Foreign-Source Income
Follow state law to determine what is community income and what is separate income.
For details, see Pub. 555.
Rounding Off to Whole Dollars To round off cents to the nearest whole
dollar on your forms and schedules, drop amounts under 50 cents and increase
amounts from 50 to 99 cents to the next dollar. If you do round off, do so for all
amounts. But if you have to add two or more amounts to figure the amount to enter on a
line, include cents when adding and only round off the total.
Line 7 - Wages, Salaries, Tips, etc.
Enter the total of your wages, salaries, tips, etc. If a joint return, also include your spouse's
income. For most people, the amount to enter on this line should be shown in box 1 of their Form(s) W-2. But the following types of income must also be
included in the total on line 7.
- Wages received as a household employee for which you did not receive a W-2
form because your employer paid you less than $1,100 in 1999. Also, enter "HSH" and
the amount not reported on a W-2 form on the dotted line next to line 7.
- Tip income you did not report to your employer. Also include allocated tips shown
on your W-2 form(s) unless you can prove that you received less. Allocated tips
should be shown in box 8 of your W-2 form(s). They are not included as income in
box 1. See Pub. 531 for more details.
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You may owe social security and Medicare tax on unreported or allocated tips. See the instructions for line 52 on page 36.
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- Dependent care benefits, which should be shown in box 10 of your W-2 form(s). But
first complete Form 2441 to see if you may
exclude part or all of the benefits.
- Employer-provided adoption benefits, which should be shown in box 13 of your W-2 form(s)
with code T. But first complete Form 8839 to
see if you may exclude part or all of the benefits.
- Scholarship and fellowship grants not reported
on a W-2 form. Also, enter "SCH" and the amount
on the dotted line next to line 7. Exception. If you were a degree candidate, include on line
7 only the amounts you used for expenses other than tuition and course-related expenses. For
example, amounts used for room, board, and travel must be reported on line 7.
- Excess salary deferrals. The amount deferred should be shown in box 13 of your W-2 form and
the "Deferred compensation" box in box 15 should be checked. If the total amount you (or your spouse
if filing jointly) deferred for 1999 under all plans was more than $10,000, include the excess on
line 7. But a different limit may apply if amounts were deferred under a tax-sheltered annuity plan or
an eligible plan of a state or local government or tax-exempt organization. See
Pub. 575 for details.
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You may not deduct the amount deferred. It is not included
as income in box 1 of your W-2 form.
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- Disability pensions shown on Form 1099-R if you have not reached the minimum retirement age set
by your employer. Disability pensions received after you reach that age and other pensions shown
on Form 1099-R (other than payments from an IRA*) are reported on lines
16a and 16b. Payments from an IRA are
reported on lines 15a and 15b.
- Corrective distributions shown on Form 1099-R of (1) excess salary deferrals plus earnings and (2)
excess contributions plus earnings to a retirement plan. But do not include distributions from an IRA*
on line 7. Instead, report them on lines 15a and 15b.
*This includes a Roth, SEP, SIMPLE, or education IRA.
Were You a Statutory Employee? If you were, the "Statutory employee" box in box 15
of your W-2 form should be checked. Statutory employees include full-time life insurance
salespeople, certain agent or commission drivers and traveling sales-people, and certain homeworkers.
If you have related business expenses to deduct, report the amount shown in box 1 of your W-2 form
on Schedule C or C-EZ along with your expenses.
Missing or Incorrect Form W-2? If you do not get a W-2 form from your
employer by January 31, 2000, use Tele-Tax Topic 154 to find out what to do. Even
if you do not get a Form W-2, you must still report your earnings on line 7.
If you lose your Form W-2 or it is incorrect, ask your employer
for a new one.
Line 8a - Taxable Interest
Each payer should send you a Form 1099-INT or
Form 1099-OID. Report all of your taxable interest
income on line 8a. But you must fill in and attach Schedule B
if the total is over $400 or any of the other conditions listed at the beginning of the Schedule B instructions
(see page B-1) apply to you.
Interest credited in 1999 on deposits that you could not withdraw because of the bankruptcy or
insolvency of the financial institution may not have to be included in your 1999 income. For details,
see Pub. 550.
