Department of the Treasury (2014)
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Contents
What's New for 2014 . . . . . . . . . . . . . . . . . . . . . . . . 1
Publication 590-B
What's New for 2015 . . . . . . . . . . . . . . . . . . . . . . . . 1
Cat. No. 66303U
Reminders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Distributions
from Individual
Retirement
Arrangements
(IRAs)
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
For use in preparing
2014 Returns
Chapter 1. Traditional IRAs . . . . . . . . . . . . . . . . . . 5
What if You Inherit an IRA? . . . . . . . . . . . . . . . . . 5
When Can You Withdraw or Use Assets? . . . . . . . 6
When Must You Withdraw Assets? (Required
Minimum Distributions) . . . . . . . . . . . . . . . . . . 6
Are Distributions Taxable? . . . . . . . . . . . . . . . . 12
What Acts Result in Penalties or Additional
Taxes? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Chapter 2. Roth IRAs . . . . . . . . . . . . . . . . . . . . . 29
What Is a Roth IRA? . . . . . . . . . . . . . . . . . . . . . 29
Are Distributions Taxable? . . . . . . . . . . . . . . . . 30
Must You Withdraw or Use Assets? . . . . . . . . . . 35
Chapter 3. How To Get Tax Help . . . . . . . . . . . . . 37
Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
What's New for 2014
Publication 590 split. Publication 590 has been split into
two separate publications as follows.
Publication 590-A, covers contributions to traditional
IRAs as well as Roth IRAs. This publication will
include the rules for rollover and conversion
contributions.
Publication 590-B, covers distributions from traditional
IRAs as well as Roth IRAs. This publication will
include the rules for required minimum distributions
and IRA beneficiaries.
What's New for 2015
Application of one-rollover-per-year limitation.
Beginning in 2015, you can make only one rollover from
an IRA to another (or the same) IRA in any 12-month
period regardless of the number of IRAs you own.
However, you can continue to make unlimited
trustee-to-trustee transfers between IRAs because it is not
considered a rollover. Furthermore, you can also make as
many rollovers from a traditional IRA to a Roth IRA (also
known as “conversions”). For more information, see
Publication 590-A.
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Jan 07, 2015
Reminders
Future developments. For the latest information about
developments related to Publication 590-B, such as legislation enacted after it was published, go to www.irs.gov/
pub590.
Simplified employee pension (SEP). SEP IRAs are not
covered in this publication. They are covered in Publication 560, Retirement Plans for Small Business.
Deemed IRAs. A qualified employer plan (retirement
plan) can maintain a separate account or annuity under
the plan (a deemed IRA) to receive voluntary employee
contributions. If the separate account or annuity otherwise
meets the requirements of an IRA, it will be subject only to
IRA rules. An employee's account can be treated as a traditional IRA or a Roth IRA.
For this purpose, a “qualified employer plan” includes:
A qualified pension, profit-sharing, or stock bonus
plan (section 401(a) plan),
A qualified employee annuity plan (section 403(a)
plan),
A tax-sheltered annuity plan (section 403(b) plan), and
A deferred compensation plan (section 457 plan)
maintained by a state, a political subdivision of a state,
or an agency or instrumentality of a state or political
subdivision of a state.
Statement of required minimum distribution (RMD).
If an RMD is required from your IRA, the trustee, custodian, or issuer that held the IRA at the end of the preceding year must either report the amount of the RMD to you,
or offer to calculate it for you. The report or offer must include the date by which the amount must be distributed.
The report is due January 31 of the year in which the minimum distribution is required. It can be provided with the
year-end fair market value statement that you normally get
each year. No report is required for section 403(b) contracts (generally tax-sheltered annuities) or for IRAs of
owners who have died.
IRA interest. Although interest earned from your IRA is
generally not taxed in the year earned, it is not tax-exempt
interest. Tax on your traditional IRA is generally deferred
until you take a distribution. Do not report this interest on
your return as tax-exempt interest. For more information
on tax-exempt interest, see the instructions for your tax return.
Net Investment Income Tax. For purposes of the Net
Investment Income Tax (NIIT), net investment income
does not include distributions from a qualified retirement
plan (for example, 401(a), 403(a), 403(b), or 457(b) plans,
and IRAs). However, these distributions are taken into account when determining the modified adjusted gross income threshold. Distributions from a nonqualified retirement plan are included in net investment income. See
Form 8960, Net Investment Tax–Individuals, Estates, and
Trusts, and its instructions for more information.
Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for
Page 2
Missing and Exploited Children. Photographs of missing
children selected by the Center may appear in this publication on pages that would otherwise be blank. You can
help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if
you recognize a child.
Introduction
This publication discusses distributions from individual retirement arrangements (IRAs). An IRA is a personal savings plan that gives you tax advantages for setting aside
money for retirement. For information about contributions
to an IRA, see Publication 590-A.
What are some tax advantages of an IRA? Two tax
advantages of an IRA are that:
Contributions you make to an IRA may be fully or partially deductible, depending on which type of IRA you
have and on your circumstances, and
Generally, amounts in your IRA (including earnings
and gains) are not taxed until distributed. In some cases, amounts are not taxed at all if distributed according to the rules.
What's in this publication? This publication discusses
traditional and Roth IRAs. It explains the rules for:
Handling an inherited IRA, and
Receiving distributions (making withdrawals) from an
IRA.
It also explains the penalties and additional taxes that
apply when the rules are not followed. To assist you in
complying with the tax rules for IRAs, this publication contains worksheets, sample forms, and tables, which can be
found throughout the publication and in the appendices at
the back of the publication.
How to use this publication. The rules that you must
follow depend on which type of IRA you have. Use Table
I-1 to help you determine which parts of this publication to
read. Also use Table I-1 if you were referred to this publication from instructions to a form.
Comments and suggestions. We welcome your comments about this publication and your suggestions for future editions.
You can send us comments from www.irs.gov/
formspubs. Click on “More Information” and then on “Give
us feedback.”
Or you can write to:
Internal Revenue Service
Tax Forms and Publications
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224
We respond to many letters by telephone. Therefore, it
would be helpful if you would include your daytime phone
number, including the area code, in your correspondence.
Publication 590-B (2014)
Although we cannot respond individually to each comment received, we do appreciate your feedback and will
consider your comments as we revise our tax products.
1099-R Distributions From Pensions, Annuities,
Retirement or Profit-Sharing Plans, IRAs,
Insurance Contracts, etc.
Ordering forms and publications. Visit www.irs.gov/
formspubs to download forms and publications. Otherwise, you can go to www.irs.gov/orderforms to order
forms or call 1-800-829-3676 to order current and
prior-year forms and instructions. Your order should arrive
within 10 business days.
5304-SIMPLE Savings Incentive Match Plan for
Employees of Small Employers (SIMPLE)–Not
for Use With a Designated Financial Institution
Tax questions. If you have a tax question, check the
information available on IRS.gov or call 1-800-829-1040.
We cannot answer tax questions sent to the above address.
Useful Items
You may want to see:
Publications
590-A Contributions to Individual Retirement
Accounts (IRAs)
560 Retirement Plans for Small Business (SEP,
SIMPLE, and Qualified Plans)
571 Tax-Sheltered Annuity Plans (403(b) Plans)
575 Pension and Annuity Income
939 General Rule for Pensions and Annuities
Forms (and instructions)
W-4P Withholding Certificate for Pension or Annuity
Payments
Publication 590-B (2014)
5305-S SIMPLE Individual Retirement Trust Account
5305-SA SIMPLE Individual Retirement Custodial
Account
5305-SIMPLE Savings Incentive Match Plan for
Employees of Small Employers (SIMPLE)–for
Use With a Designated Financial Institution
5329 Additional Taxes on Qualified Plans (Including
IRAs) and Other Tax-Favored Accounts
5498 IRA Contribution Information
8606 Nondeductible IRAs
8815 Exclusion of Interest From Series EE and I
U.S. Savings Bonds Issued After 1989
8839 Qualified Adoption Expenses
8880 Credit for Qualified Retirement Savings
Contributions
See chapter 3 for information about getting these publications and forms.
Page 3
Table I-1. Using This Publication
IF you need
information on ...
THEN see ...
traditional IRAs
chapter 1.
Roth IRAs
chapter 2, and parts of
chapter 1.
SEP IRAs, SIMPLE IRAs, and 401(k) plans
Publication 560.
Coverdell education savings accounts (formerly called
education IRAs)
Publication 970.
Table I-2. How Are a Traditional IRA and a Roth IRA Different?
This table shows the differences between traditional and Roth IRAs. Answers in the middle column apply to traditional IRAs.
Answers in the right column apply to Roth IRAs.
Question
Answer
Traditional IRA?
Roth IRA?
Do I have to start taking distributions
when I reach a certain age from a . . . . .
Yes. You must begin receiving required
minimum distributions by April 1 of the
year following the year you reach age
701 2. See When Must You Withdraw
Assets? (Required Minimum
Distributions) in chapter 1.
No. If you are the original owner of a
Roth IRA, you do not have to take
distributions regardless of your age.
See Are Distributions Taxable? in
chapter 2. However, if you are the
beneficiary of a Roth IRA, you may
have to take distributions. See
Distributions After Owner's Death in
chapter 2.
How are distributions taxed from a . . . . .
Distributions from a traditional IRA are
taxed as ordinary income, but if you
made nondeductible contributions, not
all of the distribution is taxable. See Are
Distributions Taxable? in chapter 1.
Distributions from a Roth IRA are not
taxed as long as you meet certain
criteria. See Are Distributions Taxable?
in chapter 2.
Do I have to file a form just because I
receive distributions from a . . . . . . . . . .
Not unless you have ever made a
nondeductible contribution to a
traditional IRA. If you have, file Form
8606. See Nondeductible Contributions
in Publication 590-A.
Yes. File Form 8606 if you received
distributions from a Roth IRA (other
than a rollover, qualified charitable
distribution, one-time distribution to
fund an HSA, recharacterization,
certain qualified distributions, or a
return of certain contributions).
Page 4
Publication 590-B (2014)
the distribution is not a required distribution, even if you
are not the sole beneficiary of your deceased spouse's
IRA. For more information, see When Must You Withdraw
Assets? (Required Minimum Distributions), later.
1.
Traditional IRAs
Introduction
This chapter discusses distributions from an IRA. In this
publication the original IRA (sometimes called an ordinary
or regular IRA) is referred to as a “traditional IRA.” A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE
IRA.
What if You Inherit an IRA?
If you inherit a traditional IRA, you are called a beneficiary.
A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies.
Beneficiaries of a traditional IRA must include in their
gross income any taxable distributions they receive.
Inherited from spouse. If you inherit a traditional IRA
from your spouse, you generally have the following three
choices. You can:
1. Treat it as your own IRA by designating yourself as
the account owner.
2. Treat it as your own by rolling it over into your IRA, or
to the extent it is taxable, into a:
a. Qualified employer plan,
b. Qualified employee annuity plan (section 403(a)
plan),
c. Tax-sheltered annuity plan (section 403(b) plan),
d. Deferred compensation plan of a state or local
government (section 457 plan), or
3. Treat yourself as the beneficiary rather than treating
the IRA as your own.
Treating it as your own. 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.
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.
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
Inherited from someone other than spouse. If you inherit a traditional IRA from anyone other than your deceased spouse, you cannot treat the inherited IRA as your
own. This means that you cannot make any contributions
to the IRA. It also means you cannot roll over any amounts
into or out of the inherited IRA. 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.
Like the original owner, you generally will not owe tax
on the assets in the IRA until you receive distributions
from it. You must begin receiving distributions from the
IRA under the rules for distributions that apply to beneficiaries.
IRA with basis. If you inherit a traditional IRA from a person who had a basis in the IRA because of nondeductible
contributions, that basis remains with the IRA. Unless you
are the decedent's spouse and choose to treat the IRA as
your own, you cannot combine this basis with any basis
you have in your own traditional IRA(s) or any basis in traditional IRA(s) you inherited from other decedents. If you
take distributions from both an inherited IRA and your IRA,
and each has basis, you must complete separate Forms
8606 to determine the taxable and nontaxable portions of
those distributions.
Federal estate tax deduction. A beneficiary may be
able to claim a deduction for estate tax resulting from certain distributions from a traditional IRA. The beneficiary
can deduct the estate tax paid on any part of a distribution
that is income in respect of a decedent. He or she can
take the deduction for the tax year the income is reported.
For information on claiming this deduction, see Estate Tax
Deduction under Other Tax Information in Publication 559,
Survivors, Executors, and Administrators.
Any taxable part of a distribution that is not income in
respect of a decedent is a payment the beneficiary must
include in income. However, the beneficiary cannot take
any estate tax deduction for this part.
A surviving spouse can roll over the distribution to another traditional IRA and avoid including it in income for
the year received.
More information. For more information about rollovers,
required distributions, and inherited IRAs, see:
Rollovers, under Can You Move Retirement Plan As
sets, in chapter 1 of Publication 590-A,
When Must You Withdraw Assets? (Required Mini
mum Distributions), later, and
The discussion of IRA Beneficiaries, later, under
When Must You Withdraw Assets? (Required Mini
mum Distributions).
Chapter 1
Traditional IRAs
Page 5
When Can You Withdraw or
Use Assets?
You can withdraw or use your traditional IRA assets at any
time. However, a 10% additional tax generally applies if
you withdraw or use IRA assets before you reach age 59
1
2. This is explained under Age 59 Rule under Early Distri
butions, later.
You generally can make a tax-free withdrawal of contributions if you do it before the due date for filing your tax
return for the year in which you made them. This means
that even if you are under age 591 2, the 10% additional tax
may not apply. These distributions are explained in Publication 590-A.
When Must You Withdraw
Assets? (Required Minimum
Distributions)
You cannot keep funds in a traditional IRA indefinitely.
Eventually they must be distributed. 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. See Excess Accumulations (Insuffi
cient Distributions), later, under What Acts Result in Pen
alties or Additional Taxes. The requirements for
distributing IRA funds differ, depending on whether you
are the IRA owner or the beneficiary of a decedent's IRA.
Required minimum distribution. The amount that must
be distributed each year is referred to as the required minimum distribution.
Distributions not eligible for rollover. Amounts that
must be distributed (required minimum distributions) during a particular year are not eligible for rollover treatment.
Note. A qualified charitable distribution will count towards your required minimum distribution. See Qualified
charitable distributions under Are Distributions Taxable,
later.
IRA Owners
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 701 2.
April 1 of the year following the year in which you reach
age 701 2 is referred to as the required beginning date.
Distributions by the required beginning date. You
must receive at least a minimum amount for each year
starting with the year you reach age 701 2 (your 701 2 year).
If you do not (or did not) receive that minimum amount in
your 701 2 year, then you must receive distributions for your
701 2 year by April 1 of the next year.
Page 6
Chapter 1
Traditional IRAs
If an IRA owner dies after reaching age 701 2, but before
April 1 of the next year, no minimum distribution is required because death occurred before the required beginning date.
Even if you begin receiving distributions before
you reach age 701 2, you must begin calculating
CAUTION
and receiving required minimum distributions by
your required beginning date.
!
More than minimum received. If, in any year, you receive more than the required minimum distribution for that
year, you will not receive credit for the additional amount
when determining the minimum required distributions for
future years. This does not mean that you do not reduce
your IRA account balance. It means that if you receive
more than your required minimum distribution in one year,
you cannot treat the excess (the amount that is more than
the required minimum distribution) as part of your required
minimum distribution for any later year. However, any
amount distributed in your 701 2 year will be credited toward the amount that must be distributed by April 1 of the
following year.
Distributions after the required beginning date. The
required minimum distribution for any year after the year
you turn 701 2 must be made by December 31 of that later
year.
Example. You reach age 701 2 on August 20, 2014. For
2014, you must receive the required minimum distribution
from your IRA by April 1, 2015. You must receive the required minimum distribution for 2015 by December 31,
2015.
If you do not receive your required minimum dis
tribution for 2014 until 2015, both your 2014 and
CAUTION
your 2015 distributions will be included in income
on your 2015 return.
!
Distributions from individual retirement account. If
you are the owner of a traditional IRA that is an individual
retirement account, you or your trustee must figure the required minimum distribution for each year. See Figuring
the Owner's Required Minimum Distribution below.
Distributions from individual retirement annuities. If
your traditional IRA is an individual retirement annuity,
special rules apply to figuring the required minimum distribution. For more information on rules for annuities, see
Regulations section 1.401(a)(9)-6. These regulations can
be read in many libraries, IRS offices, and online at
IRS.gov.
Change in marital status. For purposes of figuring your
required minimum distribution, your marital status is determined as of January 1 of each year. If your spouse is a
beneficiary of your IRA on January 1, he or she remains a
beneficiary for the entire year even if you get divorced or
your spouse dies during the year. For purposes of determining your distribution period, a change in beneficiary is
effective in the year following the year of death or divorce.
