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Tax Act Online 2012

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Tax Act Online 2012

Tax act online 2012 Part Six -   Figuring Your Taxes and Credits The eight chapters in this part explain how to figure your tax and how to figure the tax of certain children who have more than $2,000 of unearned income. Tax act online 2012 They also discuss tax credits that, unlike deductions, are subtracted directly from your tax and reduce your tax dollar for dollar. Tax act online 2012 Chapter 36 discusses the earned income credit. Tax act online 2012 Chapter 37 discusses a wide variety of other credits, such as the adoption credit. Tax act online 2012 Table of Contents 30. Tax act online 2012   How To Figure Your TaxIntroduction Figuring Your Tax Alternative Minimum Tax (AMT) Tax Figured by IRSFiling the Return 31. Tax act online 2012   Tax on Unearned Income of Certain ChildrenWhat's New Introduction Useful Items - You may want to see: Which Parent's Return To UseParents Who Do Not File a Joint Return Parent's Election To Report Child's Interest and DividendsEffect of Making the Election Figuring Child's Income Figuring Additional Tax Tax for Certain Children Who Have Unearned IncomeProviding Parental Information (Form 8615, lines A–C) Step 1. Tax act online 2012 Figuring the Child's Net Unearned Income (Form 8615, Part I) Step 2. Tax act online 2012 Figuring Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) Step 3. Tax act online 2012 Figuring the Child's Tax (Form 8615, Part III) 32. Tax act online 2012   Child and Dependent Care CreditReminders Introduction Useful Items - You may want to see: Tests To Claim the CreditQualifying Person Test Earned Income Test Work-Related Expense Test Joint Return Test Provider Identification Test How To Figure the CreditFiguring Total Work-Related Expenses Earned Income Limit Dollar Limit Amount of Credit How To Claim the CreditTax credit not refundable. Tax act online 2012 Employment Taxes for Household Employers 33. Tax act online 2012   Credit for the Elderly or the DisabledIntroduction Useful Items - You may want to see: Are You Eligible for the Credit?Qualified Individual Income Limits How to Claim the CreditCredit Figured for You Credit Figured by You 34. Tax act online 2012   Child Tax CreditIntroduction Useful Items - You may want to see: Qualifying Child Amount of CreditLimits on the Credit Claiming the Credit Additional Child Tax Credit Completing Schedule 8812 (Form 1040A or 1040)Part I Parts II–IV 35. Tax act online 2012   Education CreditsIntroduction Useful Items - You may want to see: Who Can Claim an Education Credit Qualified Education ExpensesNo Double Benefit Allowed Adjustments to Qualified Education Expenses 36. Tax act online 2012   Earned Income Credit (EIC)What's New Reminders Introduction Useful Items - You may want to see: Do You Qualify for the Credit?If Improper Claim Made in Prior Year Part A. Tax act online 2012 Rules for EveryoneRule 1. Tax act online 2012 Your AGI Must Be Less Than: Rule 2. Tax act online 2012 You Must Have a Valid Social Security Number (SSN) Rule 3. Tax act online 2012 Your Filing Status Cannot Be Married Filing Separately Rule 4. Tax act online 2012 You Must Be a U. Tax act online 2012 S. Tax act online 2012 Citizen or Resident Alien All Year Rule 5. Tax act online 2012 You Cannot File Form 2555 or Form 2555-EZ Rule 6. Tax act online 2012 Your Investment Income Must Be $3,300 or Less Rule 7. Tax act online 2012 You Must Have Earned Income Part B. Tax act online 2012 Rules If You Have a Qualifying ChildRule 8. Tax act online 2012 Your Child Must Meet the Relationship, Age, Residency, and Joint Return Tests Rule 9. Tax act online 2012 Your Qualifying Child Cannot Be Used By More Than One Person To Claim the EIC Rule 10. Tax act online 2012 You Cannot Be a Qualifying Child of Another Taxpayer Part C. Tax act online 2012 Rules If You Do Not Have a Qualifying ChildRule 11. Tax act online 2012 You Must Be at Least Age 25 but Under Age 65 Rule 12. Tax act online 2012 You Cannot Be the Dependent of Another Person Rule 13. Tax act online 2012 You Cannot Be a Qualifying Child of Another Taxpayer Rule 14. Tax act online 2012 You Must Have Lived in the United States More Than Half of the Year Part D. Tax act online 2012 Figuring and Claiming the EICRule 15. Tax act online 2012 Your Earned Income Must Be Less Than: IRS Will Figure the EIC for You How To Figure the EIC Yourself ExamplesExample 1. Tax act online 2012 John and Janet Smith (Form 1040A) Example 2. Tax act online 2012 Kelly Green (Form 1040EZ) 37. Tax act online 2012   Other CreditsWhat's New Introduction Useful Items - You may want to see: Nonrefundable CreditsAdoption Credit Alternative Motor Vehicle Credit Alternative Fuel Vehicle Refueling Property Credit Credit to Holders of Tax Credit Bonds Foreign Tax Credit Mortgage Interest Credit Nonrefundable Credit for Prior Year Minimum Tax Plug-in Electric Drive Motor Vehicle Credit Residential Energy Credits Retirement Savings Contributions Credit (Saver's Credit) Refundable CreditsCredit for Tax on Undistributed Capital Gain Health Coverage Tax Credit Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld Prev  Up  Next   Home   More Online Publications
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Employment Taxes

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Understanding Employment Taxes
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Correcting Employment Taxes
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The Tax Act Online 2012

Tax act online 2012 2. Tax act online 2012   Taxable and Nontaxable Income Table of Contents Compensation for Services Retirement Plan DistributionsIndividual Retirement Arrangements (IRAs) Pensions and Annuities Social Security and Equivalent Railroad Retirement BenefitsAre Any of Your Benefits Taxable? How Much Is Taxable? How To Report Your Benefits Lump-Sum Election Repayments More Than Gross Benefits Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits Life Insurance ProceedsInstallments for life. Tax act online 2012 Surviving spouse. Tax act online 2012 Endowment Contract Proceeds Accelerated Death Benefits Sale of HomeMaximum Amount of Exclusion Ownership and Use Tests Married Persons Business Use or Rental of Home Reporting the Sale Reverse Mortgages Other ItemsWelfare benefits. Tax act online 2012 Payments from a state fund for victims of crime. Tax act online 2012 Home Affordable Modification Program (HAMP). Tax act online 2012 Mortgage assistance payments. Tax act online 2012 Payments to reduce cost of winter energy use. Tax act online 2012 Nutrition Program for the Elderly. Tax act online 2012 Reemployment Trade Adjustment Assistance (RTAA). Tax act online 2012 Generally, income is taxable unless it is specifically exempt (not taxed) by law. Tax act online 2012 Your taxable income may include compensation for services, interest, dividends, rents, royalties, income from partnerships, estate or trust income, gain from sales or exchanges of property, and business income of all kinds. Tax act online 2012 Under special provisions of the law, certain items are partially or fully exempt from tax. Tax act online 2012 Provisions that are of special interest to older taxpayers are discussed in this chapter. Tax act online 2012 Compensation for Services Generally, you must include in gross income everything you receive in payment for personal services. Tax act online 2012 In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options. Tax act online 2012 You need not receive the compensation in cash for it to be taxable. Tax act online 2012 Payments you receive in the form of goods or services generally must be included in gross income at their fair market value. Tax act online 2012 Volunteer work. Tax act online 2012   Do not include in your gross income amounts you receive for supportive services or reimbursements for out-of-pocket expenses under any of the following volunteer programs. Tax act online 2012 Retired Senior Volunteer Program (RSVP). Tax act online 2012 Foster Grandparent Program. Tax act online 2012 Senior Companion Program. Tax act online 2012 Service Corps of Retired Executives (SCORE). Tax act online 2012 Unemployment compensation. Tax act online 2012   You must include in income all unemployment compensation you or your spouse (if married filing jointly) received. Tax act online 2012 More information. Tax act online 2012   See Publication 525, Taxable and Nontaxable Income, for more detailed information on specific types of income. Tax act online 2012 Retirement Plan Distributions This section summarizes the tax treatment of amounts you receive from traditional individual retirement arrangements (IRA), employee pensions or annuities, and disability pensions or annuities. Tax act online 2012 A traditional IRA is any IRA that is not a Roth or SIMPLE IRA. Tax act online 2012 A Roth IRA is an individual retirement plan that can be either an account or an annuity and features nondeductible contributions and tax-free distributions. Tax act online 2012 A SIMPLE IRA is a tax-favored retirement plan that certain small employers (including self-employed individuals) can set up for the benefit of their employees. Tax act online 2012 More detailed information can be found in Publication 590, Individual Retirement Arrangements (IRAs), and Publication 575, Pension and Annuity Income. Tax act online 2012 Individual Retirement Arrangements (IRAs) In general, distributions from a traditional IRA are taxable in the year you receive them. Tax act online 2012 Exceptions to the general rule are rollovers, tax-free withdrawals of contributions, and the return of nondeductible contributions. Tax act online 2012 These are discussed in Publication 590. Tax act online 2012 If you made nondeductible contributions to a traditional IRA, you must file Form 8606, Nondeductible IRAs. Tax act online 2012 If you do not