Friday, December 23, 2011

Topic #8 – 2011 Form 1040 Exclusive – Income Part II


Line 14 – Other gains or (losses). Attach Form 4797

If you sold or exchanged assets used in a trade or business, see the Instructions for Form 4797.

Line 15a – IRA distributions and Line 15b – Taxable amount

You should receive a Form 1099-R showing the total amount of any distribution from your IRA before income tax or other deductions were withheld. This amount should be shown in box 1 of Form 1099-R. Unless otherwise noted in the line 15a and 15b instructions, an IRA includes a traditional IRA, Roth IRA, simplified employee pension (SEP) IRA, and a savings incentive match plan for employees (SIMPLE) IRA. Except as provided below, leave line 15ablank and enter the total distribution (from Form 1099-R, box 1) on line 15b. If you converted part or all of an IRA to a Roth IRA in 2010 and did not elect to report the taxable amount on your 2010 return, you generally must report half of it on your 2011 return and the rest on your 2012 return. See 2010 Roth IRA conversions, later.

Exception 1

Enter the total distribution on line 15a if you rolled over part or all of the distribution from one:

·         IRA to another IRA of the same type (for example, from one traditional IRA to another traditional IRA),
·         SEP or SIMPLE IRA to a traditional IRA, or
·         IRA to a qualified plan other than an IRA. Also, enter “Rollover” next to line 15b. If the total distribution was rolled over in a qualified rollover, enter -0- on line 15b. If the total distribution was not rolled over in a qualified rollover, enter the part not rolled over on line 15b unless Exception 2 applies to the part not rolled over. Generally, a qualified rollover must be made within 60 days after the day you received the distribution. For more details on rollovers, see Pub. 590. If you rolled over the distribution into a qualified plan other than an IRA or you made the rollover in 2012, include a statement explaining what you did.

Exception 2

If any of the following apply, enter the total distribution on line 15a and see Form 8606 and its instructions to figure the amount to enter on line 15b.

·         You received a distribution from an IRA (other than a Roth IRA) and you made nondeductible contributions to any of your traditional or SEP IRAs for 2011 or an earlier year. If you made nondeductible contributions to these IRAs for 2011.
·         You received a distribution from a Roth IRA. But if either (a) or (b) below applies, enter -0- on line 15b; you do not have to see Form 8606 or its instructions.
·         Distribution code T is shown in box 7 of Form 1099-R and you made a contribution (including a conversion) to a Roth IRA for 2006 or an earlier year.
·         Distribution code Q is shown in box 7 of Form 1099-R.
·         You converted part or all of a traditional, SEP, or SIMPLE IRA to a Roth IRA in 2011.
·         You had a 2010 or 2011 IRA contribution returned to you, with the related earnings or less any loss, by the due date (including extensions) of your tax return for that year.
·         You made excess contributions to your IRA for an earlier year and had them returned to you in 2011.
·         You recharacterized part or all of a contribution to a Roth IRA as a traditional IRA contribution, or vice versa.

Exception 3

If the distribution is a qualified charitable distribution (QCD), enter the total distribution on line 15a. If the total amount distributed is a QCD, enter -0- on line 15b. If only part of the distribution is a QCD, enter the part that is not a QCD on line 15b unless Exception 2 applies to that part. Enter “QCD” next to line 15b. A QCD is a distribution made directly by the trustee of your IRA (other than an ongoing SEP or SIMPLE IRA) to an organization eligible to receive tax-deductible contributions (with certain exceptions).

You must have been at least age 70 ½ when the distribution was made. Generally, your total QCDs for the year cannot be more than $100,000. (On a joint return, your spouse can also have a QCD of up to $100,000.) If you elected to treat a January 2011 QCD as made in 2010, report it on your 2011 return like any other 2011 QCD, as just described. However, if you also made another 2011 QCD and the total was more than $100,000 per spouse, attach a brief explanation. For example: “Line 15b – Spouse One’s 2010 QCD $75,000; Spouse One’s 2011 QCD $70,000.” The amount of the QCD is limited to the amount that would otherwise be included in your income. If your IRA includes nondeductible contributions, the distribution is first considered to be paid out of otherwise taxable income. You cannot claim a charitable
contribution deduction for any QCD not included in your income.

Exception 4

If the distribution is a health savings account (HSA) funding distribution (HFD), enter the total distribution on line 15a. If the total amount distributed is an HFD and you elect to exclude it from income, enter -0- on line 15b. If only part of the distribution is an HFD and you elect to exclude that part from income, enter the part that is not an HFD on line 15b unless Exception 2 applies to that part. Enter “HFD” next to line 15b.

An HFD is a distribution made directly by the trustee of your IRA (other than an ongoing SEP or SIMPLE IRA) to your HSA. If eligible, you generally can elect to exclude an HFD from your income once in your lifetime. You cannot exclude more than the limit on HSA contributions or more than the amount that would otherwise be included in your income. If your IRA includes nondeductible contributions, the
HFD is first considered to be paid out of otherwise taxable income. See Pub. 969 for details.

The amount of an HFD reduces the amount you can contribute to your HSA for the year. If you fail to maintain eligibility for an HSA for the 12 months following the month of the HFD, you may have to report the HFD as income and pay an additional tax. See Form 8889, Part III.

More than one exception applies

If more than one exception applies, include a statement showing the amount of each exception, instead of making an entry next to line 15b. For example: “Line 15b – $1,000 Rollover and $500 HFD.” But you do not need to attach a statement if only Exception 2 and one other exception apply.

2010 Roth IRA conversions

If you converted part or all of an IRA to a Roth IRA in 2010 and did not elect to report the taxable amount on your 2010 return, include on line 15b the amount from your 2010 Form 8606, line 20a. However, you may have to include a different amount on line 15b if either of the following applies.
You received a distribution from a Roth IRA in 2010 or the owner of the Roth IRA died in 2011. See Pub. 590 to figure the amount to include on line 15b.
You received a distribution from a Roth IRA in 2011. Use Form 8606 to figure the amount to include on line 15b.

More than one distribution

If you (or your spouse if filing jointly) received more than one distribution, figure the taxable amount of each distribution and enter the total of the taxable amounts on line 15b. Enter the total amount of those distributions on line 15a. You may have to pay an additional tax if (a) you received an early distribution from your IRA and the total was not rolled over, or (b) you were born before July 1, 1940, and received less than the minimum required distribution from your traditional, SEP, and SIMPLE IRAs. See the instructions for line 58 for details.

More information

For more information about IRAs, see Pub. 590.

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Next up is Part III - income section of the 2011 Form 1040.

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