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Www free1040taxreturn com 17. Www free1040taxreturn com   Individual Retirement Arrangements (IRAs) Table of Contents What's New Reminders Introduction Useful Items - You may want to see: Traditional IRAsWho Can Open a Traditional IRA? When and How Can a Traditional IRA Be Opened? How Much Can Be Contributed? When Can Contributions Be Made? How Much Can You Deduct? Nondeductible Contributions Inherited IRAs Can You Move Retirement Plan Assets? When Can You Withdraw or Use IRA Assets? When Must You Withdraw IRA Assets? (Required Minimum Distributions) Are Distributions Taxable? What Acts Result in Penalties or Additional Taxes? Roth IRAsWhat Is a Roth IRA? When Can a Roth IRA Be Opened? Can You Contribute to a Roth IRA? Can You Move Amounts Into a Roth IRA? Are Distributions Taxable? What's New Traditional IRA contribution and deduction limit. Www free1040taxreturn com  The contribution limit to your traditional IRA for 2013 will be increased to the smaller of the following amounts: $5,500, or Your taxable compensation for the year. Www free1040taxreturn com If you were age 50 or older before 2014, the most that can be contributed to your traditional IRA for 2013 will be the smaller of the following amounts: $6,500, or Your taxable compensation for the year. Www free1040taxreturn com For more information, see How Much Can Be Contributed? later. Www free1040taxreturn com Roth IRA contribution limit. Www free1040taxreturn com  If contributions on your behalf are made only to Roth IRAs, your contribution limit for 2013 will generally be the lesser of: $5,500, or Your taxable compensation for the year. Www free1040taxreturn com If you were age 50 or older before 2014 and contributions on your behalf were made only to Roth IRAs, your contribution limit for 2013 will generally be the lesser of: $6,500, or Your taxable compensation for the year. Www free1040taxreturn com However, if your modified adjusted gross income (AGI) is above a certain amount, your contribution limit may be reduced. Www free1040taxreturn com For more information, see How Much Can Be Contributed? under Can You Contribute to a Roth IRA? later. Www free1040taxreturn com Modified AGI limit for traditional IRA contributions increased. Www free1040taxreturn com  For 2013, if you were covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is: More than $95,000 but less than $115,000 for a married couple filing a joint return or a qualifying widow(er), More than $59,000 but less than $69,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. Www free1040taxreturn com If you either lived with your spouse or file a joint return, and your spouse was covered by a retirement plan at work, but you were not, your deduction is phased out if your modified AGI is more than $178,000 but less than $188,000. Www free1040taxreturn com If your modified AGI is $188,000 or more, you cannot take a deduction for contributions to a traditional IRA. Www free1040taxreturn com See How Much Can You Deduct , later. Www free1040taxreturn com Modified AGI limit for Roth IRA contributions increased. Www free1040taxreturn com  For 2013, your Roth IRA contribution limit is reduced (phased out) in the following situations. Www free1040taxreturn com Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $178,000. Www free1040taxreturn com You cannot make a Roth IRA contribution if your modified AGI is $188,000 or more. Www free1040taxreturn com Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2013 and your modified AGI is at least $112,000. Www free1040taxreturn com You cannot make a Roth IRA contribution if your modified AGI is $127,000 or more. Www free1040taxreturn com Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. Www free1040taxreturn com You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more. Www free1040taxreturn com See Can You Contribute to a Roth IRA , later. Www free1040taxreturn com Net Investment Income Tax. Www free1040taxreturn com   For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan including IRAs (for example; 401(a), 403(a), 403(b), 408, 408A, or 457(b) plans). Www free1040taxreturn com However, these distributions are taken into account when determining the modified adjusted gross income threshold. Www free1040taxreturn com Distributions from a nonqualified retirement plan are included in net investment income. Www free1040taxreturn com See Form 8960, Net Investment Income Tax - Individuals, Estates, and Trusts, and its instructions for more information. Www free1040taxreturn com Name change. Www free1040taxreturn com  All spousal IRAs have been renamed Kay Bailey Hutchison Spousal IRAs. Www free1040taxreturn com There are no changes to the rules regarding these IRAs. Www free1040taxreturn com See Kay Bailey Hutchison Spousal IRA Limit , later, for more information. Www free1040taxreturn com Reminders 2014 limits. Www free1040taxreturn com   You can find information about the 2014 contribution and AGI limits in Publication 590. Www free1040taxreturn com Contributions to both traditional and Roth IRAs. Www free1040taxreturn com   For information on your combined contribution limit if you contribute to both traditional and Roth IRAs, see Roth IRAs and traditional IRAs under How Much Can Be Contributed? in Roth IRAs, later. Www free1040taxreturn com Statement of required minimum distribution. Www free1040taxreturn com  If a minimum distribution from your IRA is required, the trustee, custodian, or issuer that held the IRA at the end of the preceding year must either report the amount of the required minimum distribution to you, or offer to calculate it for you. Www free1040taxreturn com The report or offer must include the date by which the amount must be distributed. Www free1040taxreturn com The report is due January 31 of the year in which the minimum distribution is required. Www free1040taxreturn com It can be provided with the year-end fair market value statement that you normally get each year. Www free1040taxreturn com No report is required for IRAs of owners who have died. Www free1040taxreturn com IRA interest. Www free1040taxreturn com  Although interest earned from your IRA is generally not taxed in the year earned, it is not tax-exempt interest. Www free1040taxreturn com Tax on your traditional IRA is generally deferred until you take a distribution. Www free1040taxreturn com Do not report this interest on your tax return as tax-exempt interest. Www free1040taxreturn com Form 8606. Www free1040taxreturn com   To designate contributions as nondeductible, you must file Form 8606, Nondeductible IRAs. Www free1040taxreturn com The term “50 or older” is used several times in this chapter. Www free1040taxreturn com It refers to an IRA owner who is age 50 or older by the end of the tax year. Www free1040taxreturn com Introduction An individual retirement arrangement (IRA) is a personal savings plan that gives you tax advantages for setting aside money for your retirement. Www free1040taxreturn com This chapter discusses the following topics. Www free1040taxreturn com The rules for a traditional IRA (any IRA that is not a Roth or SIMPLE IRA). Www free1040taxreturn com The Roth IRA, which features nondeductible contributions and tax-free distributions. Www free1040taxreturn com Simplified Employee Pensions (SEPs) and Savings Incentive Match Plans for Employees (SIMPLEs) are not discussed in this chapter. Www free1040taxreturn com For more information on these plans and employees' SEP IRAs and SIMPLE IRAs that are part of these plans, see Publications 560 and 590. Www free1040taxreturn com For information about contributions, deductions, withdrawals, transfers, rollovers, and other transactions, see Publication 590. Www free1040taxreturn com Useful Items - You may want to see: Publication 560 Retirement Plans for Small Business 590 Individual Retirement Arrangements (IRAs) Form (and Instructions) 5329 Additional Taxes on Qualified Plans (including IRAs) and Other Tax-Favored Accounts 8606 Nondeductible IRAs Traditional IRAs In this chapter, the original IRA (sometimes called an ordinary or regular IRA) is referred to as a “traditional IRA. Www free1040taxreturn com ” A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA. Www free1040taxreturn com Two advantages of a traditional IRA are: You may be able to deduct some or all of your contributions to it, depending on your circumstances, and Generally, amounts in your IRA, including earnings and gains, are not taxed until they are distributed. Www free1040taxreturn com Who Can Open a Traditional IRA? You can open and make contributions to a traditional IRA if: You (or, if you file a joint return, your spouse) received taxable compensation during the year, and You were not age 70½ by the end of the year. Www free1040taxreturn com What is compensation?   Generally, compensation is what you earn from working. Www free1040taxreturn com Compensation includes wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services. Www free1040taxreturn com The IRS treats as compensation any amount properly shown in box 1 (Wages, tips, other compensation) of Form W-2, Wage and Tax Statement, provided that amount is reduced by any amount properly shown in box 11 (Nonqualified plans). Www free1040taxreturn com   Scholarship and fellowship payments are compensation for this purpose only if shown in box 1 of Form W-2. Www free1040taxreturn com   Compensation also includes commissions and taxable alimony and separate maintenance payments. Www free1040taxreturn com Self-employment income. Www free1040taxreturn com   If you are self-employed (a sole proprietor or a partner), compensation is the net earnings from your trade or business (provided your personal services are a material income-producing factor) reduced by the total of: The deduction for contributions made on your behalf to retirement plans, and The deductible part of your self-employment tax. Www free1040taxreturn com   Compensation includes earnings from self-employment even if they are not subject to self-employment tax because of your religious beliefs. Www free1040taxreturn com Nontaxable combat pay. Www free1040taxreturn com   For IRA purposes, if you were a member of the U. Www free1040taxreturn com S. Www free1040taxreturn com Armed Forces, your compensation includes any nontaxable combat pay you receive. Www free1040taxreturn com What is not compensation?   