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Old 12-06-2013, 02:34 PM
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Confused IRA Distribution... Earnings Limit

Sorry if this is duplicated, said I had an invalid thread. I am a little confused. On the SSA website, it lists IRA distributions are not considered as part of the Soc Sec EARNINGS LIMIT. As I look at 2012's 1040 form, line 15a requests my IRA distributions. Line 15b requests the taxable amount and when you look to line 22 it is listed as TOTAL INCOME, then you drop down to line 37, it is part of the ADJUSTED GROSS INCOME? I did notice that on line 32 it asks for an IRA deduction? Does the distribution amount get taken off by this entry? Assuming that the 2013,1040 form is like the 2012 form, will the IRA deduction be considered INCOME? Which would be used to calculate if I surpassed the determined earnings limit, correct?

Am I missing something?

Thanks in advance for any assistance,
Don



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Old 12-07-2013, 03:42 PM
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Originally Posted by Mustang65 View Post


#1;Sorry if this is duplicated, said I had an invalid thread. I am a little confused. On the SSA website, it lists IRA distributions are not considered as part of the Soc Sec EARNINGS LIMIT. As I look at 2012's 1040 form, line 15a requests my IRA distributions. Line 15b requests the taxable amount and when you look to line 22 it is listed as TOTAL INCOME, then you drop down to line 37, it is part of the ADJUSTED GROSS INCOME?



#2;I did notice that on line 32 it asks for an IRA deduction? Does the distribution amount get taken off by this entry?


#3; Assuming that the 2013,1040 form is like the 2012 form, will the IRA deduction be considered INCOME? Which would be used to calculate if I surpassed the determined earnings limit, correct?
#1;In general yes;however, it depends; you need to find out if you have made any nondeductible contributions to your IRA. Nondeductible contributions are made to your IRA when you are unable to claim a tax deduction that year for your IRA contribution. If you have nondeductible contributions, your distribution is only partially taxable. In contrast, if you were able to claim a tax deduction in the year of the contribution, then your distribution is fully taxable by being included in your AGI/TI. 1099-R statements report distributions from various retirement plans. You need to separate 1099-R statements into two piles: those received from your IRA, and those received from your pension or annuity plans. Then you need to report your IRA distributions on line 15 and taxable distribution on 15b. IRA distributions that you must include in income are taxed as ordinary income. In figuring your tax, you cannot use the special averaging or capital gain treatment that applies to lump-sum distributions from qualified employer plans.

Note; Your IRA distributions 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 IRA since it was set up, 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 Requirements for Taxable Amounts, later.
Partly taxable. If you made nondeductible contributions to your IRA, 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. You must complete, and attach to your return, Form 8606 if you receive an IRA distribution and have ever made nondeductible IRA contributions.


#2;No; You can reduce your taxable income by contributing money to a traditional IRA. You may be able to claim a deduction on your individual federal income tax return for the amount you contributed to your IRA; For the year 2014, the dollar limits for IRA contributions are:$5,500 if you are age 49 or younger, $6,500 if you are age 50 or older.

#3;No; the IRA deduction is not considered INCOME; however, deductible contributions are taxed when they are distributed to you.



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