file Form 8606 with your return, you may have to pay a $50 penalty. Tax act online 2012 Also, when you receive distributions from your traditional IRA, the amounts will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. Tax act online 2012 Early distributions. Tax act online 2012   Generally, early distributions are amounts distributed from your traditional IRA account or annuity before you are age 59½, or amounts you receive when you cash in retirement bonds before you are age  59½. Tax act online 2012 You must include early distributions of taxable amounts in your gross income. Tax act online 2012 These taxable amounts are also subject to an additional 10% tax unless the distribution qualifies for an exception. Tax act online 2012 For purposes of the additional 10% tax, an IRA is a qualified retirement plan. Tax act online 2012 For more information about this tax, see Tax on Early Distributions under Pensions and Annuities, later. Tax act online 2012 After age 59½ and before age 70½. Tax act online 2012   After you reach age 59½, you can receive distributions from your traditional IRA without having to pay the 10% additional tax. Tax act online 2012 Even though you can receive distributions after you reach age 59½, distributions are not required until you reach  age 70½. Tax act online 2012 Required distributions. Tax act online 2012   If you are the owner of a traditional IRA, you generally must receive the entire balance in your IRA or start receiving periodic distributions from your IRA by April 1 of the year following the year in which you reach age 70½. Tax act online 2012 See When Must You Withdraw Assets? (Required Minimum Distributions) in Publication 590. Tax act online 2012 If distributions from your traditional IRA(s) are less than the required minimum distribution for the year, you may have to pay a 50% excise tax for that year on the amount not distributed as required. Tax act online 2012 For purposes of the 50% excise tax, an IRA is a qualified retirement plan. Tax act online 2012 For more information about this tax, see Tax on Excess Accumulation under Pensions and Annuities, later. Tax act online 2012 See also Excess Accumulations (Insufficient Distributions) in Publication 590. Tax act online 2012 Pensions and Annuities Generally, if you did not pay any part of the cost of your employee pension or annuity, and your employer did not withhold part of the cost of the contract from your pay while you worked, the amounts you receive each year are fully taxable. Tax act online 2012 However, see Insurance Premiums for Retired Public Safety Officers , later. Tax act online 2012 If you paid part of the cost of your pension or annuity plan (see Cost , later), you can exclude part of each annuity payment from income as a recovery of your cost (investment in the contract). Tax act online 2012 This tax-free part of the payment is figured when your annuity starts and remains the same each year, even if the amount of the payment changes. Tax act online 2012 The rest of each payment is taxable. Tax act online 2012 However, see Insurance Premiums for Retired Public Safety Officers , later. Tax act online 2012 You figure the tax-free part of the payment using one of the following methods. Tax act online 2012 Simplified Method. Tax act online 2012 You generally must use this method if your annuity is paid under a qualified plan (a qualified employee plan, a qualified employee annuity, or a tax-sheltered annuity plan or contract). Tax act online 2012 You cannot use this method if your annuity is paid under a nonqualified plan. Tax act online 2012 General Rule. Tax act online 2012 You must use this method if your annuity is paid under a nonqualified plan. Tax act online 2012 You generally cannot use this method if your annuity is paid under a qualified plan. Tax act online 2012 Contact your employer or plan administrator to find out if your pension or annuity is paid under a qualified or nonqualified plan. Tax act online 2012 You determine which method to use when you first begin receiving your annuity, and you continue using it each year that you recover part of your cost. Tax act online 2012 Exclusion limit. Tax act online 2012   If your annuity starting date is after 1986, the total amount of annuity income you can exclude over the years as a recovery of the cost cannot exceed your total cost. Tax act online 2012 Any unrecovered cost at your (or the last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. Tax act online 2012 This deduction is not subject to the 2%-of-adjusted-gross-income limit on miscellaneous deductions. Tax act online 2012   If you contributed to your pension or annuity and your annuity starting date is before 1987, you can continue to take your monthly exclusion for as long as you receive your annuity. Tax act online 2012 If you chose a joint and survivor annuity, your survivor can continue to take the survivor's exclusion figured as of the annuity starting date. Tax act online 2012 The total exclusion may be more than your cost. Tax act online 2012 Cost. Tax act online 2012   Before you can figure how much, if any, of your pension or annuity benefits are taxable, you must determine your cost in the plan (your investment in the contract). Tax act online 2012 Your total cost in the plan includes everything that you paid. Tax act online 2012 It also includes amounts your employer contributed that were taxable to you when paid. Tax act online 2012 However, see Foreign employment contributions , later. Tax act online 2012   From this total cost, subtract any refunded premiums, rebates, dividends, unrepaid loans, or other tax-free amounts you received by the later of the annuity starting date or the date on which you received your first payment. Tax act online 2012   The annuity starting date is the later of the first day of the first period for which you received a payment from the plan or the date on which the plan's obligations became fixed. Tax act online 2012    The amount of your contributions to the plan may be shown in box 9b of any Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Tax act online 2012 , that you receive. Tax act online 2012 Foreign employment contributions. Tax act online 2012   If you worked abroad, certain amounts your employer paid into your retirement plan that were not includible in your gross income may be considered part of your cost. Tax act online 2012 For details, see Foreign employment contributions in Publication 575. Tax act online 2012 Withholding. Tax act online 2012   The payer of your pension, profit-sharing, stock bonus, annuity, or deferred compensation plan will withhold income tax on the taxable part of amounts paid to you. Tax act online 2012 However, you can choose not to have tax withheld on the payments you receive, unless they are eligible rollover distributions. Tax act online 2012 (These are distributions that are eligible for rollover treatment but are not paid directly to another qualified retirement plan or to a traditional IRA. Tax act online 2012 ) See Withholding Tax and Estimated Tax and Rollovers in Publication 575 for more information. Tax act online 2012   For payments other than eligible rollover distributions, you can tell the payer how much to withhold by filing a Form W-4P, Withholding Certificate for Pension or Annuity Payments. Tax act online 2012 Simplified Method. Tax act online 2012   Under the Simplified Method, you figure the tax-free part of each annuity payment by dividing your cost by the total number of anticipated monthly payments. Tax act online 2012 For an annuity that is payable over the lives of the annuitants, this number is based on the annuitants' ages on the annuity starting date and is determined from a table. Tax act online 2012 For any other annuity, this number is the number of monthly annuity payments under the contract. Tax act online 2012 Who must use the Simplified Method. Tax act online 2012   You must use the Simplified Method if your annuity starting date is after November 18, 1996, and you receive your pension or annuity payments from a qualified plan or annuity, unless you were at least 75 years old and entitled to at least 5 years of guaranteed payments (defined next). Tax act online 2012   In addition, if your annuity starting date is after July 1, 1986, and before November 19, 1996, you could have chosen to use the Simplified Method for payments from a qualified plan, unless you were at least 75 years old and entitled to at least 5 years of guaranteed payments. Tax act online 2012 If you chose to use the Simplified Method, you must continue to use it each year that you recover part of your cost. Tax act online 2012 Guaranteed payments. Tax act online 2012   Your annuity contract provides guaranteed payments if a minimum number of payments or a minimum amount (for example, the amount of your investment) is payable even if you and any survivor annuitant do not live to receive the minimum. Tax act online 2012 If the minimum amount is less than the total amount of the payments you are to receive, barring death, during the first 5 years after payments begin (figured by ignoring any payment increases), you are entitled to less than 5 years of guaranteed payments. Tax act online 2012 Who cannot use the Simplified Method. Tax act online 2012   You cannot use the Simplified Method and must use the General Rule if you receive pension or annuity payments from: A nonqualified plan, such as a private annuity, a purchased commercial annuity, or a nonqualified employee plan, or A qualified plan if you are age 75 or older on your annuity starting date and you are entitled to at least 5 years of guaranteed payments (defined above). Tax act online 2012   In addition, you had to use the General Rule for either circumstance described above if your annuity starting date is after July 1, 1986, and before November 19, 1996. Tax act online 2012 If you did not have to use the General Rule, you could have