Change of beneficiary. If your spouse is the sole
beneficiary of your IRA, and he or she dies before you,
your spouse will not fail to be your sole beneficiary for the
year that he or she died solely because someone other
than your spouse is named a beneficiary for the rest of
that year. However, if you get divorced during the year
and change the beneficiary designation on the IRA during
that same year, your former spouse will not be treated as
the sole beneficiary for that year.
Figuring the Owner's Required Minimum
Distribution
Figure your required minimum distribution for each year
by dividing the IRA account balance (defined next) as of
the close of business on December 31 of the preceding
year by the applicable distribution period or life expectancy. Tables showing distribution periods and life expectancies are found in Appendix B and are discussed later.
IRA account balance. The IRA account balance is the
amount in the IRA at the end of the year preceding the
year for which the required minimum distribution is being
figured.
Contributions. Contributions increase the account
balance in the year they are made. If a contribution for last
year is not made until after December 31 of last year, it increases the account balance for this year, but not for last
year. Disregard contributions made after December 31 of
last year in determining your required minimum distribution for this year.
Outstanding rollovers and recharacterizations.
The IRA account balance is adjusted by outstanding rollovers and recharacterizations of Roth IRA conversions
that are not in any account at the end of the preceding
year.
For a rollover from a qualified plan or another IRA that
was not in any account at the end of the preceding year,
increase the account balance of the receiving IRA by the
rollover amount valued as of the date of receipt.
If a conversion contribution is contributed to a Roth IRA
and that amount (plus net income allocable to it) is transferred to another IRA in a subsequent year as a recharacterized contribution, increase the account balance of the
receiving IRA by the recharacterized contribution (plus allocable net income) for the year in which the conversion
occurred.
Distributions. Distributions reduce the account balance in the year they are made. A distribution for last year
made after December 31 of last year reduces the account
balance for this year, but not for last year. Disregard distributions made after December 31 of last year in determining your required minimum distribution for this year.
Example 1. Laura was born on October 1, 1943. She
reaches age 701 2 in 2014. Her required beginning date is
April 1, 2015. As of December 31, 2013, her IRA account
balance was $26,500. No rollover or recharacterization
amounts were outstanding. Using Table III in Appendix B,
the applicable distribution period for someone her age
(71) is 26.5 years. Her required minimum distribution for
2014 is $1,000 ($26,500 ÷ 26.5). That amount is distributed to her on April 1, 2015.
Example 2. Joe, born October 1, 1943, reached 701 2
in 2014. His wife (his beneficiary) turned 56 in September
2014. He must begin receiving distributions by April 1,
2015. Joe's IRA account balance as of December 31,
2013, is $30,100. Because Joe's wife is more than 10
years younger than Joe and is the sole beneficiary of his
IRA, Joe uses Table II in Appendix B. Based on their ages
at year end (December 31, 2014), the joint life expectancy
for Joe (age 71) and his wife (age 56) is 30.1 years. The
required minimum distribution for 2014, Joe's first distribution year, is $1,000 ($30,100 ÷ 30.1). This amount is distributed to Joe on April 1, 2015.
Distribution period. This is the maximum number of
years over which you are allowed to take distributions
from the IRA. The period to use for 2014 is listed next to
your age as of your birthday in 2014 in Table III in Appendix B.
Life expectancy. If you must use Table I, your life expectancy for 2015 is listed in the table next to your age as
of your birthday in 2015. If you use Table II, your life expectancy is listed where the row or column containing
your age as of your birthday in 2015 intersects with the
row or column containing your spouse's age as of his or
her birthday in 2015. Both Table I and Table II are in Appendix B.
Distributions during your lifetime. Required minimum
distributions during your lifetime are based on a distribution period that generally is determined using Table III
(Uniform Lifetime) in Appendix B. However, if the sole
beneficiary of your IRA is your spouse who is more than
10 years younger than you, see Sole beneficiary spouse
who is more than 10 years younger below.
To figure the required minimum distribution for 2015, divide your account balance at the end of 2014 by the distribution period from the table. This is the distribution period
listed next to your age (as of your birthday in 2015) in Table III in Appendix B, unless the sole beneficiary of your
IRA is your spouse who is more than 10 years younger
than you.
Example. You own a traditional IRA. Your account balance at the end of 2014 was $100,000. You are married
and your spouse, who is the sole beneficiary of your IRA,
is 6 years younger than you. You turn 75 years old in
2015. You use Table III. Your distribution period is 22.9.
Your required minimum distribution for 2015 would be
$4,367 ($100,000 ÷ 22.9).
Sole beneficiary spouse who is more than 10
years younger. If the sole beneficiary of your IRA is your
spouse and your spouse is more than 10 years younger
than you, use the life expectancy from Table II (Joint Life
and Last Survivor Expectancy) in Appendix B.
The life expectancy to use is the joint life and last survivor expectancy listed where the row or column containing
your age as of your birthday in 2015 intersects with the
Chapter 1
Traditional IRAs
Page 7
row or column containing your spouse's age as of his or
her birthday in 2015.
You figure your required minimum distribution for 2015
by dividing your account balance at the end of 2014 by the
life expectancy from Table II (Joint Life and Last Survivor
Expectancy) in Appendix B.
Example. You own a traditional IRA. Your account balance at the end of 2014 was $100,000. You are married
and your spouse, who is the sole beneficiary of your IRA,
is 11 years younger than you. You turn 75 in 2015 and
your spouse turns 64. You use Table II. Your joint life and
last survivor expectancy is 23.6. Your required minimum
distribution for 2015 would be $4,237 ($100,000 ÷ 23.6).
Distributions in the year of the owner's death. The required minimum distribution for the year of the owner's
death depends on whether the owner died before the required beginning date, defined earlier.
If the owner died before the required beginning date,
there is no required minimum distribution in the year of the
owner's death. For years after the year of the owner's
death, see Owner Died Before Required Beginning Date,
later, under IRA Beneficiaries.
If the owner died on or after the required beginning
date, the IRA beneficiaries are responsible for figuring and
distributing the owner's required minimum distribution in
the year of death. The owner's required minimum distribution for the year of death generally is based on Table III
(Uniform Lifetime) in Appendix B. However, if the sole
beneficiary of the IRA is the owner's spouse who is more
than 10 years younger than the owner, use the life expectancy from Table II (Joint Life and Last Survivor Expectancy).
Note. You figure the required minimum distribution for
the year in which an IRA owner dies as if the owner lived
for the entire year.
IRA Beneficiaries
The rules for determining required minimum distributions
for beneficiaries depend on the following.
The beneficiary is the surviving spouse.
The beneficiary is an individual (other than the surviving spouse).
The beneficiary is not an individual (for example, the
beneficiary is the owner's estate). (But see Trust as
beneficiary, later, for a discussion about treating trust
beneficiaries as designated beneficiaries.)
The IRA owner died before the required beginning
date, or died on or after the required beginning date.
The following paragraphs explain the rules for required
minimum distributions and beneficiaries.
If distributions to the beneficiary from an inherited
traditional IRA are less than the required mini
CAUTION
mum distribution for the year, discussed in this
chapter under When Must You Withdraw Assets?
(Required Minimum Distributions), you may have to pay a
!
Page 8
Chapter 1
Traditional IRAs
50% excise tax for that year on the amount not distributed
as required. For details, see Excess Accumulations (Insufficient Distributions) under What Acts Result in Penalties
or Additional Taxes? later in this chapter.
Surviving spouse. If you are the surviving spouse who is
the sole beneficiary of your deceased spouse's IRA, you
may elect to be treated as the owner and not as the beneficiary. If you elect to be treated as the owner, you determine the required minimum distribution (if any) as if you
were the owner beginning with the year you elect or are
deemed to be the owner. For details, see Inherited from
spouse under What if You Inherit an IRA, earlier in this
chapter.
Note. If you become the owner in the year your deceased spouse died, do not determine the required minimum distribution for that year using your life; rather, you
must take the deceased owner's required minimum distribution for that year (to the extent it was not already distributed to the owner before his or her death).
You can never make a rollover contribution of a
required minimum distribution. Any rollover con
CAUTION
tribution is subject to the 6% tax on excess contri
butions. See chapter 1 of Publication 590A for more infor
mation on the tax on excess contributions.
!
For any year after the owner’s death, where a
surviving spouse is the sole designated benefi
ciary of the account and he or she fails to take a
required minimum distribution (if one is required) by De
cember 31 under the rules discussed below for beneficia
ries, he or she will be deemed the owner of the IRA. For
details, see Inherited from spouse under What if You Inherit an IRA, earlier in this chapter.
TIP
Date the designated beneficiary is determined. Generally, the designated beneficiary is determined on September 30 of the calendar year following the calendar year
of the IRA owner's death. In order to be a designated beneficiary, an individual must be a beneficiary as of the date
of death. Any person who was a beneficiary on the date of
the owner's death, but is not a beneficiary on September
30 of the calendar year following the calendar year of the
owner's death (because, for example, he or she disclaimed entitlement or received his or her entire benefit),
will not be taken into account in determining the designated beneficiary. An individual may be designated as a
beneficiary either by the terms of the plan or, if the plan
permits, by affirmative election by the employee specifying the beneficiary.
Note. If a person who is a beneficiary as of the owner's
date of death dies before September 30 of the year following the year of the owner's death without disclaiming entitlement to benefits, that individual, rather than his or her
successor beneficiary, continues to be treated as a beneficiary for determining the distribution period.
For the exception to this rule, see Death of surviving
spouse prior to date distributions begin, later.
Death of a beneficiary. In general, the beneficiaries of a
deceased beneficiary must continue to take the required
minimum distributions after the deceased beneficiary’s
death, based on the distribution schedule established by
that beneficiary under the rules in the following paragraphs. The beneficiaries of a deceased beneficiary do
not calculate required minimum distributions using their
own life expectancies.
For the exception to this rule, see Death of surviving
spouse prior to date distributions begin, later.
More than one beneficiary. If an IRA has more than one
beneficiary or a trust is named as beneficiary, see Miscel
laneous Rules for Required Minimum Distributions, later.
Owner Died On or After Required Beginning
Date
If the owner died on or after his or her required beginning
date (defined earlier), and you are the designated beneficiary, you must base required minimum distributions for
years after the year of the owner's death on the longer of:
Your single life expectancy shown on Table I in Appendix B as determined under Beneficiary an individ
ual, later, or
The owner's life expectancy as determined under
Death on or after required beginning date, under Ben
eficiary not an individual, later.
Surviving spouse is sole designated beneficiary. If
the owner died on or after his or her required beginning
date and his or her spouse is the sole designated beneficiary, the life expectancy the spouse must use to figure
his or her required minimum distribution may change in a
future distribution year. This change will apply where the
spouse is older than the deceased owner or the spouse
treats the IRA as his or her own.
Owner Died Before Required Beginning
Date
If the owner died before his or her required beginning date
(defined earlier), and you are the designated beneficiary,
you generally must base required minimum distributions
for years after the year of the owner's death using your
single life expectancy shown on Table I in Appendix B as
determined under Beneficiary an individual, later.
See 5year rule, later, for situations where an individual
designated beneficiary may be required to take the entire
account by the end of the fifth year following the year of
the owner's death.
If the owner's beneficiary is not an individual (for example, if the beneficiary is the owner's estate), the 5-year rule
(discussed later) applies.
Special rules for surviving spouse. If the owner died
before his or her required beginning date and the surviving spouse is the sole designated beneficiary, the following rules apply.
Year of first required distribution. If the owner died
before the year in which he or she reached age 701 2, distributions to the spouse do not need to begin until the year
in which the owner would have reached age 701 2.
Death of surviving spouse prior to date distribu
tions begin. If the surviving spouse dies before December 31 of the year he or she must begin receiving required
minimum distributions, the surviving spouse will be treated
as if he or she were the owner of the IRA.
This rule does not apply to the surviving spouse of a
surviving spouse.
Example 1. Your spouse died in 2012, at age 651 2.
You are the sole designated beneficiary of your spouse’s
traditional IRA. You do not need to take any required minimum distribution until December 31 of 2017, the year your
spouse would have reached age 701 2. If you die prior to
that date, you will be treated as the owner of the IRA for
purposes of determining the required distributions to your
beneficiaries. For example, if you die in 2014, your beneficiaries will not have any required minimum distribution for
2014 (because you, treated as the owner, died prior to
your required beginning date). They must start taking distributions under the general rules for an owner who died
prior to the required beginning date.
Example 2. Same as Example 1, except your sole
beneficiary upon your death in 2014 is your surviving
spouse. Your surviving spouse cannot wait until the year
you would have turned 701 2 to take distributions using his
or her life expectancy. Also, if your surviving spouse dies
prior to the date he or she is required to take a distribution,
he or she is not treated as the owner of the account. Just
like any other individual beneficiary of an owner who dies
before the required beginning date, your surviving spouse
must start taking distributions in 2015 based on his or her
life expectancy (or elect to fully distribute the account under the 5-year rule by the end of 2019).
5-year rule. The 5-year rule requires the IRA beneficiaries to withdraw 100% of the IRA by December 31 of the
year containing the fifth anniversary of the owner’s death.
For example, if the owner died in 2014, the beneficiary
would have to fully distribute the plan by December 31,
2019. The beneficiary is allowed, but not required, to take
distributions prior to that date. The 5-year rule never applies if the owner died on or after his or her required beginning date.
Individual designated beneficiaries. The terms of
most IRA plans require individual designated beneficiaries
to take required minimum distributions using the life expectancy rules (explained earlier) unless such beneficiaries elect to take distributions using the 5-year rule. The
deadline for making this election is December 31 of the
year the beneficiary must take the first required distribution using his or her life expectancy (or December 31 of
the year containing the fifth anniversary of the owner's
death, if earlier).
Beneficiary not an individual. The 5-year rule applies in all cases where there is no individual designated
Chapter 1
Traditional IRAs
Page 9
beneficiary by September 30 of the year following the year
of the owner’s death or where any beneficiary is not an individual (for example, the owner named his or her estate
as the beneficiary).
TIP
Review the IRA plan documents or consult with
the IRA custodian or trustee for specifics on the
5year rule provisions of any particular plan.
If the 5year rule applies, the amount remaining in
the IRA, if any, after December 31 of the year
CAUTION
containing the fifth anniversary of the owner's
death is subject to the 50% excise tax detailed in Excess
Accumulations (Insufficient Distributions), later.
!
Figuring the Beneficiary's Required
Minimum Distribution
How you figure the required minimum distribution depends on whether the beneficiary is an individual or some
other entity, such as a trust or estate.
Beneficiary an individual. If the beneficiary is an individual, to figure the required minimum distribution for
2015, divide the account balance at the end of 2014 by
the appropriate life expectancy from Table I (Single Life
Expectancy) in Appendix B. Determine the appropriate life
expectancy as follows.
Spouse as sole designated beneficiary. Use the life
expectancy listed in the table next to the spouse's age (as
of the spouse's birthday in 2015). Use this life expectancy
even if the spouse died in 2015.
If the spouse died in 2014 or a prior year, use the life
expectancy listed in the table next to the spouse’s age as
of his or her birthday in the year he or she died. Reduce
the life expectancy by one for each year since the year following the spouse’s death.
You cannot make a rollover contribution of your
required minimum distributions in years after the
CAUTION
owner's death. Such contribution is subject to the
6% tax on excess contributions. See chapter 1 of Publica
tion 590A for more information on the tax on excess con
tributions.
!
Other designated beneficiary. Use the life expectancy listed in the table next to the beneficiary's age as of
his or her birthday in the year following the year of the
owner's death. Reduce the life expectancy by one for
each year since the year following the owner's death. As
discussed in Death of a beneficiary, earlier, if the designated beneficiary dies before his or her portion of the account is fully distributed, continue to use the designated
beneficiary's remaining life expectancy to determine the
distribution period; do not use the life expectancy of any
subsequent beneficiary.
Example. Your father died in 2014. You are the designated beneficiary of your father's traditional IRA. You are
53 years old in 2015, which is the year following your father's death. You use Table I and see that your life expectancy in 2015 is 31.4. If the IRA was worth $100,000 at the
Page 10
Chapter 1
Traditional IRAs
end of 2014, your required minimum distribution for 2015
would be $3,185 ($100,000 ÷ 31.4). If the value of the IRA
at the end of 2015 was again $100,000, your required
minimum distribution for 2016 would be $3,289 ($100,000
÷ 30.4 (31.4 reduced by 1, which is the number of years
following the year after your father's death in 2014)).
Beneficiary not an individual. If the beneficiary is not
an individual, determine the required minimum distribution
for 2015 as follows.