If you get a 1999 Form 1099-INT for U.S. savings bond interest that includes amounts you reported
before 1999, see Pub. 550.
Line 8b - Tax-Exempt Interest
If you received any tax-exempt interest, such as from municipal bonds, report it on line
8b. Include any exempt-interest dividends from a mutual fund or other regulated investment company.
Do not include interest earned on your IRA.
Line 9 - Ordinary Dividends
Each payer should send you a Form 1099-DIV. Report
your total ordinary dividends on line 9. But you must fill in and attach
Schedule B if your total ordinary dividends are over $400 or you received, as a nominee, dividends that actually belong to someone else.
Capital Gain Distributions If you received any capital
gain distributions, see the instructions for line 13 on page 22.
Nontaxable Distributions Some distributions are nontaxable because they are a
return of your cost. They will not be taxed until you recover your cost. You must reduce your cost (or other
basis) by these distributions. After you get back all of your cost (or other basis), you must report these
distributions as capital gains on Schedule D. For details, see Pub. 550.
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Dividends on insurance policies are a partial return of the premiums you paid. Do not report them as dividends. Include them in income only if they exceed the total of all net premiums you paid for the contract.
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Line 10 - Taxable Refunds, Credits, or Offsets of State & Local Income Taxes
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None of your refund is taxable if, in the year you paid the tax, you did not itemize deductions.
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If you received a refund, credit, or offset of state or local income taxes in 1999, you may
receive a Form 1099-G. If you chose to apply
part or all of the refund to your 1999 estimated state or local income tax, the amount applied is
treated as received in 1999. If the refund was for a tax you paid in 1998 and you itemized
deductions for 1998, use the worksheet below to see if any of your refund is taxable.
Exceptions. See Recoveries in Pub. 525
instead of using the worksheet if any of
the following apply.
- You received a refund in 1999 that is for a tax year other than 1998.
- You received a refund other than an income tax refund, such as a real
property tax refund, in 1999 of an amount deducted or credit claimed in an earlier year.
- Your 1998 taxable income was less than zero.
- You made your last payment of 1998 estimated state or local income tax in 1999.
- You owed alternative minimum tax in 1998.
- You could not deduct the full amount of credits you were entitled to in 1998
because the total credits exceeded the tax shown on your 1998 Form 1040,
line 40.
- You could be claimed as a dependent by someone else in 1998.
Also, see Tax Benefit Rule in Pub. 525 instead
of using the worksheet if all three of the
following apply.
- You had to use the Itemized Deductions Worksheet in the 1998 Schedule A instructions
because your 1998 adjusted gross income was over: $124,500 if single, married filing jointly,
head of household, or qualifying widow(er); $62,250 if married filing separately.
- You could not deduct all of the amount on line 1 of the 1998 Itemized Deductions Worksheet.
- The amount on line 8 of that 1998 worksheet would be more than the amount on line 4 of that
worksheet if the amount on line 4 were reduced by 80% of the refund you received in 1999.
Line 11 - Alimony Received
Enter amounts received as alimony or separate maintenance. You must let the person
who made the payments know your social security number. If you do not, you may
have to pay a $50 penalty. For more details, use Tele-Tax Topic 406 or see
Pub. 504.
Line 12 - Business Income or (Loss)
If you operated a business or practiced your profession as a sole proprietor, report your
income and expenses on Schedule C or
C-EZ.
Line 13 - Capital Gain or (Loss)
If you had a capital gain or loss, including any capital gain distributions from a
mutual fund, you must complete and attach Schedule D.
Exception. You do not have to file Schedule D
if all three of the following apply.
- The only amounts you have to report on Schedule D are capital gain
distributions from box 2a of Forms
1099-DIV or substitute statements.
- None of the Forms 1099-DIV or substitute
statements have an amount in box 2b (28% rate gain), box 2c (unrecaptured
section 1250 gain), or box 2d (section 1202 gain).
- If you are filing Form 4952 (relating
to investment interest expense deduction), the amount on line 4e of that form is not
more than zero.
If all three of the above apply, enter your capital gain distributions on line 13 and
check the box on that line. Also, be sure you use the
Capital Gain Tax Worksheet on page 32 to figure your tax.