chosen to use it. Tax act online 2012 You also had to use the General Rule for payments from a qualified plan if your annuity starting date is before July 2, 1986, and you did not qualify to use the Three-Year Rule. Tax act online 2012   If you had to use the General Rule (or chose to use it), you must continue to use it each year that you recover your cost. Tax act online 2012   Unless your annuity starting date was before 1987, once you have recovered all of your non-taxable investment, all of each remaining payment you receive is fully taxable. Tax act online 2012 Once your remaining payments are fully taxable, there is no longer a concern with the General Rule or Simplified Method. Tax act online 2012   Complete information on the General Rule, including the actuarial tables you need, is contained in Publication 939, General Rule for Pensions and Annuities. Tax act online 2012 How to use the Simplified Method. Tax act online 2012   Complete the Simplified Method Worksheet in the Form 1040, Form 1040A, or Form 1040NR instructions or in Publication 575 to figure your taxable annuity for 2013. Tax act online 2012 Be sure to keep the completed worksheet; it will help you figure your taxable annuity next year. Tax act online 2012   To complete line 3 of the worksheet, you must determine the total number of expected monthly payments for your annuity. Tax act online 2012 How you do this depends on whether the annuity is for a single life, multiple lives, or a fixed period. Tax act online 2012 For this purpose, treat an annuity that is payable over the life of an annuitant as payable for that annuitant's life even if the annuity has a fixed-period feature or also provides a temporary annuity payable to the annuitant's child under age 25. Tax act online 2012    You do not need to complete line 3 of the worksheet or make the computation on line 4 if you received annuity payments last year and used last year's worksheet to figure your taxable annuity. Tax act online 2012 Instead, enter the amount from line 4 of last year's worksheet on line 4 of this year's worksheet. Tax act online 2012 Single-life annuity. Tax act online 2012   If your annuity is payable for your life alone, use Table 1 at the bottom of the worksheet to determine the total number of expected monthly payments. Tax act online 2012 Enter on line 3 the number shown for your age on your annuity starting date. Tax act online 2012 This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. Tax act online 2012 Multiple-lives annuity. Tax act online 2012   If your annuity is payable for the lives of more than one annuitant, use Table 2 at the bottom of the worksheet to determine the total number of expected monthly payments. Tax act online 2012 Enter on line 3 the number shown for the annuitants' combined ages on the annuity starting date. Tax act online 2012 For an annuity payable to you as the primary annuitant and to more than one survivor annuitant, combine your age and the age of the youngest survivor annuitant. Tax act online 2012 For an annuity that has no primary annuitant and is payable to you and others as survivor annuitants, combine the ages of the oldest and youngest annuitants. Tax act online 2012 Do not treat as a survivor annuitant anyone whose entitlement to payments depends on an event other than the primary annuitant's death. Tax act online 2012   However, if your annuity starting date is before 1998, do not use Table 2 and do not combine the annuitants' ages. Tax act online 2012 Instead, you must use Table 1 at the bottom of the worksheet and enter on line 3 the number shown for the primary annuitant's age on the annuity starting date. Tax act online 2012 This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. Tax act online 2012 Fixed-period annuities. Tax act online 2012   If your annuity does not depend in whole or in part on anyone's life expectancy, the total number of expected monthly payments to enter on line 3 of the worksheet is the number of monthly annuity payments under the contract. Tax act online 2012 Line 6. Tax act online 2012   The amount on line 6 should include all amounts that could have been recovered in prior years. Tax act online 2012 If you did not recover an amount in a prior year, you may be able to amend your returns for the affected years. Tax act online 2012    Be sure to keep a copy of the completed worksheet; it will help you figure your taxable annuity in later years. Tax act online 2012 Example. Tax act online 2012 Bill Smith, age 65, began receiving retirement benefits in 2013, under a joint and survivor annuity. Tax act online 2012 Bill's annuity starting date is January 1, 2013. Tax act online 2012 The benefits are to be paid over the joint lives of Bill and his wife, Kathy, age 65. Tax act online 2012 Bill had contributed $31,000 to a qualified plan and had received no distributions before the annuity starting date. Tax act online 2012 Bill is to receive a retirement benefit of $1,200 a month, and Kathy is to receive a monthly survivor benefit of $600 upon Bill's death. Tax act online 2012 Bill must use the Simplified Method to figure his taxable annuity because his payments are from a qualified plan and he is under age 75. Tax act online 2012 See the illustrated Worksheet 2-A, Simplified Method Worksheet, later. Tax act online 2012 You can find a blank version of this worksheet in Publication 575. Tax act online 2012 (The references in the illustrated worksheet are to sections in Publication 575). Tax act online 2012 His annuity is payable over the lives of more than one annuitant, so Bill uses his and Kathy's combined ages, 130 (65 + 65), and Table 2 at the bottom of the worksheet in completing line 3 of the worksheet and finds the line 3 amount to be 310. Tax act online 2012 Bill's tax-free monthly amount is $100 ($31,000 ÷ 310 as shown on line 4 of the worksheet). Tax act online 2012 Upon Bill's death, if Bill has not recovered the full $31,000 investment, Kathy will also exclude $100 from her $600 monthly payment. Tax act online 2012 The full amount of any annuity payments received after 310 payments are paid must generally be included in gross income. Tax act online 2012 If Bill and Kathy die before 310 payments are made, a miscellaneous itemized deduction will be allowed for the unrecovered cost on the final income tax return of the last to die. Tax act online 2012 This deduction is not subject to the 2%-of-adjusted-gross-income limit. Tax act online 2012 Worksheet 2-A. Tax act online 2012 Simplified Method Worksheet—Illustrated 1. Tax act online 2012 Enter the total pension or annuity payments received this year. Tax act online 2012 Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a 1. Tax act online 2012 $ 14,400 2. Tax act online 2012 Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion* See Cost (Investment in the Contract), earlier 2. Tax act online 2012 31,000   Note. Tax act online 2012 If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year's worksheet on line 4 below (even if the amount of your pension or annuity has changed). Tax act online 2012 Otherwise, go to line 3. Tax act online 2012     3. Tax act online 2012 Enter the appropriate number from Table 1 below. Tax act online 2012 But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, enter the appropriate number from Table 2 below 3. Tax act online 2012 310 4. Tax act online 2012 Divide line 2 by the number on line 3 4. Tax act online 2012 100 5. Tax act online 2012 Multiply line 4 by the number of months for which this year's payments were made. Tax act online 2012 If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. Tax act online 2012 Otherwise, go to line 6 5. Tax act online 2012 1,200 6. Tax act online 2012 Enter any amount previously recovered tax free in years after 1986. Tax act online 2012 This is the amount shown on line 10 of your worksheet for last year 6. Tax act online 2012 0 7. Tax act online 2012 Subtract line 6 from line 2 7. Tax act online 2012 31,000 8. Tax act online 2012 Enter the smaller of line 5 or line 7 8. Tax act online 2012 1,200 9. Tax act online 2012 Taxable amount for year. Tax act online 2012 Subtract line 8 from line 1. Tax act online 2012 Enter the result, but not less than zero. Tax act online 2012 Also, add this amount to the total for Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Tax act online 2012 Note. Tax act online 2012 If your Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. Tax act online 2012 If you are a retired public safety officer, see Insurance Premiums for Retired Public Safety Officers, earlier, before entering an amount on your tax return. Tax act online 2012 9. Tax act online 2012 $ 13,200 10. Tax act online 2012 Was your annuity starting date before 1987? □ Yes. Tax act online 2012 STOP. Tax act online 2012 Do not complete the rest of this worksheet. Tax act online 2012  ☑ No. Tax act online 2012 Add lines 6 and 8. Tax act online 2012 This is the amount you have recovered tax free through 2013. Tax act online 2012 You will need this number if you need to fill out this worksheet next year. Tax act online 2012 10. Tax act online 2012 1,200 11. Tax act online 2012 Balance of cost to be recovered. Tax act online 2012 Subtract line 10 from line 2. Tax act online 2012 If zero, you will not have to complete this worksheet next year. Tax act online 2012 The payments you receive next year will generally be fully taxable 11. Tax act online 2012 $ 29,800 * A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996. Tax act online 2012   Table 1 for Line 3 Above       AND your annuity starting date was—   IF your age on your annuity starting date was . Tax act online 2012 . Tax act online 2012 . Tax act online 2012   BEFORE November 19, 1996, enter on line 3 . Tax act online 2012 . Tax act online 2012 . Tax act online 2012 AFTER November 18, 1996, enter on line 3 . Tax act online 2012 . Tax act online 2012 . Tax act online 2012   55 or under 300 360   