Death on or after required beginning date. Divide
the account balance at the end of 2014 by the appropriate
life expectancy from Table I (Single Life Expectancy) in
Appendix B. Use the life expectancy listed next to the
owner's age as of his or her birthday in the year of death.
Reduce the life expectancy by one for each year after the
year of death. (Note. Also figure the required minimum
distribution for an individual beneficiary using this method
if it results in a longer life expectancy where the owner
died on or after the required beginning date.)
Death before required beginning date. The 5-year
rule (discussed earlier) applies. The entire account must
be distributed by the end of the fifth year following the year
of the owner's death. No distribution is required for any
year before that fifth year.
Note. The required beginning date was defined earlier
under Distributions by the required beginning date.
Example. The owner died in 2014 at the age of 80.
The owner's traditional IRA went to his estate. The account balance at the end of 2014 was $100,000. In 2015,
the required minimum distribution would be $10,870
($100,000 ÷ 9.2). (The owner's life expectancy in the year
of death, 10.2, reduced by one.) If the owner had died in
2014 at the age of 70, the entire account would have to be
distributed by the end of 2019. See Death before required
beginning date under Beneficiary not an individual above.
Which Table Do You Use
To Determine Your
Required Minimum Distribution?
There are three different life expectancy tables. The tables are found in Appendix B of this publication. You use
only one of them to determine your required minimum distribution for each traditional IRA. Determine which one to
use as follows.
Reminder. In using the tables for lifetime distributions,
marital status is determined as of January 1 each year. Divorce or death after January 1 is generally disregarded
until the next year. However, if you divorce and change
the beneficiary designation in the same year, your former
spouse cannot be considered your sole beneficiary for
that year.
Table I (Single Life Expectancy). Use Table I for years
after the year of the owner's death if either of the following
applies.
You are an individual and a designated beneficiary,
but not the owner's surviving spouse and sole designated beneficiary.
The beneficiary is not an individual and the owner died
on or after the required beginning date, defined earlier.
Surviving spouse. If you are the owner's surviving
spouse and sole designated beneficiary, you will also use
Table I for your required minimum distributions. However,
if the owner had not reached age 701 2 when he or she
died, and you do not elect to be treated as the owner of
the IRA, you do not have to take distributions until the year
in which the owner would have reached age 701 2.
Table II (Joint Life and Last Survivor Expectancy).
Use Table II if you are the IRA owner and your spouse is
both your sole designated beneficiary and more than 10
years younger than you.
Note. Use this table in the year of the owner's death if
the owner died after the required beginning date and this
is the table that would have been used had he or she not
died.
Table III (Uniform Lifetime). Use Table III if you are the
IRA owner and your spouse is not both the sole designated beneficiary of your IRA and more than 10 years
younger than you.
Note. Use this table in the year of the owner's death if
the owner died after the required beginning date and this
is the table that would have been used had he or she not
died.
No table. Do not use any of the tables if the 5-year rule
(discussed earlier) applies.
What Age(s) Do You Use With the
Table(s)?
The age or ages to use with each table are explained below.
2015. You use Table I. Your distribution period for 2016 is
26.9 (27.9 − 1) years. Your distribution period for 2017 is
25.9 (27.9 − 2). Note that the life expectancy was reduced
by one for each year after the first distribution year, which
was 2015.
Example 2. You are the owner's surviving spouse and
the sole designated beneficiary. The owner would have
turned age 701 2 in 2015. Distributions begin in 2015. You
become 69 years old in 2015. You use Table 1. Your distribution period for 2015 is 17.8. For 2016, when you are
70 years old, your distribution period is 17.0. For 2017,
when you are 71 years old, your distribution period is
16.3.
Owner's life expectancy. In two cases where the
owner dies on or after the required beginning date, you
need to use the owner's life expectancy. First, you need to
use it when the owner dies on or after the required beginning date and there is no designated beneficiary as of
September 30 of the year following the year of the owner's
death. In this case, use the owner's life expectancy for his
or her age as of the owner's birthday in the year of death
and reduce it by one for each subsequent year. Second,
use the owner’s life expectancy in the year of death (reduced by one for each subsequent year) if it results in a
longer distribution period than using your life expectancy
as detailed in Table I (Single Life Expectancy) above.
Table II (Joint Life and Last Survivor Expectancy).
For your first distribution by the required beginning date,
use your age and the age of your designated beneficiary
as of your birthdays in the year you become age 701 2.
Your combined life expectancy is at the intersection of
your ages.
If you are figuring your required minimum distribution
for 2015, use your ages as of your birthdays in 2015. For
each subsequent year, use your and your spouse's ages
as of your birthdays in the subsequent year.
Table III (Uniform Lifetime). For your first distribution by
your required beginning date, use your age as of your
birthday in the year you become age 701 2.
If you are figuring your required minimum distribution
for 2015, use your age as of your birthday in 2015. For
each subsequent year, use your age as of your birthday in
the subsequent year.
Table I (Single Life Expectancy). If you are a designated beneficiary figuring your first distribution, use your age
as of your birthday in the year distributions must begin.
This is usually the calendar year immediately following the
calendar year of the owner's death. After the first distribution year, reduce your life expectancy by one for each
subsequent year. If you are the owner's surviving spouse
and the sole designated beneficiary, this is generally the
year in which the owner would have reached age 701 2. After the first distribution year, use your age as of your birthday in each subsequent year.
Installments allowed. The yearly required minimum distribution can be taken in a series of installments (monthly,
quarterly, etc.) as long as the total distributions for the
year are at least as much as the minimum required
amount.
Example 1. You are the owner's designated beneficiary figuring your first required minimum distribution. Distributions must begin in 2015. You become 57 years old in
More than one IRA. If you have more than one traditional IRA, you must determine a separate required minimum distribution for each IRA. However, you can total
Miscellaneous Rules for
Required Minimum Distributions
The following rules may apply to you.
Chapter 1
Traditional IRAs
Page 11
these minimum amounts and take the total from any one
or more of the IRAs.
Example. Sara, born August 1, 1943, became 701 2 on
February 1, 2014. She has two traditional IRAs. She must
begin receiving her IRA distributions by April 1, 2015. On
December 31, 2013, Sara's account balance from IRA A
was $10,000; her account balance from IRA B was
$20,000. Sara's brother, age 64 as of his birthday in 2014,
is the beneficiary of IRA A. Her husband, age 78 as of his
birthday in 2014, is the beneficiary of IRA B.
Sara's required minimum distribution from IRA A is
$377 ($10,000 ÷ 26.5 (the distribution period for age 71
per Table III)). The amount of the required minimum distribution from IRA B is $755 ($20,000 ÷ 26.5). The amount
that must be withdrawn by Sara from her IRA accounts by
April 1, 2015, is $1,132 ($377 + $755).
More than minimum received. If, in any year, you receive more than the required minimum amount for that
year, you will not receive credit for the additional amount
when determining the minimum required amounts for future years. This does not mean that you do not reduce
your IRA account balance. It means that if you receive
more than your required minimum distribution in one year,
you cannot treat the excess (the amount that is more than
the required minimum distribution) as part of your required
minimum distribution for any later year. However, any
amount distributed in your 701 2 year will be credited toward the amount that must be distributed by April 1 of the
following year.
Example. Justin became 701 2 on December 15, 2014.
Justin's IRA account balance on December 31, 2013, was
$38,400. He figured his required minimum distribution for
2014 was $1,401 ($38,400 ÷ 27.4 (the distribution period
for age 70 per Table III)). By December 31, 2014, he had
actually received distributions totaling $3,600, $2,199
more than was required. Justin cannot use that $2,199 to
reduce the amount he is required to withdraw for 2015,
but his IRA account balance is reduced by the full $3,600
to figure his required minimum distribution for 2015. Justin's reduced IRA account balance on December 31,
2014, was $34,800. Justin figured his required minimum
distribution for 2015 is $1,313 ($34,800 ÷ 26.5 (the distribution period for age 71 per Table III)). During 2015, he
must receive distributions of at least that amount.
Multiple individual beneficiaries. If as of September 30
of the year following the year in which the owner dies
there is more than one beneficiary, the beneficiary with
the shortest life expectancy will be the designated beneficiary if both of the following apply.
All of the beneficiaries are individuals, and
The account or benefit has not been divided into separate accounts or shares for each beneficiary.
Separate accounts. A single IRA can be split into
separate accounts or shares for each beneficiary. These
separate accounts or shares can be established at any
time, either before or after the owner's required beginning
Page 12
Chapter 1
Traditional IRAs
date. Generally, these separate accounts or shares are
combined for purposes of determining the minimum required distribution. However, these separate accounts or
shares will not be combined for required minimum distribution purposes after the death of the IRA owner if the
separate accounts or shares are established by the end of
the year following the year of the IRA owner's death.
The separate account rules cannot be used by beneficiaries of a trust.
Trust as beneficiary. A trust cannot be a designated
beneficiary even if it is a named beneficiary. However, the
beneficiaries of a trust will be treated as having been designated beneficiaries for purposes of determining required
minimum distributions after the owner’s death (or after the
death of the owner’s surviving spouse described in Death
of surviving spouse prior to date distributions begin, earlier) if all of the following are true:
1. The trust is a valid trust under state law, or would be
but for the fact that there is no corpus.
2. The trust is irrevocable or became, by its terms, irrevocable upon the owner's death.
3. The beneficiaries of the trust who are beneficiaries
with respect to the trust's interest in the owner's benefit are identifiable from the trust instrument.
4. The trustee of the trust provides the IRA custodian or
trustee with the documentation required by that custodian or trustee. The trustee of the trust should contact
the IRA custodian or trustee for details on the documentation required for a specific plan.
The deadline for the trustee to provide the beneficiary
documentation to the IRA custodian or trustee is October
31 of the year following the year of the owner's death.
Trust beneficiary is another trust. If the beneficiary
of the trust (which is the beneficiary of the IRA) is another
trust and both trusts meet the above requirements, the
beneficiaries of the other trust will be treated as having
been designated as beneficiaries for purposes of determining the distribution period.
Note. The separate account rules, discussed earlier,
cannot be used by beneficiaries of a trust.
TIP
You may want to contact a tax advisor to comply
with this complicated area of the tax law.
Annuity distributions from an insurance company.
Special rules apply if you receive distributions from your
traditional IRA as an annuity purchased from an insurance
company. See Regulations sections 1.401(a)(9)-6 and
54.4974-2. These regulations can be found in many libraries, IRS offices, and online at IRS.gov.
Are Distributions Taxable?
In general, distributions from a traditional IRA are taxable
in the year you receive them.
Failed financial institutions. Distributions from a traditional IRA are taxable in the year you receive them even if
they are made without your consent by a state agency as
receiver of an insolvent savings institution. This means
you must include such distributions in your gross income
unless you roll them over.
Exceptions. Exceptions to distributions from traditional
IRAs being taxable in the year you receive them are:
Rollovers (see chapter 1 of Publication 590-A),
Qualified charitable distributions, discussed below,
Tax-free withdrawals of contributions (see chapter 1 of
Publication 590-A), and
The return of nondeductible contributions, discussed
later under Distributions Fully or Partly Taxable.
Although a conversion of a traditional IRA is con
sidered a rollover for Roth IRA purposes, it is not
CAUTION
an exception to the rule that distributions from a
traditional IRA are taxable in the year you receive them.
Conversion distributions are includible in your gross in
come subject to this rule and the special rules for conver
sions explained in chapter 1 of Publication 590A.
!
Qualified charitable distributions. A qualified charitable distribution (QCD) is generally a nontaxable distribution made directly by the trustee of your IRA (other than a
SEP or SIMPLE IRA) to an organization eligible to receive
tax deductible contributions. You must be at least age 70
1
2 when the distribution was made. Also, you must have
the same type of acknowledgment of your contribution
that you would need to claim a deduction for charitable
contribution. See Records To Keep in Publication 526,
Charitable Contributions.
The maximum annual exclusion for QCDs is $100,000.
Any QCD in excess of the $100,000 exclusion limit is included in income as any other distribution. If you file a joint
return, your spouse can also have a QCD and exclude up
to $100,000. The amount of the QCD is limited to the
amount of the distribution that would otherwise be included in income. If your IRA includes nondeductible contributions, the distribution is first considered to be paid out of
otherwise taxable income.
TIP
!
A QCD will count towards your required minimum
distribution, discussed earlier.
You cannot claim a charitable contribution deduc
tion for any QCD not included in your income.
CAUTION
Example. On December 23, 2013, Jeff, age 75, directed the trustee of his IRA to make a distribution of $25,000
directly to a qualified 501(c)(3) organization (a charitable
organization eligible to receive tax-deductible contributions). The total value of Jeff's IRA is $30,000 and consists $20,000 of deductible contributions and earnings
and $10,000 of nondeductible contributions (basis). Since
Jeff is at least age 701 2 and the distribution is made
directly by the trustee to a qualified organization, the part
of the distribution that would otherwise be includible in
Jeff's income ($20,000) is a QCD.
In this case, Jeff has made a QCD of $20,000 (his deductible contributions and earnings). Because Jeff made a
distribution of nondeductible contributions from his IRA,
he must file Form 8606, Nondeductible IRAs, with his return. Jeff includes the total distribution ($25,000) on
line 15a of Form 1040. He completes Form 8606 to determine the amount to enter on line 15b of Form 1040 and
the remaining basis in his IRA. Jeff enters -0- on line 15b.
This is Jeff's only IRA and he took no other distributions in
2013. He also enters “QCD” next to line 15b to indicate a
qualified charitable distribution.
After the distribution, his basis in his IRA is $5,000. If
Jeff itemizes deductions and files Schedule A with Form
1040, the $5,000 portion of the distribution attributable to
the nondeductible contributions can be deducted as a
charitable contribution, subject to AGI limits. He cannot
take charitable contribution deduction for the $20,000 portion of the distribution that was not included in his income.
One-time qualified HSA funding distribution. You
may be able to make a qualified HSA funding distribution
from your traditional IRA or Roth IRA to your Health Savings Account (HSA). You cannot make this distribution
from an ongoing SEP IRA or SIMPLE IRA. For this purpose, a SEP IRA or SIMPLE IRA is ongoing if an employer
contribution is made for the plan year ending with or within
your tax year in which the distribution would be made. The
distribution must be less than or equal to your maximum
annual HSA contribution.
This distribution must be made directly by the trustee of
the IRA to the trustee of the HSA. The distribution is not
included in your income, is not deductible, and reduces
the amount that can be contributed to your HSA. You must
make the distribution by the end of the year; the special
rule allowing contributions to your HSA for the previous
year if made by your tax return filing deadline does not apply. The qualified HSA funding distribution is reported on
Form 8889, Health Savings Accounts, for the year in
which the distribution is made.
Onetime transfer. Generally, only one qualified HSA
funding distribution is allowed during your lifetime. If you
own two or more IRAs, and want to use amounts in multiple IRAs to make a qualified HSA funding distribution, you
must first make an IRA-to-IRA transfer of the amounts to
be distributed into a single IRA, and then make the
one-time qualified HSA funding distribution from that IRA.
Testing period rules apply. If at any time during the
testing period you cease to meet all requirements to be an
eligible individual, the amount of the qualified HSA funding
distribution is included in your gross income. The qualified
HSA funding distribution is included in gross income in the
taxable year you first fail to be an eligible individual. This
amount is subject to the 10 percent additional tax (unless
the failure is due to disability or death).
More information. See Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, for
additional information about this distribution.
Chapter 1
Traditional IRAs
Page 13
Ordinary income. Distributions from traditional IRAs that
you include in income are taxed as ordinary income.
No special treatment. 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.
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.
Fully taxable. 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. Because you have
no basis in your IRA, any distributions are fully taxable
when received. See Reporting and Withholding Require
ments for Taxable Amounts, later.
Partly taxable. 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. These
nondeductible contributions are not taxed when they are
distributed to you. They are a return of your investment in
your IRA.
Only the part of the distribution that represents nondeductible contributions and rolled over after-tax amounts
(your cost basis) is tax free. 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). Until all of
your basis has been distributed, each distribution is partly
nontaxable and partly taxable.
Form 8606. 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. Using the form, you will figure the nontaxable
distributions for 2014, and your total IRA basis for 2014
and earlier years. See the illustrated Forms 8606 in this
chapter.
Note. When figuring the nontaxable and taxable
amounts of distributions made prior to death in the year
the IRA account owner dies, the value of all traditional (including SEP) and SIMPLE IRAs should be figured as of
the date of death instead of December 31.
Contribution and distribution in the same year. If you
received a distribution in 2014 from a traditional IRA and
you also made contributions to a traditional IRA for 2014
that may not be fully deductible because of the income
limits, you can use Worksheet 1-1 to figure how much of
your 2014 IRA distribution is tax free and how much is taxable. Then you can figure the amount of nondeductible
contributions to report on Form 8606. Follow the instructions under Reporting your nontaxable distribution on
Form 8606, next, to figure your remaining basis after the
distribution.
