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Self Employment Taxes

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Self Employment Taxes

Self employment taxes 4. Self employment taxes   Underpayment Penalty for 2013 Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: General RuleFarmers and fishermen. Self employment taxes Higher income taxpayers. Self employment taxes Minimum required for higher income taxpayers. Self employment taxes Estate or trust payments of estimated tax. Self employment taxes Lowering or eliminating the penalty. Self employment taxes 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. Self employment taxes 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. Self employment taxes You may understand this chapter better if you can refer to a copy of your latest federal income tax return. Self employment taxes No penalty. Self employment taxes   Generally, you will not have to pay a penalty for 2013 if any of the following apply. Self employment taxes The total of your withholding and timely estimated tax payments was at least as much as your 2012 tax. Self employment taxes (See Special rules for certain individuals for higher income taxpayers and farmers and fishermen. Self employment taxes ) 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. Self employment taxes Your total tax for 2013 (defined later) minus your withholding is less than $1,000. Self employment taxes You did not have a tax liability for 2012. Self employment taxes You did not have any withholding taxes and your current year tax (less any household employment taxes) is less than $1,000. Self employment taxes IRS can figure the penalty for you. Self employment taxes   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. Self employment taxes Generally, the IRS will figure the penalty for you and send you a bill. Self employment taxes   You only need to figure your penalty in the following three situations. Self employment taxes You are requesting a waiver of part, but not all, of the penalty. Self employment taxes You are using the annualized income installment method to figure the penalty. Self employment taxes You are treating the federal income tax withheld from your income as paid on the dates actually withheld. Self employment taxes 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. Self employment taxes See Form 2210 , later. Self employment taxes 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. Self employment taxes 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. Self employment taxes 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. Self employment taxes (Your 2012 tax return must cover a 12-month period. Self employment taxes ) Your 2013 tax, for this purpose, is defined under Total tax for 2013 , later. Self employment taxes Special rules for certain individuals. Self employment taxes   There are special rules for farmers and fishermen and certain higher income taxpayers. Self employment taxes Farmers and fishermen. Self employment taxes   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. Self employment taxes   See Farmers and Fishermen , later. Self employment taxes Higher income taxpayers. Self employment taxes   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 . Self employment taxes This rule does not apply to farmers or fishermen. Self employment taxes   For 2012, AGI is the amount shown on Form 1040, line 37; Form 1040A, line 21; and Form 1040EZ, line 4. Self employment taxes Penalty figured separately for each period. Self employment taxes   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. Self employment taxes This is true even if you are due a refund when you file your income tax return. Self employment taxes Example. Self employment taxes You did not make estimated tax payments for 2013 because you thought you had enough tax withheld from your wages. Self employment taxes Early in January 2014, you made an estimate of your total 2013 tax. Self employment taxes Then you realized that your withholding was $2,000 less than the amount needed to avoid a penalty for underpayment of estimated tax. Self employment taxes 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. Self employment taxes Your final return shows your total tax to be $50 less than your estimate, so you are due a refund. Self employment taxes You do not owe a penalty for your payment due January 15, 2014. Self employment taxes 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. Self employment taxes Minimum required each period. Self employment taxes   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. Self employment taxes 5% of your 2013 tax, or 25% of your 2012 tax. Self employment taxes (Your 2012 tax return must cover a 12-month period. Self employment taxes ) Minimum required for higher income taxpayers. Self employment taxes   If you are subject to the rule for higher income taxpayers, discussed above, substitute 27. Self employment taxes 5% for 25% in (2) under General Rule . Self employment taxes When penalty is charged. Self employment taxes   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. Self employment taxes If a payment is mailed, the date of the U. Self employment taxes S. Self employment taxes postmark is considered the date of payment. Self employment taxes   If a payment is made electronically, the date the payment is shown on your payment account (checking, savings, etc. Self employment taxes ) is considered to be the date of payment. Self employment taxes Estate or trust payments of estimated tax. Self employment taxes   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. Self employment taxes Amended returns. Self employment taxes    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. Self employment taxes If you file an amended return after the due date of the original return, use the tax shown on the original return. Self employment taxes   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. Self employment taxes This rule applies only if both original separate returns were filed on time. Self employment taxes 2012 separate returns and 2013 joint return. Self employment taxes    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. Self employment taxes You filed a separate return if you filed as single, head of household, or married filing separately. Self employment taxes 2012 joint return and 2013 separate returns. Self employment taxes    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. Self employment taxes You are filing a separate return if you file as single, head of household, or married filing separately. Self employment taxes   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. Self employment taxes Then multiply the tax on the joint return by the following fraction. Self employment taxes   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. Self employment taxes Lisa and Paul filed a joint return for 2012 showing taxable income of $49,000 and a tax of $6,484. Self employment taxes Of the $49,000 taxable income, $41,000 was Lisa's and the rest was Paul's. Self employment taxes For 2013, they file married filing separately. Self employment taxes Lisa figures her share of the tax on the 2012 joint return as follows. Self employment taxes 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. Self employment taxes 67% Lisa's part of tax on joint return ($6,484 × 88. Self employment taxes 67%) $ 5,749 Form 2210. Self employment taxes   In most cases, you do not need to file Form 2210. Self employment taxes The IRS will figure the penalty for you and send you a bill. Self employment taxes If you want us to figure the penalty for you, leave the penalty line on your return blank. Self employment taxes Do not file Form 2210. Self employment taxes   To determine if you should file Form 2210, see Part II of Form 2210. Self employment taxes 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. Self employment taxes If you use Form 2210, you cannot file Form 1040EZ. Self employment taxes   On Form 1040, enter the amount of your penalty on line 77. Self employment taxes If you owe tax on line 76, add the penalty to your tax due and show your total payment on line 76. Self employment taxes If you are due a refund, subtract the penalty from the overpayment and enter the result on line 73. Self employment taxes   On Form 1040A, enter the amount of your penalty on line 46. Self employment taxes If you owe tax on line 45, add the penalty to your tax due and show your total payment on line 45. Self employment taxes If you are due a refund, subtract the penalty from the overpayment and enter the result on line 42. Self employment taxes Lowering or eliminating the penalty. Self employment taxes    You may be able to lower or eliminate your penalty if you file Form 2210. Self employment taxes You must file Form 2210 with your return if any of the following applies. Self employment taxes You request a waiver. Self employment taxes See Waiver of Penalty , later. Self employment taxes You use the annualized income installment method. Self employment taxes See the explanation of this method under Annualized Income Installment Method (Schedule AI) . Self employment taxes You use your actual withholding for each payment period for estimated tax purposes. Self employment taxes See Actual withholding method under Figuring Your Underpayment (Part IV, Section A). Self employment taxes 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. Self employment taxes 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. Self employment taxes 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. Self employment taxes Total tax for 2013. Self employment taxes   For 2013, your total tax on Form 1040 is the amount on line 61 reduced by the following. Self employment taxes    Unreported social security and Medicare tax or RRTA tax from Forms 4137 or 8919 (line 57). Self employment taxes 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. Self employment taxes 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. Self employment taxes Any refundable credit amounts listed on lines 64a, 65, 66, 70, and any credit from Form 8885 included on line 71. Self employment taxes   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. Self employment taxes   If you filed Form 1040EZ, your 2013 total tax is the amount on line 10 reduced by the amount on line 8a. Self employment taxes Note. Self employment taxes 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. Self employment taxes Paid through withholding. Self employment taxes    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. Self employment taxes Add to that any write-in amount on line 72 identified as “Form 8689. Self employment taxes ” 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. Self employment taxes On Form 1040EZ, it is the amount on line 7. Self employment taxes No Tax Liability Last Year You do not owe a penalty if you had no tax liability last year and you were a U. Self employment taxes S. Self employment taxes citizen or resident for the whole year. Self employment taxes For this rule to apply, your