56-60 260 310   61-65 240 260   66-70 170 210   71 or over 120 160 Table 2 for Line 3 Above   IF the annuitants' combined ages on your annuity starting date were . Tax act online 2012 . Tax act online 2012 . Tax act online 2012   THEN enter on line 3 . Tax act online 2012 . Tax act online 2012 . Tax act online 2012         110 or under   410         111-120   360         121-130   310         131-140   260         141 or over   210       Survivors of retirees. Tax act online 2012   Benefits paid to you as a survivor under a joint and survivor annuity must be included in your gross income in the same way the retiree would have included them in gross income. Tax act online 2012   If you receive a survivor annuity because of the death of a retiree who had reported the annuity under the Three-Year Rule, include the total received in your income. Tax act online 2012 The retiree's cost has already been recovered tax free. Tax act online 2012   If the retiree was reporting the annuity payments under the General Rule, you must apply the same exclusion percentage the retiree used to your initial payment called for in the contract. Tax act online 2012 The resulting tax-free amount will then remain fixed. Tax act online 2012 Any increases in the survivor annuity are fully taxable. Tax act online 2012   If the retiree was reporting the annuity payments under the Simplified Method, the part of each payment that is tax free is the same as the tax-free amount figured by the retiree at the annuity starting date. Tax act online 2012 See Simplified Method , earlier. Tax act online 2012 How to report. Tax act online 2012   If you file Form 1040, report your total annuity on line 16a, and the taxable part on line 16b. Tax act online 2012 If your pension or annuity is fully taxable, enter it on line 16b. Tax act online 2012 Do not make an entry on line 16a. Tax act online 2012   If you file Form 1040A, report your total annuity on line 12a, and the taxable part on line 12b. Tax act online 2012 If your pension or annuity is fully taxable, enter it on line 12b. Tax act online 2012 Do not make an entry on line 12a. Tax act online 2012   If you file Form 1040NR, report your total annuity on line 17a, and the taxable part on line 17b. Tax act online 2012 If your pension or annuity is fully taxable, enter it on line 17b. Tax act online 2012 Do not make an entry on line 17a. Tax act online 2012 Example. Tax act online 2012 You are a Form 1040 filer and you received monthly payments totaling $1,200 (12 months x $100) during 2013 from a pension plan that was completely financed by your employer. Tax act online 2012 You had paid no tax on the payments that your employer made to the plan, and the payments were not used to pay for accident, health, or long-term care insurance premiums (as discussed later under Insurance Premiums for Retired Public Safety Officers ). Tax act online 2012 The entire $1,200 is taxable. Tax act online 2012 You include $1,200 only on Form 1040, line 16b. Tax act online 2012 Joint return. Tax act online 2012   If you file a joint return and you and your spouse each receive one or more pensions or annuities, report the total of the pensions and annuities on line 16a of Form 1040, line 12a of Form 1040A, or line 17a of Form 1040NR. Tax act online 2012 Report the total of the taxable parts on line 16b of Form 1040, line 12b of Form 1040A, or line 17b of Form 1040NR. Tax act online 2012 Form 1099-R. Tax act online 2012   You should receive a Form 1099-R for your pension or annuity. Tax act online 2012 Form 1099-R shows your pension or annuity for the year and any income tax withheld. Tax act online 2012 You should receive a Form W-2 if you receive distributions from certain nonqualified plans. Tax act online 2012 You must attach Forms 1099-R or Forms W-2 to your 2013 tax return if federal income tax was withheld. Tax act online 2012 Generally, you should be sent these forms by January 31, 2014. Tax act online 2012 Nonperiodic Distributions If you receive a nonperiodic distribution from your retirement plan, you may be able to exclude all or part of it from your income as a recovery of your cost. Tax act online 2012 Nonperiodic distributions include cash withdrawals, distributions of current earnings (dividends) on your investment, and certain loans. Tax act online 2012 For information on how to figure the taxable amount of a nonperiodic distribution, see Taxation of Nonperiodic Payments in Publication 575. Tax act online 2012 The taxable part of a nonperiodic distribution may be subject to an additional 10% tax. Tax act online 2012 See Tax on Early Distributions, later. Tax act online 2012 Lump-sum distributions. Tax act online 2012   If you receive a lump-sum distribution from a qualified employee plan or qualified employee annuity and the plan participant was born before January 2, 1936, you may be able to elect optional methods of figuring the tax on the distribution. Tax act online 2012 The part from active participation in the plan before 1974 may qualify as capital gain subject to a 20% tax rate. Tax act online 2012 The part from participation after 1973 (and any part from participation before 1974 that you do not report as capital gain) is ordinary income. Tax act online 2012 You may be able to use the 10-year tax option to figure tax on the ordinary income part. Tax act online 2012 Form 1099-R. Tax act online 2012   If you receive a total distribution from a plan, you should receive a Form 1099-R. Tax act online 2012 If the distribution qualifies as a lump-sum distribution, box 3 shows the capital gain part of the distribution. Tax act online 2012 The amount in box 2a, Taxable amount, minus the amount in box 3, Capital gain, is the ordinary income part. Tax act online 2012 More information. Tax act online 2012   For more detailed information on lump-sum distributions, see Publication 575 or Form 4972, Tax on Lump-Sum Distributions. Tax act online 2012 Tax on Early Distributions Most distributions you receive from your qualified retirement plan and nonqualified annuity contracts before you reach age 59½ are subject to an additional tax of 10%. Tax act online 2012 The tax applies to the taxable part of the distribution. Tax act online 2012 For this purpose, a qualified retirement plan is: A qualified employee plan (including a qualified cash or deferred arrangement (CODA) under Internal Revenue Code section 401(k)), A qualified employee annuity plan, A tax-sheltered annuity plan (403(b) plan), or An eligible state or local government section 457 deferred compensation plan (to the extent that any distribution is attributable to amounts the plan received in a direct transfer or rollover from one of the other plans listed here or an IRA). Tax act online 2012  An IRA is also a qualified retirement plan for purposes of this tax. Tax act online 2012 General exceptions to tax. Tax act online 2012   The early distribution tax does not apply to any distributions that are: Made as part of a series of substantially equal periodic payments (made at least annually) for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary (if from a qualified retirement plan, the payments must begin after separation from service), Made because you are totally and permanently disabled, or Made on or after the death of the plan participant or contract holder. Tax act online 2012 Additional exceptions. Tax act online 2012   There are additional exceptions to the early distribution tax for certain distributions from qualified retirement plans and nonqualified annuity contracts. Tax act online 2012 See Publication 575 for details. Tax act online 2012 Reporting tax. Tax act online 2012   If you owe only the tax on early distributions and distribution code 1 (early distribution, no known exception) is correctly shown in Form 1099-R, box 7, multiply the taxable part of the early distribution by 10% (. Tax act online 2012 10) and enter the result on Form 1040, line 58, or Form 1040NR, line 56. Tax act online 2012 See the instructions for line 58 of Form 1040 or line 56 of Form 1040NR for more information about reporting the early distribution tax. Tax act online 2012 Tax on Excess Accumulation To make sure that most of your retirement benefits are paid to you during your lifetime, rather than to your beneficiaries after your death, the payments that you receive from qualified retirement plans must begin no later than your required beginning date. Tax act online 2012 Unless the rule for 5% owners applies, this is generally April 1 of the year that follows the later of: The calendar year in which you reach age 70½, or The calendar year in which you retire from employment with the employer maintaining the plan. Tax act online 2012 However, your plan may require you to begin to receive payments by April 1 of the year that follows the year in which you reach 70½, even if you have not retired. Tax act online 2012 For this purpose, a qualified retirement plan includes: A qualified employee plan, A qualified employee annuity plan, An eligible section 457 deferred compensation plan, or A tax-sheltered annuity plan (403(b) plan) (for benefits accruing after 1986). Tax act online 2012  An IRA is also a qualified retirement plan for purposes of this tax. Tax act online 2012 An excess accumulation is the undistributed remainder of the required minimum distribution that was left in your qualified retirement plan. Tax act online 2012 5% owners. Tax act online 2012   If you own (or are considered to own under section 318 of the Internal Revenue Code) more than 5% of the company maintaining your qualified retirement plan, you must begin to receive distributions from the plan by April 1 of the year after the calendar year in which you reach age 70½. Tax act online 2012 See Publication 575 for more information. Tax act online 2012 Amount of tax. Tax act online 2012   If you do not receive the required minimum distribution, you are subject to an additional tax. Tax