Reporting your nontaxable distribution on Form
8606. To report your nontaxable distribution and to figure
the remaining basis in your traditional IRA after distributions, you must complete Worksheet 1-1 before completing Form 8606. Then follow these steps to complete Form
8606.
1. Use Worksheet 1-2 in chapter 1 of Publication 590-A,
or the IRA Deduction Worksheet in the Form 1040,
1040A, or 1040NR instructions to figure your deductible contributions to traditional IRAs to report on Form
1040, line 32; Form 1040A, line 17; or Form 1040NR,
line 32.
2. After you complete Worksheet 1-2 in chapter 1 of
Publication 590-A or the IRA deduction worksheet in
the form instructions, enter your nondeductible contributions to traditional IRAs on line 1 of Form 8606.
3. Complete lines 2 through 5 of Form 8606.
4. If line 5 of Form 8606 is less than line 8 of Worksheet
1-1, complete lines 6 through 15 of Form 8606 and
stop here.
5. If line 5 of Form 8606 is equal to or greater than line 8
of Worksheet 1-1, follow instructions 6 and 7, next. Do
not complete lines 6 through 12 of Form 8606.
6. Enter the amount from line 8 of Worksheet 1-1 on
lines 13 and 17 of Form 8606.
Note. 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. Complete Form 8606, sign it, and send it to
the IRS at the time and place you would otherwise file an
income tax return.
7. Complete line 14 of Form 8606.
Figuring the Nontaxable
and Taxable Amounts
Example. Rose Green has made the following contributions to her traditional IRAs.
If your traditional IRA includes nondeductible contributions
and you received a distribution from it in 2014, you must
use Form 8606 to figure how much of your 2014 IRA distribution is tax free.
Page 14
Chapter 1
Traditional IRAs
8. Enter the amount from line 9 of Worksheet 1-1 (or, if
you entered an amount on line 11, the amount from
that line) on line 15 of Form 8606.
Worksheet 1-1. Figuring the Taxable Part of Your IRA
Distribution
Keep for Your Records
Use only if you made contributions to a traditional IRA for 2014 that may not be fully deductible and have to figure the
taxable part of your 2014 distributions to determine your modified AGI. See Limit if Covered by Employer Plan in
chapter 1 of Publication 590-A.
Form 8606 and the related instructions will be needed when using this worksheet.
Note. When used in this worksheet, the term outstanding rollover refers to an amount distributed from a traditional IRA
as part of a rollover that, as of December 31, 2014, had not yet been reinvested in another traditional IRA, but was still
eligible to be rolled over tax free.
1. Enter the basis in your traditional IRAs as of December 31, 2013
...................
1.
2. Enter the total of all contributions made to your traditional IRAs during 2014 and all
contributions made during 2015 that were for 2014, whether or not deductible. Do
not include rollover contributions properly rolled over into IRAs. Also, do not include
certain returned contributions described in the instructions for line 7, Part I, of Form
8606 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.
3. Add lines 1 and 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.
4. Enter the value of all your traditional IRAs as of December 31, 2014 (include any
outstanding rollovers from traditional IRAs to other traditional IRAs) . . . . . . . . . . . . . . . . .
4.
5. Enter the total distributions from traditional IRAs (including amounts converted to Roth
IRAs that will be shown on line 16 of Form 8606) received in 2014. (Do not include
outstanding rollovers included on line 4 or any rollovers between traditional IRAs
completed by December 31, 2014. Also, do not include certain returned contributions
described in the instructions for line 7, Part I, of Form 8606.) . . . . . . . . . . . . . . . . . . . . . . . .
5.
6. Add lines 4 and 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.
7. Divide line 3 by line 6. Enter the result as a decimal (rounded to at least three places).
If the result is 1.000 or more, enter 1.000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.
8. Nontaxable portion of the distribution.
Multiply line 5 by line 7. Enter the result here and on lines 13 and 17 of Form
8606 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.
9. Taxable portion of the distribution (before adjustment for conversions).
Subtract line 8 from line 5. Enter the result here and if there are no amounts converted
to Roth IRAs, stop here and enter the result on line 15 of Form 8606 . . . . . . . . . . . . . . . .
9.
10. Enter the amount included on line 9 that is allocable to amounts converted to Roth
IRAs by December 31, 2014. (See Note at the end of this worksheet.) Enter here and
on line 18 of Form 8606 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.
11. Taxable portion of the distribution (after adjustments for conversions).
Subtract line 10 from line 9. Enter the result here and on line 15 of Form 8606 . . . . . . . .
11.
Note. If the amount on line 5 of this worksheet includes an amount converted to a Roth IRA by December 31, 2014, you must
determine the percentage of the distribution allocable to the conversion. To figure the percentage, divide the amount converted
(from line 16 of Form 8606) by the total distributions shown on line 5. To figure the amounts to include on line 10 of this worksheet
and on line 18, Part II of Form 8606, multiply line 9 of the worksheet by the percentage you figured.
Year
2007
2008
2009
2010
2011
2012
2013
Totals
Deductible
2,000
2,000
2,000
1,000
1,000
1,000
700
$9,700
Nondeductible
-0-0-0-0-0-0300
$300
Rose needs to complete Worksheet 1–1. Figuring the
Taxable Part of Your IRA Distribution to determine if her
IRA deduction for 2014 will be reduced or eliminated. In
2014, she makes a $2,000 contribution that may be partly
nondeductible. She also receives a distribution of $5,000
for conversion to a Roth IRA. She completed the conversion before December 31, 2014, and did not recharacterize any contributions. At the end of 2014, the fair market
values of her accounts, including earnings, total $20,000.
She did not receive any tax-free distributions in earlier
years. The amount she includes in income for 2014 is figured on Worksheet 1-1. Figuring the Taxable Part of Your
IRA Distribution—Illustrated.
The illustrated Form 8606 for Rose shows the information required when you need to use Worksheet 1-1 to figure your nontaxable distribution. Assume that the $500
entered on Form 8606, line 1, is the amount Rose figured
using instructions 1 and 2 given earlier under Reporting
your nontaxable distribution on Form 8606.
Chapter 1
Traditional IRAs
Page 15
Worksheet 1-1. Figuring the Taxable Part of Your IRA Distribution—Illustrated
Use only if you made contributions to a traditional IRA for 2014 that may not be fully deductible and have to figure the
taxable part of your 2014 distributions to determine your modified AGI. See Limit if Covered by Employer Plan in
chapter 1 of Publication 590-A.
Form 8606 and the related instructions will be needed when using this worksheet.
Note. When used in this worksheet, the term outstanding rollover refers to an amount distributed from a traditional IRA
as part of a rollover that, as of December 31, 2014, had not yet been reinvested in another traditional IRA, but was still
eligible to be rolled over tax free.
1. Enter the basis in your traditional IRAs as of December 31, 2013
.......................
1.
300
2. Enter the total of all contributions made to your traditional IRAs during 2014 and all
contributions made during 2015 that were for 2014, whether or not deductible. Do not
include rollover contributions properly rolled over into IRAs. Also, do not include certain
returned contributions described in the instructions for line 7, Part I, of Form 8606 . . . . . . . .
2.
2,000
3. Add lines 1 and 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.
2,300
4. Enter the value of all your traditional IRAs as of December 31, 2014 (include any
outstanding rollovers from traditional IRAs to other traditional IRAs) . . . . . . . . . . . . . . . . . . . . .
4.
20,000
5. Enter the total distributions from traditional IRAs (including amounts converted to Roth
IRAs that will be shown on line 16 of Form 8606) received in 2014. (Do not include
outstanding rollovers included on line 4 or any rollovers between traditional IRAs
completed by December 31, 2014. Also, do not include certain returned contributions
described in the instructions for line 7, Part I, of Form 8606.) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.
5,000
6. Add lines 4 and 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.
25,000
7. Divide line 3 by line 6. Enter the result as a decimal (rounded to at least three places).
If the result is 1.000 or more, enter 1.000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.
.092
8. Nontaxable portion of the distribution.
Multiply line 5 by line 7. Enter the result here and on lines 13 and 17 of Form 8606 . . . . . . . .
8.
460
9. Taxable portion of the distribution (before adjustment for conversions).
Subtract line 8 from line 5. Enter the result here and if there are no amounts converted to
Roth IRAs, stop here and enter the result on line 15 of Form 8606 . . . . . . . . . . . . . . . . . . . . . .
9.
4,540
10. Enter the amount included on line 9 that is allocable to amounts converted to Roth IRAs by
December 31, 2014. (See Note at the end of this worksheet.) Enter here and on line 18 of
Form 8606 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.
4,540
11. Taxable portion of the distribution (after adjustments for conversions).
Subtract line 10 from line 9. Enter the result here and on line 15 of Form 8606 . . . . . . . . . . . . 11.
0
Note. If the amount on line 5 of this worksheet includes an amount converted to a Roth IRA by December 31, 2014, you must
determine the percentage of the distribution allocable to the conversion. To figure the percentage, divide the amount converted
(from line 16 of Form 8606) by the total distributions shown on line 5. To figure the amounts to include on line 10 of this worksheet
and on line 18, Part II of Form 8606, multiply line 9 of the worksheet by the percentage you figured.
Page 16
Chapter 1
Traditional IRAs
Form
8606
Nondeductible IRAs
OMB No. 1545-0074
Attach to Form 1040, Form 1040A, or Form 1040NR.
Attachment
Sequence No. 48
Your social security number
Name. If married, file a separate form for each spouse required to file Form 8606. See instructions.
001-00-0000
Rose Green
Home address (number and street, or P.O. box if mail is not delivered to your home)
Fill in Your Address Only
If You Are Filing This
Form by Itself and Not
With Your Tax Return
Part I
2014
Information about Form 8606 and its separate instructions is at www.irs.gov/form8606.
Department of the Treasury
Internal Revenue Service (99)
Apt. no.
City, town or post office, state, and ZIP code. If you have a foreign address, also complete the spaces below.
Foreign country name
Foreign province/state/county
Foreign postal code
Nondeductible Contributions to Traditional IRAs and Distributions From Traditional, SEP, and SIMPLE IRAs
Complete this part only if one or more of the following apply.
and you made nondeductible contributions to a
distribution to fund an HSA, conversion, recharacterization, or return of certain contributions.
you recharacterized) and
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
your nondeductible contributions to traditional IRAs for
. . . . . .
In 2014, did you take a distribution
from traditional, SEP, or SIMPLE IRAs,
or make a Roth IRA conversion?
.
.
. . . . .
the value of all your traditional,
. .
No
.
.
.
. .
and
.
.
including those made for
. . . . . . . . . .
. . . . . . . . . .
. . . . . . . . . .
.
.
.
1
2
3
500
300
800
.
4
5
0
800
13
14
460*
340
15
0
Do not complete the rest of Part I.
Go to line 4.
Yes
.
.
.
.
.
.
.
.
.
. . . . . .
IRAs as of
. .
6
your distributions from traditional,
and
IRAs in
Do not include rollovers, a one-time distribution to fund an HSA,
conversions to a Roth IRA, certain returned contributions, or
recharacterizations of traditional IRA contributions (see instructions) .
7
the net amount you converted from traditional,
and
IRAs to Roth IRAs in
Do not include amounts converted that you
later recharacterized (see instructions). Also enter this amount on line 16 .
Add lines 6, 7, and 8 . . . . . . . .
9
Divide line 5 by line 9.
the result as a decimal rounded to at least
. . . . . .
Multiply line 8 by line 10. This is the nontaxable portion of the amount
you converted to Roth IRAs. Also enter this amount on line 17 . . .
Multiply line 7 by line 10. This is the nontaxable portion of your
distributions that you did not convert to a Roth IRA . . . . . . .
.
.
.
.
.
.
8
10
×
.
11
12
. . . . . . . .
your total basis in traditional IRAs for 2014 and earlier years
Taxable amount. Subtract line
from line 7. If more than zero, also include this amount on Form
1040, line 15b; Form 1040A, line 11b; or Form 1040NR, line 16b . . . . . . . . . . . .
Note.
may be subject to an additional 10% tax on the amount on line 15 if you were under
age 59½ at the time of the distribution (see instructions).
Form 8606
For Privacy Act and Paperwork Reduction Act Notice, see separate instructions.
* From Worksheet 1 - 1 in Publication 590-B
Chapter 1
Traditional IRAs
Page 17
Page 2
Form 8606 (2014)
Part II
2014 Conversions From Traditional, SEP, or SIMPLE IRAs to Roth IRAs
Complete this part if you converted part or all of your traditional, SEP, and SIMPLE IRAs to a Roth IRA in 2014 (excluding
any portion you recharacterized).
16
17
18
If you completed Part I, enter the amount from line 8. Otherwise, enter the net amount you
converted from traditional, SEP, and SIMPLE IRAs to Roth IRAs in 2014. Do not include amounts
you later recharacterized back to traditional, SEP, or SIMPLE IRAs in 2014 or 2015 (see instructions)
If you completed Part I, enter the amount from line 11. Otherwise, enter your basis in the amount
on line 16 (see instructions) . . . . . . . . . . . . . . . . . . . . . . . .
Taxable amount. Subtract line 17 from line 16. If more than zero, also include this amount on
Form 1040, line 15b; Form 1040A, line 11b; or Form 1040NR, line 16b . . . . . . . . . .
Part III
Distributions From Roth IRAs
16
5,000
17
460
18
4,540*
Complete this part only if you took a distribution from a Roth IRA in 2014. For this purpose, a distribution does not
include a rollover, one-time distribution to fund an HSA, recharacterization, or return of certain contributions (see
instructions).
19
Enter your total nonqualified distributions from Roth IRAs in 2014, including any qualified first-time
homebuyer distributions (see instructions) . . . . . . . . . . . . . . . . . . .
19
20
Qualified first-time homebuyer expenses (see instructions). Do not enter more than $10,000 . .
20
21
Subtract line 20 from line 19. If zero or less, enter -0- . . . . . . . . . . . . . . . .
21
22
22
Enter your basis in Roth IRA contributions (see instructions). If line 21 is zero, stop here . . . .
23
Subtract line 22 from line 21. If zero or less, enter -0- and skip lines 24 and 25. If more than zero,
you may be subject to an additional tax (see instructions) . . . . . . . . . . . . . .
23
24
Enter your basis in conversions from traditional, SEP, and SIMPLE IRAs and rollovers from
qualified retirement plans to a Roth IRA (see instructions) . . . . . . . . . . . . . .
24
25
Taxable amount. Subtract line 24 from line 23. If more than zero, also include this amount on
Form 1040, line 15b; Form 1040A, line 11b; or Form 1040NR, line 16b . . . . . . . . . .
25
Sign Here Only If You Under penalties of perjury, I declare that I have examined this form, including accompanying attachments, and to the best of my knowledge and
belief, it is true, correct, and complete. Declaration of preparer (other than taxpayer) is based on all information of which preparer has any knowledge.
Are Filing This Form
by Itself and Not With
Your Tax Return
Date
Your signature
Paid
Preparer
Use Only
Print/Type preparer’s name
Preparer’s signature
Date
Check
if PTIN
self-employed
Firm's name
Firm's EIN
Firm's address
Phone no.
Form 8606 (2014)
*From Worksheet 1 - 1 in Publication 590-B
Page 18
Chapter 1
Traditional IRAs
Recognizing Losses on Traditional
IRA Investments
If you have a loss on your traditional IRA investment, you
can recognize (include) the loss on your income tax return, but only when all the amounts in all your traditional
IRA accounts have been distributed to you and the total
distributions are less than your unrecovered basis, if any.
Your basis is the total amount of the nondeductible
contributions in your traditional IRAs.
You claim the loss as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit that
applies to certain miscellaneous itemized deductions on
Schedule A (Form 1040). Any such losses are added
back to taxable income for purposes of calculating the alternative minimum tax.
Example. Bill King has made nondeductible contributions to a traditional IRA totaling $2,000, giving him a basis at the end of 2013 of $2,000. By the end of 2014, his
IRA earns $400 in interest income. In that year, Bill receives a distribution of $600 ($500 basis + $100 interest),
reducing the value of his IRA to $1,800 ($2,000 + $400 −
$600) at year's end. Bill figures the taxable part of the distribution and his remaining basis on Form 8606 (illustrated).
In 2015, Bill's IRA has a loss of $500. At the end of that
year, Bill's IRA balance is $1,300 ($1,800 − $500). Bill's
remaining basis in his IRA is $1,500 ($2,000 − $500). Bill
receives the $1,300 balance remaining in the IRA. He can
claim a loss for 2015 of $200 (the $1,500 basis minus the
$1,300 distribution of the IRA balance).