tax year must have included all 12 months of the year. Self employment taxes You had no tax liability for 2012 if your total tax was zero or you were not required to file an income tax return. Self employment taxes Example. Self employment taxes Ray, who is single and 22 years old, was unemployed for a few months during 2012. Self employment taxes He earned $6,700 in wages before he was laid off, and he received $1,400 in unemployment compensation afterwards. Self employment taxes He had no other income. Self employment taxes 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). Self employment taxes He filed a return only to have his withheld income tax refunded to him. Self employment taxes In 2013, Ray began regular work as an independent contractor. Self employment taxes Ray made no estimated tax payments in 2013. Self employment taxes 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. Self employment taxes Total tax for 2012. Self employment taxes   For 2012, your total tax on Form 1040 is the amount on line 61 reduced by the following. Self employment taxes    Unreported social security and Medicare tax or RRTA tax from Forms 4137 or 8919 (line 57). Self employment taxes 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. Self employment taxes 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. Self employment taxes 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. Self employment taxes   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. Self employment taxes   If you filed Form 1040EZ, your 2012 total tax is the amount on line 11 reduced by the amount on line 8a. Self employment taxes Figuring Your Required Annual Payment (Part I) Figure your required annual payment in Part I of Form 2210, following the line-by-line instructions. Self employment taxes If you rounded the entries on your tax return to whole dollars, you can round on Form 2210. Self employment taxes Example. Self employment taxes The tax on Lori Lane's 2012 return was $12,400. Self employment taxes Her AGI was not more than $150,000 for either 2012 or 2013. Self employment taxes The tax on her 2013 return (Form 1040, line 55) is $13,044. Self employment taxes Line 56 (self-employment tax) is $8,902. Self employment taxes Her 2013 total tax is $21,946. Self employment taxes For 2013, Lori had $1,600 income tax withheld and made four equal estimated tax payments ($1,000 each). Self employment taxes 90% of her 2013 tax is $19,751. Self employment taxes 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. Self employment taxes 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. Self employment taxes Lori's required annual payment is $12,400 (100% of 2012 tax) because that is smaller than 90% of her 2013 tax. Self employment taxes Different 2012 filing status. Self employment taxes    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. Self employment taxes 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. Self employment taxes If you qualify to use this method, it will result in the same penalty amount as the regular method. Self employment taxes However, either the annualized income installment method or the actual withholding method, explained later, may result in a smaller penalty. Self employment taxes You can use the short method only if you meet one of the following requirements. Self employment taxes You made no estimated tax payments for 2013 (it does not matter whether you had income tax withholding). Self employment taxes You paid the same amount of estimated tax on each of the four payment due dates. Self employment taxes 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. Self employment taxes Note. Self employment taxes 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. Self employment taxes However, if the payment was only a few days early, the difference is likely to be small. Self employment taxes You cannot use the short method if any of the following apply. Self employment taxes You made any estimated tax payments late. Self employment taxes You checked box C or D in Part II of Form 2210. Self employment taxes You are filing Form 1040NR or 1040NR-EZ and you did not receive wages as an employee subject to U. Self employment taxes S. Self employment taxes income tax withholding. Self employment taxes If you use the short method, you cannot use the annualized income installment method to figure your underpayment for each payment period. Self employment taxes Also, you cannot use your actual withholding during each period to figure your payments for each period. Self employment taxes These methods, which may give you a smaller penalty amount, are explained under Figuring Your Underpayment (Part IV, Section A). Self employment taxes Complete Part III of Form 2210 following the line-by-line instructions in the Instructions for Form 2210. Self employment taxes 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. Self employment taxes 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. Self employment taxes You paid one or more estimated tax payments on a date after the due date. Self employment taxes You paid at least one, but less than four, installments of estimated tax. Self employment taxes You paid estimated tax payments in un- equal amounts. Self employment taxes You use the annualized income installment method to figure your underpayment for each payment period. Self employment taxes You use your actual withholding during each payment period to figure your payments. Self employment taxes 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. Self employment taxes Enter the results on line 27 of Section B. Self employment taxes 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. Self employment taxes Complete lines 20 through 26 of the first column before going to line 20 of the next column. Self employment taxes Required installments—line 18. Self employment taxes   Your required payment for each payment period (line 18) is usually one-fourth of your required annual payment (Part I, line 9). Self employment taxes This method—the regular method—is the one to use if you received your income evenly throughout the year. Self employment taxes   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. Self employment taxes First complete Schedule AI (Form 2210), then enter the amounts from line 25 of that schedule on line 18 of Form 2210, Part IV. Self employment taxes See Annualized Income Installment Method (Schedule AI), later. Self employment taxes Payments made—line 19. Self employment taxes   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. Self employment taxes For special rules for figuring your payments, see Form 2210 instructions for line 19. Self employment taxes   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. Self employment taxes 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. Self employment taxes Actual withholding method. Self employment taxes    Instead of using one-fourth of your withholding for each quarter, you can choose to use the amounts actually withheld by each due date. Self employment taxes You can make this choice separately for the tax withheld from your wages and for all other withholding. Self employment taxes This includes any excess social security and tier 1 RRTA tax withheld. Self employment taxes   Using your actual withholding may result in a smaller penalty if most of your withholding occurred early in the year. Self employment taxes   If you use your actual withholding, you must check box D in Form 2210, Part II. Self employment taxes Then complete Form 2210 using the regular method (Part IV) and file it with your return. Self employment taxes 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. Self employment taxes 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. Self employment taxes 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. Self employment taxes A 3% rate applies to all four periods. Self employment taxes Payments. Self employment taxes    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. Self employment taxes For example, if you had an underpayment for the first payment period, list your payments after April 15, 2013. Self employment taxes You can use the table in the Form 2210 instructions to make your list. Self employment taxes Follow those instructions for listing income tax withheld and payments made with your return. Self employment taxes Use the list to determine when each underpayment was paid. Self employment taxes   If you mail your estimated tax payments, use the date of the U. Self employment taxes S. Self employment taxes postmark as the date of payment. Self employment taxes Line 1b. Self employment taxes   Apply the payments listed to underpayment balance in the first column until it is fully paid. Self employment taxes Apply payments in the order made. Self employment taxes Figuring the penalty. Self employment taxes   If an underpayment was paid in two or more payments on different dates, you must figure the penalty separately for each payment. Self employment taxes 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. Self employment taxes On line 4 figure the penalty for the amount of each payment applied on line 1b or the amount remaining unpaid. Self employment taxes If no payments are applied, figure the penalty on the amount on line 1a. Self employment taxes Aid for counting days. Self employment taxes    Table 4-1 provides a simple method for counting the number of days between a due date and a payment date. Self employment taxes 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. Self employment taxes In the same manner, find the number for the date the payment was made. Self employment taxes Subtract the due date “number” from the payment date “number. Self employment taxes ”   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. Self employment taxes Table 4-1. Self employment taxes Calendar To Determine the Number of Days a Payment Is Late Instructions. Self employment taxes Use this table with Form 2210 if you are completing Part IV, Section B. Self employment taxes 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. Self employment taxes Then, in the same manner, find the number for the date the payment was made. Self employment taxes Finally, subtract the due date number from the payment date number. Self employment taxes The result is the number of days the payment is late. Self employment taxes Example. Self employment taxes The payment due date is June 15 (61). Self employment taxes The payment was made on November 4 (203). Self employment taxes The payment is 142 days late (203 – 61). Self employment taxes Tax Year 2013 Day of 2013 2013 2013 2013 2013 2013 2013 2013 2013 2014 2014 2014 2014 Month April May June July Aug. Self employment taxes Sept. Self employment taxes Oct. Self employment taxes Nov. Self employment taxes Dec. Self employment taxes Jan. Self employment taxes Feb. Self employment taxes Mar. Self employment taxes Apr. Self employment taxes 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. Self employment taxes 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. Self