011 tax return   Instead of matching contributions, you can choose to make nonelective contributions of 2% of compensation on behalf of each eligible employee who has at least $5,000 (or some lower amount you select) of compensation from you for the year. Need to file 2011 tax return If you make this choice, you must make nonelective contributions whether or not the employee chooses to make salary reduction contributions. Need to file 2011 tax return Only $255,000 of the employee's compensation can be taken into account to figure the contribution limit in 2013 ($260,000 in 2014). Need to file 2011 tax return   If you choose this 2% contribution formula, you must notify the employees within a reasonable period of time before the 60-day election period (discussed earlier) for the calendar year. Need to file 2011 tax return Example 1. Need to file 2011 tax return In 2013, your employee, Jane Wood, earned $36,000 and chose to have you contribute 10% of her salary. Need to file 2011 tax return Your net earnings from self-employment are $50,000, and you choose to contribute 10% of your earnings to your SIMPLE IRA. Need to file 2011 tax return You make a 2% nonelective contribution. Need to file 2011 tax return Both of you are under age 50. Need to file 2011 tax return The total contribution you make for Jane is $4,320, figured as follows. Need to file 2011 tax return Salary reduction contributions ($36,000 × . Need to file 2011 tax return 10) $3,600 2% nonelective contributions ($36,000 × . Need to file 2011 tax return 02) 720 Total contributions $4,320     The total contribution you make for yourself is $6,000, figured as follows. Need to file 2011 tax return Salary reduction contributions ($50,000 × . Need to file 2011 tax return 10) $5,000 2% nonelective contributions ($50,000 × . Need to file 2011 tax return 02) 1,000 Total contributions $6,000 Example 2. Need to file 2011 tax return Using the same facts as in Example 1, above, the maximum contribution you make for Jane or for yourself if you each earned $75,000 is $13,500, figured as follows. Need to file 2011 tax return Salary reduction contributions (maximum amount allowed) $12,000 2% nonelective contributions ($75,000 × . Need to file 2011 tax return 02) 1,500 Total contributions $13,500 Time limits for contributing funds. Need to file 2011 tax return   You must make the salary reduction contributions to the SIMPLE IRA within 30 days after the end of the month in which the amounts would otherwise have been payable to the employee in cash. Need to file 2011 tax return You must make matching contributions or nonelective contributions by the due date (including extensions) for filing your federal income tax return for the year. Need to file 2011 tax return Certain plans subject to Department of Labor rules may have an earlier due date for salary reduction contributions. Need to file 2011 tax return When To Deduct Contributions You can deduct SIMPLE IRA contributions in the tax year within which the calendar year for which contributions were made ends. Need to file 2011 tax return You can deduct contributions for a particular tax year if they are made for that tax year and are made by the due date (including extensions) of your federal income tax return for that year. Need to file 2011 tax return Example 1. Need to file 2011 tax return Your tax year is the fiscal year ending June 30. Need to file 2011 tax return Contributions under a SIMPLE IRA plan for the calendar year 2013 (including contributions made in 2013 before July 1, 2013) are deductible in the tax year ending June 30, 2014. Need to file 2011 tax return Example 2. Need to file 2011 tax return You are a sole proprietor whose tax year is the calendar year. Need to file 2011 tax return Contributions under a SIMPLE IRA plan for the calendar year 2013 (including contributions made in 2014 by April 15, 2014) are deductible in the 2013 tax year. Need to file 2011 tax return Where To Deduct Contributions Deduct the contributions you make for your common-law employees on your tax return. Need to file 2011 tax return For example, sole proprietors deduct them on Schedule C (Form 1040) or Schedule F (Form 1040); partnerships deduct them on Form 1065; and corporations deduct them on Form 1120 or Form 1120S. Need to file 2011 tax return Sole proprietors and partners deduct contributions for themselves on line 28 of Form 1040. Need to file 2011 tax return (If you are a partner, contributions for yourself are shown on the Schedule K-1 (Form 1065) you receive from the partnership. Need to file 2011 tax return ) Tax Treatment of Contributions You can deduct your contributions and your employees can exclude these contributions from their gross income. Need to file 2011 tax return SIMPLE IRA plan contributions are not subject to federal income tax withholding. Need to file 2011 tax return However, salary reduction contributions are subject to social security, Medicare, and