Chapter 1
Traditional IRAs
Page 19
Form
8606
Nondeductible IRAs
OMB No. 1545-0074
2014
Information about Form 8606 and its separate instructions is at www.irs.gov/form8606.
Department of the Treasury
Internal Revenue Service (99)
Attach to Form 1040, Form 1040A, or Form 1040NR.
Attachment
Sequence No. 48
Your social security number
Name. If married, file a separate form for each spouse required to file Form 8606. See instructions.
Bill King
002-00-0000
Home address (number and street, or P.O. box if mail is not delivered to your home)
Fill in Your Address Only
If You Are Filing This
Form by Itself and Not
With Your Tax Return
Part I
Apt. no.
City, town or post office, state, and ZIP code. If you have a foreign address, also complete the spaces below.
Foreign country name
Foreign province/state/county
Foreign postal code
Nondeductible Contributions to Traditional IRAs and Distributions From Traditional, SEP, and SIMPLE IRAs
Complete this part only if one or more of the following apply.
and you made nondeductible contributions to a
distribution to fund an HSA, conversion, recharacterization, or return of certain contributions.
you recharacterized) and
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
your nondeductible contributions to traditional IRAs for
. . . . . .
In 2014, did you take a distribution
from traditional, SEP, or SIMPLE IRAs,
or make a Roth IRA conversion?
.
.
. . . . .
the value of all your traditional,
. .
No
.
.
.
. .
and
.
.
including those made for
. . . . . . . . . .
. . . . . . . . . .
. . . . . . . . . .
.
.
.
. . . . . .
IRAs as of
. .
6
your distributions from traditional,
and
IRAs in
Do not include rollovers, a one-time distribution to fund an HSA,
conversions to a Roth IRA, certain returned contributions, or
recharacterizations of traditional IRA contributions (see instructions) .
7
the net amount you converted from traditional,
and
IRAs to Roth IRAs in
Do not include amounts converted that you
later recharacterized (see instructions). Also enter this amount on line 16 .
Add lines 6, 7, and 8 . . . . . . . .
9
2,400
Divide line 5 by line 9.
the result as a decimal rounded to at least
. . . . . .
Multiply line 8 by line 10. This is the nontaxable portion of the amount
you converted to Roth IRAs. Also enter this amount on line 17 . . .
Multiply line 7 by line 10. This is the nontaxable portion of your
distributions that you did not convert to a Roth IRA . . . . . . .
1
2
3
0
2,000
2,000
.
.
.
.
.
.
.
4
5
0
2,000
13
14
500
1,500
15
100
1,800
600
8
10
×
. 833
11
12
500
. . . . . . . .
your total basis in traditional IRAs for 2014 and earlier years
Taxable amount. Subtract line
from line 7. If more than zero, also include this amount on Form
1040, line 15b; Form 1040A, line 11b; or Form 1040NR, line 16b . . . . . . . . . . . .
Note.
may be subject to an additional 10% tax on the amount on line 15 if you were under
age 59½ at the time of the distribution (see instructions).
For Privacy Act and Paperwork Reduction Act Notice, see separate instructions.
Page 20
.
.
.
Do not complete the rest of Part I.
Go to line 4.
Yes
.
.
.
.
.
.
Chapter 1
Traditional IRAs
Form 8606
Other Special IRA
Distribution Situations
Two other special IRA distribution situations are discussed next.
Distribution of an annuity contract from your IRA account. You can tell the trustee or custodian of your traditional IRA account to use the amount in the account to buy
an annuity contract for you. You are not taxed when you
receive the annuity contract (unless the annuity contract is
being converted to an annuity held by a Roth IRA). You
are taxed when you start receiving payments under that
annuity contract.
Tax treatment. If only deductible contributions were
made to your traditional IRA since it was opened (this includes all your traditional IRAs, if you have more than
one), the annuity payments are fully taxable.
If any of your traditional IRAs include both deductible
and nondeductible contributions, the annuity payments
are taxed as explained earlier under Distributions Fully or
Partly Taxable.
Cashing in retirement bonds. When you cash in retirement bonds, you are taxed on the entire amount you receive. Unless you have already cashed them in, you will
be taxed on the entire value of your bonds in the year in
which you reach age 701 2. The value of the bonds is the
amount you would have received if you had cashed them
in at the end of that year. When you later cash in the
bonds, you will not be taxed again.
Reporting and Withholding
Requirements for Taxable Amounts
If you receive a distribution from your traditional IRA, you
will receive Form 1099-R, or a similar statement. IRA distributions are shown in boxes 1 and 2a of Form 1099-R. A
number or letter code in box 7 tells you what type of distribution you received from your IRA.
Number codes. Some of the number codes are explained below. All of the codes are explained in the instructions for recipients on Form 1099-R.
1—Early distribution, no known exception.
2—Early distribution, exception applies.
3—Disability.
4—Death.
5—Prohibited transaction.
7—Normal distribution.
8—Excess contributions plus earnings/
excess deferrals (and/or earnings)
taxable in 2014.
If code 1, 5, or 8 appears on your Form 1099R,
you are probably subject to a penalty or addi
CAUTION
tional tax. If code 1 appears, see Early Distributions, later. If code 5 appears, see Prohibited Transactions, later. If code 8 appears, see Excess Contributions in
chapter 1 of Publication 590A.
!
Letter codes. Some of the letter codes are explained
below. All of the codes are explained in the instructions for
recipients on Form 1099-R.
B—Designated Roth account distribution.
G—Direct rollover of a distribution (other than a designated Roth account distribution) to a qualified plan, a
section 403(b) plan, a governmental section 457(b)
plan, or an IRA.
H—Direct rollover of a designated Roth account distribution to a Roth IRA.
J—Early distribution from a Roth IRA.
N—Recharacterized IRA contribution made for 2014
and recharacterized in 2014.
P—Excess contributions plus earnings/
excess deferrals taxable in 2013.
Q—Qualified distribution from a Roth IRA.
R—Recharacterized IRA contribution made for 2013
and recharacterized in 2014.
S—Early distribution from a SIMPLE IRA in the first
2 years, no known exception.
T—Roth IRA distribution, exception applies.
If the distribution shown on Form 1099-R is from your
IRA, SEP IRA, or SIMPLE IRA, the small box in box 7 (labeled IRA/SEP/SIMPLE) should be marked with an “X.”
If code J, P, or S appears on your Form 1099R,
you are probably subject to a penalty or addi
CAUTION
tional tax. If code J appears, see Early Distributions, later. If code P appears, see Excess Contributions
in chapter 1 of Publication 590A. If code S appears, see
Distributions (Withdrawals) in chapter 3 of Publication
560.
!
Withholding. Federal income tax is withheld from distributions from traditional IRAs unless you choose not to
have tax withheld.
The amount of tax withheld from an annuity or a similar
periodic payment is based on your marital status and the
number of withholding allowances you claim on your withholding certificate (Form W-4P). If you have not filed a certificate, tax will be withheld as if you are a married individual claiming three withholding allowances.
Generally, tax will be withheld at a 10% rate on nonperiodic distributions.
IRA distributions delivered outside the United
States. In general, if you are a U.S. 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.
Chapter 1
Traditional IRAs
Page 21
To choose exemption from withholding, you must certify to the payer under penalties of perjury that you are not
a U.S. citizen, a resident alien of the United States, or a
tax-avoidance expatriate.
Even if this election is made, the payer must withhold
tax at the rates prescribed for nonresident aliens.
More information. For more information on withholding on pensions and annuities, see Pensions and Annui
ties in chapter 1 of Publication 505, Tax Withholding and
Estimated Tax. For more information on withholding on
nonresident aliens and foreign entities, see Pensions, An
nuities, and Alimony under Withholding on Specific In
come in Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities.
Reporting taxable distributions on your return. Report fully taxable distributions, including early distributions,
on Form 1040, line 15b (no entry is required on line 15a);
Form 1040A, line 11b (no entry is required on line 11a); or
Form 1040NR, line 16b (no entry is required on line 16a).
If only part of the distribution is taxable, enter the total
amount on Form 1040, line 15a; Form 1040A, line 11a; or
Form 1040NR, line 16a, and enter the taxable part on
Form 1040, line 15b; Form 1040A, line 11b; or Form
1040NR, line 16b. You cannot report distributions on
Form 1040EZ or Form 1040NR-EZ.
Estate tax. Generally, the value of an annuity or other
payment receivable by any beneficiary of a decedent's
traditional IRA that represents the part of the purchase
price contributed by the decedent (or by his or her former
employer(s)) must be included in the decedent's gross estate. For more information, see the Instructions for Schedule I, Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return.
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. There are additions to the regular tax for using your IRA funds in prohibited transactions. There are also additional taxes for the following activities.
Investing in collectibles.
Making excess contributions.
Taking early distributions.
Allowing excess amounts to accumulate (failing to
take required distributions).
There are penalties for overstating the amount of nondeductible contributions and for failure to file Form 8606, if
required.
This chapter discusses those acts (relating to distributions) that you should avoid and the additional taxes and
Page 22
Chapter 1
Traditional IRAs
other costs, including loss of IRA status, that apply if you
do not avoid those acts.
Prohibited Transactions
Generally, a prohibited transaction is any improper use of
your traditional IRA account or annuity by you, your beneficiary, or any disqualified person.
Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendant,
and any spouse of a lineal descendant).
The following are some examples of prohibited transactions with a traditional IRA.
Borrowing money from it.
Selling property to it.
Using it as security for a loan.
Buying property for personal use (present or future)
with IRA funds.
If your IRA invested in nonpublicly traded assets
or assets that you directly control, the risk of en
CAUTION
gaging in a prohibited transaction in connection
with your IRA may be increased.
!
Fiduciary. For these purposes, a fiduciary includes anyone who does any of the following.
Exercises any discretionary authority or discretionary
control in managing your IRA or exercises any authority or control in managing or disposing of its assets.
Provides investment advice to your IRA for a fee, or
has any authority or responsibility to do so.
Has any discretionary authority or discretionary responsibility in administering your IRA.
Effect on an IRA account. 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.
Effect on you or your beneficiary. 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. 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. For information on
figuring your gain and reporting it in income, see Are Dis
tributions Taxable, earlier. The distribution may be subject
to additional taxes or penalties.
Borrowing on an annuity contract. If you borrow
money against your traditional IRA annuity contract, you
must include in your gross income the fair market value of
the annuity contract as of the first day of your tax year.
You may have to pay the 10% additional tax on early distributions, discussed later.
Pledging an account as security. If you use a part of
your traditional IRA account as security for a loan, that
part is treated as a distribution and is included in your
gross income. You may have to pay the 10% additional
tax on early distributions, discussed later.
Trust account set up by an employer or an employee
association. Your account or annuity does not lose its
IRA treatment if your employer or the employee association with whom you have your traditional IRA engages in a
prohibited transaction.
Owner participation. If you participate in the prohibited transaction with your employer or the association,
your account is no longer treated as an IRA.
Taxes on prohibited transactions. 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. 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.
Loss of IRA status. If the traditional IRA ceases to be
an IRA because of a prohibited transaction by you or your
beneficiary, you or your beneficiary are not liable for these
excise taxes. However, you or your beneficiary may have
to pay other taxes as discussed under Effect on you or
your beneficiary, earlier.
Exempt Transactions
The following two types of transactions are not prohibited
transactions if they meet the requirements that follow.
Payments of cash, property, or other consideration by
the sponsor of your traditional IRA to you (or members
of your family).
Your receipt of services at reduced or no cost from the
bank where your traditional IRA is established or
maintained.
Payments of cash, property, or other consideration.
Even if a sponsor makes payments to you or your family,
there is no prohibited transaction if all three of the following requirements are met.
1. The payments are for establishing a traditional IRA or
for making additional contributions to it.
2. The IRA is established solely to benefit you, your
spouse, and your or your spouse's beneficiaries.
3. During the year, the total fair market value of the payments you receive is not more than:
Services received at reduced or no cost. Even if a
sponsor provides services at reduced or no cost, there is
no prohibited transaction if all of the following requirements are met.
The traditional IRA qualifying you to receive the services is established and maintained for the benefit of
you, your spouse, and your or your spouse's beneficiaries.
The bank itself can legally offer the services.
The services are provided in the ordinary course of
business by the bank (or a bank affiliate) to customers
who qualify but do not maintain an IRA (or a Keogh
plan).
The determination, for a traditional IRA, of who qualifies for these services is based on an IRA (or a Keogh
plan) deposit balance equal to the lowest qualifying
balance for any other type of account.
The rate of return on a traditional IRA investment that
qualifies is not less than the return on an identical investment that could have been made at the same time
at the same branch of the bank by a customer who is
not eligible for (or does not receive) these services.
Investment in Collectibles
If your traditional IRA invests in collectibles, the amount invested is considered distributed to you in the year invested. You may have to pay the 10% additional tax on early
distributions, discussed later.
Any amounts that were considered to be distributed
when the investment in the collectible was made, and
which were included in your income at that time, are not
included in your income when the collectible is actually
distributed from your IRA.
Collectibles. These include:
Artworks,
Rugs,
Antiques,
Metals,
Gems,
Stamps,
Coins,
a. $10 for IRA deposits of less than $5,000, or
Alcoholic beverages, and
b. $20 for IRA deposits of $5,000 or more.
Certain other tangible personal property.
If the consideration is group term life insurance, requirements (1) and (3) do not apply if no more than $5,000 of
the face value of the insurance is based on a dollar-for-dollar basis on the assets in your IRA.
Exception. Your IRA can invest in one, one-half,
one-quarter, or one-tenth ounce U.S. gold coins, or
one-ounce silver coins minted by the Treasury Department. It can also invest in certain platinum coins and certain gold, silver, palladium, and platinum bullion.
Chapter 1
Traditional IRAs
Page 23
Early Distributions
You use the distributions to buy, build, or rebuild a first
home.
You must include early distributions of taxable amounts
from your traditional IRA in your gross income. Early distributions are also subject to an additional 10% tax, as discussed later.
The distribution is due to an IRS levy of the qualified
plan.
Early distributions defined. Early distributions generally are amounts distributed from your traditional IRA account or annuity before you are age 591 2, or amounts you
receive when you cash in retirement bonds before you are
age 591 2.
Age 591 2 Rule
Generally, if you are under age 591 2, you must pay a 10%
additional tax on the distribution of any assets (money or
other property) from your traditional IRA. Distributions before you are age 591 2 are called early distributions.
The 10% additional tax applies to the part of the distribution that you have to include in gross income. It is in addition to any regular income tax on that amount.
A number of exceptions to this rule are discussed later
under Exceptions. Also see Contributions Returned Be
fore Due Date of Return in chapter 1 of Publication 590-A.
You may have to pay a 25%, rather than a 10%,
additional tax if you receive distributions from a
CAUTION
SIMPLE IRA before you are age 591 2. See Distributions (Withdrawals) in chapter 3 of Publication 560.
!
After age 591 2 and before age 701 2. After you reach age
591 2, you can receive distributions without having to pay
the 10% additional tax. Even though you can receive distributions after you reach age 591 2, distributions are not required until you reach age 701 2. See When Must You With
draw Assets? (Required Minimum Distributions), earlier.
Exceptions
There are several exceptions to the age 591 2 rule. Even if
you receive a distribution before you are age 591 2, you
may not have to pay the 10% additional tax if you are in
one of the following situations.
You have unreimbursed medical expenses that are
more than 10% (or 7.5% if you or your spouse was
born before January 2, 1950) of your adjusted gross
income.
The distributions are not more than the cost of your
medical insurance due to a period of unemployment.
You are totally and permanently disabled.
You are the beneficiary of a deceased IRA owner.
You are receiving distributions in the form of an annuity.
The distributions are not more than your qualified
higher education expenses.
Page 24
Chapter 1
Traditional IRAs
The distribution is a qualified reservist distribution.
Most of these exceptions are explained below.
Note. Distributions that are timely and properly rolled
over, as discussed in chapter 1 of Publication 590-A, are
not subject to either regular income tax or the 10% additional tax. Certain withdrawals of excess contributions after the due date of your return are also tax free and therefore not subject to the 10% additional tax. (See Excess
Contributions Withdrawn After Due Date of Return, in
chapter 1 of Publication 590-A.) This also applies to transfers incident to divorce, as discussed under Can You
Move Retirement Plan Assets in chapter 1 of Publication
590-A.
Receivership distributions. Early distributions (with
or without your consent) from savings institutions placed
in receivership are subject to this tax unless one of the
above exceptions applies. This is true even if the distribution is from a receiver that is a state agency.
Unreimbursed medical expenses. Even if you are under age 591 2, you do not have to pay the 10% additional
tax on distributions that are not more than:
The amount you paid for unreimbursed medical expenses during the year of the distribution, minus
10% (or 7.5% if you or your spouse was born before
January 2, 1950) of your adjusted gross income (defined next) for the year of the distribution.