act online 2012 The tax equals 50% of the difference between the amount that must be distributed and the amount that was distributed during the tax year. Tax act online 2012 You can get this excise tax excused if you establish that the shortfall in distributions was due to reasonable error and that you are taking reasonable steps to remedy the shortfall. Tax act online 2012 Form 5329. Tax act online 2012   You must file a Form 5329 if you owe a tax because you did not receive a minimum required distribution from your qualified retirement plan. Tax act online 2012 Additional information. Tax act online 2012   For more detailed information on the tax on excess accumulation, see Publication 575. Tax act online 2012 Insurance Premiums for Retired Public Safety Officers If you are an eligible retired public safety officer (law enforcement officer, firefighter, chaplain, or member of a rescue squad or ambulance crew), you can elect to exclude from income distributions made from your eligible retirement plan that are used to pay the premiums for accident or health insurance or long-term care insurance. Tax act online 2012 The premiums can be for coverage for you, your spouse, or dependent(s). Tax act online 2012 The distribution must be made directly from the plan to the insurance provider. Tax act online 2012 You can exclude from income the smaller of the amount of the insurance premiums or $3,000. Tax act online 2012 You can only make this election for amounts that would otherwise be included in your income. Tax act online 2012 The amount excluded from your income cannot be used to claim a medical expense deduction. Tax act online 2012 An eligible retirement plan is a governmental plan that is a: Qualified trust, Section 403(a) plan, Section 403(b) annuity, or Section 457(b) plan. Tax act online 2012 If you make this election, reduce the otherwise taxable amount of your pension or annuity by the amount excluded. Tax act online 2012 The taxable amount shown in box 2a of any Form 1099-R that you receive does not reflect the exclusion. Tax act online 2012 Report your total distributions on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. Tax act online 2012 Report the taxable amount on Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. Tax act online 2012 Enter “PSO” next to the appropriate line on which you report the taxable amount. Tax act online 2012 Railroad Retirement Benefits Benefits paid under the Railroad Retirement Act fall into two categories. Tax act online 2012 These categories are treated differently for income tax purposes. Tax act online 2012 Social security equivalent benefits. Tax act online 2012   The first category is the amount of tier 1 railroad retirement benefits that equals the social security benefit that a railroad employee or beneficiary would have been entitled to receive under the social security system. Tax act online 2012 This part of the tier 1 benefit is the social security equivalent benefit (SSEB) and is treated for tax purposes like social security benefits. Tax act online 2012 (See Social Security and Equivalent Railroad Retirement Benefits , later. Tax act online 2012 ) Non-social security equivalent benefits. Tax act online 2012   The second category contains the rest of the tier 1 benefits, called the non-social security equivalent benefit (NSSEB). Tax act online 2012 It also contains any tier 2 benefit, vested dual benefit (VDB), and supplemental annuity benefit. Tax act online 2012 This category of benefits is treated as an amount received from a qualified employee plan. Tax act online 2012 This allows for the tax-free (nontaxable) recovery of employee contributions from the tier 2 benefits and the NSSEB part of the tier 1 benefits. Tax act online 2012 Vested dual benefits and supplemental annuity benefits are non-contributory pensions and are fully taxable. Tax act online 2012 More information. Tax act online 2012   For more information about railroad retirement benefits, see Publication 575. Tax act online 2012 Military Retirement Pay Military retirement pay based on age or length of service is taxable and must be included in income as a pension on Form 1040, lines 16a and 16b; on Form 1040A, lines 12a and 12b; or on Form 1040NR, lines 17a and 17b. Tax act online 2012 But, certain military and government disability pensions that are based on a percentage of disability from active service in the Armed Forces of any country generally are not taxable. Tax act online 2012 For more information, including information about veterans' benefits and insurance, see Publication 525. Tax act online 2012 Social Security and Equivalent Railroad Retirement Benefits This discussion explains the federal income tax rules for social security benefits and equivalent tier 1 railroad retirement benefits. Tax act online 2012 Social security benefits include monthly retirement, survivor, and disability benefits. Tax act online 2012 They do not include supplemental security income (SSI) payments, which are not taxable. Tax act online 2012 Equivalent tier 1 railroad retirement benefits are the part of tier 1 benefits that a railroad employee or beneficiary would have been entitled to receive under the social security system. Tax act online 2012 They commonly are called the social security equivalent benefit (SSEB) portion of tier 1 benefits. Tax act online 2012 If you received these benefits during 2013, you should have received a Form SSA-1099 or Form RRB-1099 (Form SSA-1042S or Form RRB-1042S if you are a nonresident alien), showing the amount of the benefits. Tax act online 2012 Are Any of Your Benefits Taxable? Note. Tax act online 2012 When the term “benefits” is used in this section, it applies to both social security benefits and the SSEB portion of tier 1 railroad retirement benefits. Tax act online 2012  To find out whether any of your benefits may be taxable, compare the base amount for your filing status (explained later) with the total of: One-half of your benefits, plus All your other income, including tax-exempt interest. Tax act online 2012 When making this comparison, do not reduce your other income by any exclusions for: Interest from qualified U. Tax act online 2012 S. Tax act online 2012 savings bonds, Employer-provided adoption benefits, Foreign earned income or foreign housing, or Income earned in American Samoa or Puerto Rico by bona fide residents. Tax act online 2012 Figuring total income. Tax act online 2012   To figure the total of one-half of your benefits plus your other income, use Worksheet 2-B. Tax act online 2012 If that total amount is more than your base amount, part of your benefits may be taxable. Tax act online 2012 If you are married and file a joint return for 2013, you and your spouse must combine your incomes and your benefits to figure whether any of your combined benefits are taxable. Tax act online 2012 Even if your spouse did not receive any benefits, you must add your spouse's income to yours to figure whether any of your benefits are taxable. Tax act online 2012 If the only income you received during 2013 was your social security or the SSEB portion of tier 1 railroad retirement benefits, your benefits generally are not taxable and you probably do not have to file a return. Tax act online 2012 If you have income in addition to your benefits, you may have to file a return even if none of your benefits are taxable. Tax act online 2012 Worksheet 2-B. Tax act online 2012 A Quick Way To Check if Your Benefits May Be Taxable A. Tax act online 2012 Enter the amount from box 5 of all your Forms SSA-1099 and RRB-1099. Tax act online 2012 Include  the full amount of any lump-sum benefit payments received in 2013, for 2013 and  earlier years. Tax act online 2012 (If you received more than one form, combine the amounts from box 5  and enter the total. Tax act online 2012 ) A. Tax act online 2012     Note. Tax act online 2012 If the amount on line A is zero or less, stop here; none of your benefits are  taxable this year. Tax act online 2012     B. Tax act online 2012 Enter one-half of the amount on line A B. Tax act online 2012   C. Tax act online 2012 Enter your taxable pensions, wages, interest, dividends, and other taxable income C. Tax act online 2012   D. Tax act online 2012 Enter any tax-exempt interest income (such as interest on municipal bonds) plus any exclusions from income for: •Interest from qualified U. Tax act online 2012 S. Tax act online 2012 savings bonds, •Employer-provided adoption benefits, •Foreign earned income or foreign housing, or •Income earned in American Samoa or Puerto Rico by bona fide residents D. Tax act online 2012   E. Tax act online 2012 Add lines B, C, and D and enter the total E. Tax act online 2012   F. Tax act online 2012 If you are: •Married filing jointly, enter $32,000 •Single, head of household, qualifying widow(er), or married filing separately and you  lived apart from your spouse for all of 2013, enter $25,000 •Married filing separately and you lived with your spouse at any time during 2013,  enter -0- F. Tax act online 2012   G. Tax act online 2012 Is the amount on line F less than or equal to the amount on line E? □ No. Tax act online 2012 None of your benefits are taxable this year. Tax act online 2012  □ Yes. Tax act online 2012 Some of your benefits may be taxable. Tax act online 2012 To figure how much of your benefits  are taxable, see Which worksheet to use under How Much Is Taxable. Tax act online 2012     Base Amount Your base amount is: $25,000 if you are single, head of household, or qualifying widow(er) with dependent child, $25,000 if you are married filing separately and lived apart from your spouse for all of 2013, $32,000 if you are married filing jointly, or $0 if you are married filing separately and lived with your spouse at any time during 2013. Tax act online 2012 Repayment of Benefits Any repayment of benefits you made during 2013 must be subtracted from the gross benefits you received