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Irs Form 1040ez Tax Tables

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Irs Form 1040ez Tax Tables

Irs form 1040ez tax tables Other Methods of Depreciation Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: How To Figure the DeductionBasis Useful Life Salvage Value Methods To UseStraight Line Method Declining Balance Method Income Forecast Method How To Change Methods DispositionsSale or exchange. Irs form 1040ez tax tables Property not disposed of or abandoned. Irs form 1040ez tax tables Special rule for normal retirements from item accounts. Irs form 1040ez tax tables Abandoned property. Irs form 1040ez tax tables Single item accounts. Irs form 1040ez tax tables Multiple property account. Irs form 1040ez tax tables Topics - This chapter discusses: How to figure the deduction Methods to use How to change methods Dispositions Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 551 Basis of Assets 583 Starting a Business and Keeping Records 946 How To Depreciate Property Form (and Instructions) 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization Schedule C (Form 1040) Profit or Loss From Business If your property is being depreciated under ACRS, you must continue to use rules for depreciation that applied when you placed the property in service. Irs form 1040ez tax tables If your property qualified for MACRS, you must depreciate it under MACRS. Irs form 1040ez tax tables See Publication 946. Irs form 1040ez tax tables However, you cannot use MACRS for certain property because of special rules that exclude it from MACRS. Irs form 1040ez tax tables Also, you can elect to exclude certain property from being depreciated under MACRS. Irs form 1040ez tax tables Property that you cannot depreciate using MACRS includes: Intangible property, Property you can elect to exclude from MACRS that you properly depreciate under a method that is not based on a term of years, Certain public utility property, Any motion picture film or video tape, Any sound recording, and Certain real and personal property placed in service before 1987. Irs form 1040ez tax tables Intangible property. Irs form 1040ez tax tables   You cannot depreciate intangible property under ACRS or MACRS. Irs form 1040ez tax tables You depreciate intangible property using any other reasonable method, usually, the straight line method. Irs form 1040ez tax tables Note. Irs form 1040ez tax tables The cost of certain intangible property that you acquire after August 10, 1993, must be amortized over a 15-year period. Irs form 1040ez tax tables For more information, see chapter 12 of Publication 535. Irs form 1040ez tax tables Public utility property. Irs form 1040ez tax tables   The law excludes from MACRS any public utility property for which the taxpayer does not use a normalization method of accounting. Irs form 1040ez tax tables This type of property is subject to depreciation under a special rule. Irs form 1040ez tax tables Videocassettes. Irs form 1040ez tax tables   If you are in the videocassette rental business, you can depreciate those videocassettes purchased for rental. Irs form 1040ez tax tables You can depreciate the cost less salvage value of those videocassettes that have a useful life over one year using either: The straight line method, or The income forecast method. Irs form 1040ez tax tables The straight line method, salvage value, and useful life are discussed later under Methods To Use. Irs form 1040ez tax tables You can deduct in the year of purchase as a business expense the cost of any cassette that has a useful life of one year or less. Irs form 1040ez tax tables How To Figure the Deduction Two other reasonable methods can be used to figure your deduction for property not covered under ACRS or MACRS. Irs form 1040ez tax tables These methods are straight line and declining balance. Irs form 1040ez tax tables To figure depreciation using these methods, you must generally determine three things about the property you intend to depreciate. Irs form 1040ez tax tables They are: The basis, The useful life, and The estimated salvage value at the end of its useful life. Irs form 1040ez tax tables The amount of the deduction in any year also depends on which method of depreciation you choose. Irs form 1040ez tax tables Basis To deduct the proper amount of depreciation each year, first determine your basis in the property you intend to depreciate. Irs form 1040ez tax tables The basis used for figuring depreciation is the same as the basis that would be used for figuring the gain on a sale. Irs form 1040ez tax tables Your original basis is usually the purchase price. Irs form 1040ez tax tables However, if you acquire property in some other way, such as inheriting it, getting it as a gift, or building it yourself, you have to figure your original basis in a different way. Irs form 1040ez tax tables Adjusted basis. Irs form 1040ez tax tables   Events will often change the basis of property. Irs form 1040ez tax tables When this occurs, the changed basis is called the adjusted basis. Irs form 1040ez tax tables Some events, such as improvements you make, increase basis. Irs form 1040ez tax tables Events such as deducting casualty losses and depreciation decrease basis. Irs form 1040ez tax tables If basis is adjusted, the depreciation deduction may also have to be changed, depending on the reason for the adjustment and the method of depreciation you are using. Irs form 1040ez tax tables   Publication 551 explains how to figure basis for property acquired in different ways. Irs form 1040ez tax tables It also discusses what items increase and decrease basis, how to figure adjusted basis, and how to allocate cost if you buy several pieces of property at one time. Irs form 1040ez tax tables Useful Life The useful life of a piece of property is an estimate of how long you can expect to use it in your trade or business, or to produce income. Irs form 1040ez tax tables It is the length of time over which you will make yearly depreciation deductions of your basis in the property. Irs form 1040ez tax tables It is how long it will continue to be useful to you, not how long the property will last. Irs form 1040ez tax tables Many things affect the useful life of property, such as: Frequency of use, Age when acquired, Your repair policy, and Environmental conditions. Irs form 1040ez tax tables The useful life can also be affected by technological improvements, progress in the arts, reasonably foreseeable economic changes, shifting of business centers, prohibitory laws, and other causes. Irs form 1040ez tax tables Consider all these factors before you arrive at a useful life for your property. Irs form 1040ez tax tables The useful life of the same type of property varies from user to user. Irs form 1040ez tax tables When you determine the useful life of your property, keep in mind your own experience with similar property. Irs form 1040ez tax tables You can use the general experience of the industry you are in until you are able to determine a useful life of your property from your own experience. Irs form 1040ez tax tables Change in useful life. Irs form 1040ez tax tables   You base your estimate of useful life on certain facts. Irs form 1040ez tax tables If these facts change significantly, you can adjust your estimate of the remaining useful life. Irs form 1040ez tax tables However, you redetermine the estimated useful life only when the change is substantial and there is a clear reason for making the change. Irs form 1040ez tax tables Salvage Value It is important for you to accurately determine the correct salvage value of the property you want to depreciate. Irs form 1040ez tax tables You generally cannot depreciate property below a reasonable salvage value. Irs form 1040ez tax tables Determining salvage value. Irs form 1040ez tax tables   Salvage value is the estimated value of property at the end of its useful life. Irs form 1040ez tax tables It is what you expect to get for the property if you sell it after you can no longer use it productively. Irs form 1040ez tax tables You must estimate the salvage value of a piece of property when you first acquire it. Irs form 1040ez tax tables   Salvage value is affected both by how you use the property and how long you use it. Irs form 1040ez tax tables If it is your policy to dispose of property that is still in good operating condition, the salvage value can be relatively large. Irs form 1040ez tax tables However, if your policy is to use property until it is no longer usable, its salvage value can be its junk value. Irs form 1040ez tax tables Changing salvage value. Irs form 1040ez tax tables   Once you determine the salvage value for property, you should not change it merely because prices have changed. Irs form 1040ez tax tables However, if you redetermine the useful life of property, as discussed earlier under Change in useful life, you can also redetermine the salvage value. Irs form 1040ez tax tables When you redetermine the salvage value, take into account the facts that exist at the time. Irs form 1040ez tax tables Net salvage. Irs form 1040ez tax tables   Net salvage is the salvage value of property minus what it costs to remove it when you dispose of it. Irs form 1040ez tax tables You can choose either salvage value or net salvage when you figure depreciation. Irs form 1040ez tax tables You must consistently use the one you choose and the treatment of the costs of removal must be consistent with the practice adopted. Irs form 1040ez tax tables However, if the cost to remove the property is more than the estimated salvage value, then net salvage is zero. Irs form 1040ez tax tables Your salvage value can never be less than zero. Irs form 1040ez tax tables Ten percent rule. Irs form 1040ez tax tables   If you acquire personal property that has a useful life of 3 years or more, you can use an amount for salvage value that is less than your actual estimate. Irs form 1040ez tax tables You can subtract from your estimate of salvage value an amount equal to 10% of your basis in the property. Irs form 1040ez tax tables If salvage value is less than 10% of basis, you can ignore salvage value when you figure depreciation. Irs form 1040ez tax tables Methods To Use Two methods of depreciation are the straight line and declining balance methods. Irs form 1040ez tax tables If ACRS or MACRS does not apply, you can use one of these methods. Irs form 1040ez tax tables The straight line and declining balance methods discussed in this section are not figured in the same way as straight line or declining balance methods under MACRS. Irs form 1040ez tax tables Straight Line Method Before 1981, you could use any reasonable method for every kind of depreciable property. Irs form 1040ez tax tables One of these methods was the straight line method. Irs form 1040ez tax tables This method was also used for intangible property. Irs form 1040ez tax tables It lets you deduct the same amount of depreciation each year. Irs form 1040ez tax tables To figure your deduction, determine the adjusted basis of your property, its salvage value, and its estimated useful life. Irs form 1040ez tax tables Subtract the salvage value, if any, from the adjusted basis. Irs form 1040ez tax tables The balance is the total amount of depreciation you can take over the useful life of the property. Irs form 1040ez tax tables Divide the balance by the number of years remaining in the useful life. Irs form 1040ez tax tables This gives you the amount of your yearly depreciation deduction. Irs form 1040ez tax tables Unless there is a big change in adjusted basis, or useful life, this amount will stay the same throughout the time you depreciate the property. Irs form 1040ez tax tables If, in the first year, you use the property for less than a full year, you must prorate your depreciation deduction for the number of months in use. Irs form 1040ez tax tables Example. Irs form 1040ez tax tables In April 1994, Frank bought a franchise for $5,600. Irs form 1040ez tax tables It expires in 10 years. Irs form 1040ez tax tables This property is intangible property that cannot be depreciated under MACRS. Irs form 1040ez tax tables Frank depreciates the franchise under the straight line method, using a 10-year useful life and no salvage value. Irs form 1040ez tax tables He takes the $5,600 basis and divides that amount by 10 years ($5,600 ÷ 10 = $560, a full year's use). Irs form 1040ez tax tables He must prorate the $560 for his 9 months of use in 1994. Irs form 1040ez tax tables This gives him a deduction of $420 ($560 ÷ 9/12). Irs form 1040ez tax tables In 1995, Frank can deduct $560 for the full year. Irs form 1040ez tax tables Declining Balance Method The declining balance method allows you to recover a larger amount of the cost of the property in the early years of your use of the property. Irs form 1040ez tax tables The rate cannot be more than twice the straight line rate. Irs form 1040ez tax tables Rate of depreciation. Irs form 1040ez tax tables   Under this method, you must determine your declining balance rate of depreciation. Irs form 1040ez tax tables The initial step is to: Divide the number 1 by the useful life of your property to get a straight line rate. Irs form 1040ez tax tables (For example, if property has a useful life of 5 years, its normal straight line rate of depreciation is ⅕, or 20%. Irs form 1040ez tax tables ) Multiply this straight line rate by a number that is more than 1 but not more than 2 to determine the declining balance rate. Irs form 1040ez tax tables Unless there is a change in the useful life during the time you depreciate the property, the rate of depreciation