Line 14 - Other Gains or (Losses)
If you sold or exchanged assets used in a trade or business, see the Instructions for
Form 4797.
Lines 15a and 15b - IRA Distributions
Note. If you converted part or all of an IRA to a Roth IRA in 1998 and you chose to report the
taxable amount over 4 years, see 1998 Roth IRA
Conversions on this page.
You should receive a Form 1099-R showing the amount of the distribution from
your individual retirement arrangement (IRA). Unless otherwise noted in the line
15a and 15b instructions, an IRA includes a traditional IRA, Roth IRA, education (Ed)
IRA, simplified employee pension (SEP) IRA, and a savings incentive match plan for
employees (SIMPLE) IRA. Leave line 15a blank and enter the total distribution on
line 15b.
Exception. Do not enter your total IRA distribution on line 15b if any of the
following apply.
- You made nondeductible contributions to any of your traditional or SEP IRAs for
1999 or an earlier year. Instead, use Form 8606 to figure the amount to enter on line
15b; enter the total distribution on line 15a. If you made nondeductible contributions to
these IRAs for 1999, also see Pub. 590.
- You converted part or all of a traditional, SEP, or SIMPLE IRA to a Roth IRA in 1999.
Instead, use Form 8606 to figure the amount to enter on line 15b; enter the total
distribution on line 15a.
- You made an excess contribution in 1999 to your IRA and withdrew it during
the period of January 1, 2000, through April 17, 2000. Enter the total distribution on
line 15a and the taxable part (the earnings) on line 15b.
- You received a distribution from an Ed or Roth IRA and the total distribution was
not rolled over into another IRA of the same type. Instead, use Form 8606 to figure the
amount to enter on line 15b; enter the total distribution on line 15a.
- You rolled your IRA distribution over into another IRA of the same type (for example,
from one traditional IRA to another traditional IRA). Enter the total distribution on line 15a
and put "Rollover" next to line 15b. If the total on line 15a was rolled over, enter zero on
line 15b. If the total was not rolled over, enter the part not rolled over on line 15b. But if item
1 above also applies, use Form 8606 to figure the
taxable part.
If you rolled over the distribution (a) in 2000 or (b) from a conduit IRA into a qualified plan, attach a statement explaining
what you did.
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You may have to pay an additional tax if (1) you received an early distribution from your IRA and the total distribution was not rolled
over, or (2) you were born before July 1, 1928, and received less than the minimum required distribution. See the instructions for line 53 that begin on page 36 for details.
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1998 Roth IRA Conversions.
If you converted an IRA to a Roth IRA in 1998 and you chose to report the taxable amount over 4 years, leave line 15a blank and enter on line 15b the amount from your 1998 Form
8606, line 17. But you may have to enter a different amount on line 15b if either of the
following applies.
- You received a distribution from a Roth IRA in 1998 or the owner of the Roth IRA
died in 1999. See Pub. 590 to figure the
amount to enter on line 15b.
- You received a distribution from a Roth
IRA in 1999. Use Form 8606 to figure the
amount to enter on line 15b.
Note. If you received a distribution from another type of IRA, figure the taxable
amount of the distribution and enter the total of the taxable amounts on line 15b.
Lines 16a and 16b - Pensions and Annuities
You should receive a Form 1099-R showing
the amount of your pension and annuity payments. See page 24 for details on roll-overs
and lump-sum distributions. Do not include the
following payments on lines 16a and 16b. Instead, report them on line 7.
- Disability pensions received before you reach the minimum retirement age set by
your employer.
- Corrective distributions of excess salary deferrals or excess contributions to
retirement plans.
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Attach Form(s) 1099-R to Form 1040 if any
Federal income tax was withheld.
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Fully Taxable Pensions and Annuities
If your pension or annuity is fully taxable,
enter it on line 16b; do not make an entry on line 16a. Your payments are fully taxable if either of
the following applies:
- You did not contribute to the cost (see
page 24) of your pension or annuity, or
- You got your entire cost back tax free
before 1999.
Fully taxable pensions and annuities also include military retirement pay shown on
Form 1099-R. For details on military disability
pensions, see Pub. 525. If you received a Form
RRB-1099-R, see Pub. 575 to find out how to
report your benefits.