employment taxes To figure your underpayment using this method, complete Form 2210, Schedule AI. Self employment taxes 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. Self employment taxes If you use the annualized income installment method, you must check box C in Part II of Form 2210. Self employment taxes Also, you must attach Form 2210 and Schedule AI to your return. Self employment taxes If you use Schedule AI for any payment due date, you must use it for all payment due dates. Self employment taxes Completing Schedule AI. Self employment taxes   Follow the Form 2210 instructions to complete Schedule AI. Self employment taxes For each period shown on Schedule AI, figure your income and deductions based on your method of accounting. Self employment taxes 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. Self employment taxes Note. Self employment taxes Each period includes amounts from the previous period(s). Self employment taxes Period (a) includes items for January 1 through March 31. Self employment taxes Period (b) includes items for January 1 through May 31. Self employment taxes Period (c) includes items for January 1 through August 31. Self employment taxes Period (d) includes items for the entire year. Self employment taxes Farmers and Fishermen If you are a farmer or fisherman, the following special rules for underpayment of estimated tax apply to you. Self employment taxes 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. Self employment taxes 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. Self employment taxes Any penalty you owe for underpaying your 2013 estimated tax will be figured from one payment due date, January 15, 2014. Self employment taxes 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. Self employment taxes 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 . Self employment taxes See Who Must Pay Estimated Tax in chapter 2 for the definition of a farmer or fisherman who is eligible for these special rules. Self employment taxes Form 2210-F. Self employment taxes   Use Form 2210-F to figure any underpayment penalty. Self employment taxes Do not attach it to your return unless you check a box in Part I. Self employment taxes However, if none of the boxes apply to you and you owe a penalty, you do not need to attach Form 2210-F. Self employment taxes 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. Self employment taxes Keep your filled-in Form 2210-F for your records. Self employment taxes    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. Self employment taxes Waiver of Penalty The IRS can waive the penalty for underpayment if either of the following applies. Self employment taxes You did not make a payment because of a casualty, disaster, or other unusual circumstance and it would be inequitable to impose the penalty. Self employment taxes You retired (after reaching age 62) or became disabled in 2012 or 2013 and both the following requirements are met. Self employment taxes You had a reasonable cause for not making the payment. Self employment taxes Your underpayment was not due to willful neglect. Self employment taxes How to request a waiver. Self employment taxes   To request a waiver, see the Instructions for Form 2210. Self employment taxes Farmers and fishermen. Self employment taxes   To request a waiver, see the Instructions for Form 2210-F. Self employment taxes Federally declared disaster. Self employment taxes   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. Self employment taxes 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. Self employment taxes Do not file Form 2210 or 2210-F if your underpayment was due to a federally declared disaster. Self employment taxes If you still owe a penalty after the automatic waiver is applied, we will send you a bill. Self employment taxes   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. Self employment taxes Also eligible are relief workers affiliated with a recognized government or charitable organization assisting in the relief activities in a covered disaster area. Self employment taxes 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. Self employment taxes   Details on the applicable disaster postponement period can be found at IRS. Self employment taxes gov. Self employment taxes Enter Tax Relief in Disaster Situations. Self employment taxes Select the federally declared disaster that affected you. Self employment taxes    Worksheet 4-1. Self employment taxes 2013 Form 2210, Schedule AI—Line 12 Qualified Dividends and Capital Gain Tax Worksheet Note. Self employment taxes 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. Self employment taxes                   1. Self employment taxes Enter line 11 of your Schedule AI, or line 3 from Worksheet 4-2 1. Self employment taxes       2. Self employment taxes Enter your annualized qualified dividends for the period 2. Self employment taxes           3. Self employment taxes Are you filing Schedule D?               □ Yes. Self employment taxes Enter the smaller of your annualized amount from line 15 or line 16 of Schedule D. Self employment taxes If either line 15 or line 16 is blank or a loss, enter -0-. Self employment taxes 3. Self employment taxes             □ No. Self employment taxes Enter your annualized capital gain distributions from Form 1040, line 13             4. Self employment taxes Add lines 2 and 3   4. Self employment taxes           5. Self employment taxes If you are claiming investment interest expense on Form 4952, enter your annualized amount from line 4g of that form. Self employment taxes Otherwise, enter -0-   5. Self employment taxes           6. Self employment taxes Subtract line 5 from line 4. Self employment taxes If zero or less, enter -0- 6. Self employment taxes       7. Self employment taxes Subtract line 6 from line 1. Self employment taxes If zero or less, enter -0- 7. Self employment taxes       8. Self employment taxes 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. Self employment taxes 8. Self employment taxes       9. Self employment taxes Enter the smaller of line 1 or line 8 9. Self employment taxes       10. Self employment taxes Enter the smaller of line 7 or line 9 10. Self employment taxes       11. Self employment taxes Subtract line 10 from line 9. Self employment taxes This amount is taxed at 0% 11. Self employment taxes       12. Self employment taxes Enter the smaller of line 1 or line 6 12. Self employment taxes       13. Self employment taxes Enter the amount from line 11 13. Self employment taxes       14. Self employment taxes Subtract line 13 from line 12 14. Self employment taxes       15. Self employment taxes Multiply line 14 by 15% (. Self employment taxes 15) 15. Self employment taxes   16. Self employment taxes Figure the tax on the amount on line 7. Self employment taxes 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. Self employment taxes If the amount on line 7 is $100,000 or more, use the Tax Computation Worksheet in the 2013 Form 1040 instructions 16. Self employment taxes   17. Self employment taxes Add lines 15 and 16 17. Self employment taxes   18. Self employment taxes Figure the tax on the amount on line 1. Self employment taxes 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. Self employment taxes If the amount on line 1 is $100,000 or more, use the Tax Computation Worksheet in the 2013 Form 1040 instructions 18. Self employment taxes   19. Self employment taxes Tax on all taxable income. Self employment taxes Enter the smaller of line 17 or line 18. Self employment taxes Also enter this amount on line 12 of Schedule AI in the appropriate column. Self employment taxes 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. Self employment taxes   Worksheet 4-2. Self employment taxes 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. Self employment taxes             1. Self employment taxes Enter the amount from line 11 of Schedule AI for the period 1. Self employment taxes   2. Self employment taxes 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. Self employment taxes   3. Self employment taxes Add lines 1 and 2 3. Self employment taxes   4. Self employment taxes Tax on the amount on line 3. Self employment taxes Use the Tax Table, Tax Computation Worksheet, Form 8615**, Qualified Dividends and Capital Gain Tax Worksheet***, or Schedule D Tax Worksheet***, whichever applies. Self employment taxes See the 2013 Instructions for Form 1040, line 44, to find out which tax computation method to use. Self employment taxes (Note. Self employment taxes You do not have to use the same method for each period on Schedule AI. Self employment taxes ) 4. Self employment taxes   5. Self employment taxes Tax on the amount on line 2. Self employment taxes 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. Self employment taxes If the amount on line 7 is $100,000 or more, use the Tax Computation Worksheet in the 2013 Form 1040 instructions 5. Self employment taxes   6. Self employment taxes Subtract line 5 from line 4. Self employment taxes Enter the result here and on line 12 of Schedule AI. Self employment taxes If zero or less,  enter -0- 6. Self employment taxes             * 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. Self employment taxes     ** 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. Self employment taxes 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. Self employment taxes Complete the rest of Form 8615 according to its instructions. Self employment taxes Then complete lines 5 and 6 above. Self employment taxes     *** 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. Self employment taxes Complete that worksheet through line 6 (line 10 if you use the Schedule D Tax Worksheet). Self employment taxes Next, determine if you have a capital gain excess. Self employment taxes     Figuring capital gain excess. Self employment taxes 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). Self employment taxes If the result is more than zero, that amount is your capital gain excess. Self employment taxes     No capital gain excess. Self employment taxes 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. Self employment taxes Then complete lines 5 and 6 above. Self employment taxes     Capital gain excess. Self employment taxes 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. Self employment taxes Then complete lines 5 and 6 above. Self employment taxes     Make the modifications below only for purposes of filling out Worksheet 4-2 above. Self employment taxes     a. Self employment taxes 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. Self employment taxes     b. Self employment taxes 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. Self employment taxes     c. Self employment taxes Reduce (but not below zero) the amount on your Schedule D (Form 1040), line 18, by your capital gain excess. Self employment taxes     d. Self employment taxes 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). 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Affordable Care Act Tax Provisions