generally will not change. Irs form 1040ez tax tables Depreciation deductions. Irs form 1040ez tax tables   After you determine the rate of depreciation, multiply the adjusted basis of the property by it. Irs form 1040ez tax tables This gives you the amount of your deduction. Irs form 1040ez tax tables For example, if your adjusted basis at the beginning of the first year is $10,000, and your declining balance rate is 20%, your depreciation deduction for the first year is $2,000 ($10,000 ÷ 20%). Irs form 1040ez tax tables To figure your depreciation deduction in the second year, you must first adjust the basis for the amount of depreciation you deducted in the first year. Irs form 1040ez tax tables Subtract the previous year's depreciation from your basis ($10,000 - $2,000 = $8,000). Irs form 1040ez tax tables Multiply this amount by the rate of depreciation ($8,000 ÷ 20% = $1,600). Irs form 1040ez tax tables Your depreciation deduction for the second year is $1,600. Irs form 1040ez tax tables   As you can see from this example, your adjusted basis in the property gets smaller each year. Irs form 1040ez tax tables Also, under this method, deductions are larger in the earlier years and smaller in the later years. Irs form 1040ez tax tables You can make a change to the straight line method without consent. Irs form 1040ez tax tables Salvage value. Irs form 1040ez tax tables   Do not subtract salvage value when you figure your yearly depreciation deductions under the declining balance method. Irs form 1040ez tax tables However, you cannot depreciate the property below its reasonable salvage value. Irs form 1040ez tax tables Determine salvage value using the rules discussed earlier, including the special 10% rule. Irs form 1040ez tax tables Example. Irs form 1040ez tax tables If your adjusted basis has been decreased to $1,000 and the rate of depreciation is 20%, your depreciation deduction should be $200. Irs form 1040ez tax tables But if your estimate of salvage value was $900, you can only deduct $100. Irs form 1040ez tax tables This is because $100 is the amount that would lower your adjusted basis to equal salvage value. Irs form 1040ez tax tables Income Forecast Method The income forecast method requires income projections for each videocassette or group of videocassettes. Irs form 1040ez tax tables You can group the videocassettes by title for making this projection. Irs form 1040ez tax tables You determine the depreciation by applying a fraction to the cost less salvage value of the cassette. Irs form 1040ez tax tables The numerator is the income from the videocassette for the tax year and the denominator is the total projected income for the cassette. Irs form 1040ez tax tables For more information on the income forecast method, see Revenue Ruling 60-358 in Cumulative Bulletin 1960, Volume 2, on page 68. Irs form 1040ez tax tables How To Change Methods In some cases, you may change your method of depreciation for property depreciated under a reasonable method. Irs form 1040ez tax tables If you change your method of depreciation, it is generally a change in your method of accounting. Irs form 1040ez tax tables You must get IRS consent before making the change. Irs form 1040ez tax tables However, you do not need permission for certain changes in your method of depreciation. Irs form 1040ez tax tables The rules discussed in this section do not apply to property depreciated under ACRS or MACRS. Irs form 1040ez tax tables For information on ACRS elections,see Revocation of election, in chapter 1 under Alternate ACRS Method. Irs form 1040ez tax tables Change to the straight line method. Irs form 1040ez tax tables   You can change from the declining balance method to the straight line method at any time during the useful life of your property without IRS consent. Irs form 1040ez tax tables However, if you have a written agreement with the IRS that prohibits a change, you must first get IRS permission. Irs form 1040ez tax tables When the change is made, figure depreciation based on your adjusted basis in the property at that time. Irs form 1040ez tax tables Your adjusted basis takes into account all previous depreciation deductions. Irs form 1040ez tax tables Use the estimated remaining useful life of your property at the time of change and its estimated salvage value. Irs form 1040ez tax tables   You can change from the declining balance method to straight line only on the original tax return for the year you first use the straight line method. Irs form 1040ez tax tables You cannot make the change on an amended return filed after the due date of the original return (including extensions). Irs form 1040ez tax tables   When you make the change, attach a statement to your tax return showing: When you acquired the property, Its original cost or other original basis, The total amount claimed for depreciation and other allowances since you acquired it, Its salvage value and remaining useful life, and A description of the property and its use. Irs form 1040ez tax tables   After you change to straight line, you cannot change back to the declining balance method or to any other method for a period of 10 years without written permission from the IRS. Irs form 1040ez tax tables Changes that require permission. Irs form 1040ez tax tables   For most other changes in method of depreciation, you must get permission from the IRS. Irs form 1040ez tax tables To request a change in method of depreciation, file Form 3115. Irs form 1040ez tax tables File the application within the first 180 days of the tax year the change is to become effective. Irs form 1040ez tax tables In most cases, there is a user fee that must accompany Form 3115. Irs form 1040ez tax tables See the instructions for Form 3115 to determine if a fee is required. Irs form 1040ez tax tables Changes granted automatically. Irs form 1040ez tax tables   The IRS automatically approves certain changes of a method of depreciation. Irs form 1040ez tax tables But, you must file Form 3115 for these automatic changes. Irs form 1040ez tax tables   However, IRS can deny permission if Form 3115 is not filed on time. Irs form 1040ez tax tables For more information on automatic changes, see Revenue Procedure 74-11, 1974-1 C. Irs form 1040ez tax tables B. Irs form 1040ez tax tables 420. Irs form 1040ez tax tables Changes for which approval is not automatic. Irs form 1040ez tax tables   The automatic change procedures do not apply to: Property or an account where you made a change in depreciation within the last 10 tax years (unless the change was made under the Class Life System), Class Life Asset Depreciation Range System, and Public utility property. Irs form 1040ez tax tables   You must request and receive permission for these changes. Irs form 1040ez tax tables To make the request, file Form 3115 during the first 180 days of the tax year for which you want the change to be effective. Irs form 1040ez tax tables Change from an improper method. Irs form 1040ez tax tables   If the IRS disallows the method you are using, you do not need permission to change to a proper method. Irs form 1040ez tax tables You can adopt the straight line method, or any other method that would have been permitted if you had used it from the beginning. Irs form 1040ez tax tables If you file your tax return using an improper method, but later file an amended return, you can use a proper method on the amended return without getting IRS permission. Irs form 1040ez tax tables However, you must file the amended return before the filing date for the next tax year. Irs form 1040ez tax tables Dispositions Retirement is the permanent withdrawal of depreciable property from use in your trade or business or for the production of income. Irs form 1040ez tax tables You can do this by selling, exchanging, or abandoning the item of property. Irs form 1040ez tax tables You can also withdraw it from use without disposing of it. Irs form 1040ez tax tables For example, you could place it in a supplies or scrap account. Irs form 1040ez tax tables Retirements can be either normal or abnormal depending on all facts and circumstances. Irs form 1040ez tax tables The rules discussed next do not apply to MACRS and ACRS property. Irs form 1040ez tax tables Normal retirement. Irs form 1040ez tax tables   A normal retirement is a permanent withdrawal of depreciable property from use if the following apply: The retirement is made within the useful life you estimated originally, and The property has reached a condition at which you customarily retire or would retire similar property from use. Irs form 1040ez tax tables A retirement is generally considered normal unless you can show that you retired the property because of a reason you did not consider when you originally estimated the useful life of the property. Irs form 1040ez tax tables Abnormal retirement. Irs form 1040ez tax tables   A retirement can be abnormal if you withdraw the property early or under other circumstances. Irs form 1040ez tax tables For example, if the property is damaged by a fire or suddenly becomes obsolete and is now useless. Irs form 1040ez tax tables Gain or loss on retirement. Irs form 1040ez tax tables   There are special rules for figuring the gain or loss on retirement of property. Irs form 1040ez tax tables The gain or loss will depend on several factors. Irs form 1040ez tax tables These include the type of withdrawal, if the withdrawal was from a single property or multiple property account, and if the retirement was normal or abnormal. Irs form 1040ez tax tables A single property account contains only one item of property. Irs form 1040ez tax tables A multiple property account is one in which several items have been combined with a single rate of depreciation assigned to the entire account. Irs form 1040ez tax tables Sale or exchange. Irs form 1040ez tax tables   If property is retired by sale or exchange, you figure gain or loss by the usual rules that apply to sales or other dispositions of property. Irs form 1040ez tax tables See Publication 544. Irs form 1040ez tax tables Property not disposed of or abandoned. Irs form 1040ez tax tables   If property is retired permanently, but not disposed of or physically abandoned, you do not recognize gain. Irs form 1040ez tax tables You are allowed a loss in such a case, but only if the retirement is: An abnormal retirement, A normal retirement from a single property account in which you determined the life of each item of property separately, or A normal retirement from a multiple property account in which the depreciation rate is based on the maximum expected life of the longest lived item of property and the loss occurs before the expiration of the full useful life. Irs form 1040ez tax tables However, you are not allowed a loss if the depreciation rate is based on the average useful life of the items of property in the account. Irs form 1040ez tax tables   To figure your loss, subtract the estimated salvage or fair market value of the property at the date of retirement, whichever is more, from its adjusted basis. Irs form 1040ez tax tables Special rule for normal retirements from item accounts. Irs form 1040ez tax tables   You can generally deduct losses upon retirement of a few depreciable items of property with similar useful lives, if: You account for each one in a separate account, and You use the average useful life to figure depreciation. Irs form 1040ez tax tables However, you cannot deduct losses if you use the average useful life to figure depreciation and they have a wide range of useful lives. Irs form 1040ez tax tables   If you have a large number of depreciable property items and use average useful lives to figure depreciation, you cannot deduct the losses upon normal retirements from these accounts. Irs form 1040ez tax tables Abandoned property. Irs form 1040ez tax tables   If you physically abandon property, you can deduct as a loss the adjusted basis of the property at the time of its abandonment. Irs form 1040ez tax tables However, your intent must be to discard the property so that you will not use it again or retrieve it for sale, exchange, or other disposition. Irs form 1040ez tax tables Basis of property retired. Irs form 1040ez tax tables   The basis for figuring gain or loss on the retirement of property is its adjusted basis at the time of retirement, as determined in the following discussions. Irs form 1040ez tax tables Single item accounts. Irs form 1040ez tax tables   If an item of property is accounted for in a single item account, the adjusted basis is the basis you would use to figure gain or loss for a sale or exchange of the property. Irs form 1040ez tax tables This is generally the cost or other basis of the item of property less depreciation. Irs form 1040ez tax tables See Publication 551. Irs form 1040ez tax tables Multiple property account. Irs form 1040ez tax tables   For a normal retirement from a multiple property account, if you figured depreciation using the average expected useful life, the adjusted basis is the salvage value estimated for the item of property when it was originally acquired. Irs form 1040ez tax tables If you figured depreciation using the maximum expected useful life of the longest lived item of property in the account, you must use the depreciation method used for the multiple property account and a rate based on the maximum expected useful life of the item of property retired. Irs form 1040ez tax tables   You make the adjustment for depreciation for an abnormal retirement from a multiple property account at the rate that would be proper if the item of property was depreciated in a single property account. Irs form 1040ez tax tables The method of depreciation used for the multiple property account is used. Irs form 1040ez tax tables You base the rate on either the average expected useful life or the maximum expected useful life of the retired item of property, depending on the method used to determine the depreciation rate for the multiple property account. Irs form 1040ez tax tables Prev  Up  Next   Home   More Online Publications