You can only take into account unreimbursed medical expenses that you would be able to include in figuring a deduction for medical expenses on Schedule A (Form
1040). You do not have to itemize your deductions to take
advantage of this exception to the 10% additional tax.
Adjusted gross income. This is the amount on Form
1040, line 38; Form 1040A, line 22; or Form 1040NR,
line 37.
Medical insurance. Even if you are under age 591 2, you
may not have to pay the 10% additional tax on distributions during the year that are not more than the amount
you paid during the year for medical insurance for yourself, your spouse, and your dependents. You will not have
to pay the tax on these amounts if all of the following conditions apply.
You lost your job.
You received unemployment compensation paid under any federal or state law for 12 consecutive weeks
because you lost your job.
You receive the distributions during either the year
you received the unemployment compensation or the
following year.
You receive the distributions no later than 60 days after you have been reemployed.
Disabled. If you become disabled before you reach age
591 2, any distributions from your traditional IRA because of
your disability are not subject to the 10% additional tax.
You are considered disabled if you can furnish proof
that you cannot do any substantial gainful activity because
of your physical or mental condition. A physician must determine that your condition can be expected to result in
death or to be of long, continued, and indefinite duration.
Beneficiary. If you die before reaching age 591 2, the assets in your traditional IRA can be distributed to your beneficiary or to your estate without either having to pay the
10% additional tax.
However, if you inherit a traditional IRA from your deceased spouse and elect to treat it as your own (as discussed under What if You Inherit an IRA, earlier), any distribution you later receive before you reach age 591 2 may
be subject to the 10% additional tax.
Annuity. You can receive distributions from your traditional IRA that are part of a series of substantially equal
payments over your life (or your life expectancy), or over
the lives (or the joint life expectancies) of you and your
beneficiary, without having to pay the 10% additional tax,
even if you receive such distributions before you are age
591 2. You must use an IRS-approved distribution method
and you must take at least one distribution annually for
this exception to apply. The “required minimum distribution method,” when used for this purpose, results in the
exact amount required to be distributed, not the minimum
amount.
There are two other IRS-approved distribution methods
that you can use. They are generally referred to as the
“fixed amortization method” and the “fixed annuitization
method.” These two methods are not discussed in this
publication because they are more complex and generally
require professional assistance. For information on these
methods, see Revenue Ruling 2002-62, which is on
page 710 of Internal Revenue Bulletin 2002-42 at
www.irs.gov/pub/irsirbs/irb0242.pdf.
Recapture tax for changes in distribution method
under equal payment exception. You may have to pay
an early distribution recapture tax if, before you reach age
591 2, the distribution method under the equal periodic payment exception changes (for reasons other than your
death or disability). The tax applies if the method changes
from the method requiring equal payments to a method
that would not have qualified for the exception to the tax.
The recapture tax applies to the first tax year to which the
change applies. The amount of tax is the amount that
would have been imposed had the exception not applied,
plus interest for the deferral period.
You may have to pay the recapture tax if you do not receive the payments for at least 5 years under a method
that qualifies for the exception. You may have to pay it
even if you modify your method of distribution after you
reach age 591 2. In that case, the tax applies only to payments distributed before you reach age 591 2.
Report the recapture tax and interest on line 4 of Form
5329. Attach an explanation to the form. Do not write the
explanation next to the line or enter any amount for the recapture on lines 1 or 3 of the form.
Onetime switch. If you are receiving a series of substantially equal periodic payments, you can make a
one-time switch to the required minimum distribution
method at any time without incurring the additional tax.
Once a change is made, you must follow the required minimum distribution method in all subsequent years.
Higher education expenses. Even if you are under age
591 2, if you paid expenses for higher education during the
year, part (or all) of any distribution may not be subject to
the 10% additional tax. The part not subject to the tax is
generally the amount that is not more than the qualified
higher education expenses (defined next) for the year for
education furnished at an eligible educational institution
(defined below). The education must be for you, your
spouse, or the children or grandchildren of you or your
spouse.
When determining the amount of the distribution that is
not subject to the 10% additional tax, include qualified
higher education expenses paid with any of the following
funds.
Payment for services, such as wages.
A loan.
A gift.
An inheritance given to either the student or the individual making the withdrawal.
A withdrawal from personal savings (including savings
from a qualified tuition program).
Do not include expenses paid with any of the following
funds.
Tax-free distributions from a Coverdell education savings account.
Tax-free part of scholarships and fellowships.
Pell grants.
Employer-provided educational assistance.
Veterans' educational assistance.
Any other tax-free payment (other than a gift or inheritance) received as educational assistance.
Qualified higher education expenses. Qualified
higher education expenses are tuition, fees, books, supplies, and equipment required for the enrollment or attendance of a student at an eligible educational institution.
They also include expenses for special needs services incurred by or for special needs students in connection with
their enrollment or attendance. In addition, if the individual
is at least a half-time student, room and board are qualified higher education expenses.
Chapter 1
Traditional IRAs
Page 25
Eligible educational institution. This is any college,
university, vocational school, or other postsecondary educational institution eligible to participate in the student aid
programs administered by the U.S. Department of Education. It includes virtually all accredited, public, nonprofit,
and proprietary (privately owned profit-making) postsecondary institutions. The educational institution should be
able to tell you if it is an eligible educational institution.
For more information, see chapter 9 of Publication 970,
Tax Benefits for Education.
First home. Even if you are under age 59 , you do not
have to pay the 10% additional tax on up to $10,000 of
distributions you receive to buy, build, or rebuild a first
home. To qualify for treatment as a first-time homebuyer
distribution, the distribution must meet all the following requirements.
1
2
1. It must be used to pay qualified acquisition costs (defined next) before the close of the 120th day after the
day you received it.
2. It must be used to pay qualified acquisition costs for
the main home of a first-time homebuyer (defined below) who is any of the following.
a. Yourself.
If you received a distribution to buy, build, or re
build a first home and the purchase or construc
tion was canceled or delayed, you generally can
contribute the amount of the distribution to an IRA within
120 days of the distribution. This contribution is treated as
a rollover contribution to the IRA.
TIP
Qualified reservist distributions. A qualified reservist
distribution is not subject to the additional tax on early distributions.
Definition. A distribution you receive is a qualified reservist distribution if the following requirements are met.
You were ordered or called to active duty after September 11, 2001.
You were ordered or called to active duty for a period
of more than 179 days or for an indefinite period because you are a member of a reserve component.
The distribution is from an IRA or from amounts attributable to elective deferrals under a section 401(k) or
403(b) plan or a similar arrangement.
The distribution was made no earlier than the date of
the order or call to active duty and no later than the
close of the active duty period.
Reserve component. The term “reserve component”
means the:
b. Your spouse.
c. Your or your spouse's child.
Army National Guard of the United States,
d. Your or your spouse's grandchild.
Army Reserve,
e. Your or your spouse's parent or other ancestor.
3. When added to all your prior qualified first-time homebuyer distributions, if any, total qualifying distributions
cannot be more than $10,000.
If both you and your spouse are firsttime home
TIP buyers (defined later), each of you can receive
distributions up to $10,000 for a first home with
out having to pay the 10% additional tax.
Qualified acquisition costs. Qualified acquisition
costs include the following items.
Costs of buying, building, or rebuilding a home.
Any usual or reasonable settlement, financing, or
other closing costs.
Firsttime homebuyer. Generally, you are a first-time
homebuyer if you had no present interest in a main home
during the 2-year period ending on the date of acquisition
of the home which the distribution is being used to buy,
build, or rebuild. If you are married, your spouse must also
meet this no-ownership requirement.
Date of acquisition. The date of acquisition is the
date that:
You enter into a binding contract to buy the main
home for which the distribution is being used, or
The building or rebuilding of the main home for which
the distribution is being used begins.
Page 26
Chapter 1
Traditional IRAs
Naval Reserve,
Marine Corps Reserve,
Air National Guard of the United States,
Air Force Reserve,
Coast Guard Reserve, or
Reserve Corps of the Public Health Service.
Additional 10% tax
The additional tax on early distributions is 10% of the
amount of the early distribution that you must include in
your gross income. This tax is in addition to any regular income tax resulting from including the distribution in income.
Use Form 5329 to figure the tax. See the discussion of
Form 5329, later, under Reporting Additional Taxes for information on filing the form.
Example. Tom Jones, who is 35 years old, receives a
$3,000 distribution from his traditional IRA account. Tom
does not meet any of the exceptions to the 10% additional
tax, so the $3,000 is an early distribution. Tom never
made any nondeductible contributions to his IRA. He must
include the $3,000 in his gross income for the year of the
distribution and pay income tax on it. Tom must also pay
an additional tax of $300 (10% × $3,000). He files Form
5329. See the filled-in Form 5329, later.
Early distributions of funds from a SIMPLE retire
ment account made within 2 years of beginning
CAUTION
participation in the SIMPLE are subject to a 25%,
rather than a 10%, early distributions tax.
!
Nondeductible contributions. The tax on early distributions does not apply to the part of a distribution that represents a return of your nondeductible contributions (basis).
Excess Accumulations
(Insufficient Distributions)
You cannot keep amounts in your traditional IRA indefinitely. Generally, you must begin receiving distributions by
April 1 of the year following the year in which you reach
age 701 2. The required minimum distribution for any year
after the year in which you reach age 701 2 must be made
by December 31 of that later year.
Tax on excess. If distributions are less than the required minimum distribution for the year, discussed earlier
under When Must You Withdraw Assets? (Required Mini
mum Distributions), you may have to pay a 50% excise
tax for that year on the amount not distributed as required.
Reporting the tax. Use Form 5329 to report the tax on
excess accumulations. See the discussion of Form 5329,
later, under Reporting Additional Taxes, for more information on filing the form.
Request to waive the tax. If the excess accumulation is
due to reasonable error, and you have taken, or are taking, steps to remedy the insufficient distribution, you can
request that the tax be waived. If you believe you qualify
for this relief, attach a statement of explanation and complete Form 5329 as instructed under Waiver of tax in the
Instructions for Form 5329.
Exemption from tax. If you are unable to take required
distributions because you have a traditional IRA invested
in a contract issued by an insurance company that is in
state insurer delinquency proceedings, the 50% excise
tax does not apply if the conditions and requirements of
Revenue Procedure 92-10 are satisfied. Those conditions
and requirements are summarized below. Revenue Procedure 92-10 is in Cumulative Bulletin 1992-1. You can
read the revenue procedure at most IRS offices, at many
public libraries, and online at IRS.gov.
Conditions. To qualify for exemption from the tax, the
assets in your traditional IRA must include an affected investment. Also, the amount of your required distribution
must be determined as discussed earlier under When
Must You Withdraw Assets? (Required Minimum Distribu
tions).
Affected investment defined. Affected investment
means an annuity contract or a guaranteed investment
contract (with an insurance company) for which payments
under the terms of the contract have been reduced or
suspended because of state insurer delinquency proceedings against the contracting insurance company.
Requirements. If your traditional IRA (or IRAs) includes assets other than your affected investment, all traditional IRA assets, including the available portion of your
affected investment, must be used to satisfy as much as
possible of your IRA distribution requirement. If the affected investment is the only asset in your IRA, as much of
the required distribution as possible must come from the
available portion, if any, of your affected investment.
Chapter 1
Traditional IRAs
Page 27
Form
5329
Department of the Treasury
Internal Revenue Service (99)
Additional Taxes on Qualified Plans
(Including IRAs) and Other Tax-Favored Accounts
Fill in Your Address Only
If You Are Filing This
Form by Itself and Not
With Your Tax Return
2014
Attach to Form 1040 or Form 1040NR.
Attachment
Sequence No. 29
Information about Form 5329 and its separate instructions is at www.irs.gov/form5329.
Your social security number
Name of individual subject to additional tax. If married filing jointly, see instructions.
Tom Jones
OMB No. 1545-0074
004-00-0000
Home address (number and street), or P.O. box if mail is not delivered to your home
City, town or post office, state, and ZIP code. If you have a foreign address, also complete
the spaces below (see instructions).
Foreign country name
Foreign province/state/county
Apt. no.
If this is an amended
return, check here
Foreign postal code
If you only owe the additional 10% tax on early distributions, you may be able to report this tax directly on Form 1040, line 59, or
Form 1040NR, line 57, without filing Form 5329. See the instructions for Form 1040, line 59, or for Form 1040NR, line 57.
Part I
1
2
3
4
Part II
5
6
7
8
Additional Tax on Early Distributions
Complete this part if you took a taxable distribution before you reached age 59½ from a qualified retirement plan (including an
IRA) or modified endowment contract (unless you are reporting this tax directly on Form 1040 or Form 1040NR—see above). You
may also have to complete this part to indicate that you qualify for an exception to the additional tax on early distributions or for
certain Roth IRA distributions (see instructions).
3000
Early distributions included in income. For Roth IRA distributions, see instructions . . . . . .
1
Early distributions included on line 1 that are not subject to the additional tax (see instructions).
Enter the appropriate exception number from the instructions:
. . . . . . . . .
2
-03000
Amount subject to additional tax. Subtract line 2 from line 1 . . . . . . . . . . . . .
3
Additional tax. Enter 10% (.10) of line 3. Include this amount on Form 1040, line 59, or Form 1040NR, line 57
4
300
Caution: If any part of the amount on line 3 was a distribution from a SIMPLE IRA, you may have
to include 25% of that amount on line 4 instead of 10% (see instructions).
Additional Tax on Certain Distributions From Education Accounts
Complete this part if you included an amount in income, on Form 1040 or Form 1040NR, line 21, from a Coverdell
education savings account (ESA) or a qualified tuition program (QTP).
Distributions included in income from Coverdell ESAs and QTPs . . . . . . . . . . . .
5
Distributions included on line 5 that are not subject to the additional tax (see instructions) . . .
6
Amount subject to additional tax. Subtract line 6 from line 5 . . . . . . . . . . . . .
7
Additional tax. Enter 10% (.10) of line 7. Include this amount on Form 1040, line 59, or Form 1040NR, line 57
8
Part III
Additional Tax on Excess Contributions to Traditional IRAs
Complete this part if you contributed more to your traditional IRAs for 2014 than is allowable or you had an amount on line
17 of your 2013 Form 5329.
9
10
11
12
13
14
15
16
17
Enter your excess contributions from line 16 of your 2013 Form 5329 (see instructions). If zero, go to line 15
If your traditional IRA contributions for 2014 are less than your
maximum allowable contribution, see instructions. Otherwise, enter -010
2014 traditional IRA distributions included in income (see instructions) .
11
2014 distributions of prior year excess contributions (see instructions) .
12
Add lines 10, 11, and 12 . . . . . . . . . . . . . . . . . . . . . . . . .
Prior year excess contributions. Subtract line 13 from line 9. If zero or less, enter -0- . . . . .
Excess contributions for 2014 (see instructions) . . . . . . . . . . . . . . . . .
Total excess contributions. Add lines 14 and 15 . . . . . . . . . . . . . . . . .
Additional tax. Enter 6% (.06) of the smaller of line 16 or the value of your traditional IRAs on December 31, 2014
(including 2014 contributions made in 2015). Include this amount on Form 1040, line 59, or Form 1040NR, line 57 .
Part IV
18
19
20
21
22
23
24
25
13
14
15
16
17
Additional Tax on Excess Contributions to Roth IRAs
Complete this part if you contributed more to your Roth IRAs for 2014 than is allowable or you had an amount on line 25 of your 2013 Form 5329.
Enter your excess contributions from line 24 of your 2013 Form 5329 (see instructions). If zero, go to line 23
18
If your Roth IRA contributions for 2014 are less than your maximum
allowable contribution, see instructions. Otherwise, enter -0- . . . .
19
2014 distributions from your Roth IRAs (see instructions) . . . . .
20
Add lines 19 and 20 . . . . . . . . . . . . . . . . . . . . . . . . . .
21
Prior year excess contributions. Subtract line 21 from line 18. If zero or less, enter -0- . . . . .
22
Excess contributions for 2014 (see instructions) . . . . . . . . . . . . . . . . .
23
Total excess contributions. Add lines 22 and 23 . . . . . . . . . . . . . . . . .
24
Additional tax. Enter 6% (.06) of the smaller of line 24 or the value of your Roth IRAs on December 31, 2014
(including 2014 contributions made in 2015). Include this amount on Form 1040, line 59, or Form 1040NR, line 57
25
For Privacy Act and Paperwork Reduction Act Notice, see your tax return instructions.
Page 28
9
Chapter 1
Traditional IRAs
Cat. No. 13329Q
Form 5329 (2014)
Available portion. The available portion of your affected investment is the amount of payments remaining after
they have been reduced or suspended because of state
insurer delinquency proceedings.