Check out the new Affordable Care Act Tax Provisions Home Page

Información en Español: Disposiciones de La Ley del Cuidado de Salud de Bajo Precio
 

Update

The open enrollment period to purchase health insurance coverage for 2014 through the Health Insurance Marketplace runs from Oct. 1, 2013, through March 31, 2014. If you are seeking information about how to obtain health care coverage or financial assistance to purchase health care coverage for you and your family, visit the Health and Human Services website, HealthCare.gov.

Effect of Sequestration on Small Business Health Care Tax Credit

Pursuant to the requirements of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, refund payments issued to certain small tax-exempt employers claiming the refundable portion of the Small Business Health Care Tax Credit under Internal Revenue Code Section 45R, are subject to sequestration. This means that refund payments processed on or after Oct.1, 2013, and on or before Sept. 30, 2014, to a Section 45R applicant will be reduced by the fiscal year 2014 sequestration rate of 7.2 percent, irrespective of when the original or amended tax return was received by the IRS. The sequestration reduction rate will be applied unless and until a law is enacted that cancels or otherwise impacts the sequester, at which time the sequestration reduction rate is subject to change.

Affected taxpayers will be notified through correspondence that a portion of their requested payment was subject to the sequester reduction and the amount.

IRC §7216, Disclosure or Use of Information by Tax Return Preparers

Final Treasury Regulations on rules and consent requirements relating to the disclosure or use of tax return information by tax return preparers became effective Dec. 28, 2012. For additional information about how these apply to services and education related to the Affordable Care Act, please see our questions and answers

Medical Loss Ratio (MLR)

Beginning in 2011, insurance companies are required to spend a specified percentage of premium dollars on medical care and quality improvement activities, meeting a medical loss ratio (MLR) standard. Insurance companies that are not meeting the MLR standard will be required to provide rebates to their consumers beginning in 2012. For information on the federal tax consequences to an insurance company that pays a MLR rebate and an individual policyholder who receives a MLR rebate, as well as information on the federal tax consequences to employees if a MLR rebate stems from a group health insurance policy, see our frequently asked questions.

Reporting Employer Provided Health Coverage in Form W-2

The Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan on an employee’s Form W-2, Wage and Tax Statement, in Box 12, using Code DD. Many employers are eligible for transition relief for tax-year 2012 and beyond, until the IRS issues final guidance for this reporting requirement.

The amount reported does not affect tax liability, as the value of the employer excludible contribution to health coverage continues to be excludible from an employee's income, and it is not taxable. This reporting is for informational purposes only, to show employees the value of their health care benefits.

More information about the reporting can be found on Form W-2 Reporting of Employer-Sponsored Health Coverage.

Net Investment Income Tax

A new Net Investment Income Tax went into effect on Jan. 1, 2013. The 3.8 percent Net Investment Income Tax applies to individuals, estates and trusts that have certain investment income above certain threshold amounts. On Nov. 26, 2013, the IRS and the Treasury Department issued final regulations, which provide guidance on the general application of the Net Investment Income Tax and the computation of Net Investment Income. In addition, on Nov. 26, 2013, the IRS and the Treasury Department issued proposed regulations on the computation of net investment income as it relates to certain specific types of property. Comments may be submitted electronically, by mail or hand delivered to the IRS. For additional information on the Net Investment Income Tax, see our questions and answers.

Additional Medicare Tax

A new Additional Medicare Tax went into effect on Jan. 1, 2013. The 0.9 percent Additional Medicare Tax applies to an individual’s wages, Railroad Retirement Tax Act compensation and self-employment income that exceeds a threshold amount based on the individual’s filing status. The threshold amounts are $250,000 for married taxpayers who file jointly, $125,000 for married taxpayers who file separately and $200,000 for all other taxpayers. An employer is responsible for withholding the Additional Medicare Tax from wages or compensation it pays to an employee in excess of $200,000 in a calendar year. On Nov. 26, 2013, the IRS and the Department of the Treasury issued final regulations which provide guidance for employers and individuals relating to the implementation of Additional Medicare Tax, including the requirement to withhold Additional Medicare Tax on certain wages and compensation, the requirement to report Additional Medicare Tax, and the employer process for adjusting underpayments and overpayments of Additional Medicare Tax. In addition, the regulations provide guidance on the employer and individual processes for filing a claim for refund for an overpayment of Additional Medicare Tax. For additional information on the Additional Medicare Tax, see our questions and answers.

Minimum Value

On April 26, 2012, the Department of the Treasury and IRS issued Notice 2012-31, which provides information and requested public comment on an approach to determining whether an eligible employer-sponsored health plan provides minimum value. Additionally, on April 30, 2013, the Treasury Department and the IRS issued proposed regulations relating to minimum value of eligible employer-sponsored plans and other rules regarding the premium tax credit. Starting in 2014, whether such a plan provides minimum value will be relevant to eligibility for the premium tax credit and application of the employer shared responsibility payment.

Information Reporting on Health Coverage by Employers

On March 5, 2014, the Department of the Treasury and IRS issued final regulations on employer health insurance coverage information reporting. The information reporting relates to health insurance coverage that is offered by certain employers, referred to as applicable large employers, and reporting is to be provided by each member of an applicable large employer. Additionally, on July 9, 2013, the Department of the Treasury and the IRS issued Notice 2013-45, announcing transition relief for 2014 from this annual information reporting. Learn more about this reporting requirement by reading the fact sheet issued by the U.S. Department of the Treasury.

Information Reporting on Health Coverage by Insurers

On March 5, 2014, the Department of the Treasury and IRS issued final regulations on minimum essential coverage information reporting. The information reporting is to be provided by health insurance issuers, certain sponsors of self-insured plans, government agencies and certain other parties that provide health coverage. Additionally, on July 9, 2013, the Department of the Treasury and the IRS issued Notice 2013-45 announcing transition relief for 2014 from this annual information reporting. Learn more about this reporting requirement by reading the fact sheet issued by the U.S. Department of the Treasury.

Disclosure of Return Information

On Aug. 13, 2013, the Department of the Treasury and the IRS issued final regulations with rules for disclosure of return information to the Department of Health and Human Services that will be used to carry out eligibility determinations for advance payments of the premium tax credit, Medicaid and other health insurance affordability programs. For additional information on the final regulations, see our questions and answers.

Small Business Health Care Tax Credit

This credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low- and moderate-income workers. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees. On Aug. 23, 2013, the Department of Treasury and the IRS issued proposed regulations, which include information on the transition of eligibility for the credit and requiring the purchase of insurance coverage through an Affordable Insurance Exchange (also known as a Health Insurance Marketplace). Additionally, IRS Notice 2014-06 provides transition relief for employers in certain counties in Washington and Wisconsin with no SHOP coverage available. Learn more by browsing our page on the Small Business Health Care Tax Credit for Small Employers.

Application of the Affordable Care Act to Health Reimbursement Arrangements, Health Flexible Spending Arrangements and Certain Other Employer Healthcare Arrangements

The Affordable Care Act’s market reforms apply to group health plans. On Sept. 13, 2013, the IRS issued Notice 2013-54, which explains how the Affordable Care Act’s market reforms apply to certain types of group health plans, including health reimbursement arrangements (HRAs), health flexible spending arrangements (health FSAs) and certain other employer healthcare arrangements, including arrangements under which an employer reimburses an employee for some or all of the premium expenses incurred for an individual health insurance policy. The notice also provides guidance on employee assistance programs or EAPs and on section 125(f)(3), which prohibits the use of pre-tax employee contributions to cafeteria plans to purchase coverage on an Affordable Insurance Exchange (also known as a Health Insurance Marketplace). The notice applies for plan years beginning on and after Jan. 1, 2014, but taxpayers may apply the guidance provided in the notice for all prior periods.  

DOL has issued a notice in substantially identical form to Notice 2013-54, DOL Technical Release 2013-03, and HHS will shortly issue guidance to reflect that it concurs with Notice 2013-54. On Jan. 24, 2013, DOL and HHS issued FAQs that addressed the application of the Affordable Care Act to HRAs.

On Jan. 9, 2014, DOL and HHS issued FAQs that addressed, among other things, future rules relating to excepted benefits.

Health Flexible Spending Arrangements

Effective Jan. 1, 2011, the cost of an over-the-counter medicine or drug cannot be reimbursed from Flexible Spending Arrangements (FSAs) or health reimbursement arrangements unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles. This standard applies only to purchases made on or after Jan. 1, 2011. A similar rule went into effect on Jan. 1, 2011, for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs). Employers and employees should take these changes into account as they make health benefit decisions. For more information, see news release IR-2010-95, Notice 2010-59, Revenue Ruling 2010-23 and our questions and answers. FSA and HRA participants can continue using debit cards to buy prescribed over-the-counter medicines, if requirements are met. For more information, see news release IR-2010-128 and Notice 2011-5. Additionally, Notice 2013-57 provides information about the definition of preventive care for purposes of high deductible health plans associated with HSAs. 