Compensation does not include any of the following items. Www free1040taxreturn com Earnings and profits from property, such as rental income, interest income, and dividend income. Www free1040taxreturn com Pension or annuity income. Www free1040taxreturn com Deferred compensation received (compensation payments postponed from a past year). Www free1040taxreturn com Income from a partnership for which you do not provide services that are a material income-producing factor. Www free1040taxreturn com Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b. Www free1040taxreturn com Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs. Www free1040taxreturn com When and How Can a Traditional IRA Be Opened? You can open a traditional IRA at any time. Www free1040taxreturn com However, the time for making contributions for any year is limited. Www free1040taxreturn com See When Can Contributions Be Made , later. Www free1040taxreturn com You can open different kinds of IRAs with a variety of organizations. Www free1040taxreturn com You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. Www free1040taxreturn com You can also open an IRA through your stockbroker. Www free1040taxreturn com Any IRA must meet Internal Revenue Code requirements. Www free1040taxreturn com Kinds of traditional IRAs. Www free1040taxreturn com   Your traditional IRA can be an individual retirement account or annuity. Www free1040taxreturn com It can be part of either a simplified employee pension (SEP) or an employer or employee association trust account. Www free1040taxreturn com How Much Can Be Contributed? There are limits and other rules that affect the amount that can be contributed to a traditional IRA. Www free1040taxreturn com These limits and other rules are explained below. Www free1040taxreturn com Community property laws. Www free1040taxreturn com   Except as discussed later under Kay Bailey Hutchison Spousal IRA limit , each spouse figures his or her limit separately, using his or her own compensation. Www free1040taxreturn com This is the rule even in states with community property laws. Www free1040taxreturn com Brokers' commissions. Www free1040taxreturn com   Brokers' commissions paid in connection with your traditional IRA are subject to the contribution limit. Www free1040taxreturn com Trustees' fees. Www free1040taxreturn com   Trustees' administrative fees are not subject to the contribution limit. Www free1040taxreturn com Qualified reservist repayments. Www free1040taxreturn com   If you are (or were) a member of a reserve component and you were ordered or called to active duty after September 11, 2001, you may be able to contribute (repay) to an IRA amounts equal to any qualified reservist distributions you received. Www free1040taxreturn com You can make these repayment contributions even if they would cause your total contributions to the IRA to be more than the general limit on contributions. Www free1040taxreturn com To be eligible to make these repayment contributions, you must have received a qualified reservist distribution from an IRA or from a section 401(k) or 403(b) plan or similar arrangement. Www free1040taxreturn com   For more information, see Qualified reservist repayments under How Much Can Be Contributed? in chapter 1 of Publication 590. Www free1040taxreturn com Contributions on your behalf to a traditional IRA reduce your limit for contributions to a Roth IRA. Www free1040taxreturn com (See Roth IRAs, later. Www free1040taxreturn com ) General limit. Www free1040taxreturn com   For 2013, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts. Www free1040taxreturn com $5,500 ($6,500 if you are 50 or older). Www free1040taxreturn com Your taxable compensation (defined earlier) for the year. Www free1040taxreturn com This is the most that can be contributed regardless of whether the contributions are to one or more traditional IRAs or whether all or part of the contributions are nondeductible. Www free1040taxreturn com (See Nondeductible Contributions , later. Www free1040taxreturn com ) Qualified reservist repayments do not affect this limit. Www free1040taxreturn com Example 1. Www free1040taxreturn com Betty, who is 34 years old and single, earned $24,000 in 2013. Www free1040taxreturn com Her IRA contributions for 2013 are limited to $5,500. Www free1040taxreturn com Example 2. Www free1040taxreturn com John, an unmarried college student working part time, earned $3,500 in 2013. Www free1040taxreturn com His IRA contributions for 2013 are limited to $3,500, the amount of his compensation. Www free1040taxreturn com Kay Bailey Hutchison Spousal IRA limit. Www free1040taxreturn com   For 2013, if you file a joint return and your taxable compensation is less than that of your spouse, the most that can be contributed for the year to your IRA is the smaller of the following amounts. Www free1040taxreturn com $5,500 ($6,500 if you are 50 or older). Www free1040taxreturn com The total compensation includible in the gross income of both you and your spouse for the year, reduced by the following two amounts. Www free1040taxreturn com Your spouse's IRA contribution for the year to a traditional IRA. Www free1040taxreturn com Any contribution for the year to a Roth IRA on behalf of your spouse. Www free1040taxreturn com This means that the total combined contributions that can be made for the year to your IRA and your spouse's IRA can be as much as $11,000 ($12,000 if only one of you is 50 or older, or $13,000 if both of you are 50 or older). Www free1040taxreturn com When Can Contributions Be Made? As soon as you open your traditional IRA, contributions can be made to it through your chosen sponsor (trustee or other administrator). Www free1040taxreturn com Contributions must be in the form of money (cash, check, or money order). Www free1040taxreturn com Property cannot be contributed. Www free1040taxreturn com Contributions must be made by due date. Www free1040taxreturn com   Contributions can be made to your traditional IRA for a year at any time during the year or by the due date for filing your return for that year, not including extensions. Www free1040taxreturn com Age 70½ rule. Www free1040taxreturn com   Contributions cannot be made to your traditional IRA for the year in which you reach age 70½ or for any later year. Www free1040taxreturn com   You attain age 70½ on the date that is 6 calendar months after the 70th anniversary of your birth. Www free1040taxreturn com If you were born on or before June 30, 1943, you cannot contribute for 2013 or any later year. Www free1040taxreturn com Designating year for which contribution is made. Www free1040taxreturn com   If an amount is contributed to your traditional IRA between January 1 and April 15, you should tell the sponsor which year (the current year or the previous year) the contribution is for. Www free1040taxreturn com If you do not tell the sponsor which year it is for, the sponsor can assume, and report to the IRS, that the contribution is for the current year (the year the sponsor received it). Www free1040taxreturn com Filing before a contribution is made. Www free1040taxreturn com   You can file your return claiming a traditional IRA contribution before the contribution is actually made. Www free1040taxreturn com Generally, the contribution must be made by the due date of your return, not including extensions. Www free1040taxreturn com Contributions not required. Www free1040taxreturn com   You do not have to contribute to your traditional IRA for every tax year, even if you can. Www free1040taxreturn com How Much Can You Deduct? Generally, you can deduct the lesser of: The contributions to your traditional IRA for the year, or The general limit (or the Kay Bailey Hutchison Spousal IRA limit, if it applies). Www free1040taxreturn com However, if you or your spouse was covered by an employer retirement plan, you may not be able to deduct this amount. Www free1040taxreturn com See Limit If Covered by Employer Plan , later. Www free1040taxreturn com You may be able to claim a credit for contributions to your traditional IRA. Www free1040taxreturn com For more information, see chapter 37. Www free1040taxreturn com Trustees' fees. Www free1040taxreturn com   Trustees' administrative fees that are billed separately and paid in connection with your traditional IRA are not deductible as IRA contributions. Www free1040taxreturn com However, they may be deductible as a miscellaneous itemized deduction on Schedule A (Form 1040). Www free1040taxreturn com See chapter 28. Www free1040taxreturn com Brokers' commissions. Www free1040taxreturn com   Brokers' commissions are part of your IRA contribution and, as such, are deductible subject to the limits. Www free1040taxreturn com Full deduction. Www free1040taxreturn com   If neither you nor your spouse was covered for any part of the year by an employer retirement plan, you can take a deduction for total contributions to one or more traditional IRAs of up to the lesser of: $5,500 ($6,500 if you are age 50 or older in 2013). Www free1040taxreturn com 100% of your compensation. Www free1040taxreturn com This limit is reduced by any contributions made to a 501(c)(18) plan on your behalf. Www free1040taxreturn com Kay Bailey Hutchison Spousal IRA. Www free1040taxreturn com   In the case of a married couple with unequal compensation who file a joint return, the deduction for contributions to the traditional IRA of the spouse with less compensation is limited to the lesser of