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The Irs Form 1040ez Tax Tables

Irs form 1040ez tax tables 4. Irs form 1040ez tax tables   Qualified Plans Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Kinds of PlansDefined Contribution Plan Defined Benefit Plan Qualification RulesEarly retirement. Irs form 1040ez tax tables Loan secured by benefits. Irs form 1040ez tax tables Waiver of survivor benefits. Irs form 1040ez tax tables Waiver of 30-day waiting period before annuity starting date. Irs form 1040ez tax tables Involuntary cash-out of benefits not more than dollar limit. Irs form 1040ez tax tables Exception for certain loans. Irs form 1040ez tax tables Exception for QDRO. Irs form 1040ez tax tables SIMPLE and safe harbor 401(k) plan exception. Irs form 1040ez tax tables Setting Up a Qualified PlanAdopting a Written Plan Investing Plan Assets Minimum Funding RequirementDue dates. Irs form 1040ez tax tables Installment percentage. Irs form 1040ez tax tables Extended period for making contributions. Irs form 1040ez tax tables ContributionsEmployer Contributions Employee Contributions When Contributions Are Considered Made Employer DeductionDeduction Limits Deduction Limit for Self-Employed Individuals Where To Deduct Contributions Carryover of Excess Contributions Excise Tax for Nondeductible (Excess) Contributions Elective Deferrals (401(k) Plans)Limit on Elective Deferrals Automatic Enrollment Treatment of Excess Deferrals Qualified Roth Contribution ProgramElective Deferrals Qualified Distributions Reporting Requirements DistributionsRequired Distributions Distributions From 401(k) Plans Tax Treatment of Distributions Tax on Early Distributions Tax on Excess Benefits Excise Tax on Reversion of Plan Assets Notification of Significant Benefit Accrual Reduction Prohibited TransactionsTax on Prohibited Transactions Reporting RequirementsOne-participant plan. Irs form 1040ez tax tables Caution: Form 5500-EZ not required. Irs form 1040ez tax tables Form 5500. Irs form 1040ez tax tables Electronic filing of Forms 5500 and 5500-SF. Irs form 1040ez tax tables Topics - This chapter discusses: Kinds of plans Qualification rules Setting up a qualified plan Minimum funding requirement Contributions Employer deduction Elective deferrals (401(k) plans) Qualified Roth contribution program Distributions Prohibited transactions Reporting requirements Useful Items - You may want to see: Publications 575 Pension and Annuity Income 590 Individual Retirement Arrangements (IRAs) 3066 Have you had your Check-up this year? for Retirement Plans 3998 Choosing A Retirement Solution for Your Small Business 4222 401(k) Plans for Small Businesses 4530 Designated Roth Accounts under a 401(k), 403(b), or governmental 457(b) plans 4531 401(k) Plan Checklist 4674 Automatic Enrollment 401(k) Plans for Small Businesses 4806 Profit Sharing Plans for Small Businesses Forms (and Instructions) www. Irs form 1040ez tax tables dol. Irs form 1040ez tax tables gov/ebsa/pdf/2013-5500. Irs form 1040ez tax tables pdf www. Irs form 1040ez tax tables dol. Irs form 1040ez tax tables gov/ebsa/pdf/2013-5500-SF. Irs form 1040ez tax tables pdf W-2 Wage and Tax Statement Schedule K-1 (Form 1065) Partner's Share of Income, Deductions, Credits, etc. Irs form 1040ez tax tables 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Irs form 1040ez tax tables 1040 U. Irs form 1040ez tax tables S. Irs form 1040ez tax tables Individual Income Tax Return Schedule C (Form 1040) Profit or Loss From Business Schedule F (Form 1040) Profit or Loss From Farming 5300 Application for Determination for Employee Benefit Plan 5310 Application for Determination for Terminating Plan 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts 5330 Return of Excise Taxes Related to Employee Benefit Plans 5500 Annual Return/Report of Employee Benefit Plan. Irs form 1040ez tax tables For copies of this form, go to: 5500-EZ Annual Return of One-Participant (Owners and Their Spouses) Retirement Plan 5500-SF Short Form Annual Return/Report of Small Employee Benefit Plan. Irs form 1040ez tax tables For copies of this form, go to: 8717 User Fee for Employee Plan Determination Letter Request 8880 Credit for Qualified Retirement Savings Contributions 8881 Credit for Small Employer Pension Plan Startup Costs 8955-SSA Annual Registration Statement Identifying Separated Participants With Deferred Vested Benefits These qualified retirement plans set up by self-employed individuals are sometimes called Keogh or H. Irs form 1040ez tax tables R. Irs form 1040ez tax tables 10 plans. Irs form 1040ez tax tables A sole proprietor or a partnership can set up one of these plans. Irs form 1040ez tax tables A common-law employee or a partner cannot set up one of these plans. Irs form 1040ez tax tables The plans described here can also be set up and maintained by employers that are corporations. Irs form 1040ez tax tables All the rules discussed here apply to corporations except where specifically limited to the self-employed. Irs form 1040ez tax tables The plan must be for the exclusive benefit of employees or their beneficiaries. Irs form 1040ez tax tables These qualified plans can include coverage for a self-employed individual. Irs form 1040ez tax tables As an employer, you can usually deduct, subject to limits, contributions you make to a qualified plan, including those made for your own retirement. Irs form 1040ez tax tables The contributions (and earnings and gains on them) are generally tax free until distributed by the plan. Irs form 1040ez tax tables Kinds of Plans There are two basic kinds of qualified plans—defined contribution plans and defined benefit plans—and different rules apply to each. Irs form 1040ez tax tables You can have more than one qualified plan, but your contributions to all the plans must not total more than the overall limits discussed under Contributions and Employer Deduction, later. Irs form 1040ez tax tables Defined Contribution Plan A defined contribution plan provides an individual account for each participant in the plan. Irs form 1040ez tax tables It provides benefits to a participant largely based on the amount contributed to that participant's account. Irs form 1040ez tax tables Benefits are also affected by any income, expenses, gains, losses, and forfeitures of other accounts that may be allocated to an account. Irs form 1040ez tax tables A defined contribution plan can be either a profit-sharing plan or a money purchase pension plan. Irs form 1040ez tax tables Profit-sharing plan. Irs form 1040ez tax tables   Although it is called a “profit-sharing plan,” you do not actually have to make a business profit for the year in order to make a contribution (except for yourself if you are self-employed as discussed under Self-employed Individual, later). Irs form 1040ez tax tables A profit-sharing plan can be set up to allow for discretionary employer contributions, meaning the amount contributed each year to the plan is not fixed. Irs form 1040ez tax tables An employer may even make no contribution to the plan for a given year. Irs form 1040ez tax tables   The plan must provide a definite formula for allocating the contribution among the participants and for distributing the accumulated funds to the employees after they reach a certain age, after a fixed number of years, or upon certain other occurrences. Irs form 1040ez tax tables   In general, you can be more flexible in making contributions to a profit-sharing plan than to a money purchase pension plan (discussed next) or a defined benefit plan (discussed later). Irs form 1040ez tax tables Money purchase pension plan. Irs form 1040ez tax tables   Contributions to a money purchase pension plan are fixed and are not based on your business profits. Irs form 1040ez tax tables For example, if the plan requires that contributions be 10% of the participants' compensation without regard to whether you have profits (or the self-employed person has earned income), the plan is a money purchase pension plan. Irs form 1040ez tax tables This applies even though the compensation of a self-employed individual as a participant is based on earned income derived from business profits. Irs form 1040ez tax tables Defined Benefit Plan A defined benefit plan is any plan that is not a defined contribution plan. Irs form 1040ez tax tables Contributions to a defined benefit plan are based on what is needed to provide definitely determinable benefits to plan participants. Irs form 1040ez tax tables Actuarial assumptions and computations are required to figure these contributions. Irs form 1040ez tax tables Generally, you will need continuing professional help to have a defined benefit plan. Irs form 1040ez tax tables Qualification Rules To qualify for the tax benefits available to qualified plans, a plan must meet certain requirements (qualification rules) of the tax law. Irs form 1040ez tax tables Generally, unless you write your own plan, the financial institution that provided your plan will take the continuing responsibility for meeting qualification rules that are later changed. Irs form 1040ez tax tables The following is a brief overview of important qualification rules that generally have not yet been discussed. Irs form 1040ez tax tables It is not intended to be all-inclusive. Irs form 1040ez tax tables See Setting Up a Qualified Plan , later. Irs form 1040ez tax tables Generally, the following qualification rules also apply to a SIMPLE 401(k) retirement plan. Irs form 1040ez tax tables A SIMPLE 401(k) plan is, however, not subject to the top-heavy plan rules and nondiscrimination rules if the plan satisfies the provisions discussed in chapter 3 under SIMPLE 401(k) Plan. Irs form 1040ez tax tables Plan assets must not be diverted. Irs form 1040ez tax tables   Your plan must make it impossible for its assets to be used for, or diverted to, purposes other than the benefit of employees and their beneficiaries. Irs form 1040ez tax tables As a general rule, the assets cannot be diverted to the employer. Irs form 1040ez tax tables Minimum coverage requirement must be met. Irs form 1040ez tax tables   To be a qualified plan, a defined benefit plan must benefit at least the lesser of the following. Irs form 1040ez tax tables 50 employees, or The greater of: 40% of all employees, or Two employees. Irs form 1040ez tax tables If there is only one employee, the plan must benefit that employee. Irs form 1040ez tax tables Contributions or benefits must not discriminate. Irs form 1040ez tax tables   Under the plan, contributions or benefits to be provided must not discriminate in favor of highly compensated employees. Irs form 1040ez tax tables Contributions and benefits must not be more than certain limits. Irs form 1040ez tax tables   Your plan must not provide for contributions or benefits that are more than certain limits. Irs form 1040ez tax tables The limits apply to the annual contributions and other additions to the account of a participant in a defined contribution plan and to the annual benefit payable to a participant in a defined benefit plan. Irs form 1040ez tax tables These limits are discussed later in this chapter under Contributions. Irs form 1040ez tax tables Minimum vesting standard must be met. Irs form 1040ez tax tables   Your plan must satisfy certain requirements regarding when benefits vest. Irs form 1040ez tax tables A benefit is vested (you have a fixed right to it) when it becomes nonforfeitable. Irs form 1040ez tax tables A benefit is nonforfeitable if it cannot be lost upon the happening, or failure to happen, of any event. Irs form 1040ez tax tables Special rules apply to forfeited benefit amounts. Irs form 1040ez tax tables In defined contribution plans, forfeitures can be allocated to the accounts of remaining participants in a nondiscriminatory way, or they can be used to reduce your contributions. Irs form 1040ez tax tables   Forfeitures under a defined benefit plan cannot be used to increase the benefits any employee would otherwise receive under the plan. Irs form 1040ez tax tables Forfeitures must be used instead to reduce employer contributions. Irs form 1040ez tax tables Participation. Irs form 1040ez tax tables   In general, an employee must be allowed to participate in your plan if he or she meets both the following requirements. Irs form 1040ez tax tables Has reached age 21. Irs form 1040ez tax tables Has at least 1 year of service (2 years if the plan is not a 401(k) plan and provides that after not more than 2 years of service the employee has a nonforfeitable right to all his or her accrued benefit). Irs form 1040ez tax tables A plan cannot exclude an employee because he or she has reached a specified age. Irs form 1040ez tax tables Leased employee. Irs form 1040ez tax tables   A leased employee, defined in chapter 1, who performs services for you (recipient of the services) is treated as your employee for certain plan qualification rules. Irs form 1040ez tax tables These rules include those in all the following areas. Irs form 1040ez tax tables Nondiscrimination in coverage, contributions, and benefits. Irs form 1040ez tax tables Minimum age and service requirements. Irs form 1040ez tax tables Vesting. Irs form 1040ez tax tables Limits on contributions and benefits. Irs form 1040ez tax tables Top-heavy plan