in 2013. Tax act online 2012 It does not matter whether the repayment was for a benefit you received in 2013 or in an earlier year. Tax act online 2012 If you repaid more than the gross benefits you received in 2013, see Repayments More Than Gross Benefits , later. Tax act online 2012 Your gross benefits are shown in box 3 of Form SSA-1099 or Form RRB-1099. Tax act online 2012 Your repayments are shown in box 4. Tax act online 2012 The amount in box 5 shows your net benefits for 2013 (box 3 minus box 4). Tax act online 2012 Use the amount in box 5 to figure whether any of your benefits are taxable. Tax act online 2012 Tax Withholding and Estimated Tax You can choose to have federal income tax withheld from your social security and/or the SSEB portion of your tier 1 railroad retirement benefits. Tax act online 2012 If you choose to do this, you must complete a Form W-4V, Voluntary Withholding Request. Tax act online 2012 If you do not choose to have income tax withheld, you may have to request additional withholding from other income, or pay estimated tax during the year. Tax act online 2012 For details, see Publication 505, Tax Withholding and Estimated Tax, or the instructions for Form 1040-ES, Estimated Tax for Individuals. Tax act online 2012 How Much Is Taxable? If part of your benefits is taxable, how much is taxable depends on the total amount of your benefits and other income. Tax act online 2012 Generally, the higher that total amount, the greater the taxable part of your benefits. Tax act online 2012 Maximum taxable part. Tax act online 2012   The taxable part of your benefits usually cannot be more than 50%. Tax act online 2012 However, up to 85% of your benefits can be taxable if either of the following situations applies to you. Tax act online 2012 The total of one-half of your benefits and all your other income is more than $34,000 ($44,000 if you are married filing jointly). Tax act online 2012 You are married filing separately and lived with your spouse at any time during 2013. Tax act online 2012   If you are a nonresident alien, 85% of your benefits are taxable. Tax act online 2012 However, this income is exempt under some tax treaties. Tax act online 2012 Which worksheet to use. Tax act online 2012   A worksheet to figure your taxable benefits is in the instructions for your Form 1040 or 1040A. Tax act online 2012 However, you will need to use a different worksheet(s) if any of the following situations applies to you. Tax act online 2012 You contributed to a traditional individual retirement arrangement (IRA) and you or your spouse were covered by a retirement plan at work. Tax act online 2012 In this situation, you must use the special worksheets in Appendix B of Publication 590 to figure both your IRA deduction and your taxable benefits. Tax act online 2012 Situation (1) does not apply and you take one or more of the following exclusions. Tax act online 2012 Interest from qualified U. Tax act online 2012 S. Tax act online 2012 savings bonds (Form 8815). Tax act online 2012 Employer-provided adoption benefits (Form 8839). Tax act online 2012 Foreign earned income or housing (Form 2555 or Form 2555-EZ). Tax act online 2012 Income earned in American Samoa (Form 4563) or Puerto Rico by bona fide residents. Tax act online 2012 In these situations, you must use Worksheet 1 in Publication 915, Social Security and Equivalent Railroad Retirement Benefits, to figure your taxable benefits. Tax act online 2012 You received a lump-sum payment for an earlier year. Tax act online 2012 In this situation, also complete Worksheet 2 or 3 and Worksheet 4 in Publication 915. Tax act online 2012 See Lump-Sum Election , later. Tax act online 2012 How To Report Your Benefits If part of your benefits are taxable, you must use Form 1040, Form 1040A, or Form 1040NR. Tax act online 2012 You cannot use Form 1040EZ. Tax act online 2012 Reporting on Form 1040. Tax act online 2012   Report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on line 20a and the taxable part on line 20b. Tax act online 2012 If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on line 20a. Tax act online 2012 Reporting on Form 1040A. Tax act online 2012   Report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on line 14a and the taxable part on line 14b. Tax act online 2012 If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on line 14a. Tax act online 2012 Reporting on Form 1040NR. Tax act online 2012   Report 85% of the total amount of your benefits (box 5 of your Form SSA-1042S or Form RRB-1042S) in the appropriate column of Form 1040NR, Schedule NEC, line 8. Tax act online 2012 Benefits not taxable. Tax act online 2012   If you are filing Form 1040EZ, do not report any benefits on your tax return. Tax act online 2012 If you are filing Form 1040 or Form 1040A, report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on Form 1040, line 20a, or Form 1040A, line 14a. Tax act online 2012 Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Tax act online 2012 If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Tax act online 2012 Lump-Sum Election You must include the taxable part of a lump-sum (retroactive) payment of benefits received in 2013 in your 2013 income, even if the payment includes benefits for an earlier year. Tax act online 2012 This type of lump-sum benefit payment should not be confused with the lump-sum death benefit that both the SSA and RRB pay to many of their beneficiaries. Tax act online 2012 No part of the lump-sum death benefit is subject to tax. Tax act online 2012 For more information about the lump-sum death benefit, visit the Social Security Administration website at www. Tax act online 2012 SSA. Tax act online 2012 gov, and use keyword: death benefit. Tax act online 2012 Generally, you use your 2013 income to figure the taxable part of the total benefits received in 2013. Tax act online 2012 However, you may be able to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year. Tax act online 2012 You can elect this method if it lowers your taxable benefits. Tax act online 2012 See Publication 915 for more information. Tax act online 2012 Repayments More Than Gross Benefits In some situations, your Form SSA-1099 or Form RRB-1099 will show that the total benefits you repaid (box 4) are more than the gross benefits (box 3) you received. Tax act online 2012 If this occurred, your net benefits in box 5 will be a negative figure (a figure in parentheses) and none of your benefits will be taxable. Tax act online 2012 If you receive more than one form, a negative figure in box 5 of one form is used to offset a positive figure in box 5 of another form for that same year. Tax act online 2012 If you have any questions about this negative figure, contact your local Social Security Administration office or your local U. Tax act online 2012 S. Tax act online 2012 Railroad Retirement Board field office. Tax act online 2012 Joint return. Tax act online 2012   If you and your spouse file a joint return, and your Form SSA-1099 or RRB-1099 has a negative figure in box 5 but your spouse's does not, subtract the box 5 amount on your form from the box 5 amount on your spouse's form. Tax act online 2012 You do this to get your net benefits when figuring if your combined benefits are taxable. Tax act online 2012 Repayment of benefits received in an earlier year. Tax act online 2012   If the total amount shown in box 5 of all of your Forms SSA-1099 and RRB-1099 is a negative figure, you can take an itemized deduction for the part of this negative figure that represents benefits you included in gross income in an earlier year. Tax act online 2012   If this deduction is $3,000 or less, it is subject to the 2%-of-adjusted-gross-income limit that applies to certain miscellaneous itemized deductions. Tax act online 2012 Claim it on Schedule A (Form 1040), line 23. Tax act online 2012   If this deduction is more than $3,000, you have to follow some special instructions. Tax act online 2012 See Publication 915 for those instructions. Tax act online 2012 Sickness and Injury Benefits Generally, you must report as income any amount you receive for personal injury or sickness through an accident or health plan that is paid for by your employer. Tax act online 2012 If both you and your employer pay for the plan, only the amount you receive that is due to your employer's payments is reported as income. Tax act online 2012 However, certain payments may not be taxable to you. Tax act online 2012 Some of these payments are discussed later in this section. Tax act online 2012 Also, see Military and Government Disability Pensions and Other Sickness and Injury Benefits in Publication 525. Tax act online 2012 Cost paid by you. Tax act online 2012   If you pay the entire cost of an accident or health plan, do not include any amounts you receive from the plan for personal injury or sickness as income on your tax return. Tax act online 2012 If your plan reimbursed you for medical expenses you deducted in an earlier year, you may have to include some, or all, of the reimbursement in your income. Tax act online 2012 Disability Pensions If you retired on disability, you must include in income any disability pension you receive under a plan that is paid for by your employer. Tax act online 2012 You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A or on line 8 of Form 1040NR until you reach minimum retirement age. Tax act online 2012 Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. Tax act online 2012 If you were 65 or older by the end of 2013 or you were retired on permanent and total disability and received taxable disability income, you may be able to claim the credit for the elderly or the disabled. Tax act online 2012 See Credit for the Elderly or the Disabled, later. Tax act online 2012 For more information on this credit, see Publication 524, Credit for the Elderly or the Disabled. Tax act online 2012 Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. Tax act online 2012 Report the payments on lines 16a and 16b of Form 1040, on lines 12a and 12b of Form 1040A, or on lines 17a and 17b of Form 1040NR. Tax act online 2012 For more information on pensions and annuities, see Publication 575. Tax act online 2012 Retirement and profit-sharing plans. Tax act online 2012   If you receive payments from a retirement or profit-sharing plan that does not provide for disability retirement, do not treat the payments as a disability pension. Tax act online 2012 The payments must be reported as a pension or annuity. Tax act online 2012 Accrued leave payment. Tax act online 2012   If you retire on disability, any lump-sum payment you receive for accrued annual leave is a salary payment. Tax act online 2012 The payment is not a disability payment. Tax act online 2012 Include it in your income in the tax year you receive it. Tax act online 2012 Long-Term Care Insurance Contracts In most cases, long-term care insurance contracts generally are treated as accident and health insurance contracts. Tax act online 2012 Amounts you receive from them (other than policyholder dividends or premium refunds) generally are excludable from income as amounts received for personal injury or sickness. Tax act online 2012 However, the amount you can exclude may be limited. Tax act online 2012 Long-term care insurance contracts are discussed in more detail in Publication 525. Tax act online 2012 Workers' Compensation Amounts you receive as workers' compensation for an occupational sickness or injury are fully exempt from tax if they are paid under a workers' compensation act or a statute in the nature of a workers' compensation act. Tax act online 2012 The exemption also applies to your survivors. Tax act online 2012 The exemption, however, does not apply to retirement plan benefits you receive based on your age, length of service, or prior contributions to the plan, even if you retired because of an occupational sickness or injury. Tax act online 2012 If part of your workers' compensation reduces your social security or equivalent railroad retirement benefits, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. Tax act online 2012 For a discussion of the taxability of these benefits, see Social Security and Equivalent Railroad Retirement Benefits, earlier. Tax act online 2012 Return to work. Tax act online 2012   If you return to work after qualifying for workers' compensation, salary payments you receive for performing light duties are taxable as wages. Tax act online 2012 Other Sickness and Injury Benefits In addition to disability pensions and annuities, you may receive other payments for sickness or injury. Tax act online 2012 Federal Employees' Compensation Act (FECA). Tax act online 2012   Payments received under this Act for personal injury or sickness, including payments to beneficiaries in case of death, are not taxable. Tax act online 2012 However, you are taxed on amounts you receive under this Act as continuation of pay for up to 45 days while a claim is being decided. Tax act online 2012 Report this income on Form 1040, line 7; Form 1040A, line 7; on Form 1040EZ, line 1; or Form 1040NR, line 8. Tax act online 2012 Also, pay for sick leave while a claim is being processed is taxable and must be included in your income as wages. Tax act online 2012    If part of the payments you receive under FECA reduces your social security or equivalent railroad retirement benefits, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. Tax act online 2012 For a discussion of the taxability of these benefits, see Social Security and Equivalent Railroad Retirement Benefits, earlier. Tax act online 2012 Other compensation. Tax act online 2012   Many other amounts you receive as compensation for sickness or injury are not taxable. Tax act online 2012 These include the following amounts. Tax act online 2012 Benefits you receive under an accident or health insurance policy on which either you paid the premiums or your employer paid the premiums but you had to include them in your income. Tax act online 2012 Disability benefits you receive for loss of income or earning capacity as a result of injuries under a no-fault car insurance policy. Tax act online 2012 Compensation you receive for permanent loss or loss of use of a part or function of your body, for your permanent disfigurement, or for such loss or disfigurement suffered by your spouse or dependent(s). Tax act online 2012 This compensation must be based only on the injury and not on the period of your absence from work. Tax act online 2012 These benefits are not taxable even if your employer pays for the accident and health plan that provides these benefits. Tax act online 2012 Life Insurance Proceeds Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price. Tax act online 2012 This is true even if the proceeds were paid under an accident or health insurance policy or an endowment contract. Tax act online 2012 Proceeds not received in installments. Tax act online 2012   If death benefits are paid to you in a lump sum or other than at regular intervals, include in your income only the benefits that are more than the amount payable to you at the time of the insured person's death. Tax act online 2012 If the benefit payable at death is not specified, you include in your income the benefit payments that are more than the present value of the payments at the time of death. Tax act online 2012 Proceeds received in installments. Tax act online 2012   If you receive life insurance proceeds in installments, you can exclude part of each installment from your income. Tax act online 2012   To determine the excluded part, divide the amount held by the insurance company (generally the total lump sum payable at the death of the insured person) by the number of installments to be paid. Tax act online 2012 Include anything over this excluded part in your income as interest. Tax act online 2012 Installments for life. Tax act online 2012   If, as the beneficiary under an insurance contract, you are entitled to receive the proceeds in installments for the rest of your life without a refund or period-certain guarantee, you figure the excluded part of each installment by dividing the amount held by the insurance company by your life expectancy. Tax act online 2012 If there is a refund or period-certain guarantee, the amount held by the insurance company for this purpose is reduced by the actuarial value of the guarantee. Tax act online 2012 Surviving spouse. Tax act online 2012   If your spouse died before October 23, 1986, and insurance proceeds paid to you because of the death of your spouse are received in installments, you can exclude, in any year, up to $1,000 of the interest included in the installments. Tax act online 2012 If you remarry, you can continue to take the exclusion. Tax act online 2012 Surrender of policy for cash. Tax act online 2012   If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. Tax act online 2012 In general, your cost (or investment in the contract) is the total of premiums that you paid for the life insurance policy, less any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income. Tax act online 2012 You should receive a Form 1099-R showing the total proceeds and the taxable part. Tax act online 2012 Report these amounts on Form 1040, lines 16a and 16b; Form 1040A, lines 12a and 12b; or Form 1040NR, lines 17a and 17b. Tax act online 2012 Endowment Contract Proceeds An endowment contract is a policy that pays over to you a specified amount of money on a certain date unless you die before that date, in which case, the money is paid to your designated beneficiary. Tax act online 2012 Endowment proceeds paid in a lump sum to you at maturity are taxable only if the proceeds are more than the cost of the policy. Tax act online 2012 To determine your cost, subtract from the total premiums (or other consideration) paid for the contract any amount that you previously received under the contract and excluded from your income. Tax act online 2012 Include in your income the part of the lump-sum payment that is more than your cost. Tax act online 2012 Endowment proceeds that you choose to receive in installments instead of a lump-sum payment at the maturity of the policy are taxed as an annuity. Tax act online 2012 The tax treatment of an annuity is explained in Publication 575. Tax act online 2012 For this treatment to apply, you must choose to receive the proceeds in installments before receiving any part of the lump sum. Tax act online 2012 This election must be made within 60 days after the lump-sum payment first becomes payable to you. Tax act online 2012 Accelerated Death Benefits Certain amounts paid as accelerated death benefits under a life insurance contract or viatical settlement before the insured's death are generally excluded from income if the insured is terminally or chronically ill. Tax act online 2012 However, see Exception , later. Tax act online 2012 For a chronically ill individual, accelerated death benefits paid on the basis of costs incurred for qualified long-term care services are fully excludable. Tax act online 2012 Accelerated death benefits paid on a per diem or other periodic basis without regard to the costs are excludable up to a limit. Tax act online 2012 In addition, if any portion of a death benefit under a life insurance contract on the life of a terminally or chronically ill individual is sold or assigned to a viatical settlement provider, the amount received also is excluded from income. Tax act online 2012 Generally, a viatical settlement provider is one who regularly engages in the business of buying or taking assignment of life insurance contracts on the lives of insured individuals who are terminally or chronically ill. Tax act online 2012 To report taxable accelerated death benefits made on a per diem or other periodic basis, you must file Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, with your return. Tax act online 2012 Terminally or chronically ill defined. Tax act online 2012   A terminally ill person is one who has been certified by a physician as having an illness or physical condition that reasonably can be expected to result in death within 24 months from the date of the certification. Tax act online 2012 A chronically ill person is one who is not terminally ill but has been certified (within the previous 12 months) by a licensed health care practitioner as meeting either of the following conditions. Tax act online 2012 The person is unable to perform (without substantial help) at least two activities of daily living (eating, toileting, transferring, bathing, dressing, and continence) for a period of 90 days or more because of a loss of functional capacity. Tax act online 2012 The person requires substantial supervision to protect himself or herself from threats to health and safety due to severe cognitive impairment. Tax act online 2012 Exception. Tax act online 2012   The exclusion does not apply to any amount paid to a person other than the insured if that other person has an insurable interest in the life of the insured because the insured: Is a director, officer, or employee of the other person, or Has a financial interest in the business of the other person. Tax act online 2012 Sale of Home You may be able to exclude from income any gain up to $250,000 ($500,000 on a joint return in most cases) on the sale of your main home. Tax act online 2012 Generally, if you can exclude all of the gain, you do not need to report the sale on your tax return. Tax act online 2012 You can choose not to take the exclusion by including the gain from the sale in your gross income on your tax return for the year of the sale. Tax act online 2012 Main home. Tax act online 2012   Usually, your main home is the home you live in most of the time and can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. Tax act online 2012 Repaying the first-time homebuyer credit because you sold your home. Tax act online 2012   If you claimed a first-time homebuyer credit for your main home and you sell it, you may have to repay the credit. Tax act online 2012 For a home purchased in 2008 and used as your main home until sold in 2013, you must file Form 5405 and repay the balance of the unpaid credit on your 2013 tax return. Tax act online 2012   For a home purchased after 2008, you generally must repay the entire credit if the home was sold (or otherwise ceased to be your main home) within 36 months of the purchase date. Tax act online 2012 If you purchased your home in 2009 and used it as your main home until sold in 2013, you do not have to repay the credit or file Form 5405. Tax act online 2012 If you purchased your home in 2010 and used it as your main home until sold in 2013, you may have to file Form 5405 and repay the entire credit on your 2013 tax return. Tax act online 2012   See the Instructions for Form 5405 for more information about repaying the credit and exceptions to repayment that may apply to you. Tax act online 2012 Maximum Amount of Exclusion You can generally exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true. Tax act online 2012 You meet the ownership test. Tax act online 2012 You meet the use test. Tax act online 2012 During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home. Tax act online 2012 You may be able to exclude up to $500,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if you are married and file a joint return and meet the requirements listed in the discussion of the special rules for joint returns, later, under Married Persons . Tax act online 2012 Ownership and Use Tests To claim the exclusion, you must meet the ownership and use tests. Tax act online 2012 This means that during the 5-year period ending on the date of the sale, you must have: Owned the home for at least 2 years (the ownership test), and Lived in the home as your main home for at least 2 years (the use test). Tax act online 2012 Exception to ownership and use tests. Tax act online 2012   If you owned and lived in the property as your main home for less than 2 years, you still can claim an exclusion in some cases. Tax act online 2012 Generally, you must have sold the home due to a change in place of employment, health, or unforeseen circumstances. Tax act online 2012 The maximum amount you can exclude will be reduced. Tax act online 2012 See Publication 523, Selling Your Home, for more information. Tax act online 2012 Exception to use test for individuals with a disability. Tax act online 2012   There is an exception to the use test if, during the 5-year period before the sale of your home: You become physically or mentally unable to care for yourself, and You owned and lived in your home as your main home for a total of at least 1 year. Tax act online 2012 Under this exception, you are considered to live in your home during any time that you own the home and live in a facility (including a nursing home) that is licensed by a state or political subdivision to care for persons in your condition. Tax act online 2012   If you meet this exception to the use test, you still have to meet the 2-out-of-5-year ownership test to claim the exclusion. Tax act online 2012 Exception to ownership test for property acquired in a like-kind exchange. Tax act online 2012   You must have owned your main home for at least 5 years to qualify for the exclusion if you acquired your main home in a like-kind exchange. Tax act online 2012 This special 5-year ownership rule continues to apply to a home you acquired in a like-kind exchange and gave to another person. Tax act online 2012 A like-kind exchange is an exchange of property held for productive use in a trade or business or for investment. Tax act online 2012 See Publication 523 for more information. Tax act online 2012 Period of nonqualified use. Tax act online 2012   Generally, the gain from the sale or exchange of your main home will not qualify for the exclusion to the extent that the gain is allocated to periods of nonqualified use. Tax act online 2012 Nonqualified use is any period after December 31, 2008, during which the property is not used as the main home. Tax act online 2012 See Publication 523 for more information. Tax act online 2012 Married Persons In the special situations discussed below, if you and your spouse file a joint return for the year of sale and one spouse meets the ownership and use test, you can exclude up to $250,000 of gain. Tax act online 2012 However, see Special rules for joint returns , next. Tax act online 2012 Special rules for joint returns. Tax act online 2012   You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true. Tax act online 2012 You are married and file a joint return for the year. Tax act online 2012 Either you or your spouse meets the ownership test. Tax act online 2012 Both you and your spouse meet the use test. Tax act online 2012 During the 2-year period ending on the date of the sale, neither you nor your spouse exclude gain from the sale of another home. Tax act online 2012 Sale of home by surviving spouse. Tax act online 2012   If your spouse died and you did not remarry before the date of sale, you are considered to have owned and lived in the property as your main home during any period of time when your spouse owned and lived in it as a main home. Tax act online 2012   If you meet all of the following requirements, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home in 2013. Tax act online 2012 The sale or exchange took place no more than 2 years after the date of death of your spouse. Tax act online 2012 You have not remarried. Tax act online 2012 You and your spouse met the use test at the time of your spouse's death. Tax act online 2012 You or your spouse met the ownership test at the time of your spouse's death. Tax act online 2012 Neither you nor your spouse excluded gain from the sale of another home during the last 2 years. Tax act online 2012 Home transferred from spouse. Tax act online 2012   If your home was transferred to you by your spouse (or former spouse if the transfer was incident to divorce), you are considered to have owned it during any period of time when your spouse owned it. Tax act online 2012 Use of home after divorce. Tax act online 2012   You are considered to have used property as your main home during any period when: You owned it, and Your spouse or former spouse is allowed to live in it under a divorce or separation instrument and uses it as his or her main home. Tax act online 2012 Business Use or Rental of Home You may be able to exclude gain from the sale of a home that you have used for business or to produce rental income. Tax act online 2012 However, you must meet the ownership and use tests. Tax act online 2012 See Publication 523 for more information. Tax act online 2012 Depreciation after May 6, 1997. Tax act online 2012   If you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997. Tax act online 2012 See Publication 523 for more information. Tax act online 2012 Reporting the Sale Do not report the 2013 sale of your main home on your tax return unless: You have a gain and you do not qualify to exclude all of it, You have a gain and you choose not to exclude it, or You received Form 1099-S. Tax act online 2012 If you have a gain that you cannot or choose not to exclude, if you received a Form 1099-S, or if you have a deductible loss, report the sale on your tax return. Tax act online 2012 Report the sale on Part I or Part II of Form 8949 as a short-term or long-term transaction, depending on how long you owned the home. Tax act online 2012 If you used your home for business or to produce rental income, you may have to use Form 4797, Sales of Business Property, to report the sale of the business or rental part. Tax act online 2012 See Publication 523 for more information. Tax act online 2012 Reverse Mortgages A revers