the following amounts. Www free1040taxreturn com $5,500 ($6,500 if the spouse with the lower compensation is age 50 or older in 2013). Www free1040taxreturn com The total compensation includible in the gross income of both spouses for the year reduced by the following three amounts. Www free1040taxreturn com The IRA deduction for the year of the spouse with the greater compensation. Www free1040taxreturn com Any designated nondeductible contribution for the year made on behalf of the spouse with the greater compensation. Www free1040taxreturn com Any contributions for the year to a Roth IRA on behalf of the spouse with the greater compensation. Www free1040taxreturn com This limit is reduced by any contributions to a 501(c)(18) plan on behalf of the spouse with the lesser compensation. Www free1040taxreturn com Note. Www free1040taxreturn com If you were divorced or legally separated (and did not remarry) before the end of the year, you cannot deduct any contributions to your spouse's IRA. Www free1040taxreturn com After a divorce or legal separation, you can deduct only contributions to your own IRA. Www free1040taxreturn com Your deductions are subject to the rules for single individuals. Www free1040taxreturn com Covered by an employer retirement plan. Www free1040taxreturn com   If you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, your deduction may be further limited. Www free1040taxreturn com This is discussed later under Limit If Covered by Employer Plan . Www free1040taxreturn com Limits on the amount you can deduct do not affect the amount that can be contributed. Www free1040taxreturn com See Nondeductible Contributions , later. Www free1040taxreturn com Are You Covered by an Employer Plan? The Form W-2 you receive from your employer has a box used to indicate whether you were covered for the year. Www free1040taxreturn com The “Retirement plan” box should be checked if you were covered. Www free1040taxreturn com Reservists and volunteer firefighters should also see Situations in Which You Are Not Covered by an Employer Plan , later. Www free1040taxreturn com If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer. Www free1040taxreturn com Federal judges. Www free1040taxreturn com   For purposes of the IRA deduction, federal judges are covered by an employer retirement plan. Www free1040taxreturn com For Which Year(s) Are You Covered by an Employer Plan? Special rules apply to determine the tax years for which you are covered by an employer plan. Www free1040taxreturn com These rules differ depending on whether the plan is a defined contribution plan or a defined benefit plan. Www free1040taxreturn com Tax year. Www free1040taxreturn com   Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. Www free1040taxreturn com For almost all people, the tax year is the calendar year. Www free1040taxreturn com Defined contribution plan. Www free1040taxreturn com   Generally, you are covered by a defined contribution plan for a tax year if amounts are contributed or allocated to your account for the plan year that ends with or within that tax year. Www free1040taxreturn com   A defined contribution plan is a plan that provides for a separate account for each person covered by the plan. Www free1040taxreturn com Types of defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans. Www free1040taxreturn com Defined benefit plan. Www free1040taxreturn com   If you are eligible to participate in your employer's defined benefit plan for the plan year that ends within your tax year, you are covered by the plan. Www free1040taxreturn com This rule applies even if you: Declined to participate in the plan, Did not make a required contribution, or Did not perform the minimum service required to accrue a benefit for the year. Www free1040taxreturn com   A defined benefit plan is any plan that is not a defined contribution plan. Www free1040taxreturn com Defined benefit plans include pension plans and annuity plans. Www free1040taxreturn com No vested interest. Www free1040taxreturn com   If you accrue a benefit for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the accrual. Www free1040taxreturn com Situations in Which You Are Not Covered by an Employer Plan Unless you are covered under another employer plan, you are not covered by an employer plan if you are in one of the situations described below. Www free1040taxreturn com Social security or railroad retirement. Www free1040taxreturn com   Coverage under social security or railroad retirement is not coverage under an employer retirement plan. Www free1040taxreturn com Benefits from a previous employer's plan. Www free1040taxreturn com   If you receive retirement benefits from a previous employer's plan, you are not covered by that plan. Www free1040taxreturn com Reservists. Www free1040taxreturn com   If the only reason you participate in a plan is because you are a member of a reserve unit of the armed forces, you may not be covered by the plan. Www free1040taxreturn com You are not covered by the plan if both of the following conditions are met. Www free1040taxreturn com The plan you participate in is established for its employees by: The United States, A state or political subdivision of a state, or An instrumentality of either (a) or (b) above. Www free1040taxreturn com You did not serve more than 90 days on active duty during the year (not counting duty for training). Www free1040taxreturn com Volunteer firefighters. Www free1040taxreturn com   If the only reason you participate in a plan is because you are a volunteer firefighter, you may not be covered by the plan. Www free1040taxreturn com You are not covered by the plan if both of the following conditions are met. Www free1040taxreturn com The plan you participate in is established for its employees by: The United States, A state or political subdivision of a state, or An instrumentality of either (a) or (b) above. Www free1040taxreturn com Your accrued retirement benefits at the beginning of the year will not provide more than $1,800 per year at retirement. Www free1040taxreturn com Limit If Covered by Employer Plan If either you or your spouse was covered by an employer retirement plan, you may be entitled to only a partial (reduced) deduction or no deduction at all, depending on your income and your filing status. Www free1040taxreturn com Your deduction begins to decrease (phase out) when your income rises above a certain amount and is eliminated altogether when it reaches a higher amount. Www free1040taxreturn com These amounts vary depending on your filing status. Www free1040taxreturn com To determine if your deduction is subject to phaseout, you must determine your modified adjusted gross income (AGI) and your filing status. Www free1040taxreturn com See Filing status and Modified adjusted gross income (AGI) , later. Www free1040taxreturn com Then use Table 17-1 or 17-2 to determine if the phaseout applies. Www free1040taxreturn com Social security recipients. Www free1040taxreturn com   Instead of using Table 17-1 or Table 17-2, use the worksheets in Appendix B of Publication 590 if, for the year, all of the following apply. Www free1040taxreturn com You received social security benefits. Www free1040taxreturn com You received taxable compensation. Www free1040taxreturn com Contributions were made to your traditional IRA. Www free1040taxreturn com You or your spouse was covered by an employer retirement plan. Www free1040taxreturn com Use those worksheets to figure your IRA deduction, your nondeductible contribution, and the taxable portion, if any, of your social security benefits. Www free1040taxreturn com Deduction phaseout. Www free1040taxreturn com   If you were covered by an employer retirement plan and you did not receive any social security retirement benefits, your IRA deduction may be reduced or eliminated depending on your filing status and modified AGI as shown in Table 17-1. Www free1040taxreturn com Table 17-1. Www free1040taxreturn com Effect of Modified AGI1 on Deduction if You Are Covered by Retirement Plan at Work If you are covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. Www free1040taxreturn com IF your filing status is. Www free1040taxreturn com . Www free1040taxreturn com . Www free1040taxreturn com   AND your modified AGI is. Www free1040taxreturn com . Www free1040taxreturn com . Www free1040taxreturn com   THEN you can take. Www free1040taxreturn com . Www free1040taxreturn com . Www free1040taxreturn com single   or  head of household   $59,000 or less   a full deduction. Www free1040taxreturn com   more than $59,000 but less than $69,000   a partial deduction. Www free1040taxreturn com   $69,000 or more   no deduction. Www free1040taxreturn com married filing jointly   or  qualifying widow(er)   $95,000 or less   a full deduction. Www free1040taxreturn com   more than $95,000 but less than $115,000   a partial deduction. Www free1040taxreturn com   $115,000 or more   no deduction. Www free1040taxreturn com married filing separately2   less than $10,000   a partial deduction. Www free1040taxreturn com   $10,000 or more   no deduction. Www free1040taxreturn com 1Modified AGI (adjusted gross income). Www free1040taxreturn com See Modified adjusted gross income (AGI) . Www free1040taxreturn com 2If you did not live with your spouse at any time during the year, your filing status is considered Single for this purpose (therefore, your IRA deduction is determined under the “Single” column). Www free1040taxreturn com If your spouse is covered. Www free1040taxreturn com   If you are not covered by an employer retirement plan, but your spouse is, and you did not receive any social security benefits, your IRA deduction may be reduced or eliminated entirely depending on your filing status and modified AGI as shown in Table 17-2. Www free1040taxreturn com Filing status. Www free1040taxreturn com   Your filing status depends primarily on your marital status. Www free1040taxreturn