requirements. Irs form 1040ez tax tables Contributions or benefits provided by the leasing organization for services performed for you are treated as provided by you. Irs form 1040ez tax tables Benefit payment must begin when required. Irs form 1040ez tax tables   Your plan must provide that, unless the participant chooses otherwise, the payment of benefits to the participant must begin within 60 days after the close of the latest of the following periods. Irs form 1040ez tax tables The plan year in which the participant reaches the earlier of age 65 or the normal retirement age specified in the plan. Irs form 1040ez tax tables The plan year in which the 10th anniversary of the year in which the participant began participating in the plan occurs. Irs form 1040ez tax tables The plan year in which the participant separates from service. Irs form 1040ez tax tables Early retirement. Irs form 1040ez tax tables   Your plan can provide for payment of retirement benefits before the normal retirement age. Irs form 1040ez tax tables If your plan offers an early retirement benefit, a participant who separates from service before satisfying the early retirement age requirement is entitled to that benefit if he or she meets both the following requirements. Irs form 1040ez tax tables Satisfies the service requirement for the early retirement benefit. Irs form 1040ez tax tables Separates from service with a nonforfeitable right to an accrued benefit. Irs form 1040ez tax tables The benefit, which may be actuarially reduced, is payable when the early retirement age requirement is met. Irs form 1040ez tax tables Required minimum distributions. Irs form 1040ez tax tables   Special rules require minimum annual distributions from qualified plans, generally beginning after age  70½. Irs form 1040ez tax tables See Required Distributions , under Distributions, later. Irs form 1040ez tax tables Survivor benefits. Irs form 1040ez tax tables   Defined benefit and money purchase pension plans must provide automatic survivor benefits in both the following forms. Irs form 1040ez tax tables A qualified joint and survivor annuity for a vested participant who does not die before the annuity starting date. Irs form 1040ez tax tables A qualified pre-retirement survivor annuity for a vested participant who dies before the annuity starting date and who has a surviving spouse. Irs form 1040ez tax tables   The automatic survivor benefit also applies to any participant under a profit-sharing plan unless all the following conditions are met. Irs form 1040ez tax tables The participant does not choose benefits in the form of a life annuity. Irs form 1040ez tax tables The plan pays the full vested account balance to the participant's surviving spouse (or other beneficiary if the surviving spouse consents or if there is no surviving spouse) if the participant dies. Irs form 1040ez tax tables The plan is not a direct or indirect transferee of a plan that must provide automatic survivor benefits. Irs form 1040ez tax tables Loan secured by benefits. Irs form 1040ez tax tables   If automatic survivor benefits are required for a spouse under a plan, he or she must consent to a loan that uses as security the accrued benefits in the plan. Irs form 1040ez tax tables Waiver of survivor benefits. Irs form 1040ez tax tables   Each plan participant may be permitted to waive the joint and survivor annuity or the pre-retirement survivor annuity (or both), but only if the participant has the written consent of the spouse. Irs form 1040ez tax tables The plan also must allow the participant to withdraw the waiver. Irs form 1040ez tax tables The spouse's consent must be witnessed by a plan representative or notary public. Irs form 1040ez tax tables Waiver of 30-day waiting period before annuity starting date. Irs form 1040ez tax tables    A plan may permit a participant to waive (with spousal consent) the 30-day minimum waiting period after a written explanation of the terms and conditions of a joint and survivor annuity is provided to each participant. Irs form 1040ez tax tables   The waiver is allowed only if the distribution begins more than 7 days after the written explanation is provided. Irs form 1040ez tax tables Involuntary cash-out of benefits not more than dollar limit. Irs form 1040ez tax tables   A plan may provide for the immediate distribution of the participant's benefit under the plan if the present value of the benefit is not greater than $5,000. Irs form 1040ez tax tables   However, the distribution cannot be made after the annuity starting date unless the participant and the spouse or surviving spouse of a participant who died (if automatic survivor benefits are required for a spouse under the plan) consents in writing to the distribution. Irs form 1040ez tax tables If the present value is greater than $5,000, the plan must have the written consent of the participant and the spouse or surviving spouse (if automatic survivor benefits are required for a spouse under the plan) for any immediate distribution of the benefit. Irs form 1040ez tax tables   Benefits attributable to rollover contributions and earnings on them can be ignored in determining the present value of these benefits. Irs form 1040ez tax tables   A plan must provide for the automatic rollover of any cash-out distribution of more than $1,000 to an individual retirement account or annuity, unless the participant chooses otherwise. Irs form 1040ez tax tables A section 402(f) notice must be sent prior to an involuntary cash-out of an eligible rollover distribution. Irs form 1040ez tax tables See Section 402(f) Notice under Distributions, later, for more details. Irs form 1040ez tax tables Consolidation, merger, or transfer of assets or liabilities. Irs form 1040ez tax tables   Your plan must provide that, in the case of any merger or consolidation with, or transfer of assets or liabilities to, any other plan, each participant would (if the plan then terminated) receive a benefit equal to or more than the benefit he or she would have been entitled to just before the merger, etc. Irs form 1040ez tax tables (if the plan had then terminated). Irs form 1040ez tax tables Benefits must not be assigned or alienated. Irs form 1040ez tax tables   Your plan must provide that a participant's or beneficiary's benefits under the plan cannot be taken away by any legal or equitable proceeding except as provided below or pursuant to certain judgements or settlements against the participant for violations of plan rules. Irs form 1040ez tax tables Exception for certain loans. Irs form 1040ez tax tables   A loan from the plan (not from a third party) to a participant or beneficiary is not treated as an assignment or alienation if the loan is secured by the participant's accrued nonforfeitable benefit and is exempt from the tax on prohibited transactions under section 4975(d)(1) or would be exempt if the participant were a disqualified person. Irs form 1040ez tax tables A disqualified person is defined later in this chapter under Prohibited Transactions. Irs form 1040ez tax tables Exception for QDRO. Irs form 1040ez tax tables   Compliance with a QDRO (qualified domestic relations order) does not result in a prohibited assignment or alienation of benefits. Irs form 1040ez tax tables   Payments to an alternate payee under a QDRO before the participant attains age 59½ are not subject to the 10% additional tax that would otherwise apply under certain circumstances. Irs form 1040ez tax tables Benefits distributed to an alternate payee under a QDRO can be rolled over tax free to an individual retirement account or to an individual retirement annuity. Irs form 1040ez tax tables No benefit reduction for social security increases. Irs form 1040ez tax tables   Your plan must not permit a benefit reduction for a post-separation increase in the social security benefit level or wage base for any participant or beneficiary who is receiving benefits under your plan, or who is separated from service and has nonforfeitable rights to benefits. Irs form 1040ez tax tables This rule also applies to plans supplementing the benefits provided by other federal or state laws. Irs form 1040ez tax tables Elective deferrals must be limited. Irs form 1040ez tax tables   If your plan provides for elective deferrals, it must limit those deferrals to the amount in effect for that particular year. Irs form 1040ez tax tables See Limit on Elective Deferrals later in this chapter. Irs form 1040ez tax tables Top-heavy plan requirements. Irs form 1040ez tax tables   A top-heavy plan is one that mainly favors partners, sole proprietors, and other key employees. Irs form 1040ez tax tables   A plan is top-heavy for a plan year if, for the preceding plan year, the total value of accrued benefits or account balances of key employees is more than 60% of the total value of accrued benefits or account balances of all employees. Irs form 1040ez tax tables Additional requirements apply to a top-heavy plan primarily to provide minimum benefits or contributions for non-key employees covered by the plan. Irs form 1040ez tax tables   Most qualified plans, whether or not top-heavy, must contain provisions that meet the top-heavy requirements and will take effect in plan years in which the plans are top-heavy. Irs form 1040ez tax tables These qualification requirements for top-heavy plans are explained in section 416 and its regulations. Irs form 1040ez tax tables SIMPLE and safe harbor 401(k) plan exception. Irs form 1040ez tax tables   The top-heavy plan requirements do not apply to SIMPLE 401(k) plans, discussed earlier in chapter 3, or to safe harbor 401(k) plans that consist solely of safe harbor contributions, discussed later in this chapter. Irs form 1040ez tax tables QACAs (discussed later) also are not subject to top-heavy requirements. Irs form 1040ez tax tables Setting Up a Qualified Plan There are two basic steps in setting up a qualified plan. Irs form 1040ez tax tables First you adopt a written plan. Irs form 1040ez tax tables Then you invest the plan assets. Irs form 1040ez tax tables You, the employer, are responsible for setting up and maintaining the plan. Irs form 1040ez tax tables If you are self-employed, it is not necessary to have employees besides yourself to sponsor and set up a qualified plan. Irs form 1040ez tax tables If you have employees, see Participation, under Qualification Rules, earlier. Irs form 1040ez tax tables Set-up deadline. Irs form 1040ez tax tables   To take a deduction for contributions for a tax year, your plan must be set up (adopted) by the last day of that year (December 31 for calendar-year employers). Irs form 1040ez tax tables Credit for startup costs. Irs form 1040ez tax tables   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a qualified plan that first became effective in 2013. Irs form 1040ez tax tables For more information, see Credit for startup costs under Reminders, earlier. Irs form 1040ez tax tables Adopting a Written Plan You must adopt a written plan. Irs form 1040ez tax tables The plan can be an IRS-approved master or prototype plan offered by a sponsoring organization. Irs form 1040ez tax tables Or it can be an individually designed plan. Irs form 1040ez tax tables Written plan requirement. Irs form 1040ez tax tables   To qualify, the plan you set up must be in writing and must be communicated to your employees. Irs form 1040ez tax tables The plan's provisions must be stated in the plan. Irs form 1040ez tax tables It is not sufficient for the plan to merely refer to a requirement of the Internal Revenue Code. Irs form 1040ez tax tables Master or prototype plans. Irs form 1040ez tax tables   Most qualified plans follow a standard form of plan (a master or prototype plan) approved by the IRS. Irs form 1040ez tax tables Master and prototype plans are plans made available by plan providers for adoption by employers (including self-employed individuals). Irs form 1040ez tax tables Under a master plan, a single trust or custodial account is established, as part of the plan, for the joint use of all adopting employers. Irs form 1040ez tax tables Under a prototype plan, a separate trust or custodial account is established for each employer. Irs form 1040ez tax tables Plan providers. Irs form 1040ez tax tables   The following organizations generally can provide IRS-approved master or prototype plans. Irs form 1040ez tax tables Banks (including some savings and loan associations and federally insured credit unions). Irs form 1040ez tax tables Trade or professional organizations. Irs form 1040ez tax tables Insurance companies. Irs form 1040ez tax tables Mutual funds. Irs form 1040ez tax tables Individually designed plan. Irs form 1040ez tax tables   If you prefer, you can set up an individually designed plan to meet specific needs. Irs form 1040ez tax tables Although advance IRS approval is not required, you can apply for approval by paying a fee and requesting a determination letter. Irs form 1040ez tax tables You may need professional help for this. Irs form 1040ez tax tables See Rev. Irs form 1040ez tax tables Proc. Irs form 1040ez tax tables 2014-6, 2014-1 I. Irs form 1040ez tax tables R. Irs form 1040ez tax tables B. Irs form 1040ez tax tables 198, available at www. Irs form 1040ez tax tables irs. Irs form 1040ez tax tables gov/irb/2014-1_IRB/ar10. Irs form 1040ez tax tables html, as annually updated, that may help you decide whether to apply for approval. Irs form 1040ez tax tables Internal Revenue Bulletins are available on the IRS website at IRS. Irs form 1040ez tax tables gov They are also available at most IRS offices and at certain libraries. Irs form 1040ez tax tables User fee. Irs form 1040ez