federal unemployment (FUTA) taxes. Need to file 2011 tax return Matching and nonelective contributions are not subject to these taxes. Need to file 2011 tax return Reporting on Form W-2. Need to file 2011 tax return   Do not include SIMPLE IRA plan contributions in the “Wages, tips, other compensation” box of Form W-2. Need to file 2011 tax return You must, however, include them in the “Social security wages” and “Medicare wages and tips” boxes. Need to file 2011 tax return You must also include them in box 12. Need to file 2011 tax return Mark the “Retirement plan” checkbox in box 13. Need to file 2011 tax return For more information, see the Form W-2 instructions. Need to file 2011 tax return Distributions (Withdrawals) Distributions from a SIMPLE IRA are subject to IRA rules and generally are includible in income for the year received. Need to file 2011 tax return Tax-free rollovers can be made from one SIMPLE IRA into another SIMPLE IRA. Need to file 2011 tax return However, a rollover from a SIMPLE IRA to a non-SIMPLE IRA can be made tax free only after a 2-year participation in the SIMPLE IRA plan. Need to file 2011 tax return Generally, you or your employee must begin to receive distributions from a SIMPLE IRA by April 1 of the first year after the calendar year in which you or your employee reaches age 70½. Need to file 2011 tax return Early withdrawals generally are subject to a 10% additional tax. Need to file 2011 tax return However, the additional tax is increased to 25% if funds are withdrawn within 2 years of beginning participation. Need to file 2011 tax return More information. Need to file 2011 tax return   See Publication 590 for information about IRA rules, including those on the tax treatment of distributions, rollovers, required distributions, and income tax withholding. Need to file 2011 tax return More Information on SIMPLE IRA Plans If you need help to set up or maintain a SIMPLE IRA plan, go to the IRS website and search SIMPLE IRA Plan. Need to file 2011 tax return SIMPLE 401(k) Plan You can adopt a SIMPLE plan as part of a 401(k) plan if you meet the 100-employee limit as discussed earlier under SIMPLE IRA Plan. Need to file 2011 tax return A SIMPLE 401(k) plan is a qualified retirement plan and generally must satisfy the rules discussed under Qualification Rules in chapter 4, including the required distribution rules. Need to file 2011 tax return However, a SIMPLE 401(k) plan is not subject to the nondiscrimination and top-heavy rules discussed in chapter 4 if the plan meets the conditions listed below. Need to file 2011 tax return Under the plan, an employee can choose to have you make salary reduction contributions for the year to a trust in an amount expressed as a percentage of the employee's compensation, but not more than $12,000 for 2013 and 2014. Need to file 2011 tax return If permitted under the plan, an employee who is age 50 or over can also make a catch-up contribution of up to $2,500 for 2013 and 2014. Need to file 2011 tax return See Catch-up contributions , earlier under Contribution Limits. Need to file 2011 tax return You must make either: Matching contributions up to 3% of compensation for the year, or Nonelective contributions of 2% of compensation on behalf of each eligible employee who has at least $5,000 of compensation from you for the year. Need to file 2011 tax return No other contributions can be made to the trust. Need to file 2011 tax return No contributions are made, and no benefits accrue, for services during the year under any other qualified retirement plan sponsored by you on behalf of any employee eligible to participate in the SIMPLE 401(k) plan. Need to file 2011 tax return The employee's rights to any contributions are nonforfeitable. Need to file 2011 tax return No more than $255,000 of the employee's compensation can be taken into account in figuring matching contributions and nonelective contributions in 2013 ($260,000 in 2014). Need to file 2011 tax return Compensation is defined earlier in this chapter. Need to file 2011 tax return Employee notification. Need to file 2011 tax return   The notification requirement that applies to SIMPLE IRA plans also applies to SIMPLE 401(k) plans. Need to file 2011 tax return See Notification Requirement in this chapter. Need to file 2011 tax return Credit for startup costs. Need to file 2011 tax return   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SIMPLE 401(k) plan that first became effective in 2013. Need to file 2011 tax return For more information, see Credit for startup costs under Reminders, earlier. Need to file 2011 tax return Note on Forms. Need to file 2011 tax return   Please note that Forms 5304-SIMPLE and 5305-SIMPLE can not be used to establish a SIMPLE 401(k) plan. Need to file 2011 tax return To set up a SIMPLE 401(k) plan, see Adopting a Written Plan in chapter 4. Need to file 2011 tax return Prev  Up  Next   Home   More Online Publications