com For this purpose, you need to know if your filing status is single or head of household, married filing jointly or qualifying widow(er), or married filing separately. Www free1040taxreturn com If you need more information on filing status, see chapter 2. Www free1040taxreturn com Lived apart from spouse. Www free1040taxreturn com   If you did not live with your spouse at any time during the year and you file a separate return, your filing status, for this purpose, is single. Www free1040taxreturn com Table 17-2. Www free1040taxreturn com Effect of Modified AGI1 on Deduction if You Are NOT Covered by Retirement Plan at Work If you are not covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. Www free1040taxreturn com IF your filing status is. Www free1040taxreturn com . Www free1040taxreturn com . Www free1040taxreturn com   AND your modified AGI is. Www free1040taxreturn com . Www free1040taxreturn com . Www free1040taxreturn com   THEN you can take. Www free1040taxreturn com . Www free1040taxreturn com . Www free1040taxreturn com single, head of household, or qualifying widow(er)   any amount   a full deduction. Www free1040taxreturn com married filing jointly or separately with a spouse who is not covered by a plan at work   any amount   a full deduction. Www free1040taxreturn com married filing jointly with a spouse who is covered by a plan at work   $178,000 or less   a full deduction. Www free1040taxreturn com   more than $178,000 but less than $188,000   a partial deduction. Www free1040taxreturn com   $188,000 or more   no deduction. Www free1040taxreturn com married filing separately with a spouse who is covered by a plan at work2   less than $10,000   a partial deduction. Www free1040taxreturn com   $10,000 or more   no deduction. Www free1040taxreturn com 1Modified AGI (adjusted gross income). Www free1040taxreturn com See Modified adjusted gross income (AGI) . Www free1040taxreturn com 2You are entitled to the full deduction if you did not live with your spouse at any time during the year. Www free1040taxreturn com Modified adjusted gross income (AGI). Www free1040taxreturn com   How you figure your modified AGI depends on whether you are filing Form 1040 or Form 1040A. Www free1040taxreturn com If you made contributions to your IRA for 2013 and received a distribution from your IRA in 2013, see Publication 590. Www free1040taxreturn com You may be able to use Worksheet 17-1 to figure your modified AGI. Www free1040taxreturn com    Do not assume that your modified AGI is the same as your compensation. Www free1040taxreturn com Your modified AGI may include income in addition to your compensation (discussed earlier), such as interest, dividends, and income from IRA distributions. Www free1040taxreturn com Form 1040. Www free1040taxreturn com   If you file Form 1040, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following eight amounts. Www free1040taxreturn com IRA deduction. Www free1040taxreturn com Student loan interest deduction. Www free1040taxreturn com Tuition and fees deduction. Www free1040taxreturn com Domestic production activities deduction. Www free1040taxreturn com Foreign earned income exclusion. Www free1040taxreturn com Foreign housing exclusion or deduction. Www free1040taxreturn com Exclusion of qualified savings bond interest shown on Form 8815, Exclusion of Interest From Series EE and I U. Www free1040taxreturn com S. Www free1040taxreturn com Savings Bonds Issued After 1989. Www free1040taxreturn com Exclusion of employer-provided adoption benefits shown on Form 8839, Qualified Adoption Expenses. Www free1040taxreturn com This is your modified AGI. Www free1040taxreturn com Form 1040A. Www free1040taxreturn com   If you file Form 1040A, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. Www free1040taxreturn com IRA deduction. Www free1040taxreturn com Student loan interest deduction. Www free1040taxreturn com Tuition and fees deduction. Www free1040taxreturn com Exclusion of qualified savings bond interest shown on Form 8815. Www free1040taxreturn com This is your modified AGI. Www free1040taxreturn com Both contributions for 2013 and distributions in 2013. Www free1040taxreturn com   If all three of the following apply, any IRA distributions you received in 2013 may be partly tax free and partly taxable. Www free1040taxreturn com You received distributions in 2013 from one or more traditional IRAs. Www free1040taxreturn com You made contributions to a traditional IRA for 2013. Www free1040taxreturn com Some of those contributions may be nondeductible contributions. Www free1040taxreturn com If this is your situation, you must figure the taxable part of the traditional IRA distribution before you can figure your modified AGI. Www free1040taxreturn com To do this, you can use Worksheet 1-5, Figuring the Taxable Part of Your IRA Distribution, in Publication 590. Www free1040taxreturn com   If at least one of the above does not apply, figure your modified AGI using Worksheet 17-1, later. Www free1040taxreturn com    How to figure your reduced IRA deduction. Www free1040taxreturn com   You can figure your reduced IRA deduction for either Form 1040 or Form 1040A by using the worksheets in chapter 1 of Publication 590. Www free1040taxreturn com Also, the instructions for Form 1040 and Form 1040A include similar worksheets that you may be able to use instead. Www free1040taxreturn com Worksheet 17-1. Www free1040taxreturn com Figuring Your Modified AGI Use this worksheet to figure your modified adjusted gross income for traditional IRA purposes. Www free1040taxreturn com 1. Www free1040taxreturn com Enter your adjusted gross income (AGI) from Form 1040, line 38, or Form 1040A, line 22, figured without taking into account the amount from Form 1040, line 32, or Form 1040A, line 17 1. Www free1040taxreturn com   2. Www free1040taxreturn com Enter any student loan interest deduction from Form 1040, line 33, or Form 1040A, line 18 2. Www free1040taxreturn com   3. Www free1040taxreturn com Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 3. Www free1040taxreturn com   4. Www free1040taxreturn com Enter any domestic production activities deduction from Form 1040, line 35 4. Www free1040taxreturn com   5. Www free1040taxreturn com Enter any foreign earned income and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 5. Www free1040taxreturn com   6. Www free1040taxreturn com Enter any foreign housing deduction from Form 2555, line 50 6. Www free1040taxreturn com   7. Www free1040taxreturn com Enter any excludable savings bond interest from Form 8815, line 14 7. Www free1040taxreturn com   8. Www free1040taxreturn com Enter any excluded employer-provided adoption benefits from Form 8839, line 28 8. Www free1040taxreturn com   9. Www free1040taxreturn com Add lines 1 through 8. Www free1040taxreturn com This is your Modified AGI for traditional IRA purposes 9. Www free1040taxreturn com   Reporting Deductible Contributions If you file Form 1040, enter your IRA deduction on line 32 of that form. Www free1040taxreturn com If you file Form 1040A, enter your IRA deduction on line 17. Www free1040taxreturn com You cannot deduct IRA contributions on Form 1040EZ. Www free1040taxreturn com Nondeductible Contributions Although your deduction for IRA contributions may be reduced or eliminated, contributions can be made to your IRA up to the general limit or, if it applies, the Kay Bailey Hutchison Spousal IRA limit. Www free1040taxreturn com The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. Www free1040taxreturn com Example. Www free1040taxreturn com Mike is 28 years old and single. Www free1040taxreturn com In 2013, he was covered by a retirement plan at work. Www free1040taxreturn com His salary was $57,312. Www free1040taxreturn com His modified AGI was $70,000. Www free1040taxreturn com Mike made a $5,500 IRA contribution for 2013. Www free1040taxreturn com Because he was covered by a retirement plan and his modified AGI was over $69,000, he cannot deduct his $5,500 IRA contribution. Www free1040taxreturn com He must designate this contribution as a nondeductible contribution by reporting it on Form 8606, as explained next. Www free1040taxreturn com Form 8606. Www free1040taxreturn com   To designate contributions as nondeductible, you must file Form 8606. Www free1040taxreturn com   You do not have to designate a contribution as nondeductible until you file your tax return. Www free1040taxreturn com When you file, you can even designate otherwise deductible contributions as nondeductible. Www free1040taxreturn com   You must file Form 8606 to report nondeductible contributions even if you do not have to file a tax return for the year. Www free1040taxreturn com A Form 8606 is not used for the year that you make a rollover from a qualified retirement plan to a traditional IRA and the rollover includes nontaxable amounts. Www free1040taxreturn com In those situations, a Form 8606 is completed for the year you take a distribution from that IRA. Www free1040taxreturn com See Form 8606 under Distributions Fully or Partly Taxable, later. Www free1040taxreturn com Failure to report nondeductible contributions. Www free1040taxreturn com   If you do not report nondeductible contributions, all of the contributions to your traditional IRA will be treated as deductible contributions when withdrawn. Www free1040taxreturn com All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. Www free1040taxreturn com Penalty for overstatement. Www free1040taxreturn com   If you overstate the amount of nondeductible contributions on your Form 8606 for any tax year, you must pay a penalty of $100 for each overstatement, unless it was due to reasonable cause. Www free1040taxreturn com Penalty for failure to file Form 8606. Www free1040taxreturn com   You will have to pay a $50 penalty if you do not file a required Form 8606, unless you can prove that the failure was due to reasonable cause. Www free1040taxreturn