tax tables   The fee mentioned earlier for requesting a determination letter does not apply to employers who have 100 or fewer employees who received at least $5,000 of compensation from the employer for the preceding year. Irs form 1040ez tax tables At least one of them must be a non-highly compensated employee participating in the plan. Irs form 1040ez tax tables The fee does not apply to requests made by the later of the following dates. Irs form 1040ez tax tables The end of the 5th plan year the plan is in effect. Irs form 1040ez tax tables The end of any remedial amendment period for the plan that begins within the first 5 plan years. Irs form 1040ez tax tables The request cannot be made by the sponsor of a prototype or similar plan the sponsor intends to market to participating employers. Irs form 1040ez tax tables   For more information about whether the user fee applies, see Rev. Irs form 1040ez tax tables Proc. Irs form 1040ez tax tables 2014-8, 2014-1 I. Irs form 1040ez tax tables R. Irs form 1040ez tax tables B. Irs form 1040ez tax tables 242, available at www. Irs form 1040ez tax tables irs. Irs form 1040ez tax tables gov/irb/2014-1_IRB/ar12. Irs form 1040ez tax tables html, as may be annually updated; Notice 2003-49, 2003-32 I. Irs form 1040ez tax tables R. Irs form 1040ez tax tables B. Irs form 1040ez tax tables 294, available at www. Irs form 1040ez tax tables irs. Irs form 1040ez tax tables gov/irb/2003-32_IRB/ar13. Irs form 1040ez tax tables html; and Notice 2011-86, 2011-45 I. Irs form 1040ez tax tables R. Irs form 1040ez tax tables B. Irs form 1040ez tax tables 698, available at www. Irs form 1040ez tax tables irs. Irs form 1040ez tax tables gov/irb/2011-45_IRB/ar11. Irs form 1040ez tax tables html. Irs form 1040ez tax tables Investing Plan Assets In setting up a qualified plan, you arrange how the plan's funds will be used to build its assets. Irs form 1040ez tax tables You can establish a trust or custodial account to invest the funds. Irs form 1040ez tax tables You, the trust, or the custodial account can buy an annuity contract from an insurance company. Irs form 1040ez tax tables Life insurance can be included only if it is incidental to the retirement benefits. Irs form 1040ez tax tables You set up a trust by a legal instrument (written document). Irs form 1040ez tax tables You may need professional help to do this. Irs form 1040ez tax tables You can set up a custodial account with a bank, savings and loan association, credit union, or other person who can act as the plan trustee. Irs form 1040ez tax tables You do not need a trust or custodial account, although you can have one, to invest the plan's funds in annuity contracts or face-amount certificates. Irs form 1040ez tax tables If anyone other than a trustee holds them, however, the contracts or certificates must state they are not transferable. Irs form 1040ez tax tables Other plan requirements. Irs form 1040ez tax tables   For information on other important plan requirements, see Qualification Rules , earlier in this chapter. Irs form 1040ez tax tables Minimum Funding Requirement In general, if your plan is a money purchase pension plan or a defined benefit plan, you must actually pay enough into the plan to satisfy the minimum funding standard for each year. Irs form 1040ez tax tables Determining the amount needed to satisfy the minimum funding standard for a defined benefit plan is complicated, and you should seek professional help in order to meet these contribution requirements. Irs form 1040ez tax tables For information on this funding requirement, see section 412 and its regulations. Irs form 1040ez tax tables Quarterly installments of required contributions. Irs form 1040ez tax tables   If your plan is a defined benefit plan subject to the minimum funding requirements, you generally must make quarterly installment payments of the required contributions. Irs form 1040ez tax tables If you do not pay the full installments timely, you may have to pay interest on any underpayment for the period of the underpayment. Irs form 1040ez tax tables Due dates. Irs form 1040ez tax tables   The due dates for the installments are 15 days after the end of each quarter. Irs form 1040ez tax tables For a calendar-year plan, the installments are due April 15, July 15, October 15, and January 15 (of the following year). Irs form 1040ez tax tables Installment percentage. Irs form 1040ez tax tables   Each quarterly installment must be 25% of the required annual payment. Irs form 1040ez tax tables Extended period for making contributions. Irs form 1040ez tax tables   Additional contributions required to satisfy the minimum funding requirement for a plan year will be considered timely if made by 8½ months after the end of that year. Irs form 1040ez tax tables Contributions A qualified plan is generally funded by your contributions. Irs form 1040ez tax tables However, employees participating in the plan may be permitted to make contributions, and you may be permitted to make contributions on your own behalf. Irs form 1040ez tax tables See Employee Contributions and Elective Deferrals later. Irs form 1040ez tax tables Contributions deadline. Irs form 1040ez tax tables   You can make deductible contributions for a tax year up to the due date of your return (plus extensions) for that year. Irs form 1040ez tax tables Self-employed individual. Irs form 1040ez tax tables   You can make contributions on behalf of yourself only if you have net earnings (compensation) from self-employment in the trade or business for which the plan was set up. Irs form 1040ez tax tables Your net earnings must be from your personal services, not from your investments. Irs form 1040ez tax tables If you have a net loss from self-employment, you cannot make contributions for yourself for the year, even if you can contribute for common-law employees based on their compensation. Irs form 1040ez tax tables Employer Contributions There are certain limits on the contributions and other annual additions you can make each year for plan participants. Irs form 1040ez tax tables There are also limits on the amount you can deduct. Irs form 1040ez tax tables See Deduction Limits , later. Irs form 1040ez tax tables Limits on Contributions and Benefits Your plan must provide that contributions or benefits cannot exceed certain limits. Irs form 1040ez tax tables The limits differ depending on whether your plan is a defined contribution plan or a defined benefit plan. Irs form 1040ez tax tables Defined benefit plan. Irs form 1040ez tax tables   For 2013, the annual benefit for a participant under a defined benefit plan cannot exceed the lesser of the following amounts. Irs form 1040ez tax tables 100% of the participant's average compensation for his or her highest 3 consecutive calendar years. Irs form 1040ez tax tables $205,000 ($210,000 for 2014). Irs form 1040ez tax tables Defined contribution plan. Irs form 1040ez tax tables   For 2013, a defined contribution plan's annual contributions and other additions (excluding earnings) to the account of a participant cannot exceed the lesser of the following amounts. Irs form 1040ez tax tables 100% of the participant's compensation. Irs form 1040ez tax tables $51,000 ($52,000 for 2014). Irs form 1040ez tax tables   Catch-up contributions (discussed later under Limit on Elective Deferrals) are not subject to the above limit. Irs form 1040ez tax tables Employee Contributions Participants may be permitted to make nondeductible contributions to a plan in addition to your contributions. Irs form 1040ez tax tables Even though these employee contributions are not deductible, the earnings on them are tax free until distributed in later years. Irs form 1040ez tax tables Also, these contributions must satisfy the actual contribution percentage (ACP) test of section 401(m)(2), a nondiscrimination test that applies to employee contributions and matching contributions. Irs form 1040ez tax tables See Regulations sections 1. Irs form 1040ez tax tables 401(k)-2 and 1. Irs form 1040ez tax tables 401(m)-2 for further guidance relating to the nondiscrimination rules under sections 401(k) and 401(m). Irs form 1040ez tax tables When Contributions Are Considered Made You generally apply your plan contributions to the year in which you make them. Irs form 1040ez tax tables But you can apply them to the previous year if all the following requirements are met. Irs form 1040ez tax tables You make them by the due date of your tax return for the previous year (plus extensions). Irs form 1040ez tax tables The plan was established by the end of the previous year. Irs form 1040ez tax tables The plan treats the contributions as though it had received them on the last day of the previous year. Irs form 1040ez tax tables You do either of the following. Irs form 1040ez tax tables You specify in writing to the plan administrator or trustee that the contributions apply to the previous year. Irs form 1040ez tax tables You deduct the contributions on your tax return for the previous year. Irs form 1040ez tax tables A partnership shows contributions for partners on Form 1065. Irs form 1040ez tax tables Employer's promissory note. Irs form 1040ez tax tables   Your promissory note made out to the plan is not a payment that qualifies for the deduction. Irs form 1040ez tax tables Also, issuing this note is a prohibited transaction subject to tax. Irs form 1040ez tax tables See Prohibited Transactions , later. Irs form 1040ez tax tables Employer Deduction You can usually deduct, subject to limits, contributions you make to a qualified plan, including those made for your own retirement. Irs form 1040ez tax tables The contributions (and earnings and gains on them) are generally tax free until distributed by the plan. Irs form 1040ez tax tables Deduction Limits The deduction limit for your contributions to a qualified plan depends on the kind of plan you have. Irs form 1040ez tax tables Defined contribution plans. Irs form 1040ez tax tables   The deduction for contributions to a defined contribution plan (profit-sharing plan or money purchase pension plan) cannot be more than 25% of the compensation paid (or accrued) during the year to your eligible employees participating in the plan. Irs form 1040ez tax tables If you are self-employed, you must reduce this limit in figuring the deduction for contributions you make for your own account. Irs form 1040ez tax tables See Deduction Limit for Self-Employed Individuals , later. Irs form 1040ez tax tables   When figuring the deduction limit, the following rules apply. Irs form 1040ez tax tables Elective deferrals (discussed later) are not subject to the limit. Irs form 1040ez tax tables Compensation includes elective deferrals. Irs form 1040ez tax tables The maximum compensation that can be taken into account for each employee in 2013 is $255,000 ($260,000 for 2014). Irs form 1040ez tax tables Defined benefit plans. Irs form 1040ez tax tables   The deduction for contributions to a defined benefit plan is based on actuarial assumptions and computations. Irs form 1040ez tax tables Consequently, an actuary must figure your deduction limit. Irs form 1040ez tax tables    In figuring the deduction for contributions, you cannot take into account any contributions or benefits that are more than the limits discussed earlier under Limits on Contributions and Benefits, earlier. Irs form 1040ez tax tables Table 4–1. Irs form 1040ez tax tables Carryover of Excess Contributions Illustrated—Profit-Sharing Plan (000's omitted) Year Participants' compensation Participants' share of required contribution (10% of annual profit) Deductible  limit for current year (25% of compensation) Contribution Excess contribution carryover used1 Total  deduction including carryovers Excess contribution carryover available at end of year 2010 $1,000 $100 $250 $100 $ 0 $100 $ 0 2011 400 165 100 165 0 100 65 2012 500 100 125 100 25 125 40 2013 600 100 150 100 40 140 0  1There were no carryovers from years before 2010. Irs form 1040ez tax tables Deduction Limit for Self-Employed Individuals If you make contributions for yourself, you need to make a special computation to figure your maximum deduction for these contributions. Irs form 1040ez tax tables Compensation is your net earnings from self-employment, defined in chapter 1. Irs form 1040ez tax tables This definition takes into account both the following items. Irs form 1040ez tax tables The deduction for the deductible part of your self-employment tax. Irs form 1040ez tax tables The deduction for contributions on your behalf to the plan. Irs form 1040ez tax tables The deduction for your own contributions and your net earnings depend on each other. Irs form 1040ez tax tables For this reason, you determine the deduction for your own contributions indirectly by reducing the contribution rate called for in your plan. Irs form 1040ez tax tables To do this, use either the Rate Table for Self-Employed or the Rate Worksheet for Self-Employed in chapter 5. Irs form 1040ez tax tables Then figure your maximum deduction by using the Deduction Worksheet for Self-Employed in chapter 5. Irs form 1040ez tax tables Where To Deduct Contributions Deduct the contributions you make for your common-law employees on your tax return. Irs form 1040ez tax tables For example, sole proprietors deduct them on Schedule C (Form 1040) or Schedule F (Form 1040); partnerships deduct them on Form 1065; and corporations deduct them on Form 1120, or Form 1120S. Irs form 1040ez tax tables Sole proprietors and partners deduct contributions for themselves on line 28 of Form 1040. Irs form 1040ez tax tables (If you are a partner, contributions for yourself are shown on the