Make up of shortfall in distribution. If the payments
to you under the contract increase because all or part of
the reduction or suspension is canceled, you must make
up the amount of any shortfall in a prior distribution because of the proceedings. You make up (reduce or eliminate) the shortfall with the increased payments you receive.
You must make up the shortfall by December 31 of the
calendar year following the year that you receive increased payments.
Reporting Additional Taxes
Generally, you must use Form 5329 to report the tax on
excess contributions, early distributions, and excess accumulations. If you must file Form 5329, you cannot use
Form 1040A, Form 1040EZ, or Form 1040NR-EZ.
Filing a tax return. If you must file an individual income
tax return, complete Form 5329 and attach it to your Form
1040 or Form 1040NR. Enter the total additional taxes
due on Form 1040, line 59, or on Form 1040NR, line 57.
Not filing a tax return. If you do not have to file a return,
but do have to pay one of the additional taxes mentioned
earlier, file the completed Form 5329 with the IRS at the
time and place you would have filed Form 1040 or Form
1040NR. Be sure to include your address on page 1 and
your signature and date on page 2. Enclose, but do not attach, a check or money order payable to the United States
Treasury for the tax you owe, as shown on Form 5329.
Write your social security number and “2014 Form 5329”
on your check or money order.
Form 5329 not required. You do not have to use
Form 5329 if either of the following situations exists.
Distribution code 1 (early distribution) is correctly
shown in box 7 of Form 1099-R. If you do not owe any
other additional tax on a distribution, multiply the taxable part of the early distribution by 10% and enter the
result on Form 1040, line 59, or on Form 1040NR,
line 57. Put “No” to the left of the line to indicate that
you do not have to file Form 5329. However, if you
owe this tax and also owe any other additional tax on
a distribution, do not enter this 10% additional tax directly on your Form 1040 or Form 1040NR. You must
file Form 5329 to report your additional taxes.
If you rolled over part or all of a distribution from a
qualified retirement plan, the part rolled over is not
subject to the tax on early distributions.
2.
Roth IRAs
Reminders
Deemed IRAs. For plan years beginning after 2002, a
qualified employer plan (retirement plan) can maintain a
separate account or annuity under the plan (a deemed
IRA) to receive voluntary employee contributions. If the
separate account or annuity otherwise meets the requirements of an IRA, it will be subject only to IRA rules. An
employee's account can be treated as a traditional IRA or
a Roth IRA.
For this purpose, a “qualified employer plan” includes:
A qualified pension, profit-sharing, or stock bonus
plan (section 401(a) plan),
A qualified employee annuity plan (section 403(a)
plan),
A tax-sheltered annuity plan (section 403(b) plan), and
A deferred compensation plan (section 457 plan)
maintained by a state, a political subdivision of a state,
or an agency or instrumentality of a state or political
subdivision of a state.
Designated Roth accounts. Designated Roth accounts
are separate accounts under 401(k), 403(b), or 457(b)
plans that accept elective deferrals that are referred to as
Roth contributions. These elective deferrals are included
in your income, but qualified distributions from these accounts are not included in your income. Designated Roth
accounts are not IRAs and should not be confused with
Roth IRAs. Contributions, up to their respective limits, can
be made to Roth IRAs and designated Roth accounts according to your eligibility to participate. A contribution to
one does not impact your eligibility to contribute to the
other. See Publication 575, for more information on designated Roth accounts.
Introduction
Regardless of your age, you may be able to establish and
make nondeductible contributions to an individual retirement plan called a Roth IRA.
Contributions not reported. You do not report Roth IRA
contributions on your return.
What Is a Roth IRA?
A Roth IRA is an individual retirement plan that, except as
explained in this chapter, is subject to the rules that apply
Chapter 2
Roth IRAs
Page 29
to a traditional IRA (defined next). It can be either an account or an annuity. Individual retirement accounts and
annuities are described in How Can a Traditional IRA Be
Opened in chapter 1 of Publication 590-A.
To be a Roth IRA, the account or annuity must be designated as a Roth IRA when it is opened. A deemed IRA
can be a Roth IRA, but neither a SEP IRA nor a SIMPLE
IRA can be designated as a Roth IRA.
Unlike a traditional IRA, you cannot deduct contributions to a Roth IRA. But, if you satisfy the requirements,
qualified distributions (discussed later) are tax free. Contributions can be made to your Roth IRA after you reach
age 701 2 and you can leave amounts in your Roth IRA as
long as you live.
Traditional IRA. A traditional IRA is any IRA that is not a
Roth IRA or SIMPLE IRA. Traditional IRAs are discussed
in chapter 1.
Are Distributions Taxable?
You do not include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s). You also do not include
distributions from your Roth IRA that you roll over tax free
into another Roth IRA. You may have to include part of
other distributions in your income. See Ordering Rules for
Distributions, later.
Basis of distributed property. The basis of property
distributed from a Roth IRA is its fair market value (FMV)
on the date of distribution, whether or not the distribution
is a qualified distribution.
Withdrawals of contributions by due date. If you withdraw contributions (including any net earnings on the contributions) by the due date of your return for the year in
which you made the contribution, the contributions are
treated as if you never made them. If you have an extension of time to file your return, you can withdraw the contributions and earnings by the extended due date. The withdrawal of contributions is tax free, but you must include
the earnings on the contributions in income for the year in
which you made the contributions.
What Are Qualified Distributions?
A qualified distribution is any payment or distribution from
your Roth IRA that meets the following requirements.
1. It is made after the 5-year period beginning with the
first taxable year for which a contribution was made to
a Roth IRA set up for your benefit, and
2. The payment or distribution is:
d. One that meets the requirements listed under First
home under Exceptions in chapter 1 (up to a
$10,000 lifetime limit).
Additional Tax on Early Distributions
If you receive a distribution that is not a qualified distribution, you may have to pay the 10% additional tax on early
distributions as explained in the following paragraphs.
Distributions of conversion and certain rollover contributions within 5-year period. If, within the 5-year period starting with the first day of your tax year in which you
convert an amount from a traditional IRA or rollover an
amount from a qualified retirement plan to a Roth IRA, you
take a distribution from a Roth IRA, you may have to pay
the 10% additional tax on early distributions. You generally must pay the 10% additional tax on any amount attributable to the part of the amount converted or rolled over
(the conversion or rollover contribution) that you had to include in income (recapture amount). A separate 5-year
period applies to each conversion and rollover. See Or
dering Rules for Distributions, later, to determine the recapture amount, if any.
The 5-year period used for determining whether the
10% early distribution tax applies to a distribution from a
conversion or rollover contribution is separately determined for each conversion and rollover, and is not necessarily the same as the 5-year period used for determining
whether a distribution is a qualified distribution. See What
Are Qualified Distributions, earlier.
For example, if a calendar-year taxpayer makes a conversion contribution on February 25, 2014, and makes a
regular contribution for 2013 on the same date, the 5-year
period for the conversion begins January 1, 2014, while
the 5-year period for the regular contribution begins on
January 1, 2013.
Unless one of the exceptions listed later applies, you
must pay the additional tax on the portion of the distribution attributable to the part of the conversion or rollover
contribution that you had to include in income because of
the conversion or rollover.
You must pay the 10% additional tax in the year of the
distribution, even if you had included the conversion or
rollover contribution in an earlier year. You also must pay
the additional tax on any portion of the distribution attributable to earnings on contributions.
Other early distributions. Unless one of the exceptions
listed below applies, you must pay the 10% additional tax
on the taxable part of any distributions that are not qualified distributions.
Exceptions. You may not have to pay the 10% additional
tax in the following situations.
You have reached age 591 2.
a. Made on or after the date you reach age 591 2,
You are totally and permanently disabled.
b. Made because you are disabled (defined earlier),
You are the beneficiary of a deceased IRA owner.
c. Made to a beneficiary or to your estate after your
death, or
Page 30
Chapter 2
Roth IRAs
You use the distribution to buy, build, or rebuild a first
home.
The distributions are not more than your qualified
higher education expenses.
The distributions are part of a series of substantially
equal payments.
The distribution is due to an IRS levy of the qualified
plan.
You have unreimbursed medical expenses that are
more than 10% (or 7.5% if you or your spouse was
born before January 2, 1950) of your adjusted gross
income (defined earlier) for the year.
The distribution is a qualified reservist distribution.
Most of these exceptions are discussed earlier in chapter 1 under Early Distributions.
You are paying medical insurance premiums during a
period of unemployment.
Chapter 2
Roth IRAs
Page 31
Figure 2-1.
Is the Distribution From Your Roth IRA a Qualified Distribution?
Start Here
Has it been at least 5 years from the beginning of the
year for which you first set up and contributed to a
Roth IRA?
No
Yes
Yes
Were you at least 591⁄2 years old at the time of the
distribution?
No
Yes
Is the distribution being used to buy or rebuild a first
home as explained in First Home under Early
Distr ibutions in chapter 1?
No
Yes
Is the distribution due to your being disabled (defined
under Early Distributions in chapter 1)?
No
Was the distribution made to the owner’s beneficiary
or the owner’s estate?
No
Yes
The distribution from the Roth IRA is a qualified
distribution. It is not subject to tax or penalty.
Page 32
Chapter 2
Roth IRAs
The distribution from the Roth IRA is
not a qualified distribution. The
portion of the distribution allocable
to earnings may be subject to tax
and it may be subject to the 10%
additional tax.
Ordering Rules for Distributions
If you receive a distribution from your Roth IRA that is not
a qualified distribution, part of it may be taxable. There is a
set order in which contributions (including conversion contributions and rollover contributions from qualified retirement plans) and earnings are considered to be distributed
from your Roth IRA. For these purposes, disregard the
withdrawal of excess contributions and the earnings on
them (discussed underWhat if You Contribute Too Much
in chapter 2 of Publication 590-A). Order the distributions
as follows.
1. Regular contributions.
2. Conversion and rollover contributions, on a first-in,
first-out basis (generally, total conversions and rollovers from the earliest year first). See Aggregation
(grouping and adding) rules, later. Take these conversion and rollover contributions into account as follows:
a. Taxable portion (the amount required to be included in gross income because of the conversion or
rollover) first, and then the
b. Nontaxable portion.
3. Earnings on contributions.
Disregard rollover contributions from other Roth IRAs for
this purpose.
Aggregation (grouping and adding) rules. Determine the taxable amounts distributed (withdrawn), distributions, and contributions by grouping and adding them
together as follows.
Add all distributions from all your Roth IRAs during the
year together.
Add all regular contributions made for the year (including contributions made after the close of the year, but
before the due date of your return) together. Add this
total to the total undistributed regular contributions
made in prior years.
Add all conversion and rollover contributions made
during the year together. For purposes of the ordering
rules, in the case of any conversion or rollover in
which the conversion or rollover distribution is made in
2014 and the conversion or rollover contribution is
made in 2015, treat the conversion or rollover contribution as contributed before any other conversion or
rollover contributions made in 2015.
Add any recharacterized contributions that end up in a
Roth IRA to the appropriate contribution group for the year
that the original contribution would have been taken into
account if it had been made directly to the Roth IRA.
Disregard any recharacterized contribution that ends
up in an IRA other than a Roth IRA for the purpose of
grouping (aggregating) both contributions and distributions. Also disregard any amount withdrawn to correct an
excess contribution (including the earnings withdrawn) for
this purpose.
Example. On October 15, 2010, Justin converted all
$80,000 in his traditional IRA to his Roth IRA. His Forms
8606 from prior years show that $20,000 of the amount
converted is his basis.
Justin included $60,000 ($80,000 − $20,000) in his
gross income.
On February 23, 2014, Justin made a regular contribution of $5,000 to a Roth IRA. On November 8, 2014, at
age 60, Justin took a $7,000 distribution from his Roth
IRA.
The first $5,000 of the distribution is a return of Justin's
regular contribution and is not includible in his income.
The next $2,000 of the distribution is not includible in
income because it was included previously.
Figuring your recapture amount. If you had an early
distribution from your Roth IRAs in 2014, you must allocate the early distribution by using the Recapture
Amount—Allocation Chart, later.
Amount to include on Form 5329, line 1. Include on
line 1 of your 2014 Form 5329 the following four amounts
from the Recapture Amount—Allocation Chart that you filled out.
The amount you allocated to line 20 of your 2014
Form 8606.
The amount(s) allocated to your 2010 through 2014
Forms 8606, line 18, and your 2010 Form 8606,
line 23.
The amount(s) allocated to your 2011, 2012, 2013,
and 2014 Forms 1040, line 16b; Forms 1040A,
line 12b; and Forms 1040NR, line 17b.
The amount from your 2014 Form 8606, line 25.
Also, include any amount you allocated to line 20 of
your 2014 Form 8606 on your 2014 Form 5329, line 2,
and enter exception number 09.
Example. Ishmael, age 32, opened a Roth IRA in
2000. He made the maximum contributions to it every
year. In addition, he made the following transactions into
his Roth IRA.
In 2005, he converted $10,000 from his traditional IRA
into his Roth IRA. He filled out a 2005 Form 8606 and
attached it with his 2005 Form 1040. He entered $0 on
line 17 of Form 8606 because he took a deduction for
all the contributions to the traditional IRA, therefore he
has no basis. He entered $10,000 on line 18 of Form
8606.
In 2011, he rolled over the entire balance of his qualified retirement plan, $20,000, into a Roth IRA when he
changed jobs. He used a 2011 Form 1040 to file his
taxes. He entered $20,000 on line 16a of Form 1040
because that was the amount reported in box 1 of his
2011 Form 1099-R. Box 5 of his 2011 Form 1099-R
reported $0 since he did not make any after-tax contributions to the qualified retirement plan. He entered
$20,000 on line 16b of Form 1040 since that is the taxable amount that was rolled over in 2011.
Chapter 2
Roth IRAs
Page 33
The total balance in his Roth IRA as of January 1, 2014
was $110,500 ($55,500 in contributions from 2000
through 2013 + $10,000 from the 2005 conversion +
$20,000 from the 2011 rollover + $25,000 from earnings).
He has not taken any early distribution from his Roth IRA
before 2014. In 2014, he made the maximum contribution
of $5,500 to his Roth IRA.
Recapture Amount—Allocation Chart
Enter the amount from your 2014 Form 8606,
line 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Before you begin: You will need your prior year Form(s) 8606 and income tax return(s) if you entered an amount on any line(s) as indicated below.
You will now allocate the amount you entered above (2014 Form 8606, line 19) in the order shown, to the amounts on the lines listed below (to the
extent a prior year distribution was not allocable to the amount). The maximum amount you can enter on each line below is the amount entered on
the referenced lines of the form for that year. Note. Once you have allocated the full amount from your 2014 Form 8606, line 19, STOP. See the
Example, earlier.
Tax Year
Your Form
2014
Form 8606, line 20 . . . . . . . . . . . . . . . . .
Form 8606, line 22 . . . . . . . . . . . . . . . . .
1998
Form 8606, line 16 . . . . . . . . . . . . . . . . .
Form 8606, line 15 . . . . . . . . . . . . . . . . .
1999
Form 8606, line 16 . . . . . . . . . . . . . . . . .
Form 8606, line 15 . . . . . . . . . . . . . . . . .
2000
Form 8606, line 16 . . . . . . . . . . . . . . . . .
Form 8606, line 15 . . . . . . . . . . . . . . . . .
2001
Form 8606, line 18 . . . . . . . . . . . . . . . . .
Form 8606, line 17 . . . . . . . . . . . . . . . . .
2002
Form 8606, line 18 . . . . . . . . . . . . . . . . .
Form 8606, line 17 . . . . . . . . . . . . . . . . .
2003
Form 8606, line 18 . . . . . . . . . . . . . . . . .
Form 8606, line 17 . . . . . . . . . . . . . . . . .
2004
Form 8606, line 18 . . . . . . . . . . . . . . . . .
Form 8606, line 17 . . . . . . . . . . . . . . . . .
2005
Form 8606, line 18 . . . . . . . . . . . . . . . . .
Form 8606, line 17 . . . . . . . . . . . . . . . . .
2006
Form 8606, line 18 . . . . . . . . . . . . . . . . .
Form 8606, line 17 . . . . . . . . . . . . . . . . .
2007
Form 8606, line 18 . . . . . . . . . . . . . . . . .
Form 8606, line 17 . . . . . . . . . . . . . . . . .
2008
Form 8606, line 18
and
Form 1040, line 16b; Form 1040A,
line 12b; or Form 1040NR,
line 17b* . . . . . . . . . . . . . . . . . . . . . . . .
Form 8606, line 17
and
Form 1040, line 16a; Form 1040A,
line 12a; or Form 1040NR,
line 17a** . . . . . . . . . . . . . . . . . . . . . . .
2009
Form 8606, line 18
and
Form 1040, line 16b; Form 1040A,
line 12b; or Form 1040NR,
line 17b* . . . . . . . . . . . . . . . . . . . . . . . .