com    Tax on earnings on nondeductible contributions. Www free1040taxreturn com   As long as contributions are within the contribution limits, none of the earnings or gains on contributions (deductible or nondeductible) will be taxed until they are distributed. Www free1040taxreturn com See When Can You Withdraw or Use IRA Assets , later. Www free1040taxreturn com Cost basis. Www free1040taxreturn com   You will have a cost basis in your traditional IRA if you made any nondeductible contributions. Www free1040taxreturn com Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions. Www free1040taxreturn com Inherited IRAs If you inherit a traditional IRA, you are called a beneficiary. Www free1040taxreturn com A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. Www free1040taxreturn com Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive. Www free1040taxreturn com Inherited from spouse. Www free1040taxreturn com   If you inherit a traditional IRA from your spouse, you generally have the following three choices. Www free1040taxreturn com You can: Treat it as your own IRA by designating yourself as the account owner. Www free1040taxreturn com Treat it as your own by rolling it over into your IRA, or to the extent it is taxable, into a: Qualified employer plan, Qualified employee annuity plan (section 403(a) plan), Tax-sheltered annuity plan (section 403(b) plan), or Deferred compensation plan of a state or local government (section 457 plan). Www free1040taxreturn com Treat yourself as the beneficiary rather than treating the IRA as your own. Www free1040taxreturn com Treating it as your own. Www free1040taxreturn com   You will be considered to have chosen to treat the IRA as your own if: Contributions (including rollover contributions) are made to the inherited IRA, or You do not take the required minimum distribution for a year as a beneficiary of the IRA. Www free1040taxreturn com You will only be considered to have chosen to treat the IRA as your own if: You are the sole beneficiary of the IRA, and You have an unlimited right to withdraw amounts from it. Www free1040taxreturn com   However, if you receive a distribution from your deceased spouse's IRA, you can roll that distribution over into your own IRA within the 60-day time limit, as long as the distribution is not a required distribution, even if you are not the sole beneficiary of your deceased spouse's IRA. Www free1040taxreturn com Inherited from someone other than spouse. Www free1040taxreturn com   If you inherit a traditional IRA from anyone other than your deceased spouse, you cannot treat the inherited IRA as your own. Www free1040taxreturn com This means that you cannot make any contributions to the IRA. Www free1040taxreturn com It also means you cannot roll over any amounts into or out of the inherited IRA. Www free1040taxreturn com However, you can make a trustee-to-trustee transfer as long as the IRA into which amounts are being moved is set up and maintained in the name of the deceased IRA owner for the benefit of you as beneficiary. Www free1040taxreturn com For more information, see the discussion of inherited IRAs under Rollover From One IRA Into Another, later. Www free1040taxreturn com Can You Move Retirement Plan Assets? You can transfer, tax free, assets (money or property) from other retirement plans (including traditional IRAs) to a traditional IRA. Www free1040taxreturn com You can make the following kinds of transfers. Www free1040taxreturn com Transfers from one trustee to another. Www free1040taxreturn com Rollovers. Www free1040taxreturn com Transfers incident to a divorce. Www free1040taxreturn com Transfers to Roth IRAs. Www free1040taxreturn com   Under certain conditions, you can move assets from a traditional IRA or from a designated Roth account to a Roth IRA. Www free1040taxreturn com You can also move assets from a qualified retirement plan to a Roth IRA. Www free1040taxreturn com See Can You Move Amounts Into a Roth IRA? under Roth IRAs, later. Www free1040taxreturn com Trustee-to-Trustee Transfer A transfer of funds in your traditional IRA from one trustee directly to another, either at your request or at the trustee's request, is not a rollover. Www free1040taxreturn com Because there is no distribution to you, the transfer is tax free. Www free1040taxreturn com Because it is not a rollover, it is not affected by the 1-year waiting period required between rollovers, discussed later under Rollover From One IRA Into Another . Www free1040taxreturn com For information about direct transfers to IRAs from retirement plans other than IRAs, see Can You Move Retirement Plan Assets? in chapter 1 and Can You Move Amounts Into a Roth IRA? in chapter 2 of Publication 590. Www free1040taxreturn com Rollovers Generally, a rollover is a tax-free distribution to you of cash or other assets from one retirement plan that you contribute (roll over) to another retirement plan. Www free1040taxreturn com The contribution to the second retirement plan is called a “rollover contribution. Www free1040taxreturn com ” Note. Www free1040taxreturn com An amount rolled over tax free from one retirement plan to another is generally includible in income when it is distributed from the second plan. Www free1040taxreturn com Kinds of rollovers to a traditional IRA. Www free1040taxreturn com   You can roll over amounts from the following plans into a traditional IRA: A traditional IRA, An employer's qualified retirement plan for its employees, A deferred compensation plan of a state or local government (section 457 plan), or A tax-sheltered annuity plan (section 403(b) plan). Www free1040taxreturn com Treatment of rollovers. Www free1040taxreturn com   You cannot deduct a rollover contribution, but you must report the rollover distribution on your tax return as discussed later under Reporting rollovers from IRAs and under Reporting rollovers from employer plans . Www free1040taxreturn com Kinds of rollovers from a traditional IRA. Www free1040taxreturn com   You may be able to roll over, tax free, a distribution from your traditional IRA into a qualified plan. Www free1040taxreturn com These plans include the federal Thrift Savings Fund (for federal employees), deferred compensation plans of state or local governments (section 457 plans), and tax-sheltered annuity plans (section 403(b) plans). Www free1040taxreturn com The part of the distribution that you can roll over is the part that would otherwise be taxable (includible in your income). Www free1040taxreturn com Qualified plans may, but are not required to, accept such rollovers. Www free1040taxreturn com Time limit for making a rollover contribution. Www free1040taxreturn com   You generally must make the rollover contribution by the 60th day after the day you receive the distribution from your traditional IRA or your employer's plan. Www free1040taxreturn com The IRS may waive the 60-day requirement where the failure to do so would be against equity or good conscience, such as in the event of a casualty, disaster, or other event beyond your reasonable control. Www free1040taxreturn com For more information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Www free1040taxreturn com Extension of rollover period. Www free1040taxreturn com   If an amount distributed to you from a traditional IRA or a qualified employer retirement plan is a frozen deposit at any time during the 60-day period allowed for a rollover, special rules extend the rollover period. Www free1040taxreturn com For more information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Www free1040taxreturn com More information. Www free1040taxreturn com   For more information on rollovers, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Www free1040taxreturn com Rollover From One IRA Into Another You can withdraw, tax free, all or part of the assets from one traditional IRA if you reinvest them within 60 days in the same or another traditional IRA. Www free1040taxreturn com Because this is a rollover, you cannot deduct the amount that you reinvest in an IRA. Www free1040taxreturn com Waiting period between rollovers. Www free1040taxreturn com   Generally, if you make a tax-free rollover of any part of a distribution from a traditional IRA, you cannot, within a 1-year period, make a tax-free rollover of any later distribution from that same IRA. Www free1040taxreturn com You also cannot make a tax-free rollover of any amount distributed, within the same 1-year period, from the IRA into which you made the tax-free rollover. Www free1040taxreturn com   The 1-year period begins on the date you receive the IRA distribution, not on the date you roll it over into an IRA. Www free1040taxreturn com Example. Www free1040taxreturn com You have two traditional IRAs, IRA-1 and IRA-2. Www free1040taxreturn com You make a tax-free rollover of a distribution from IRA-1 into a new traditional IRA (IRA-3). Www free1040taxreturn com You cannot, within 1 year of the distribution from IRA-1, make a tax-free rollover of any distribution from either IRA-1 or IRA-3 into another traditional IRA. Www free1040taxreturn com However, the rollover from IRA-1 into IRA-3 does not prevent you from making a tax-free rollover from IRA-2 into any other traditional IRA. Www free1040taxreturn com This is because you have not, within the last year, rolled over, tax free, any distribution from IRA-2 or made a tax-free rollover into IRA-2. Www free1040taxreturn com Exception. Www free1040taxreturn com   For an exception for distributions from failed financial institutions, see Rollover From One IRA Into Another under Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Www free1040taxreturn com Partial rollovers. Www free1040taxreturn com   If you withdraw assets from a traditional IRA, you can roll over part of the withdrawal tax free and keep the rest of it. Www free1040taxreturn com The amount you keep will generally be taxable (except for the part that is a return