Schedule K-1 (Form 1065) you get from the partnership. Irs form 1040ez tax tables ) Carryover of Excess Contributions If you contribute more to the plans than you can deduct for the year, you can carry over and deduct the difference in later years, combined with your contributions for those years. Irs form 1040ez tax tables Your combined deduction in a later year is limited to 25% of the participating employees' compensation for that year. Irs form 1040ez tax tables For purposes of this limit, a SEP is treated as a profit-sharing (defined contribution) plan. Irs form 1040ez tax tables However, this percentage limit must be reduced to figure your maximum deduction for contributions you make for yourself. Irs form 1040ez tax tables See Deduction Limit for Self-Employed Individuals, earlier. Irs form 1040ez tax tables The amount you carry over and deduct may be subject to the excise tax discussed next. Irs form 1040ez tax tables Table 4-1, earlier, illustrates the carryover of excess contributions to a profit-sharing plan. Irs form 1040ez tax tables Excise Tax for Nondeductible (Excess) Contributions If you contribute more than your deduction limit to a retirement plan, you have made nondeductible contributions and you may be liable for an excise tax. Irs form 1040ez tax tables In general, a 10% excise tax applies to nondeductible contributions made to qualified pension and profit-sharing plans and to SEPs. Irs form 1040ez tax tables Special rule for self-employed individuals. Irs form 1040ez tax tables   The 10% excise tax does not apply to any contribution made to meet the minimum funding requirements in a money purchase pension plan or a defined benefit plan. Irs form 1040ez tax tables Even if that contribution is more than your earned income from the trade or business for which the plan is set up, the difference is not subject to this excise tax. Irs form 1040ez tax tables See Minimum Funding Requirement , earlier. Irs form 1040ez tax tables Reporting the tax. Irs form 1040ez tax tables   You must report the tax on your nondeductible contributions on Form 5330. Irs form 1040ez tax tables Form 5330 includes a computation of the tax. Irs form 1040ez tax tables See the separate instructions for completing the form. Irs form 1040ez tax tables Elective Deferrals (401(k) Plans) Your qualified plan can include a cash or deferred arrangement under which participants can choose to have you contribute part of their before-tax compensation to the plan rather than receive the compensation in cash. Irs form 1040ez tax tables A plan with this type of arrangement is popularly known as a “401(k) plan. Irs form 1040ez tax tables ” (As a self-employed individual participating in the plan, you can contribute part of your before-tax net earnings from the business. Irs form 1040ez tax tables ) This contribution is called an “elective deferral” because participants choose (elect) to defer receipt of the money. Irs form 1040ez tax tables In general, a qualified plan can include a cash or deferred arrangement only if the qualified plan is one of the following plans. Irs form 1040ez tax tables A profit-sharing plan. Irs form 1040ez tax tables A money purchase pension plan in existence on June 27, 1974, that included a salary reduction arrangement on that date. Irs form 1040ez tax tables Partnership. Irs form 1040ez tax tables   A partnership can have a 401(k) plan. Irs form 1040ez tax tables Restriction on conditions of participation. Irs form 1040ez tax tables   The plan cannot require, as a condition of participation, that an employee complete more than 1 year of service. Irs form 1040ez tax tables Matching contributions. Irs form 1040ez tax tables   If your plan permits, you can make matching contributions for an employee who makes an elective deferral to your 401(k) plan. Irs form 1040ez tax tables For example, the plan might provide that you will contribute 50 cents for each dollar your participating employees choose to defer under your 401(k) plan. Irs form 1040ez tax tables Matching contributions are generally subject to the ACP test discussed earlier under Employee Contributions. Irs form 1040ez tax tables Nonelective contributions. Irs form 1040ez tax tables   You can also make contributions (other than matching contributions) for your participating employees without giving them the choice to take cash instead. Irs form 1040ez tax tables These are called nonelective contributions. Irs form 1040ez tax tables Employee compensation limit. Irs form 1040ez tax tables   No more than $255,000 of the employee's compensation can be taken into account when figuring contributions other than elective deferrals in 2013. Irs form 1040ez tax tables This limit is $260,000 in 2014. Irs form 1040ez tax tables SIMPLE 401(k) plan. Irs form 1040ez tax tables   If you had 100 or fewer employees who earned $5,000 or more in compensation during the preceding year, you may be able to set up a SIMPLE 401(k) plan. Irs form 1040ez tax tables A SIMPLE 401(k) plan is not subject to the nondiscrimination and top-heavy plan requirements discussed earlier under Qualification Rules. Irs form 1040ez tax tables For details about SIMPLE 401(k) plans, see SIMPLE 401(k) Plan in chapter 3. Irs form 1040ez tax tables Distributions. Irs form 1040ez tax tables   Certain rules apply to distributions from 401(k) plans. Irs form 1040ez tax tables See Distributions From 401(k) Plans , later. Irs form 1040ez tax tables Limit on Elective Deferrals There is a limit on the amount an employee can defer each year under these plans. Irs form 1040ez tax tables This limit applies without regard to community property laws. Irs form 1040ez tax tables Your plan must provide that your employees cannot defer more than the limit that applies for a particular year. Irs form 1040ez tax tables For 2013 and 2014, the basic limit on elective deferrals is $17,500. Irs form 1040ez tax tables This limit applies to all salary reduction contributions and elective deferrals. Irs form 1040ez tax tables If, in conjunction with other plans, the deferral limit is exceeded, the difference is included in the employee's gross income. Irs form 1040ez tax tables Catch-up contributions. Irs form 1040ez tax tables   A 401(k) plan can permit participants who are age 50 or over at the end of the calendar year to also make catch-up contributions. Irs form 1040ez tax tables The catch-up contribution limit for 2013 and 2014 is $5,500. Irs form 1040ez tax tables Elective deferrals are not treated as catch-up contributions for 2013 until they exceed the $17,500 limit, the actual deferral percentage (ADP) test limit of section 401(k)(3), or the plan limit (if any). Irs form 1040ez tax tables However, the catch-up contribution a participant can make for a year cannot exceed the lesser of the following amounts. Irs form 1040ez tax tables The catch-up contribution limit. Irs form 1040ez tax tables The excess of the participant's compensation over the elective deferrals that are not catch-up contributions. Irs form 1040ez tax tables Treatment of contributions. Irs form 1040ez tax tables   Your contributions to your own 401(k) plan are generally deductible by you for the year they are contributed to the plan. Irs form 1040ez tax tables Matching or nonelective contributions made to the plan are also deductible by you in the year of contribution. Irs form 1040ez tax tables Your employees' elective deferrals other than designated Roth contributions are tax free until distributed from the plan. Irs form 1040ez tax tables Elective deferrals are included in wages for social security, Medicare, and federal unemployment (FUTA) tax. Irs form 1040ez tax tables Forfeiture. Irs form 1040ez tax tables   Employees have a nonforfeitable right at all times to their accrued benefit attributable to elective deferrals. Irs form 1040ez tax tables Reporting on Form W-2. Irs form 1040ez tax tables   Do not include elective deferrals in the “Wages, tips, other compensation” box of Form W-2. Irs form 1040ez tax tables You must, however, include them in the “Social security wages” and “Medicare wages and tips” boxes. Irs form 1040ez tax tables You must also include them in box 12. Irs form 1040ez tax tables Mark the “Retirement plan” checkbox in box 13. Irs form 1040ez tax tables For more information, see the Form W-2 instructions. Irs form 1040ez tax tables Automatic Enrollment Your 401(k) plan can have an automatic enrollment feature. Irs form 1040ez tax tables Under this feature, you can automatically reduce an employee's pay by a fixed percentage and contribute that amount to the 401(k) plan on his or her behalf unless the employee affirmatively chooses not to have his or her pay reduced or chooses to have it reduced by a different percentage. Irs form 1040ez tax tables These contributions are elective deferrals. Irs form 1040ez tax tables An automatic enrollment feature will encourage employees' saving for retirement and will help your plan pass nondiscrimination testing (if applicable). Irs form 1040ez tax tables For more information, see Publication 4674, Automatic Enrollment 401(k) Plans for Small Businesses. Irs form 1040ez tax tables Eligible automatic contribution arrangement. Irs form 1040ez tax tables   Under an eligible automatic contribution arrangement (EACA), a participant is treated as having elected to have the employer make contributions in an amount equal to a uniform percentage of compensation. Irs form 1040ez tax tables This automatic election will remain in place until the participant specifically elects not to have such deferral percentage made (or elects a different percentage). Irs form 1040ez tax tables There is no required deferral percentage. Irs form 1040ez tax tables Withdrawals. Irs form 1040ez tax tables   Under an EACA, you may allow participants to withdraw their automatic contributions to the plan if certain conditions are met. Irs form 1040ez tax tables The participant must elect the withdrawal no later than 90 days after the date of the first elective contributions under the EACA. Irs form 1040ez tax tables The participant must withdraw the entire amount of EACA default contributions, including any earnings thereon. Irs form 1040ez tax tables   If the plan allows withdrawals under the EACA, the amount of the withdrawal other than the amount of any designated Roth contributions must be included in the employee's gross income for the tax year in which the distribution is made. Irs form 1040ez tax tables The additional 10% tax on early distributions will not apply to the distribution. Irs form 1040ez tax tables Notice requirement. Irs form 1040ez tax tables   Under an EACA, employees must be given written notice of the terms of the EACA within a reasonable period of time before each plan year. Irs form 1040ez tax tables The notice must be written in a manner calculated to be understood by the average employee and be sufficiently accurate and comprehensive in order to apprise the employee of his or her rights and obligations under the EACA. Irs form 1040ez tax tables The notice must include an explanation of the employee's right to elect not to have elective contributions made on his or her behalf, or to elect a different percentage, and the employee must be given a reasonable period of time after receipt of the notice before the first elective contribution is made. Irs form 1040ez tax tables The notice also must explain how contributions will be invested in the absence of an investment election by the employee. Irs form 1040ez tax tables Qualified automatic contribution arrangement. Irs form 1040ez tax tables    A qualified automatic contribution arrangement (QACA) is a type of safe harbor plan. Irs form 1040ez tax tables It contains an automatic enrollment feature, and mandatory employer contributions are required. Irs form 1040ez tax tables If your plan includes a QACA, it will not be subject to the ADP test (discussed later) nor the top-heavy requirements (discussed earlier). Irs form 1040ez tax tables Additionally, your plan will not be subject to the actual contribution percentage (ACP) test if certain additional requirements are met. Irs form 1040ez tax tables Under a QACA, each employee who is eligible to participate in the plan will be treated as having elected to make elective deferral contributions equal to a certain default percentage of compensation. Irs form 1040ez tax tables In order to not have default elective deferrals made, an employee must make an affirmative election specifying a deferral percentage (including zero, if desired). Irs form 1040ez tax tables If an employee does not make an affirmative election, the default deferral percentage must meet the following conditions. Irs form 1040ez tax tables It must be applied uniformly. Irs form 1040ez tax tables It must not exceed 10%. Irs form 1040ez tax tables It must be at least 3% in the first plan year it applies to an employee and through the end of the following year. Irs form 1040ez tax tables It must increase to at least 4% in the following plan year. Irs form 1040ez tax tables It must increase to at least 5% in the following plan year. Irs form 1040ez tax tables It must increase to at least 6% in subsequent plan years. Irs form 1040ez tax tables Matching or nonelective contributions. Irs form 1040ez tax tables   Under the terms of the QACA, you must make either matching or nonelective contributions according to the following terms. Irs form 1040ez tax tables Matching contributions. Irs form 1040ez tax tables You must make matching contributions on behalf of each non-highly compensated employee in the following amounts. Irs form 1040ez tax tables An amount equal to 100% of elective deferrals, up to 1% of compensation. Irs form 1040ez