Publication 554 - Older Americans' Tax Guide - 2004 Page 5
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31•
For more information, see Publication 559, Survivors,
Foster Grandparent Program.
Executors, and Administrators.
•
Senior Companion Program.
•
Surviving spouse. If you are the surviving spouse, the
Service Corps of Retired Executives (SCORE).
year your spouse died is the last year you can file a joint
return with that spouse. After that, if you do not remarry,
Unemployment compensation. You must include in
you must file as a qualifying widow(er) with dependent
your income all unemployment compensation you receive.
child, head of household, or single. For more information
about each of these filing statuses, see Publication 501.
More information. See Publication 525, Taxable and
If you remarry before the end of the year in which your
Nontaxable Income, for more detailed information on spe-
spouse died, a final joint return with the deceased spouse
cific types of income.
cannot be filed. You can, however, file a joint return with
your new spouse. In that case, the filing status of your
deceased spouse for his or her final return is married filing
Retirement Plan Distributions
separately.
The level of income that requires you to file an
This section summarizes the tax treatment of amounts you
!
income tax return changes when your filing status
receive from certain individual retirement arrangements,
changes. Even if you and your deceased spouse
employee pensions or annuities, and disability pensions or
CAUTION
were not required to file a return for several years, you may
annuities. More detailed information can be found in Publi-
have to file a return for the year of death.
cation 590, Individual Retirement Arrangements (IRAs), or
Publication 575, Pension and Annuity Income.
Individual Retirement Arrangements
(IRAs)
2.
In general, distributions from a traditional IRA are taxable
in the year you receive them. A traditional IRA is any IRA
Taxable and
that is not a Roth or SIMPLE IRA. Exceptions to the
general rule are rollovers, tax-free withdrawals of contribu-
Nontaxable Income
tions, and the return of nondeductible contributions dis-
cussed in Publication 590.
Generally, income is taxable unless it is specifically ex-
If you made nondeductible contributions to a
empt (not taxed) by law. Your taxable income may include
TIP
traditional IRA, you must file Form 8606, Nonde-
compensation for services, interest, dividends, rents, roy-
ductible IRAs. If you do not file Form 8606 with
alties, income from partnerships, estate or trust income,
your return, you may have to pay a $50 penalty. Also, when
gain from sales or exchanges of property, and business
you receive distributions from your traditional IRA, the
income of all kinds.
amounts will be taxed unless you can show, with satisfac-
Under special provisions of the law, certain items are
tory evidence, that nondeductible contributions were
partially or fully exempt from tax. Provisions that are of
made.
special interest to older taxpayers are discussed in this
chapter.
Early distributions. Generally, early distributions are
amounts distributed from your traditional IRA account or
annuity before you are age 59
1
/
, or amounts you receive
2
Compensation for Services
when you cash in retirement bonds before you are age
59
1
/
. You must include early distributions of taxable
2
Generally, you must include in gross income everything
amounts in your gross income. These taxable amounts are
you receive in payment for personal services. In addition to
also subject to an additional 10% tax unless the distribution
wages, salaries, commissions, fees, and tips, this includes
qualifies for an exception. See Tax on Early Distributions,
other forms of compensation such as fringe benefits and
later.
stock options.
After age 59
1
/
and before age 70
1
/
. After you reach age
You need not receive the compensation in cash for it to
2
2
59
1
/
, you can receive distributions from your traditional
be taxable. Payments you receive in the form of goods or
2
IRA without having to pay the 10% additional tax. Even
services generally must be included in gross income at
though you can receive distributions after you reach age
their fair market value.
59
/
, distributions are not required until April 1 of the year
1
2
following the year in which you reach age 70
1
/
.
Volunteer work. Do not include in your gross income
2
amounts you receive for supportive services or reimburse-
Required distributions. If you are the owner of a tradi-
ments for out-of-pocket expenses under any of the follow-
tional IRA, you must receive the entire balance in your IRA
ing volunteer programs.
or start receiving periodic distributions from your IRA by
•
Retired Senior Volunteer Program (RSVP).
April 1 of the year following the year in which you reach age
Chapter 2 Taxable and Nontaxable Income
Page 5
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