of nondeductible contributions). Www free1040taxreturn com The amount you keep may be subject to the 10% additional tax on early distributions, discussed later under What Acts Result in Penalties or Additional Taxes? . Www free1040taxreturn com Required distributions. Www free1040taxreturn com   Amounts that must be distributed during a particular year under the required distribution rules (discussed later) are not eligible for rollover treatment. Www free1040taxreturn com Inherited IRAs. Www free1040taxreturn com   If you inherit a traditional IRA from your spouse, you generally can roll it over, or you can choose to make the inherited IRA your own. Www free1040taxreturn com See Treating it as your own , earlier. Www free1040taxreturn com Not inherited from spouse. Www free1040taxreturn com   If you inherit a traditional IRA from someone other than your spouse, you cannot roll it over or allow it to receive a rollover contribution. Www free1040taxreturn com You must withdraw the IRA assets within a certain period. Www free1040taxreturn com For more information, see When Must You Withdraw Assets? in chapter 1 of Publication 590. Www free1040taxreturn com Reporting rollovers from IRAs. Www free1040taxreturn com   Report any rollover from one traditional IRA to the same or another traditional IRA on lines 15a and 15b, Form 1040, or lines 11a and 11b, Form 1040A, as follows. Www free1040taxreturn com   Enter the total amount of the distribution on Form 1040, line 15a, or Form 1040A, line 11a. Www free1040taxreturn com If the total amount on Form 1040, line 15a, or Form 1040A, line 11a, was rolled over, enter zero on Form 1040, line 15b, or Form 1040A, line 11b. Www free1040taxreturn com If the total distribution was not rolled over, enter the taxable portion of the part that was not rolled over on Form 1040, line 15b, or Form 1040A, line 11b. Www free1040taxreturn com Put “Rollover” next to Form 1040, line 15b, or Form 1040A, line 11b. Www free1040taxreturn com See your tax return instructions. Www free1040taxreturn com   If you rolled over the distribution into a qualified plan (other than an IRA) or you make the rollover in 2014, attach a statement explaining what you did. Www free1040taxreturn com Rollover From Employer's Plan Into an IRA You can roll over into a traditional IRA all or part of an eligible rollover distribution you receive from your (or your deceased spouse's): Employer's qualified pension, profit-sharing, or stock bonus plan; Annuity plan; Tax-sheltered annuity plan (section 403(b) plan); or Governmental deferred compensation plan (section 457 plan). Www free1040taxreturn com A qualified plan is one that meets the requirements of the Internal Revenue Code. Www free1040taxreturn com Eligible rollover distribution. Www free1040taxreturn com   Generally, an eligible rollover distribution is any distribution of all or part of the balance to your credit in a qualified retirement plan except the following. Www free1040taxreturn com A required minimum distribution (explained later under When Must You Withdraw IRA Assets? (Required Minimum Distributions) ). Www free1040taxreturn com A hardship distribution. Www free1040taxreturn com Any of a series of substantially equal periodic distributions paid at least once a year over: Your lifetime or life expectancy, The lifetimes or life expectancies of you and your beneficiary, or A period of 10 years or more. Www free1040taxreturn com Corrective distributions of excess contributions or excess deferrals, and any income allocable to the excess, or of excess annual additions and any allocable gains. Www free1040taxreturn com A loan treated as a distribution because it does not satisfy certain requirements either when made or later (such as upon default), unless the participant's accrued benefits are reduced (offset) to repay the loan. Www free1040taxreturn com Dividends on employer securities. Www free1040taxreturn com The cost of life insurance coverage. Www free1040taxreturn com Any nontaxable amounts that you roll over into your traditional IRA become part of your basis (cost) in your IRAs. Www free1040taxreturn com To recover your basis when you take distributions from your IRA, you must complete Form 8606 for the year of the distribution. Www free1040taxreturn com See Form 8606 under Distributions Fully or Partly Taxable, later. Www free1040taxreturn com Rollover by nonspouse beneficiary. Www free1040taxreturn com   A direct transfer from a deceased employee's qualified pension, profit-sharing, or stock bonus plan; annuity plan; tax-sheltered annuity (section 403(b)) plan; or governmental deferred compensation (section 457) plan to an IRA set up to receive the distribution on your behalf can be treated as an eligible rollover distribution if you are the designated beneficiary of the plan and not the employee's spouse. Www free1040taxreturn com The IRA is treated as an inherited IRA. Www free1040taxreturn com For more information about inherited IRAs, see Inherited IRAs , earlier. Www free1040taxreturn com Reporting rollovers from employer plans. Www free1040taxreturn com    Enter the total distribution (before income tax or other deductions were withheld) on Form 1040, line 16a, or Form 1040A, line 12a. Www free1040taxreturn com This amount should be shown in box 1 of Form 1099-R. Www free1040taxreturn com From this amount, subtract any contributions (usually shown in box 5 of Form 1099-R) that were taxable to you when made. Www free1040taxreturn com From that result, subtract the amount that was rolled over either directly or within 60 days of receiving the distribution. Www free1040taxreturn com Enter the remaining amount, even if zero, on Form 1040, line 16b, or Form 1040A, line 12b. Www free1040taxreturn com Also, enter "Rollover" next to Form 1040, line 16b, or Form 1040A, line 12b. Www free1040taxreturn com Transfers Incident to Divorce If an interest in a traditional IRA is transferred from your spouse or former spouse to you by a divorce or separate maintenance decree or a written document related to such a decree, the interest in the IRA, starting from the date of the transfer, is treated as your IRA. Www free1040taxreturn com The transfer is tax free. Www free1040taxreturn com For detailed information, see Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Www free1040taxreturn com Converting From Any Traditional IRA to a Roth IRA Allowable conversions. Www free1040taxreturn com   You can withdraw all or part of the assets from a traditional IRA and reinvest them (within 60 days) in a Roth IRA. Www free1040taxreturn com The amount that you withdraw and timely contribute (convert) to the Roth IRA is called a conversion contribution. Www free1040taxreturn com If properly (and timely) rolled over, the 10% additional tax on early distributions will not apply. Www free1040taxreturn com However, a part or all of the conversion contribution from your traditional IRA is included in your gross income. Www free1040taxreturn com Required distributions. Www free1040taxreturn com   You cannot convert amounts that must be distributed from your traditional IRA for a particular year (including the calendar year in which you reach age 70½) under the required distribution rules (discussed later). Www free1040taxreturn com Income. Www free1040taxreturn com   You must include in your gross income distributions from a traditional IRA that you would have had to include in income if you had not converted them into a Roth IRA. Www free1040taxreturn com These amounts are normally included in income on your return for the year that you converted them from a traditional IRA to a Roth IRA. Www free1040taxreturn com   You do not include in gross income any part of a distribution from a traditional IRA that is a return of your basis, as discussed later. Www free1040taxreturn com   You must file Form 8606 to report 2013 conversions from traditional, SEP, or SIMPLE IRAs to a Roth IRA in 2013 (unless you recharacterized the entire amount) and to figure the amount to include in income. Www free1040taxreturn com   If you must include any amount in your gross income, you may have to increase your withholding or make estimated tax payments. Www free1040taxreturn com See chapter 4. Www free1040taxreturn com Recharacterizations You may be able to treat a contribution made to one type of IRA as having been made to a different type of IRA. Www free1040taxreturn com This is called recharacterizing the contribution. Www free1040taxreturn com See Can You Move Retirement Plan Assets? in chapter 1 of Publication 590 for more detailed information. Www free1040taxreturn com How to recharacterize a contribution. Www free1040taxreturn com   To recharacterize a contribution, you generally must have the contribution transferred from the first IRA (the one to which it was made) to the second IRA in a trustee-to-trustee transfer. Www free1040taxreturn com If the transfer is made by the due date (including extensions) for your tax return for the year during which the contribution was made, you can elect to treat the contribution as having been originally made to the second IRA instead of to the first IRA. Www free1040taxreturn com If you recharacterize your contribution, you must do all three of the following. Www free1040taxreturn com Include in the transfer any net income allocable to the contribution. Www free1040taxreturn com If there was a loss, the net income you must transfer may be a negative amount. Www free1040taxreturn com Report the recharacterization on your tax return for the year during which the contribution was made. Www free1040taxreturn com Treat the contribution as having been made to the second IRA on the date that it was actually made to the first IRA. Www free1040taxreturn com No deduction allowed. Www free1040taxreturn com   You cannot deduct the contribution to the first IRA. Www free1040taxreturn com Any net income you transfer with the recharacterized contribution is treated as earned