tax tables An amount equal to 50% of elective deferrals, from 1% up to 6% of compensation. Irs form 1040ez tax tables Other formulas may be used as long as they are at least as favorable to non-highly compensated employees. Irs form 1040ez tax tables The rate of matching contributions for highly compensated employees, including yourself, must not exceed the rates for non-highly compensated employees. Irs form 1040ez tax tables Nonelective contributions. Irs form 1040ez tax tables You must make nonelective contributions on behalf of every non-highly compensated employee eligible to participate in the plan, regardless of whether they elected to participate, in an amount equal to at least 3% of their compensation. Irs form 1040ez tax tables Vesting requirements. Irs form 1040ez tax tables   All accrued benefits attributed to matching or nonelective contributions under the QACA must be 100% vested for all employees who complete 2 years of service. Irs form 1040ez tax tables These contributions are subject to special withdrawal restrictions, discussed later. Irs form 1040ez tax tables Notice requirements. Irs form 1040ez tax tables   Each employee eligible to participate in the QACA must receive written notice of their rights and obligations under the QACA, within a reasonable period before each plan year. Irs form 1040ez tax tables The notice must be written in a manner calculated to be understood by the average employee, and it must be accurate and comprehensive. Irs form 1040ez tax tables The notice must explain their right to elect not to have elective contributions made on their behalf, or to have contributions made at a different percentage than the default percentage. Irs form 1040ez tax tables Additionally, the notice must explain how contributions will be invested in the absence of any investment election by the employee. Irs form 1040ez tax tables The employee must have a reasonable period of time after receiving the notice to make such contribution and investment elections prior to the first contributions under the QACA. Irs form 1040ez tax tables Treatment of Excess Deferrals If the total of an employee's deferrals is more than the limit for 2013, the employee can have the difference (called an excess deferral) paid out of any of the plans that permit these distributions. Irs form 1040ez tax tables He or she must notify the plan by April 15, 2014 (or an earlier date specified in the plan), of the amount to be paid from each plan. Irs form 1040ez tax tables The plan must then pay the employee that amount, plus earnings on the amount through the end of 2013, by April 15, 2014. Irs form 1040ez tax tables Excess withdrawn by April 15. Irs form 1040ez tax tables   If the employee takes out the excess deferral by April 15, 2014, it is not reported again by including it in the employee's gross income for 2014. Irs form 1040ez tax tables However, any income earned in 2013 on the excess deferral taken out is taxable in the tax year in which it is taken out. Irs form 1040ez tax tables The distribution is not subject to the additional 10% tax on early distributions. Irs form 1040ez tax tables   If the employee takes out part of the excess deferral and the income on it, the distribution is treated as made proportionately from the excess deferral and the income. Irs form 1040ez tax tables   Even if the employee takes out the excess deferral by April 15, the amount will be considered for purposes of nondiscrimination testing requirements of the plan, unless the distributed amount is for a non-highly compensated employee who participates in only one employer's 401(k) plan or plans. Irs form 1040ez tax tables Excess not withdrawn by April 15. Irs form 1040ez tax tables   If the employee does not take out the excess deferral by April 15, 2014, the excess, though taxable in 2013, is not included in the employee's cost basis in figuring the taxable amount of any eventual distributions under the plan. Irs form 1040ez tax tables In effect, an excess deferral left in the plan is taxed twice, once when contributed and again when distributed. Irs form 1040ez tax tables Also, if the employee's excess deferral is allowed to stay in the plan and the employee participates in no other employer's plan, the plan can be disqualified. Irs form 1040ez tax tables Reporting corrective distributions on Form 1099-R. Irs form 1040ez tax tables   Report corrective distributions of excess deferrals (including any earnings) on Form 1099-R. Irs form 1040ez tax tables For specific information about reporting corrective distributions, see the Instructions for Forms 1099-R and 5498. Irs form 1040ez tax tables Tax on excess contributions of highly compensated employees. Irs form 1040ez tax tables   The law provides tests to detect discrimination in a plan. Irs form 1040ez tax tables If tests, such as the actual deferral percentage test (ADP test) (see section 401(k)(3)) and the actual contribution percentage test (ACP test) (see section 401(m)(2)), show that contributions for highly compensated employees are more than the test limits for these contributions, the employer may have to pay a 10% excise tax. Irs form 1040ez tax tables Report the tax on Form 5330. Irs form 1040ez tax tables The ADP test does not apply to a safe harbor 401(k) plan (discussed next) nor to a QACA. Irs form 1040ez tax tables Also, the ACP test does not apply to these plans if certain additional requirements are met. Irs form 1040ez tax tables   The tax for the year is 10% of the excess contributions for the plan year ending in your tax year. Irs form 1040ez tax tables Excess contributions are elective deferrals, employee contributions, or employer matching or nonelective contributions that are more than the amount permitted under the ADP test or the ACP test. Irs form 1040ez tax tables   See Regulations sections 1. Irs form 1040ez tax tables 401(k)-2 and 1. Irs form 1040ez tax tables 401(m)-2 for further guidance relating to the nondiscrimination rules under sections 401(k) and 401(m). Irs form 1040ez tax tables    If the plan fails the ADP or ACP testing, and the failure is not corrected by the end of the next plan year, the plan can be disqualified. Irs form 1040ez tax tables Safe harbor 401(k) plan. Irs form 1040ez tax tables If you meet the requirements for a safe harbor 401(k) plan, you do not have to satisfy the ADP test, nor the ACP test, if certain additional requirements are met. Irs form 1040ez tax tables For your plan to be a safe harbor plan, you must meet the following conditions. Irs form 1040ez tax tables Matching or nonelective contributions. Irs form 1040ez tax tables You must make matching or nonelective contributions according to one of the following formulas. Irs form 1040ez tax tables Matching contributions. Irs form 1040ez tax tables You must make matching contributions according to the following rules. Irs form 1040ez tax tables You must contribute an amount equal to 100% of each non-highly compensated employee's elective deferrals, up to 3% of compensation. Irs form 1040ez tax tables You must contribute an amount equal to 50% of each non-highly compensated employee's elective deferrals, from 3% up to 5% of compensation. Irs form 1040ez tax tables The rate of matching contributions for highly compensated employees, including yourself, must not exceed the rates for non-highly compensated employees. Irs form 1040ez tax tables Nonelective contributions. Irs form 1040ez tax tables You must make nonelective contributions, without regard to whether the employee made elective deferrals, on behalf of all non-highly compensated employees eligible to participate in the plan, equal to at least 3% of the employee's compensation. Irs form 1040ez tax tables These mandatory matching and nonelective contributions must be immediately 100% vested and are subject to special withdrawal restrictions. Irs form 1040ez tax tables Notice requirement. Irs form 1040ez tax tables You must give eligible employees written notice of their rights and obligations with regard to contributions under the plan, within a reasonable period before the plan year. Irs form 1040ez tax tables The other requirements for a 401(k) plan, including withdrawal and vesting rules, must also be met for your plan to qualify as a safe harbor 401(k) plan. Irs form 1040ez tax tables Qualified Roth Contribution Program Under this program an eligible employee can designate all or a portion of his or her elective deferrals as after-tax Roth contributions. Irs form 1040ez tax tables Elective deferrals designated as Roth contributions must be maintained in a separate Roth account. Irs form 1040ez tax tables However, unlike other elective deferrals, designated Roth contributions are not excluded from employees' gross income, but qualified distributions from a Roth account are excluded from employees' gross income. Irs form 1040ez tax tables Elective Deferrals Under a qualified Roth contribution program, the amount of elective deferrals that an employee may designate as a Roth contribution is limited to the maximum amount of elective deferrals excludable from gross income for the year (for 2013 and 2014, $17,500 if under age 50 and $23,000 if age 50 or over) less the total amount of the employee's elective deferrals not designated as Roth contributions. Irs form 1040ez tax tables Designated Roth deferrals are treated the same as pre-tax elective deferrals for most purposes, including: The annual individual elective deferral limit (total of all designated Roth contributions and traditional, pre-tax elective deferrals) of $17,500 for 2013 and 2014, with an additional $5,500 if age 50 or over for 2013 and 2014, Determining the maximum employee and employer annual contributions of the lesser of 100% of compensation or $51,000 for 2013 ($52,000 for 2014), Nondiscrimination testing, Required distributions, and Elective deferrals not taken into account for purposes of deduction limits. Irs form 1040ez tax tables Qualified Distributions A qualified distribution is a distribution that is made after the employee's nonexclusion period and: On or after the employee attains age   59½, On account of the employee's being disabled, or On or after the employee's death. Irs form 1040ez tax tables An employee's nonexclusion period for a plan is the 5-tax-year period beginning with the earlier of the following tax years. Irs form 1040ez tax tables The first tax year in which the employee made a contribution to his or her Roth account in the plan, or If a rollover contribution was made to the employee's designated Roth account from a designated Roth account previously established for the employee under another plan, then the first tax year the employee made a designated Roth contribution to the previously established account. Irs form 1040ez tax tables Rollover. Irs form 1040ez tax tables   Beginning September 28, 2010, a rollover from another account can be made to a designated Roth account in the same plan. Irs form 1040ez tax tables For additional information on these in-plan Roth rollovers, see Notice 2010-84, 2010-51 I. Irs form 1040ez tax tables R. Irs form 1040ez tax tables B. Irs form 1040ez tax tables 872, available at www. Irs form 1040ez tax tables irs. Irs form 1040ez tax tables gov/irb/2010-51_IRB/ar11. Irs form 1040ez tax tables html, and Notice 2013-74. Irs form 1040ez tax tables A distribution from a designated Roth account can only be rolled over to another designated Roth account or a Roth IRA. Irs form 1040ez tax tables Rollover amounts do not apply toward the annual deferral limit. Irs form 1040ez tax tables Reporting Requirements You must report a contribution to a Roth account on Form W-2 and a distribution from a Roth account on Form 1099-R. Irs form 1040ez tax tables See the Form W-2 and 1099-R instructions for detailed information. Irs form 1040ez tax tables Distributions Amounts paid to plan participants from a qualified plan are called distributions. Irs form 1040ez tax tables Distributions may be nonperiodic, such as lump-sum distributions, or periodic, such as annuity payments. Irs form 1040ez tax tables Also, certain loans may be treated as distributions. Irs form 1040ez tax tables See Loans Treated as Distributions in Publication 575. Irs form 1040ez tax tables Required Distributions A qualified plan must provide that each participant will either: Receive his or her entire interest (benefits) in the plan by the required beginning date (defined later), or Begin receiving regular periodic distributions by the required beginning date in annual amounts calculated to distribute the participant's entire interest (benefits) over his or her life expectancy or over the joint life expectancy of the participant and the designated beneficiary (or over a shorter period). Irs form 1040ez tax tables These distribution rules apply individually to each qualified plan. Irs form 1040ez tax tables You cannot satisfy the requirement for one plan by taking a distribution from another. Irs form 1040ez tax tables The plan must provide that these rules override any inconsistent distribution options previously offered. Irs form 1040ez tax tables Minimum distribution. Irs form 1040ez tax tables   If the account balance of a qualified plan participant is to be distributed (other than as an annuity), the plan administrator must figure the minimum amount required to be distributed each distribution calendar year. Irs form 1040ez tax tables This minimum is figured by dividing the account balance by the applicable life expectancy. Irs form 1040ez tax tables The plan administrator can use the life expectancy tables in Appendix C of Publication 590 for this purpose. Irs form 1040ez tax tables For more information on figuring the minimum