Page 80 - 2020 Publication 17

14:38 - 19-Jan-2021
Page 78 of 138
Fileid: … ations/P17/2020/A/XML/Cycle03/source
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
Contributions to both traditional and Roth • The Roth IRA, which features nondeducti- ment, provided that this amount is reduced by
IRAs. For information on your combined contri- ble contributions and tax-free distributions. any amount properly shown in box 11 (Nonqua-
bution limit if you contribute to both traditional Simplified Employee Pensions (SEPs) and lified plans).
and Roth IRAs, see Roth IRAs and traditional Savings Incentive Match Plans for Employees Scholarship and fellowship payments are
IRAs, later. aren't discussed in this chapter. For more infor- compensation for this purpose only if shown in
Extended rollover period for qualified plan mation on these plans and employees' SEP box 1 of Form W-2.
loan offsets in 2018 or later. For distribu- IRAs and SIMPLE IRAs that are part of these Compensation also includes commissions
tions made in tax years after tax year 2017, you plans, see Pub. 560, Retirement Plans for Small and taxable alimony and separate maintenance
have until the due date (including extensions) Business. payments.
for your tax return for the tax year in which the For information about contributions, deduc-
offset occurs to rollover a qualified plan loan off- tions, withdrawals, transfers, rollovers, and Self-employment income. If you are
set amount. For more information, see Pub. other transactions, see Pub. 590-A and Pub. self-employed (a sole proprietor or a partner),
590-A. 590-B. compensation is the net earnings from your
trade or business (provided your personal serv-
No recharacterizations of conversions ices are a material income-producing factor) re-
made in 2018 or later. A conversion of a tra- Useful Items duced by the total of:
ditional IRA to a Roth IRA, and a rollover from You may want to see:
any other eligible retirement plan to a Roth IRA, • The deduction for contributions made on
your behalf to retirement plans, and
made after tax year 2017, can’t be recharacter- Publication
ized as having been made to a traditional IRA. 560 560 Retirement Plans for Small Business • The deductible part of your self-employ-
For more information, see Pub. 590-A. ment tax.
Statement of required minimum distribu- 575 575 Pension and Annuity Income Compensation includes earnings from
tion. If a minimum distribution from your IRA is 590-A 590-A Contributions to Individual self-employment even if they aren't subject to
required, the trustee, custodian, or issuer that Retirement Arrangements (IRAs) self-employment tax because of your religious
held the IRA at the end of the preceding year beliefs.
must either report the amount of the required 590-B 590-B Distributions from Individual
minimum distribution to you, or offer to figure it Retirement Arrangements (IRAs) Nontaxable combat pay. For IRA purpo-
for you. The report or offer must include the Form (and Instructions) ses, if you were a member of the U.S. Armed
date by which the amount must be distributed. Forces, your compensation includes any non-
The report is due January 31 of the year in 5329 5329 Additional Taxes on Qualified Plans taxable combat pay you receive.
which the minimum distribution is required. It (Including IRAs) and Other What isn't compensation? Compensation
can be provided with the year-end fair market Tax-Favored Accounts doesn't include any of the following items.
value statement that you normally get each
year. No report is required for IRAs of owners 8606 8606 Nondeductible IRAs • Earnings and profits from property, such as
who have died. For these and other useful items, go to IRS.gov/ rental income, interest income, and divi-
dend income.
IRA interest. Although interest earned from Forms.
your IRA is generally not taxed in the year • Pension or annuity income.
earned, it isn't tax-exempt interest. Tax on your Traditional IRAs • Deferred compensation received (compen-
traditional IRA is generally deferred until you sation payments postponed from a past
take a distribution. Don't report this interest on In this chapter, the original IRA (sometimes year).
your tax return as tax-exempt interest. called an ordinary or regular IRA) is referred to • Income from a partnership for which you
Net investment income tax. For purposes of as a “traditional IRA.” A traditional IRA is any don't provide services that are a material
the Net Investment Income Tax (NIIT), net in- IRA that isn't a Roth IRA or a SIMPLE IRA.Two income-producing factor.
advantages of a traditional IRA are:
vestment income doesn't include distributions • Conservation Reserve Program (CRP)
from a qualified retirement plan including IRAs • You may be able to deduct some or all of payments reported on Schedule SE (Form
(for example, 401(a), 403(a), 403(b), 408, your contributions to it, depending on your 1040), line 1b.
408A, or 457(b) plans). However, these distri- circumstances; and
butions are taken into account when determin- • Generally, amounts in your IRA, including • Any amounts (other than combat pay) you
ing the modified AGI threshold. Distributions earnings and gains, aren't taxed until they exclude from income, such as foreign
from a nonqualified retirement plan are included are distributed. earned income and housing costs.
in net investment income. See Form 8960, Net
Investment Income Tax—Individuals, Estates, When and How Can a
and Trusts, and its instructions for more infor- Who Can Open
mation. a Traditional IRA? Traditional IRA Be
Form 8606. To designate contributions as Opened?
nondeductible, you must file Form 8606, Non- You can open and make contributions to a tradi-
deductible IRAs. tional IRA if you (or, if you file a joint return, your You can open a traditional IRA at any time.
spouse) received taxable compensation during
The term “50 or older” is used several the year. However, the time for making contributions for
any year is limited. See When Can Contribu-
TIP times in this chapter. It refers to an IRA tions Be Made, later.
owner who is age 50 or older by the For tax years beginning after 2019, You can open different kinds of IRAs with a
end of the tax year. TIP there is no age limit on making contri-
butions to your traditional IRA. For variety of organizations. You can open an IRA
more information, see Pub. 590-A. at a bank or other financial institution or with a
Introduction What is compensation? Generally, compen- mutual fund or life insurance company. You can
also open an IRA through your stockbroker. Any
An IRA is a personal savings plan that gives you sation is what you earn from working. Compen- IRA must meet Internal Revenue Code require-
ments.
sation includes wages, salaries, tips, professio-
tax advantages for setting aside money for your nal fees, bonuses, and other amounts you
retirement. receive for providing personal services. The Kinds of traditional IRAs. Your traditional IRA
This chapter discusses the following topics. IRS treats as compensation any amount prop- can be an individual retirement account or an-
• The rules for a traditional IRA (any IRA that erly shown in box 1 (Wages, tips, other com- nuity. It can be part of either a SEP or an em-
ployer or employee association trust account.
isn't a Roth or SIMPLE IRA). pensation) of Form W-2, Wage and Tax State-
Page 76 Chapter 9 Individual Retirement Arrangements (IRAs)