in the second IRA. Www free1040taxreturn com Required notifications. Www free1040taxreturn com   To recharacterize a contribution, you must notify both the trustee of the first IRA (the one to which the contribution was actually made) and the trustee of the second IRA (the one to which the contribution is being moved) that you have elected to treat the contribution as having been made to the second IRA rather than the first. Www free1040taxreturn com You must make the notifications by the date of the transfer. Www free1040taxreturn com Only one notification is required if both IRAs are maintained by the same trustee. Www free1040taxreturn com The notification(s) must include all of the following information. Www free1040taxreturn com The type and amount of the contribution to the first IRA that is to be recharacterized. Www free1040taxreturn com The date on which the contribution was made to the first IRA and the year for which it was made. Www free1040taxreturn com A direction to the trustee of the first IRA to transfer in a trustee-to-trustee transfer the amount of the contribution and any net income (or loss) allocable to the contribution to the trustee of the second IRA. Www free1040taxreturn com The name of the trustee of the first IRA and the name of the trustee of the second IRA. Www free1040taxreturn com Any additional information needed to make the transfer. Www free1040taxreturn com Reporting a recharacterization. Www free1040taxreturn com   If you elect to recharacterize a contribution to one IRA as a contribution to another IRA, you must report the recharacterization on your tax return as directed by Form 8606 and its instructions. Www free1040taxreturn com You must treat the contribution as having been made to the second IRA. Www free1040taxreturn com When Can You Withdraw or Use IRA Assets? There are rules limiting use of your IRA assets and distributions from it. Www free1040taxreturn com Violation of the rules generally results in additional taxes in the year of violation. Www free1040taxreturn com See What Acts Result in Penalties or Additional Taxes , later. Www free1040taxreturn com Contributions returned before the due date of return. Www free1040taxreturn com   If you made IRA contributions in 2013, you can withdraw them tax free by the due date of your return. Www free1040taxreturn com If you have an extension of time to file your return, you can withdraw them tax free by the extended due date. Www free1040taxreturn com You can do this if, for each contribution you withdraw, both of the following conditions apply. Www free1040taxreturn com You did not take a deduction for the contribution. Www free1040taxreturn com You withdraw any interest or other income earned on the contribution. Www free1040taxreturn com You can take into account any loss on the contribution while it was in the IRA when calculating the amount that must be withdrawn. Www free1040taxreturn com If there was a loss, the net income earned on the contribution may be a negative amount. Www free1040taxreturn com Note. Www free1040taxreturn com To calculate the amount you must withdraw, see Worksheet 1-4 under When Can You Withdraw or Use Assets? in chapter 1 of Publication 590. Www free1040taxreturn com Earnings includible in income. Www free1040taxreturn com   You must include in income any earnings on the contributions you withdraw. Www free1040taxreturn com Include the earnings in income for the year in which you made the contributions, not in the year in which you withdraw them. Www free1040taxreturn com Generally, except for any part of a withdrawal that is a return of nondeductible contributions (basis), any withdrawal of your contributions after the due date (or extended due date) of your return will be treated as a taxable distribution. Www free1040taxreturn com Excess contributions can also be recovered tax free as discussed under What Acts Result in Penalties or Additional Taxes?, later. Www free1040taxreturn com    Early distributions tax. Www free1040taxreturn com   The 10% additional tax on distributions made before you reach age 59½ does not apply to these tax-free withdrawals of your contributions. Www free1040taxreturn com However, the distribution of interest or other income must be reported on Form 5329 and, unless the distribution qualifies as an exception to the age 59½ rule, it will be subject to this tax. Www free1040taxreturn com When Must You Withdraw IRA Assets? (Required Minimum Distributions) You cannot keep funds in a traditional IRA indefinitely. Www free1040taxreturn com Eventually they must be distributed. Www free1040taxreturn com If there are no distributions, or if the distributions are not large enough, you may have to pay a 50% excise tax on the amount not distributed as required. Www free1040taxreturn com See Excess Accumulations (Insufficient Distributions) , later. Www free1040taxreturn com The requirements for distributing IRA funds differ depending on whether you are the IRA owner or the beneficiary of a decedent's IRA. Www free1040taxreturn com Required minimum distribution. Www free1040taxreturn com   The amount that must be distributed each year is referred to as the required minimum distribution. Www free1040taxreturn com Required distributions not eligible for rollover. Www free1040taxreturn com   Amounts that must be distributed (required minimum distributions) during a particular year are not eligible for rollover treatment. Www free1040taxreturn com IRA owners. Www free1040taxreturn com   If you are the owner of a traditional IRA, you must generally start receiving distributions from your IRA by April 1 of the year following the year in which you reach age 70½. Www free1040taxreturn com April 1 of the year following the year in which you reach age 70½ is referred to as the required beginning date. Www free1040taxreturn com Distributions by the required beginning date. Www free1040taxreturn com   You must receive at least a minimum amount for each year starting with the year you reach age 70½ (your 70½ year). Www free1040taxreturn com If you do not (or did not) receive that minimum amount in your 70½ year, then you must receive distributions for your 70½ year by April 1 of the next year. Www free1040taxreturn com   If an IRA owner dies after reaching age 70½, but before April 1 of the next year, no minimum distribution is required because death occurred before the required beginning date. Www free1040taxreturn com Even if you begin receiving distributions before you attain age 70½, you must begin calculating and receiving required minimum distributions by your required beginning date. Www free1040taxreturn com Distributions after the required beginning date. Www free1040taxreturn com   The required minimum distribution for any year after the year you turn 70½ must be made by December 31 of that later year. Www free1040taxreturn com    Beneficiaries. Www free1040taxreturn com   If you are the beneficiary of a decedent's traditional IRA, the requirements for distributions from that IRA generally depend on whether the IRA owner died before or after the required beginning date for distributions. Www free1040taxreturn com More information. Www free1040taxreturn com   For more information, including how to figure your minimum required distribution each year and how to figure your required distribution if you are a beneficiary of a decedent's IRA, see When Must You Withdraw Assets? in chapter 1 of Publication 590. Www free1040taxreturn com Are Distributions Taxable? In general, distributions from a traditional IRA are taxable in the year you receive them. Www free1040taxreturn com Exceptions. Www free1040taxreturn com   Exceptions to distributions from traditional IRAs being taxable in the year you receive them are: Rollovers, Qualified charitable distributions (QCD), discussed later, Tax-free withdrawals of contributions, discussed earlier, and The return of nondeductible contributions, discussed later under Distributions Fully or Partly Taxable . Www free1040taxreturn com    Although a conversion of a traditional IRA is considered a rollover for Roth IRA purposes, it is not an exception to the rule that distributions from a traditional IRA are taxable in the year you receive them. Www free1040taxreturn com Conversion distributions are includible in your gross income subject to this rule and the special rules for conversions explained in Converting From Any Traditional IRA Into a Roth IRA under Can You Move Retirement Plan Assets? in chapter 1 of Publication 590. Www free1040taxreturn com Qualified charitable distributions (QCD). Www free1040taxreturn com   A QCD is generally a nontaxable distribution made directly by the trustee of your IRA to an organization eligible to receive tax-deductible contributions. Www free1040taxreturn com Special rules apply if you made a qualified charitable distribution in January 2013 that you elected to treat as made in 2012. Www free1040taxreturn com See Qualified Charitable Distributions in Publication 590 for more information. Www free1040taxreturn com Ordinary income. Www free1040taxreturn com   Distributions from traditional IRAs that you include in income are taxed as ordinary income. Www free1040taxreturn com No special treatment. Www free1040taxreturn com   In figuring your tax, you cannot use the 10-year tax option or capital gain treatment that applies to lump-sum distributions from qualified retirement plans. Www free1040taxreturn com Distributions Fully or Partly Taxable Distributions from your traditional IRA may be fully or partly taxable, depending on whether your IRA includes any nondeductible contributions. Www free1040taxreturn com Fully taxable. Www free1040taxreturn com   If only deductible contributions were made to your traditional IRA (or IRAs, if you have more than one), you have no basis in your IRA. Www free1040taxreturn com Because you have no basis in your IRA, any distributions are fully taxable when received. Www free1040taxreturn com