In addition, starting in 2013, there are new rules about the amount that can be contributed to an FSA. Notice 2012-40 provides information about these rules and flexibility for employers applying the new rules. On Oct. 31, 2013, the Department of the Treasury and IRS issued Notice 2013-71, which provides information on a new $500 carryover option for employer-sponsored healthcare flexible spending arrangements. Learn more by reading the news release issued by the U.S. Department of the Treasury.

Further, Notice 2013-54 provides guidance regarding the application of the Affordable Care Act’s market reforms to certain health FSAs.   

Medical Device Excise Tax

On Dec. 5, 2012, the IRS and the Department of the Treasury issued final regulations on the new 2.3-percent medical device excise tax (IRC §4191) that manufacturers and importers will pay on their sales of certain medical devices starting in 2013. On Dec. 5, 2012, the IRS and the Department of the Treasury also issued Notice 2012-77, which provides interim guidance on certain issues related to the medical device excise tax. Additional information is available on the Medical Device Excise Tax page and Medical Device Excise Tax FAQs on IRS.gov.

Changes to Itemized Deduction for Medical Expenses

Beginning Jan. 1, 2013, you can claim deductions for medical expenses not covered by your health insurance when they reach 10 percent of your adjusted gross income. This change affects your 2013 tax return that you will file in 2014. There is a temporary exemption from Jan. 1, 2013, to Dec. 31, 2016, for individuals age 65 and older and their spouses. For additional information, see our questions and answers.

Health Insurance Premium Tax Credit

Starting in 2014, individuals and families can take a new premium tax credit to help them afford health insurance coverage purchased through an Affordable Insurance Exchange (also known as a Health Insurance Marketplace). The premium tax credit is refundable so taxpayers who have little or no income tax liability can still benefit. The credit also can be paid in advance to a taxpayer’s insurance company to help cover the cost of premiums. On May 18, 2012, the Department of the Treasury and the IRS issued final regulations, which provide guidance for individuals who enroll in qualified health plans through Marketplaces and claim the premium tax credit, and for Marketplaces that make qualified health plans available to individuals and employers. On Jan. 30, 2013, the Department of the Treasury and IRS released final regulations on the premium tax credit affordability test for related individuals. On April 30, 2013, the Department of the Treasury and the IRS issued proposed regulations relating to minimum value of eligible employer-sponsored plans and other rules regarding the premium tax credit. Additionally, Notice 2013-41, issued on June 26, 2013, provides information for determining whether or when individuals are considered eligible for coverage under certain Medicaid, Medicare, CHIP, TRICARE, student health or state high-risk pool programs. This determination will affect whether the individual is eligible for the premium tax credit. On June 28, 2013, the Department of the Treasury and IRS issued proposed regulations on the new reporting requirements for Marketplaces. Notice 2014-23 was issued on March 26, 2014, and allows certain victims of domestic abuse to claim the premium tax credit while filing a return using the Married Filing Separately filing status for the 2014 calendar year. For more information on the credit, see our premium tax credit page and our questions and answers.

Individual Shared Responsibility Provision

Starting in 2014, the Individual Shared Responsibility provision calls for each individual to either have minimum essential coverage for each month, qualify for an exemption, or make a payment when filing his or her federal income tax return. On Aug. 27, 2013, the Department of the Treasury and the IRS issued final regulations on the Individual Shared Responsibility provision. On Jan. 23, 2014, the Department of the Treasury and the IRS issued proposed regulations addressing several issues that were identified in the preamble to the final regulations. In particular, the proposed regulations provide that certain limited-benefit Medicaid and TRICARE coverage is not minimum essential coverage. The proposed regulations also address the treatment of health reimbursement arrangements and wellness program incentives for purposes of determining the exemption for individuals who cannot afford employer-sponsored coverage. Comments are due April 28, 2014, and may be submitted electronically, by mail or hand delivered to the IRS. Additionally, because individuals may not be aware that these limited-benefit government health programs are not minimum essential coverage at the time of enrollment, Notice 2014-10, issued on Jan. 23, 2014, provides transition relief from the shared responsibility payment for months in 2014 in which individuals have certain Medicaid coverage or limited-benefit coverage under chapter 55 of title 10, U.S.C. For additional information on the Individual Shared Responsibility provision, the final regulations and Notice 2013-42, see our ISRP page and questions and answers. Additional information on exemptions and minimum essential coverage is available in final regulations issued by the U.S. Department of Health & Human Services. The open enrollment period to purchase health insurance coverage for 2014 through the Health Insurance Marketplace runs from Oct. 1, 2013, through March 31, 2014.

Health Coverage for Older Children

Health coverage for an employee's children under 27 years of age is now generally tax-free to the employee. This expanded health care tax benefit applies to various work place and retiree health plans. These changes immediately allow employers with cafeteria plans –– plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits –– to permit employees to begin making pre-tax contributions to pay for this expanded benefit. This also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return. Learn more by reading our news release or this notice.

Excise Tax on Indoor Tanning Services

A 10-percent excise tax on indoor UV tanning services went into effect on July 1, 2010. Payments are made along with Form 720, Quarterly Federal Excise Tax Return. The tax doesn't apply to phototherapy services performed by a licensed medical professional on his or her premises. There's also an exception for certain physical fitness facilities that offer tanning as an incidental service to members without a separately identifiable fee. For more information on the tax and how it is administered, see the Indoor Tanning Services Tax Center.

Adoption Credit

For tax years 2010 and 2011, the Affordable Care Act raised the maximum adoption credit per child and the credit was refundable. For more information related to the adoption credit for tax years 2010 and 2011, see our news release, tax tip, questions and answers, flyer, Notice 2010-66, Revenue Procedure 2010-31, Revenue Procedure 2010-35 and Revenue Procedure 2011-52.

For tax year 2012, the credit has reverted to being nonrefundable, with a maximum amount (dollar limitation) of $12,650 per child. If you adopted a child in 2012, see Tax Topic 607 for more information. 

Transitional Reinsurance Program

The ACA requires all health insurance issuers and self-insured group health plans to make contributions under the transitional Reinsurance Program to support payments to individual market issuers that cover high-cost individuals. For information on the tax treatment of contributions made under the Reinsurance Program, see our frequently asked questions.

Medicare Shared Savings Program

The Affordable Care Act establishes a Medicare shared savings program (MSSP) which encourages Accountable Care Organizations (ACOs) to facilitate cooperation among providers to improve the quality of care provided to Medicare beneficiaries and reduce unnecessary costs. More information can be found in Notice 2011-20, which solicited written comments regarding what additional guidance, if any, is needed for tax-exempt organizations participating in the MSSP through an ACO. This guidance also addresses the participation of tax-exempt organizations in non-MSSP activities through ACOs. Additional information on the MSSP is available on the Department of Health and Human Services website.

The Centers for Medicare and Medicaid Services has released final regulations describing the rules for the Shared Savings Program and accountable care organizations. Fact Sheet 2011-11 confirms that Notice 2011-20 continues to reflect IRS expectations regarding the Shared Savings Program and ACOs, and provides additional information for charitable organizations that may wish to participate.

Qualified Therapeutic Discovery Project Program

This program was designed to provide tax credits and grants to small firms that show significant potential to produce new and cost-saving therapies, support U.S. jobs and increase U.S. competitiveness. Applicants were required to have their research projects certified as eligible for the credit or grant. IRS guidance describes the application process.

Submission of certification applications began June 21, 2010, and applications had to be postmarked no later than July 21, 2010, to be considered for the program. Applications that were postmarked by July 21, 2010, were reviewed by both the Department of Health and Human Services (HHS) and the IRS. All applicants were notified by letter dated October 29, 2010, advising whether or not the application for certification was approved. For those applications that were approved, the letter also provided the amount of the grant to be awarded or the tax credit the applicant was eligible to take.

The IRS published the names of the applicants whose projects were approved as required by law. Listings of results are available by state.

Learn more by reading the IRS news release, the news release issued by the U.S. Department of the Treasury, the page on the HHS website and our questions and answers.