distribution, see Tax on Excess Accumulation in Publication 575. Irs form 1040ez tax tables Required beginning date. Irs form 1040ez tax tables   Generally, each participant must receive his or her entire benefits in the plan or begin to receive periodic distributions of benefits from the plan by the required beginning date. Irs form 1040ez tax tables   A participant must begin to receive distributions from his or her qualified retirement plan by April 1 of the first year after the later of the following years. Irs form 1040ez tax tables Calendar year in which he or she reaches age 70½. Irs form 1040ez tax tables Calendar year in which he or she retires from employment with the employer maintaining the plan. Irs form 1040ez tax tables However, the plan may require the participant to begin receiving distributions by April 1 of the year after the participant reaches age 70½ even if the participant has not retired. Irs form 1040ez tax tables   If the participant is a 5% owner of the employer maintaining the plan, the participant must begin receiving distributions by April 1 of the first year after the calendar year in which the participant reached age 70½. Irs form 1040ez tax tables For more information, see Tax on Excess Accumulation in Publication 575. Irs form 1040ez tax tables Distributions after the starting year. Irs form 1040ez tax tables   The distribution required to be made by April 1 is treated as a distribution for the starting year. Irs form 1040ez tax tables (The starting year is the year in which the participant meets (1) or (2) above, whichever applies. Irs form 1040ez tax tables ) After the starting year, the participant must receive the required distribution for each year by December 31 of that year. Irs form 1040ez tax tables If no distribution is made in the starting year, required distributions for 2 years must be made in the next year (one by April 1 and one by December 31). Irs form 1040ez tax tables Distributions after participant's death. Irs form 1040ez tax tables   See Publication 575 for the special rules covering distributions made after the death of a participant. Irs form 1040ez tax tables Distributions From 401(k) Plans Generally, distributions cannot be made until one of the following occurs. Irs form 1040ez tax tables The employee retires, dies, becomes disabled, or otherwise severs employment. Irs form 1040ez tax tables The plan ends and no other defined contribution plan is established or continued. Irs form 1040ez tax tables In the case of a 401(k) plan that is part of a profit-sharing plan, the employee reaches age 59½ or suffers financial hardship. Irs form 1040ez tax tables For the rules on hardship distributions, including the limits on them, see Regulations section 1. Irs form 1040ez tax tables 401(k)-1(d). Irs form 1040ez tax tables The employee becomes eligible for a qualified reservist distribution (defined next). Irs form 1040ez tax tables Certain distributions listed above may be subject to the tax on early distributions discussed later. Irs form 1040ez tax tables Qualified reservist distributions. Irs form 1040ez tax tables   A qualified reservist distribution is a distribution from an IRA or an elective deferral account made after September 11, 2001, to a military reservist or a member of the National Guard who has been called to active duty for at least 180 days or for an indefinite period. Irs form 1040ez tax tables All or part of a qualified reservist distribution can be recontributed to an IRA. Irs form 1040ez tax tables The additional 10% tax on early distributions does not apply to a qualified reservist distribution. Irs form 1040ez tax tables Tax Treatment of Distributions Distributions from a qualified plan minus a prorated part of any cost basis are subject to income tax in the year they are distributed. Irs form 1040ez tax tables Since most recipients have no cost basis, a distribution is generally fully taxable. Irs form 1040ez tax tables An exception is a distribution that is properly rolled over as discussed under Rollover, next. Irs form 1040ez tax tables The tax treatment of distributions depends on whether they are made periodically over several years or life (periodic distributions) or are nonperiodic distributions. Irs form 1040ez tax tables See Taxation of Periodic Payments and Taxation of Nonperiodic Payments in Publication 575 for a detailed description of how distributions are taxed, including the 10-year tax option or capital gain treatment of a lump-sum distribution. Irs form 1040ez tax tables Note. Irs form 1040ez tax tables A recipient of a distribution from a designated Roth account will have a cost basis since designated Roth contributions are made on an after-tax basis. Irs form 1040ez tax tables Also, a distribution from a designated Roth account is entirely tax-free if certain conditions are met. Irs form 1040ez tax tables See Qualified distributions under Qualified Roth Contribution Program, earlier. Irs form 1040ez tax tables Rollover. Irs form 1040ez tax tables   The recipient of an eligible rollover distribution from a qualified plan can defer the tax on it by rolling it over into a traditional IRA or another eligible retirement plan. Irs form 1040ez tax tables However, it may be subject to withholding as discussed under Withholding requirement, later. Irs form 1040ez tax tables A rollover can also be made to a Roth IRA, in which case, any previously untaxed amounts are includible in gross income unless the rollover is from a designated Roth account. Irs form 1040ez tax tables Eligible rollover distribution. Irs form 1040ez tax tables   This is a distribution of all or any part of an employee's balance in a qualified retirement plan that is not any of the following. Irs form 1040ez tax tables A required minimum distribution. Irs form 1040ez tax tables See Required Distributions , earlier. Irs form 1040ez tax tables Any of a series of substantially equal payments made at least once a year over any of the following periods. Irs form 1040ez tax tables The employee's life or life expectancy. Irs form 1040ez tax tables The joint lives or life expectancies of the employee and beneficiary. Irs form 1040ez tax tables A period of 10 years or longer. Irs form 1040ez tax tables A hardship distribution. Irs form 1040ez tax tables The portion of a distribution that represents the return of an employee's nondeductible contributions to the plan. Irs form 1040ez tax tables See Employee Contributions , earlier, and Rollover of nontaxable amounts, next. Irs form 1040ez tax tables Loans treated as distributions. Irs form 1040ez tax tables Dividends on employer securities. Irs form 1040ez tax tables The cost of any life insurance coverage provided under a qualified retirement plan. Irs form 1040ez tax tables Similar items designated by the IRS in published guidance. Irs form 1040ez tax tables See, for example, the Instructions for Forms 1099-R and 5498. Irs form 1040ez tax tables Rollover of nontaxable amounts. Irs form 1040ez tax tables   You may be able to roll over the nontaxable part of a distribution to another qualified retirement plan or a section 403(b) plan, or to an IRA. Irs form 1040ez tax tables If the rollover is to a qualified retirement plan or a section 403(b) plan that separately accounts for the taxable and nontaxable parts of the rollover, the transfer must be made through a direct (trustee-to-trustee) rollover. Irs form 1040ez tax tables If the rollover is to an IRA, the transfer can be made by any rollover method. Irs form 1040ez tax tables Note. Irs form 1040ez tax tables A distribution from a designated Roth account can be rolled over to another designated Roth account or to a Roth IRA. Irs form 1040ez tax tables If the rollover is to a Roth IRA, it can be rolled over by any rollover method, but if the rollover is to another designated Roth account, it must be rolled over directly (trustee-to-trustee). Irs form 1040ez tax tables More information. Irs form 1040ez tax tables   For more information about rollovers, see Rollovers in Pubs. Irs form 1040ez tax tables 575 and 590. Irs form 1040ez tax tables Withholding requirement. Irs form 1040ez tax tables   If, during a year, a qualified plan pays to a participant one or more eligible rollover distributions (defined earlier) that are reasonably expected to total $200 or more, the payor must withhold 20% of the taxable portion of each distribution for federal income tax. Irs form 1040ez tax tables Exceptions. Irs form 1040ez tax tables   If, instead of having the distribution paid to him or her, the participant chooses to have the plan pay it directly to an IRA or another eligible retirement plan (a direct rollover), no withholding is required. Irs form 1040ez tax tables   If the distribution is not an eligible rollover distribution, defined earlier, the 20% withholding requirement does not apply. Irs form 1040ez tax tables Other withholding rules apply to distributions that are not eligible rollover distributions, such as long-term periodic distributions and required distributions (periodic or nonperiodic). Irs form 1040ez tax tables However, the participant can choose not to have tax withheld from these distributions. Irs form 1040ez tax tables If the participant does not make this choice, the following withholding rules apply. Irs form 1040ez tax tables For periodic distributions, withholding is based on their treatment as wages. Irs form 1040ez tax tables For nonperiodic distributions, 10% of the taxable part is withheld. Irs form 1040ez tax tables Estimated tax payments. Irs form 1040ez tax tables   If no income tax is withheld or not enough tax is withheld, the recipient of a distribution may have to make estimated tax payments. Irs form 1040ez tax tables For more information, see Withholding Tax and Estimated Tax in Publication 575. Irs form 1040ez tax tables Section 402(f) Notice. Irs form 1040ez tax tables   If a distribution is an eligible rollover distribution, as defined earlier, you must provide a written notice to the recipient that explains the following rules regarding such distributions. Irs form 1040ez tax tables That the distribution may be directly transferred to an eligible retirement plan and information about which distributions are eligible for this direct transfer. Irs form 1040ez tax tables That tax will be withheld from the distribution if it is not directly transferred to an eligible retirement plan. Irs form 1040ez tax tables That the distribution will not be subject to tax if transferred to an eligible retirement plan within 60 days after the date the recipient receives the distribution. Irs form 1040ez tax tables Certain other rules that may be applicable. Irs form 1040ez tax tables   Notice 2009-68, 2009-39 I. Irs form 1040ez tax tables R. Irs form 1040ez tax tables B. Irs form 1040ez tax tables 423, available at www. Irs form 1040ez tax tables irs. Irs form 1040ez tax tables gov/irb/2009-39_IRB/ar14. Irs form 1040ez tax tables html, contains two updated safe harbor section 402(f) notices that plan administrators may provide recipients of eligible rollover distributions. Irs form 1040ez tax tables If the plan allows in-plan Roth rollovers, the 402(f) notice must be amended to reflect this. Irs form 1040ez tax tables Notice 2010-84 contains guidance on how to modify a 402(f) notice for in-plan Roth rollovers. Irs form 1040ez tax tables Timing of notice. Irs form 1040ez tax tables   The notice generally must be provided no less than 30 days and no more than 180 days before the date of a distribution. Irs form 1040ez tax tables Method of notice. Irs form 1040ez tax tables   The written notice must be provided individually to each distributee of an eligible rollover distribution. Irs form 1040ez tax tables Posting of the notice is not sufficient. Irs form 1040ez tax tables However, the written requirement may be satisfied through the use of electronic media if certain additional conditions are met. Irs form 1040ez tax tables See Regulations section 1. Irs form 1040ez tax tables 401(a)-21. Irs form 1040ez tax tables Tax on failure to give notice. Irs form 1040ez tax tables   Failure to give a 402(f) notice will result in a tax of $100 for each failure, with a total not exceeding $50,000 per calendar year. Irs form 1040ez tax tables The tax will not be imposed if it is shown that such failure is due to reasonable cause and not to willful neglect. Irs form 1040ez tax tables Tax on Early Distributions If a distribution is made to an employee under the plan before he or she reaches age 59½, the employee may have to pay a 10% additional tax on the distribution. Irs form 1040ez tax tables This tax applies to the amount received that the employee must include in income. Irs form 1040ez tax tables Exceptions. Irs form 1040ez tax tables   The 10% tax will not apply if distributions before age 59½ are made in any of the following circumstances. Irs form 1040ez tax tables Made to a beneficiary (or to the estate of the employee) on or after the death of the employee. Irs form 1040ez tax tables Made due to the employee having a qualifying disability. Irs form 1040ez tax tables Made as part of a series of substantially equal periodic payments beginning after separation from service and made at least annually for the life or life expectancy of the employee or the joint lives or life expectancies of the employee and his or her designated beneficiary. Irs form 1040ez tax tables (The payments under this exception, except in the case of death or disability, must continue for at least 5 years or until the employee reaches age 59½, whichever is the longer period. Irs form 1040ez tax tables ) Made to an employee after separation from service if the separation occurred during o