See Reporting taxable distributions on your return , later. Www free1040taxreturn com Partly taxable. Www free1040taxreturn com    If you made nondeductible contributions or rolled over any after-tax amounts to any of your traditional IRAs, you have a cost basis (investment in the contract) equal to the amount of those contributions. Www free1040taxreturn com These nondeductible contributions are not taxed when they are distributed to you. Www free1040taxreturn com They are a return of your investment in your IRA. Www free1040taxreturn com   Only the part of the distribution that represents nondeductible contributions and rolled over after-tax amounts (your cost basis) is tax free. Www free1040taxreturn com If nondeductible contributions have been made or after-tax amounts have been rolled over to your IRA, distributions consist partly of nondeductible contributions (basis) and partly of deductible contributions, earnings, and gains (if there are any). Www free1040taxreturn com Until all of your basis has been distributed, each distribution is partly nontaxable and partly taxable. Www free1040taxreturn com Form 8606. Www free1040taxreturn com   You must complete Form 8606 and attach it to your return if you receive a distribution from a traditional IRA and have ever made nondeductible contributions or rolled over after-tax amounts to any of your traditional IRAs. Www free1040taxreturn com Using the form, you will figure the nontaxable distributions for 2013 and your total IRA basis for 2013 and earlier years. Www free1040taxreturn com Note. Www free1040taxreturn com If you are required to file Form 8606, but you are not required to file an income tax return, you still must file Form 8606. Www free1040taxreturn com Send it to the IRS at the time and place you would otherwise file an income tax return. Www free1040taxreturn com Distributions reported on Form 1099-R. Www free1040taxreturn com   If you receive a distribution from your traditional IRA, you will receive Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Www free1040taxreturn com , or a similar statement. Www free1040taxreturn com IRA distributions are shown in boxes 1 and 2a of Form 1099-R. Www free1040taxreturn com A number or letter code in box 7 tells you what type of distribution you received from your IRA. Www free1040taxreturn com Withholding. Www free1040taxreturn com   Federal income tax is withheld from distributions from traditional IRAs unless you choose not to have tax withheld. Www free1040taxreturn com See chapter 4. Www free1040taxreturn com IRA distributions delivered outside the United States. Www free1040taxreturn com   In general, if you are a U. Www free1040taxreturn com S. Www free1040taxreturn com citizen or resident alien and your home address is outside the United States or its possessions, you cannot choose exemption from withholding on distributions from your traditional IRA. Www free1040taxreturn com Reporting taxable distributions on your return. Www free1040taxreturn com    Report fully taxable distributions, including early distributions on Form 1040, line 15b, or Form 1040A, line 11b (no entry is required on Form 1040, line 15a, or Form 1040A, line 11a). Www free1040taxreturn com If only part of the distribution is taxable, enter the total amount on Form 1040, line 15a, or Form 1040A, line 11a, and the taxable part on Form 1040, line 15b, or Form 1040A, line 11b. Www free1040taxreturn com You cannot report distributions on Form 1040EZ. Www free1040taxreturn com What Acts Result in Penalties or Additional Taxes? The tax advantages of using traditional IRAs for retirement savings can be offset by additional taxes and penalties if you do not follow the rules. Www free1040taxreturn com There are additions to the regular tax for using your IRA funds in prohibited transactions. Www free1040taxreturn com There are also additional taxes for the following activities. Www free1040taxreturn com Investing in collectibles. Www free1040taxreturn com Making excess contributions. Www free1040taxreturn com Taking early distributions. Www free1040taxreturn com Allowing excess amounts to accumulate (failing to take required distributions). Www free1040taxreturn com There are penalties for overstating the amount of nondeductible contributions and for failure to file a Form 8606, if required. Www free1040taxreturn com Prohibited Transactions Generally, a prohibited transaction is any improper use of your traditional IRA by you, your beneficiary, or any disqualified person. Www free1040taxreturn com Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendent, and any spouse of a lineal descendent). Www free1040taxreturn com The following are examples of prohibited transactions with a traditional IRA. Www free1040taxreturn com Borrowing money from it. Www free1040taxreturn com Selling property to it. Www free1040taxreturn com Receiving unreasonable compensation for managing it. Www free1040taxreturn com Using it as security for a loan. Www free1040taxreturn com Buying property for personal use (present or future) with IRA funds. Www free1040taxreturn com Effect on an IRA account. Www free1040taxreturn com   Generally, if you or your beneficiary engages in a prohibited transaction in connection with your traditional IRA account at any time during the year, the account stops being an IRA as of the first day of that year. Www free1040taxreturn com Effect on you or your beneficiary. Www free1040taxreturn com   If your account stops being an IRA because you or your beneficiary engaged in a prohibited transaction, the account is treated as distributing all its assets to you at their fair market values on the first day of the year. Www free1040taxreturn com If the total of those values is more than your basis in the IRA, you will have a taxable gain that is includible in your income. Www free1040taxreturn com For information on figuring your gain and reporting it in income, see Are Distributions Taxable , earlier. Www free1040taxreturn com The distribution may be subject to additional taxes or penalties. Www free1040taxreturn com Taxes on prohibited transactions. Www free1040taxreturn com   If someone other than the owner or beneficiary of a traditional IRA engages in a prohibited transaction, that person may be liable for certain taxes. Www free1040taxreturn com In general, there is a 15% tax on the amount of the prohibited transaction and a 100% additional tax if the transaction is not corrected. Www free1040taxreturn com More information. Www free1040taxreturn com   For more information on prohibited transactions, see What Acts Result in Penalties or Additional Taxes? in chapter 1 of Publication 590. Www free1040taxreturn com Investment in Collectibles If your traditional IRA invests in collectibles, the amount invested is considered distributed to you in the year invested. Www free1040taxreturn com You may have to pay the 10% additional tax on early distributions, discussed later. Www free1040taxreturn com Collectibles. Www free1040taxreturn com   These include: Artworks, Rugs, Antiques, Metals, Gems, Stamps, Coins, Alcoholic beverages, and Certain other tangible personal property. Www free1040taxreturn com Exception. Www free1040taxreturn com    Your IRA can invest in one, one-half, one-quarter, or one-tenth ounce U. Www free1040taxreturn com S. Www free1040taxreturn com gold coins, or one-ounce silver coins minted by the Treasury Department. Www free1040taxreturn com It can also invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion. Www free1040taxreturn com Excess Contributions Generally, an excess contribution is the amount contributed to your traditional IRA(s) for the year that is more than the smaller of: The maximum deductible amount for the year. Www free1040taxreturn com For 2013, this is $5,500 ($6,500 if you are 50 or older), or Your taxable compensation for the year. Www free1040taxreturn com Tax on excess contributions. Www free1040taxreturn com   In general, if the excess contributions for a year are not withdrawn by the date your return for the year is due (including extensions), you are subject to a 6% tax. Www free1040taxreturn com You must pay the 6% tax each year on excess amounts that remain in your traditional IRA at the end of your tax year. Www free1040taxreturn com The tax cannot be more than 6% of the combined value of all your IRAs as of the end of your tax year. Www free1040taxreturn com Excess contributions withdrawn by due date of return. Www free1040taxreturn com   You will not have to pay the 6% tax if you withdraw an excess contribution made during a tax year and you also withdraw interest or other income earned on the excess contribution. Www free1040taxreturn com You must complete your withdrawal by the date your tax return for that year is due, including extensions. Www free1040taxreturn com How to treat withdrawn contributions. Www free1040taxreturn com   Do not include in your gross income an excess contribution that you withdraw from your traditional IRA before your tax return is due if both the following conditions are met. Www free1040taxreturn com No deduction was allowed for the excess contribution. Www free1040taxreturn com You withdraw the interest or other income earned on the excess contribution. Www free1040taxreturn com You can take into account any loss on the contribution while it was in the IRA when calculating the amount that must be withdrawn. Www free1040taxreturn com If there was a loss, the net income you must withdraw may be a negative amount. Www free1040taxreturn com How to treat withdrawn interest or other income. Www free1040taxreturn com   You must include in your gross income the interest or other income that was earned on the excess contribution. Www free1040taxreturn com Report it on your return for the year in which the excess contribution was made. Www free1040taxreturn com Your withdrawal of interest or other income may be subject to an additional 10% tax on early distributions, discus