Group Health Plan Requirements

The Affordable Care Act establishes a number of new requirements for group health plans. Interim guidance on changes to the nondiscrimination requirements for group health plans can be found in Notice 2011-1, which provides that employers will not be subject to penalties until after additional guidance is issued. Additionally, TD 9575 and REG-140038-10, issued by DOL, HHS and IRS, provide information on the summary of benefits and coverage and the uniform glossary. Notice 2012-59 provides guidance to group health plans on the waiting periods they may apply before coverage starts. On March 19, 2013, HHS, DOL and IRS issued proposed regulations on the ninety-day waiting period limitation.. 

More information on group health plan requirements is available on the websites of the Departments of Health and Human Services and Labor and in additional guidance.

Further, Notice 2013-54 provides guidance regarding the application of the Affordable Care Act’s market reforms to certain types of group health plans, including health reimbursement arrangements (HRAs), health flexible spending arrangements (health FSAs) and certain other employer healthcare arrangements, including arrangements under which an employer reimburses an employee for some or all of the premium expenses incurred for an individual health insurance policy. 

Annual Fee on Health Insurance Providers

The Affordable Care Act created an annual fee on certain health insurance providers beginning in 2014. On Nov. 26, 2013, the Treasury Department and IRS issued final regulations on this annual fee imposed on covered entities engaged in the business of providing health insurance for United States health risks.

For additional information visit our Affordable Care Act Provision 9010 - Health Insurance Providers Fee page

Tax-Exempt 501(c)(29) Qualified Nonprofit Health Insurance Issuers

The Affordable Care Act requires the Department of Health and Human Services (HHS) to establish the Consumer Operated and Oriented Plan program (CO-OP program). It also provides for tax exemption for recipients of CO-OP program grants and loans that meet additional requirements under section 501(c)(29). IRS Notice 2011-23 outlined the requirements for tax exemption under section 501(c)(29) and solicited written comments regarding these requirements as well as the application process. Revenue Procedure 2012-11, issued in conjunction with temporary regulations and a notice of proposed rulemaking, sets out the procedures for issuing determination letters and rulings on the exempt status of organizations applying for recognition of exemption under 501(c)(29).

An overview of the CO-OP program is available on the HHS website.

Medicare Part D Coverage Gap “donut hole” Rebate

The Affordable Care Act provides a one-time $250 rebate in 2010 to assist Medicare Part D recipients who have reached their Medicare drug plan’s coverage gap. This payment is not taxable. This payment is not made by the IRS. More information can be found at www.medicare.gov.

Additional Requirements for Tax-Exempt Hospitals

The Affordable Care Act added new requirements for charitable hospitals (see Notice 2010-39 and Notice 2011-52). On June 26, 2012, the IRS published proposed regulations that provide information on the requirements for charitable hospitals relating to financial assistance and emergency medical care policies, charges for emergency or medically necessary care provided to individuals eligible for financial assistance, and billing and collections. On April 5, 2013, the IRS published proposed regulations on the requirement that charitable hospitals conduct community health needs assessments (CHNAs) and adopt implementation strategies at least once every three years. These proposed regulations also discuss the related excise tax and reporting requirements for charitable hospitals and the consequences for failure to satisfy the section 501(r) requirements. On August 15, 2013, the IRS published temporary regulations and proposed regulations providing information on which form to use when making an excise tax payment for failure to meet the CHNA requirements and the due date for filing the form. Notice 2014-2 confirms that hospital organizations can rely on proposed regulations under section 501(r) of the Internal Revenue Code published on June 26, 2012 and April 5, 2013, pending the publication of final regulations or other applicable guidance. Notice 2014-3 contains a proposed revenue procedure that provides correction and disclosure procedures under which certain failures to meet the requirements of section 501(r) will be excused.

Annual Fee on Branded Prescription Pharmaceutical Manufacturers and Importers

The Affordable Care Act created an annual fee payable beginning in 2011 by certain manufacturers and importers of brand name pharmaceuticals. On Aug. 15, 2011, the IRS issued temporary regulations and a notice of proposed rulemaking on the branded prescription drug fee. The temporary regulations describe the rules related to the fee, including how it is computed and how it is paid. On Aug. 5, 2013, the IRS issued Notice 2013-51, which provides additional guidance on the branded prescription drug fee for the 2014 fee year. For information on the fee for the 2012 fee year and for the 2013 fee year, see Notice 2011-92 and Notice 2012-74.

For additional information, visit our Affordable Care Act Provision 9008 Branded Prescription Drug Fee page.

Modification of Section 833 Treatment of Certain Health Organizations

The Affordable Care Act amended section 833 of the Code, which provides special rules for the taxation of Blue Cross and Blue Shield organizations and certain other organizations that provide health insurance. IRS Notice 2010-79 provides transitional relief and interim guidance on the computation of an organization’s taxpayer’s Medical Loss Ratio (MLR) for purposes of section 833, the consequences of nonapplication and changes in accounting method. Notice 2011-04 provides additional information and the procedures for qualifying organizations to obtain automatic consent to change its method of accounting for unearned premiums. Notice 2012-37 extends the transitional relief and interim guidance provided in Notice 2010-79 for another year to any taxable year beginning in 2012 and the first taxable year beginning after Dec. 31, 2012. 

On January 6, 2014, the IRS issued final regulations that describe how the MLR for purposes of section 833 is computed.

Limitation on Deduction for Compensation Paid by Certain Health Insurance Providers (amended section 162(m))

The Affordable Care Act amended section 162(m) of the Code to limit the compensation deduction available to certain health insurance providers. The amendment goes into effect for taxable years beginning after Dec. 31, 2012, but may affect deferred compensation attributable to services performed in a taxable year beginning after Dec. 31, 2009. On April 1, 2013, the Treasury Department and IRS issued proposed regulations on this provision. 

Employer Shared Responsibility Payment

The Affordable Care Act establishes that certain employers must offer health coverage to their full-time employees or a shared responsibility payment may apply. On Feb. 10, 2014, the Department of the Treasury and the IRS issued final regulations on the Employer Shared Responsibility provisions. For additional information on the Employer Shared Responsibility provisions and the proposed regulations, see our questions and answers. On July 9, 2013, the Department of the Treasury and the IRS announced transition relief from the Employer Shared Responsibility provisions for 2014. For more information, please see Notice 2013-45. For additional transition relief generally applicable to 2015, see the preamble to the final regulations.  

Patient-Centered Outcomes Research Institute Fee

The Affordable Care Act imposes the Patient-Centered Outcomes Research Institute (PCORI). Funded by the Patient-Centered Outcomes Research Trust Fund, the institute will assist patients, clinicians, purchasers and policy-makers in making informed health decisions by advancing clinical effectiveness research. The trust fund will be funded in part by fees paid by issuers of certain health insurance policies and sponsors of certain self-insured health plans.

The IRS and the Department of the Treasury have issued final regulations on this fee. Additional information on the fee is available on the PCORI page and in our questions and answers and chart summaryForm 720, Quarterly Federal Excise Tax Return, was revised to provide for the reporting and payment of the PCORI fee.

Retiree Drug Subsidies

Under § 139A of the Internal Revenue Code, certain special subsidy payments for retiree drug coverage made under the Social Security Act  are not included in the gross income of plan sponsors. Plan sponsors receive these retiree drug subsidy payments based on the allowable retiree costs for certain qualified retiree prescription drug plans. For taxable years beginning on or after Jan. 1, 2013, new statutory rules affect the ability of plan sponsors to deduct costs that are reimbursed through these subsidies. See our questions and answers for more information.

For More Information

For tips, fact sheets, questions and answers, videos and more, see our Affordable Care Act of 2010: News Releases, Multimedia and Legal Guidance page.