Form 8606, line 17
and
Form 1040, line 16a; Form 1040A,
line 12a; or Form 1040NR,
line 17a** . . . . . . . . . . . . . . . . . . . . . . .
2010
Form 8606, lines 18 and 23* . . . . . . . . . .
Form 8606, lines 17 and 22** . . . . . . . . .
2011
Form 8606, line 18
and
Form 1040, line 16b; Form 1040A,
line 12b; or Form 1040NR,
line 17b* . . . . . . . . . . . . . . . . . . . . . . . .
Form 8606, line 17
and
Form 1040, line 16a; Form 1040A,
line 12a; or Form 1040NR,
line 17a** . . . . . . . . . . . . . . . . . . . . . . .
2012
Form 8606, line 18
and
Form 1040, line 16b; Form 1040A,
line 12b; or Form 1040NR,
line 17b* . . . . . . . . . . . . . . . . . . . . . . . .
Form 8606, line 17
and
Form 1040, line 16a; Form 1040A,
line 12a; or Form 1040NR,
line 17a** . . . . . . . . . . . . . . . . . . . . . . .
2013
Form 8606, line 18
and
Form 1040, line 16b; Form 1040A,
line 12b; or Form 1040NR,
line 17b* . . . . . . . . . . . . . . . . . . . . . . . .
Form 8606, line 17
and
Form 1040, line 16a; Form 1040A,
line 12a; or Form 1040NR,
line 17a** . . . . . . . . . . . . . . . . . . . . . . .
2014
Form 8606, line 18
and
Form 1040, line 16b; Form 1040A,
line 12b; or Form 1040NR,
line 17b* . . . . . . . . . . . . . . . . . . . . . . . .
Form 8606, line 17
and
Form 1040, line 16a; Form 1040A,
line 12a; or Form 1040NR,
line 17a** . . . . . . . . . . . . . . . . . . . . . . .
2014
Form 8606, line 25 . . . . . . . . . . . . . . . . .
*Only include those amounts rolled over to a Roth IRA.
**Only include any contributions (usually Form 1099-R, box 5) that were taxable to you when made and rolled over to a Roth IRA.
Page 34
Chapter 2
Roth IRAs
Illustrated Recapture Amount—Allocation Chart
Enter the amount from your 2014 Form 8606,
line 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $85,500
Before you begin: You will need your prior year Form(s) 8606 and income tax return(s) if you entered an amount on any line(s) as indicated below.
You will now allocate the amount you entered above (2014 Form 8606, line 19) in the order shown, to the amounts on the lines listed below (to the
extent a prior year distribution was not allocable to the amount). The maximum amount you can enter on each line below is the amount entered on
the referenced lines of the form for that year. Note. Once you have allocated the full amount from your 2014 Form 8606, line 19, STOP. See the
Example, earlier.
Tax Year
2014
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2014
Your Form
Form 8606, line 20 . . . . . . . . . . . . . . . . .
Form 8606, line 16 . . . . . . . . . . . . . . . . .
Form 8606, line 16 . . . . . . . . . . . . . . . . .
Form 8606, line 16 . . . . . . . . . . . . . . . . .
Form 8606, line 18 . . . . . . . . . . . . . . . . .
Form 8606, line 18 . . . . . . . . . . . . . . . . .
Form 8606, line 18 . . . . . . . . . . . . . . . . .
Form 8606, line 18 . . . . . . . . . . . . . . . . .
Form 8606, line 18 . . . . . . . . . . . . . . . . .
Form 8606, line 18 . . . . . . . . . . . . . . . . .
Form 8606, line 18 . . . . . . . . . . . . . . . . .
Form 8606, line 18
and
Form 1040, line 16b; Form 1040A,
line 12b; or Form 1040NR,
line 17b* . . . . . . . . . . . . . . . . . . . . . . . .
Form 8606, line 18
and
Form 1040, line 16b; Form 1040A,
line 12b; or Form 1040NR,
line 17b* . . . . . . . . . . . . . . . . . . . . . . . .
Form 8606, lines 18 and 23* . . . . . . . . . .
Form 8606, line 18
and
Form 1040, line 16b; Form 1040A,
line 12b; or Form 1040NR,
line 17b* . . . . . . . . . . . . . . . . . . . . . . . .
Form 8606, line 18
and
Form 1040, line 16b; Form 1040A,
line 12b; or Form 1040NR,
line 17b* . . . . . . . . . . . . . . . . . . . . . . . .
Form 8606, line 18
and
Form 1040, line 16b; Form 1040A,
line 12b; or Form 1040NR,
line 17b* . . . . . . . . . . . . . . . . . . . . . . . .
Form 8606, line 18
and
Form 1040, line 16b; Form 1040A,
line 12b; or Form 1040NR,
line 17b* . . . . . . . . . . . . . . . . . . . . . . . .
Form 8606, line 25 . . . . . . . . . . . . . . . . .
$10,000
$10,000
$10,000
Form 8606, line 22 . . . . . . . . . . . . . . . . . $55,500
Form 8606, line 15 . . . . . . . . . . . . . . . . .
Form 8606, line 15 . . . . . . . . . . . . . . . . .
Form 8606, line 15 . . . . . . . . . . . . . . . . .
Form 8606, line 17 . . . . . . . . . . . . . . . . .
Form 8606, line 17 . . . . . . . . . . . . . . . . .
Form 8606, line 17 . . . . . . . . . . . . . . . . .
Form 8606, line 17 . . . . . . . . . . . . . . . . .
Form 8606, line 17 . . . . . . . . . . . . . . . . . $-0Form 8606, line 17 . . . . . . . . . . . . . . . . .
Form 8606, line 17 . . . . . . . . . . . . . . . . .
Form 8606, line 17
and
Form 1040, line 16a; Form 1040A,
line 12a; or Form 1040NR,
line 17a** . . . . . . . . . . . . . . . . . . . . . . .
Form 8606, line 17
and
Form 1040, line 16a; Form 1040A,
line 12a; or Form 1040NR,
line 17a** . . . . . . . . . . . . . . . . . . . . . . .
Form 8606, lines 17 and 22** . . . . . . . . .
Form 8606, line 17
and
Form 1040, line 16a; Form 1040A,
line 12a; or Form 1040NR,
line 17a** . . . . . . . . . . . . . . . . . . . . . . .
Form 8606, line 17
and
Form 1040, line 16a; Form 1040A,
line 12a; or Form 1040NR,
line 17a** . . . . . . . . . . . . . . . . . . . . . . .
Form 8606, line 17
and
Form 1040, line 16a; Form 1040A,
line 12a; or Form 1040NR,
line 17a** . . . . . . . . . . . . . . . . . . . . . . .
Form 8606, line 17
and
Form 1040, line 16a; Form 1040A,
line 12a; or Form 1040NR,
line 17a** . . . . . . . . . . . . . . . . . . . . . . .
*Only include those amounts rolled over to a Roth IRA.
**Only include any contributions (usually Form 1099-R, box 5) that were taxable to you when made and rolled over to a Roth IRA.
In August of 2014, he took a $85,500 early distribution
from his Roth IRA to use as a down payment on the purchase of his first home. See his filled out Illustrated Recapture Amount—Allocation Chart, above, to see how he
allocated the amounts from the above transactions.
Based on his allocation, he would enter $20,000 on his
2014 Form 5329, line 1 (see Amount to include on Form
5329, line 1, earlier). He should also report $10,000 on his
2014 Form 5329, line 2, and enter exception 09 since that
amount is not subject to the 10% additional tax on early
distributions.
How Do You Figure the Taxable Part?
To figure the taxable part of a distribution that is not a
qualified distribution, complete Form 8606, Part III.
Must You Withdraw or Use
Assets?
You are not required to take distributions from your Roth
IRA at any age. The minimum distribution rules that apply
to traditional IRAs do not apply to Roth IRAs while the
owner is alive. However, after the death of a Roth IRA
owner, certain of the minimum distribution rules that apply
to traditional IRAs also apply to Roth IRAs as explained
later under Distributions After Owner's Death.
Minimum distributions. You cannot use your Roth
IRA to satisfy minimum distribution requirements for your
traditional IRA. Nor can you use distributions from
Chapter 2
Roth IRAs
Page 35
traditional IRAs for required distributions from Roth IRAs.
See Distributions to beneficiaries, later.
Recognizing Losses on Investments
If you have a loss on your Roth IRA investment, you can
recognize the loss on your income tax return, but only
when all the amounts in all of your Roth IRA accounts
have been distributed to you and the total distributions are
less than your unrecovered basis.
Your basis is the total amount of contributions in your
Roth IRAs.
You claim the loss as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit that
applies to certain miscellaneous itemized deductions on
Schedule A (Form 1040). Any such losses are added
back to taxable income for purposes of calculating the alternative minimum tax.
Distributions After Owner's Death
If a Roth IRA owner dies, the minimum distribution rules
that apply to traditional IRAs apply to Roth IRAs as though
the Roth IRA owner died before his or her required beginning date. See When Can You Withdraw or Use Assets?
in chapter 1.
Distributions to beneficiaries. Generally, the entire interest in the Roth IRA must be distributed by the end of
the fifth calendar year after the year of the owner's death
unless the interest is payable to a designated beneficiary
over the life or life expectancy of the designated beneficiary. See When Must You Withdraw Assets? (Required
Minimum Distributions) in chapter 1.
If paid as an annuity, the entire interest must be payable over a period not greater than the designated beneficiary's life expectancy and distributions must begin before
the end of the calendar year following the year of death.
Distributions from another Roth IRA cannot be substituted
for these distributions unless the other Roth IRA was inherited from the same decedent.
If the sole beneficiary is the spouse, he or she can either delay distributions until the decedent would have
reached age 701 2 or treat the Roth IRA as his or her own.
Combining with other Roth IRAs. A beneficiary can
combine an inherited Roth IRA with another Roth IRA
maintained by the beneficiary only if the beneficiary either:
Inherited the other Roth IRA from the same decedent,
or
Was the spouse of the decedent and the sole beneficiary of the Roth IRA and elects to treat it as his or her
own IRA.
Page 36
Chapter 2
Roth IRAs
Distributions that are not qualified distributions. If
a distribution to a beneficiary is not a qualified distribution,
it is generally includible in the beneficiary's gross income
in the same manner as it would have been included in the
owner's income had it been distributed to the IRA owner
when he or she was alive.
If the owner of a Roth IRA dies before the end of:
The 5-year period beginning with the first taxable year
for which a contribution was made to a Roth IRA set
up for the owner's benefit, or
The 5-year period starting with the year of a conversion contribution from a traditional IRA or a rollover
from a qualified retirement plan to a Roth IRA,
each type of contribution is divided among multiple beneficiaries according to the pro-rata share of each. See Or
dering Rules for Distributions, earlier in this chapter under
Are Distributions Taxable.
Example. When Ms. Hibbard died in 2014, her Roth
IRA contained regular contributions of $4,000, a conversion contribution of $10,000 that was made in 2010, and
earnings of $2,000. No distributions had been made from
her IRA. She had no basis in the conversion contribution
in 2010.
When she established this Roth IRA (her first) in 2010,
she named each of her four children as equal beneficiaries. Each child will receive one-fourth of each type of contribution and one-fourth of the earnings. An immediate distribution of $4,000 to each child will be treated as $1,000
from regular contributions, $2,500 from conversion contributions, and $500 from earnings.
In this case, because the distributions are made before
the end of the applicable 5-year period for a qualified distribution, each beneficiary includes $500 in income for
2014. The 10% additional tax on early distributions does
not apply because the distribution was made to the beneficiaries as a result of the death of the IRA owner.
If distributions from an inherited Roth IRA are less
than the required minimum distribution for the
year, discussed in chapter 1 under When Must You With
draw Assets? (Required Minimum Distributions), you may
have to pay a 50% excise tax for that year on the amount
not distributed as required. For the tax on excess accumu
lations (insufficient distributions), see Excess Accumula
tions (Insufficient Distributions) under What Acts Result in
Penalties or Additional Taxes? in chapter 1. If this applies
to you, substitute “Roth IRA” for “traditional IRA” in that
discussion.
!
CAUTION
3.
How To Get Tax Help
Do you need help with a tax issue or preparing your tax return, or do you need a free publication or form?
Preparing and filing your tax return. Find free options
to prepare and file your return on IRS.gov or in your local
community if you qualify.
Go to IRS.gov and click on the Filing tab to see your
options.
Enter “Free File” in the search box to use brand name
software to prepare and efile your federal tax return
for free.
Enter “VITA” in the search box, download the free
IRS2Go app, or call 1-800-906-9887 to find the nearest Volunteer Income Tax Assistance or Tax Counseling for the Elderly (TCE) location for free tax preparation.
Enter “TCE” in the search box, download the free
IRS2Go app, or call 1-888-227-7669 to find the nearest Tax Counseling for the Elderly location for free tax
preparation.
The Volunteer Income Tax Assistance (VITA) program
offers free tax help to people who generally make $53,000
or less, persons with disabilities, the elderly, and limited-English-speaking taxpayers who need help preparing
their own tax returns. The Tax Counseling for the Elderly
(TCE) program offers free tax help for all taxpayers, particularly those who are 60 years of age and older. TCE
volunteers specialize in answering questions about pensions and retirement-related issues unique to seniors.
Getting answers to your tax law questions. IRS.gov
and IRS2Go are ready when you are—24 hours a day, 7
days a week.
Enter “ITA” in the search box on IRS.gov for the Interactive Tax Assistant, a tool that will ask you questions
on a number of tax law topics and provide answers.
You can print the entire interview and the final response.
Enter “Tax Map” or “Tax Trails” in the search box for
detailed information by tax topic.
Enter “Pub 17” in the search box to get Pub. 17, Your
Federal Income Tax for Individuals, which features details on tax-saving opportunities, 2014 tax changes,
and thousands of interactive links to help you find answers to your questions.
Call TeleTax at 1-800-829-4477 for recorded information on a variety of tax topics.
Access tax law information in your electronic filing
software.
Go to IRS.gov and click on the Help & Resources tab
for more information.
Tax forms and publications. You can download or print
all of the forms and publications you may need on
www.irs.gov/formspubs. Otherwise, you can:
Go to www.irs.gov/orderforms to place an order and
have forms mailed to you, or
Call 1-800-829-3676 to order current-year forms, instructions, publications, and prior-year forms and instructions (limited to 5 years).
You should receive your order within 10 business days.
Where to file your tax return.
There are many ways to file your return electronically.
It’s safe, quick and easy. See Preparing and filing your
tax return, earlier, for more information.
See your tax return instructions to determine where to
mail your completed paper tax return.
Getting a transcript or copy of a return.
Go to IRS.gov and click on “Get Transcript of Your
Tax Records” under “Tools.”
Download the free IRS2Go app to your smart phone
and use it to order transcripts of your tax returns or tax
account.
Call the transcript toll-free line at 1-800-908-9946.
Mail Form 4506-T or Form 4506T-EZ (both available
on IRS.gov).
Using online tools to help prepare your return. Go to
IRS.gov and click on the Tools bar to use these and other
self-service options.
The Earned Income Tax Credit Assistant determines if
you are eligible for the EIC.
The First Time Homebuyer Credit Account Lookup
tool provides information on your repayments and account balance.
The Alternative Minimum Tax (AMT) Assistant determines whether you may be subject to AMT.
The Online EIN Application helps you get an Employer
Identification Number.
The IRS Withholding Calculator estimates the amount
you should have withheld from your paycheck for federal income tax purposes.
The Electronic Filing PIN Request helps to verify your
identity when you do not have your prior year AGI or
prior year self-selected PIN available.
Understanding identity theft issues.
Go to www.irs.gov/uac/IdentityProtection for information and videos.
If your SSN has been lost or stolen or you suspect you
are a victim of tax-related identity theft, visit
Chapter 3
How To Get Tax Help
Page 37
www.irs.gov/identitytheft to learn what steps you
should take.
Checking on the status of a refund.
Go to www.irs.gov/refunds.
Download the free IRS2Go app to your smart phone
and use it to check your refund status.
Call the automated refund hotline at 1-800-829-1954.
Making a tax payment. You can make electronic payments online, by phone, or from a mobile device. Paying
electronically is safe and secure. The IRS uses the latest
encryption technology and does not store banking information. It’s easy and secure and much quicker than mailing in a check or money order. Go to IRS.gov and click on
the Payments tab or the “Pay Your Tax Bill” icon to make a
payment using the following options.
Direct Pay (only if you are an individual who has a
checking or savings account).
Debit or credit card.
Electronic Federal Tax Payment System.
Check or money order.
What if I can’t pay now? Click on the Payments tab or
the “Pay Your Tax Bill” icon on IRS.gov to find more in
This text is long and has been trimmed here. Open the source document for the complete record.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.