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Page Last Reviewed or Updated: 26-Mar-2014

 

The Self Employment Taxes

Self employment taxes 8. Self employment taxes   Distributions and Rollovers Table of Contents DistributionsMinimum Required Distributions No Special 10-Year Tax Option Transfer of Interest in 403(b) ContractAfter-tax contributions. Self employment taxes Permissive service credit. Self employment taxes Tax-Free RolloversHardship exception to rollover rules. Self employment taxes Eligible retirement plans. Self employment taxes Nonqualifying distributions. Self employment taxes Second rollover. Self employment taxes Gift Tax Distributions Permissible distributions. Self employment taxes   Generally, a distribution cannot be made from a 403(b) account until the employee: Reaches age 59½, Has a severance from employment, Dies, Becomes disabled, In the case of elective deferrals, encounters financial hardship, or Has a qualified reservist distribution. Self employment taxes In most cases, the payments you receive or that are made available to you under your 403(b) account are taxable in full as ordinary income. Self employment taxes In general, the same tax rules apply to distributions from 403(b) plans that apply to distributions from other retirement plans. Self employment taxes These rules are explained in Publication 575. Self employment taxes Publication 575 also discusses the additional tax on early distributions from retirement plans. Self employment taxes Retired public safety officers. Self employment taxes   If you are an eligible retired public safety officer, distributions of up to $3,000, made directly from your 403(b) plan to pay accident, health, or long-term care insurance, are not included in your taxable income. Self employment taxes The premiums can be for you, your spouse, or your dependents. Self employment taxes   A public safety officer is a law enforcement officer, fire fighter, chaplain, or member of a rescue squad or ambulance crew. Self employment taxes   For additional information, see Publication 575. Self employment taxes Distribution for active reservist. Self employment taxes   The 10% penalty for early withdrawals will not apply to a qualified reservist distribution attributable to elective deferrals from a 403(b) plan. Self employment taxes A qualified reservist distribution is a distribution that is made: To an individual who is a reservist or national guardsman and who was ordered or called to active duty for a period in excess of 179 days or for an indefinite period; and During the period beginning on the date of the order or call to duty and ending at the close of the active duty period. Self employment taxes Minimum Required Distributions You must receive all, or at least a certain minimum, of your interest accruing after 1986 in the 403(b) plan by April 1 of the calendar year following the later of the calendar year in which you become age 70½, or the calendar year in which you retire. Self employment taxes Check with your employer, plan administrator, or provider to find out whether this rule also applies to pre-1987 accruals. Self employment taxes If not, a minimum amount of these accruals must begin to be distributed by the later of the end of the calendar year in which you reach age 75 or April 1 of the calendar year following retirement. Self employment taxes For each year thereafter, the minimum distribution must be made by the last day of the year. Self employment taxes If you do not receive the required minimum distribution, you are subject to a nondeductible 50% excise tax on the difference between the required minimum distribution and the amount actually distributed. Self employment taxes No Special 10-Year Tax Option A distribution from a 403(b) plan does not qualify as a lump-sum distribution. Self employment taxes This means you cannot use the special 10-year tax option to calculate the taxable portion of a 403(b) distribution. Self employment taxes For more information, see Publication 575. Self employment taxes Transfer of Interest in 403(b) Contract Contract exchanges. Self employment taxes   If you transfer all or part of your interest from a 403(b) contract to another 403(b) contract (held in the same plan), the transfer is tax free, and is referred to as a contract exchange. Self employment taxes This was previously known as a 90-24 transfer. Self employment taxes A contract exchange is similar to a 90-24 transfer with one major difference. Self employment taxes Previously, you were able to accomplish the transfer without your employer’s involvement. Self employment taxes After September 24, 2007, all such transfers are accomplished through a contract exchange requiring your employer’s involvement. Self employment taxes In addition, the plan must provide for the exchange and the transferred interest must be subject to the same or stricter distribution restrictions. Self employment taxes Finally, your accumulated benefit after the exchange must be equal to what it was before the exchange. Self employment taxes   Transfers that do not satisfy this rule are plan distributions and are generally taxable as ordinary income. Self employment taxes Plan-to-plan transfers. Self employment taxes   You may also transfer part or all of your interest from a 403(b) plan to another 403(b) plan if you are an employee of (or were formerly employed by) the employer of the plan to which you would like to transfer. Self employment taxes Both the initial plan and the receiving plan must provide for transfers. Self employment taxes Your accumulated benefit after the transfer must be at least equal to what it was before the transfer. Self employment taxes The new plan’s restrictions on distributions must be the same or stricter than those of the original plan. Self employment taxes Tax-free transfers for certain cash distributions. Self employment taxes   A tax-free transfer may also apply to a cash distribution of your 403(b) account from an insurance company that is subject to a rehabilitation, conservatorship, insolvency, or similar state proceeding. Self employment taxes To receive tax-free treatment, you must do all of the following: Withdraw all the cash to which you are entitled in full settlement of your contract rights or, if less, the maximum permitted by the state. Self employment taxes Reinvest the cash distribution in a single policy or contract issued by another insurance company or in a single custodial account subject to the same or stricter distribution restrictions as the original contract not later than 60 days after you receive the cash distribution. Self employment taxes Assign all future distribution rights to the new contract or account for investment in that contract or account if you received an amount that is less than what you are entitled to because of state restrictions. Self employment taxes   In addition to the preceding requirements, you must provide the new insurer with a written statement containing all of the following information: The gross amount of cash distributed under the old contract. Self employment taxes The amount of cash reinvested in the new contract. Self employment taxes Your investment in the old contract on the date you receive your first cash distribution. Self employment taxes   Also, you must attach the following items to your timely filed income tax return in the year you receive the first distribution of cash. Self employment taxes A copy of the statement you gave the new insurer. Self employment taxes A statement that includes: The words ELECTION UNDER REV. Self employment taxes PROC. Self employment taxes 92-44, The name of the company that issued the new contract, and The new policy number. Self employment taxes Direct trustee-to-trustee transfer. Self employment taxes   If you make a direct trustee-to-trustee transfer, from your governmental 403(b) account to a defined benefit governmental plan, it may not be includible in gross income. Self employment taxes   The transfer amount is not includible in gross income if it is made to: Purchase permissive service credits, or Repay contributions and earnings that were previously refunded under a forfeiture of service credit under the plan, or under another plan maintained by a state or local government employer within the same state. Self employment taxes After-tax contributions. Self employment taxes   For distributions beginning after December 31, 2006, after-tax contributions can be rolled over between a 403(b) plan and a defined benefit plan, IRA, or a defined contribution plan. Self employment taxes If the rollover is to or from a 403(b) plan, it must occur through a direct trustee-to-trustee transfer. Self employment taxes Permissive service credit. Self employment taxes   A permissive service credit is credit for a period of service recognized by a defined benefit governmental plan only if you voluntarily contribute to the plan an amount that does not exceed the amount necessary to fund the benefit attributable to the period of service and the amount contributed is in addition to the regular employee contribution, if any, under the plan. Self employment taxes   A permissive service credit may also include service credit for up to 5 years where there is no performance of service, or service credited to provide an increased benefit for service credit which a participant is receiving under the plan. Self employment taxes   Check with your plan administrator as to the type and extent of service that may be purchased by this transfer. Self employment taxes Tax-Free Rollovers You can generally roll over tax free all or any part of a distribution from a 403(b) plan to a traditional IRA or a non-Roth eligible retirement plan, except for any nonqualifying distributions, described later. Self employment taxes You may also roll over any part of a distribution from a 403(b) plan by converting it through a direct rollover, described below, to a Roth IRA. Self employment taxes Conversion amounts are generally includible in your taxable income in the year of the distribution from your 403(b) account. Self employment taxes See Publication 590 for more information about conversion into a Roth IRA. Self employment taxes Note. Self employment taxes A participant is required to roll over distribution amounts received within 60 days in order for the amount to be treated as nontaxable. Self employment taxes Distribution amounts that are rolled over within the 60 days are not subject to the 10% early distribution penalty. Self employment taxes Rollovers to and from 403(b) plans. Self employment taxes   You can generally roll over tax free all or any part of a distribution from an eligible retirement plan to a 403(b) plan. Self employment taxes Beginning January 1, 2008, distributions from tax-qualified retirement plans and tax-sheltered annuities can be converted by making a direct rollover into a Roth IRA subject to the restrictions that currently apply to rollovers from a traditional IRA into a Roth IRA. Self employment taxes Converted amounts are generally includible in your taxable income in the year of the distribution from your 403(b) account. Self employment taxes See Publication 590 for more information on conversion into a Roth IRA. Self employment taxes   If a distribution includes both pre-tax contributions and after-tax contributions, the portion of the distribution that is rolled over is treated as consisting first of pre-tax amounts (contributions and earnings that would be includible in income if no rollover occurred). Self employment taxes This means that if you roll over an amount that is at least as much as the pre-tax portion of the distribution, you do not have to include any of the distribution in income. Self employment taxes   For more information on rollovers and eligible retirement plans, see Publication 575. Self employment taxes If you roll over money or other property from a 403(b) plan to an eligible retirement plan, see Publication 575 for information about possible effects on later distributions from the eligible retirement plan. Self employment taxes Hardship exception to rollover rules. Self employment taxes   The IRS may waive the 60-day rollover period if the failure to waive such requirement would be against equity or good conscience, including cases of casualty, disaster, or other events beyond the reasonable control of an individual. Self employment taxes   To obtain a hardship exception, you must apply to the IRS for a waiver of the 60-day rollover requirement. Self employment taxes You apply for the waiver by following the general instructions used in requesting a letter ruling. Self employment taxes These instructions are stated in Revenue Procedure 2013-4, 2013-1 I. Self employment taxes R. Self employment taxes B. Self employment taxes 126 available at www. Self employment taxes irs. Self employment taxes gov/irb/2013-01_IRB/ar09. Self employment taxes html, or see the latest annual update. Self employment taxes You must also pay a user fee with the application. Self employment taxes The user fee for a rollover that is less than $50,000 is $500. Self employment taxes For rollovers that are $50,000 or more, see Revenue Procedure 2013-8, 2013-1 I. Self employment taxes R. Self employment taxes B. Self employment taxes 237 available at www. Self employment taxes irs. Self employment taxes gov/irb/2013-01_IRB/ar13. Self employment taxes html, or see the latest annual update. Self employment taxes   In determining whether to grant a waiver, the IRS will consider all relevant facts and circumstances, including: Whether errors were made by the financial institution; Whether you were unable to complete the rollover due to death, disability, hospitalization, incarceration, restrictions imposed by a foreign country, or postal error; Whether you used the amount distributed (for example, in the case of payment by check, whether you cashed the check); and How much time has passed since the date of distribution. Self employment taxes   For additional information on rollovers, see Publication 590. Self employment taxes Eligible retirement plans. Self employment taxes   The following are considered eligible retirement plans. Self employment taxes Individual retirement arrangements. Self employment taxes Roth IRA. Self employment taxes 403(b) plans. Self employment taxes Government eligible 457 plans. Self employment taxes Qualified retirement plans. Self employment taxes  If the distribution is from a designated Roth account, then the only eligible retirement plan is another designated Roth account or a Roth IRA. Self employment taxes Nonqualifying distributions. Self employment taxes   You cannot roll over tax free: Minimum required distributions (generally required to begin at age 70½), Substantially equal payments over your life or life expectancy, Substantially equal payments over the joint lives or life expectancies of your beneficiary and you, Substantially equal payments for a period of 10 years or more, Hardship distributions, or Corrective distributions of excess contributions or excess deferrals, and any income allocable to the excess, or excess annual additions and any allocable gains. Self employment taxes Rollover of nontaxable amounts. Self employment taxes    You may be able to roll over the nontaxable part of a distribution (such as your after-tax contributions) made to another eligible retirement plan, traditional IRA, or Roth IRA. Self employment taxes The transfer must be made either through a direct rollover to an eligible plan that separately accounts for the taxable and nontaxable parts of the rollover or through a rollover to a traditional IRA or Roth IRA. Self employment taxes   If you roll over only part of a distribution that includes both taxable and nontaxable amounts, the amount you roll over is treated as coming first from the taxable part of the distribution. Self employment taxes Direct rollovers of 403(b) plan distributions. Self employment taxes   You have the option of having your 403(b) plan make the rollover directly to a traditional IRA, Roth IRA, or new plan. Self employment taxes Before you receive a distribution, your plan will give you information on this. Self employment taxes It is generally to your advantage to choose this option because your plan will not withhold tax on the distribution if you choose it. Self employment taxes Distribution received by you. Self employment taxes   If you receive a distribution that qualifies to be rolled over, you can roll over all or any part of the distribution. Self employment taxes Generally, you will receive only 80% of the distribution because 20% must be withheld. Self employment taxes If you roll over only the 80% you receive, you must pay tax on the 20% you did not roll over. Self employment taxes You can replace the 20% that was withheld with other money within the 60-day period to make a 100% rollover. Self employment taxes Voluntary deductible contributions. Self employment taxes   For tax years 1982 through 1986, employees could make deductible contributions to a 403(b) plan under the individual retirement arrangement (IRA) rules instead of deducting contributions to a traditional IRA. Self employment taxes   If you made voluntary deductible contributions to a 403(b) plan under these traditional IRA rules, the distribution of all or part of the accumulated deductible contributions may be rolled over if it otherwise qualifies as a distribution you can roll over. Self employment taxes Accumulated deductible contributions are the deductible contributions: Plus Income allocable to the contributions, Gain allocable to the contributions, and Minus Expenses and losses allocable to the contributions, and Distributions from the contributions, income, or gain. Self employment taxes Excess employer contributions. Self employment taxes   The portion of a distribution from a 403(b) plan transferred to a traditional IRA that was previously included in income as excess employer contributions (discussed earlier) is not an eligible rollover distribution. Self employment taxes   Its transfer does not affect the rollover treatment of the eligible portion of the transferred amounts. Self employment taxes However, the ineligible portion is subject to the traditional IRA contribution limits and may create an excess IRA contribution subject to a 6% excise tax (see chapter 1 of Publication 590). Self employment taxes Qualified domestic relations order. Self employment taxes   You may be able to roll over tax free all or any part of an eligible rollover distribution from a 403(b) plan that you receive under a qualified domestic relations order (QDRO). Self employment taxes If you receive the interest in the 403(b) plan as an employee's spouse or former spouse under a QDRO, all of the rollover rules apply to you as if you were the employee. Self employment taxes You can roll over your interest in the plan to a traditional IRA or another 403(b) plan. Self employment taxes For more information on the treatment of an interest received under a QDRO, see Publication 575. Self employment taxes Spouses of deceased employees. Self employment taxes   If you are the spouse of a deceased employee, you can roll over the qualifying distribution attributable to the employee. Self employment taxes You can make the rollover to any eligible retirement plan. Self employment taxes   After you roll money and other property over from a 403(b) plan to an eligible retirement plan, and you take a distribution from that plan, you will not be eligible to receive the capital gain treatment or the special averaging treatment for the distribution. Self employment taxes Second rollover. Self employment taxes   If you roll over a qualifying distribution to a traditional IRA, you can, if certain conditions are satisfied, later roll the distribution into another 403(b) plan. Self employment taxes For more information, see IRA as a holding account (conduit IRA) for rollovers to other eligible plans in chapter 1 of Publication 590. Self employment taxes Nonspouse beneficiary. Self employment taxes   A nonspouse beneficiary may make a direct rollover of a distribution from a 403(b) plan of a deceased participant if the rollover is a direct transfer to an inherited IRA established to receive the distribution. Self employment taxes If the rollover is a direct trustee-to-trustee transfer to an IRA established to receive the distribution: The transfer will be treated as an eligible rollover distribution. Self employment taxes The IRA will be considered an inherited account. Self employment taxes The required minimum distribution rules that apply in instances where the participant dies before the entire interest is distributed will apply to the transferred IRA. Self employment taxes    For more information on IRAs, see Publication 590. Self employment taxes Frozen deposits. Self employment taxes   The 60-day period usually allowed for completing a rollover is extended for any time that the amount distributed is a frozen deposit in a financial institution. Self employment taxes The 60-day period cannot end earlier than 10 days after the deposit ceases to be a frozen deposit. Self employment taxes   A frozen deposit is any deposit that on any day during the 60-day period cannot be withdrawn because: The financial institution is bankrupt or insolvent, or The state where the institution is located has placed limits on withdrawals because one or more banks in the state are (or are about to be) bankrupt or insolvent. Self employment taxes Gift Tax If, by choosing or not choosing an election, or option, you provide an annuity for your beneficiary at or after your death, you may have made a taxable gift equal to the value of the annuity. Self employment taxes Joint and survivor annuity. Self employment taxes   If the gift is an interest in a joint and survivor annuity where only you and your spouse have the right to receive payments, the gift will generally be treated as qualifying for the unlimited marital deduction. Self employment taxes More information. Self employment taxes   For information on the gift tax, see Publication 559, Survivors, Executors, and Administrators. Self employment taxes Prev  Up  Next   Home   More Online Publications