Partially Taxable Pensions and Annuities
If your
pension or annuity is partially taxable and your
Form 1099-R does not show the taxable part, you must use the General Rule to figure the
taxable part. The General Rule is explained in Pub.
939. However, if your annuity starting date (defined on page 23) was after July 1, 1986,
you may be able to use the Simplified Method explained on
page 23. But if your annuity starting date was after November 18, 1996, and items 1, 2, and
3 under Simplified Method apply, you must use the Simplified
Method to figure the taxable part.
You can ask the IRS to figure the taxable part for you for an $80 fee. For details, see
Pub. 939.
If your Form 1099-R shows a taxable amount,
you may report that amount on line 16b. But you may be able to report a lower taxable amount
by using the General Rule or the
Simplified Method.
Once you have figured the taxable part of your pension or annuity, enter that amount
on line 16b and the total on line 16a.
Annuity Starting Date Your annuity starting date
is the later of the first day of the first period for which you received a payment, or
the date the plan's obligations became fixed.
Simplified Method
If your annuity starting date (defined earlier) was after July 1, 1986, and
all three of the following apply, you can use this simpler method. But if your annuity
starting date was after November 18, 1996, and all three of the following apply, you must use
the Simplified Method.
- The payments are for (a) your life or (b) your life and that of your beneficiary.
- The payments are from a qualified employee plan, a qualified employee annuity, or a tax-sheltered annuity.
- At the time the pension or annuity payments began, either you were under age 75 or the number of years of guaranteed payments was fewer than 5.
See Pub. 575 for the definition
of guaranteed payments.
If all three apply, use the worksheet below to figure the taxable part of your pension or
annuity. For more details on the Simplified Method, see Pub. 575 or Pub. 721 for U.S.
Civil Service retirement.
If you received U.S. Civil Service retirement benefits and you chose the lump-sum credit option, use the worksheet in
Pub. 721. Do not use the worksheet on page 23.
Age (or Combined Ages) at Annuity Starting Date:
If you are the retiree, use your age on the annuity starting date. If you are the survivor
of a retiree, use the retiree's age on his or her annuity starting date. But if your annuity
starting date was after 1997 and the payments are for your life and that of your beneficiary,
use your combined ages on the annuity starting date.
If you are the beneficiary of an employee who died, see Pub. 575.
If there is more than one beneficiary, see Pub. 575 or Pub. 721
to figure each beneficiary's taxable amount.
Changing Methods. If your annuity starting date was after July 1, 1986, and before November
19, 1996, you may be able to change from the General Rule to the Simplified Method (or the
other way around). For details, see Pub. 575
or Pub. 721.
Cost
Your cost is generally your net investment
in the plan as of the annuity starting date. It should be shown in box 9b of Form 1099-R
for the first year you received payments from the plan.
Death Benefit Exclusion:
If you are the beneficiary of a deceased employee or
former employee who died before August 21, 1996, amounts paid to you by, or on behalf
of, an employer because of the death of the employee may qualify for a death benefit
exclusion of up to $5,000. If you are entitled to this exclusion, add it to the amount you
enter on line 2 of the worksheet on page 23.
Do this even if the Form 1099-R shows a
taxable amount. The payer of the annuity cannot add the death benefit exclusion to
your cost when figuring the taxable amount. Special rules apply if you are the survivor
under a joint and survivor's annuity. For details, see Pub. 939.
Rollovers
A rollover is a tax-free distribution of
cash or other assets from one retirement plan that is contributed to another plan. Use lines
16a and 16b to report a rollover, including a direct rollover, from one qualified employer's
plan to another or to an IRA or SEP.
Enter on line 16a the total distribution before income tax or other deductions were
withheld. This amount should be shown in box 1 of Form 1099-R. From the total on
line 16a, subtract any contributions (usually shown in box 5) that were taxable to you
when made. From that result, subtract the amount that was rolled over either directly
or within 60 days of receiving the distribution. Enter the remaining amount, even if zero, on
line 16b. Also, put "Rollover" next to line 16b.
Special rules apply to partial rollovers of property. For more details on rollovers, including
distributions under qualified domestic relations orders, see Pub. 575.
Lump-Sum Distributions
If you received a lump-sum
distribution from a profit-sharing or retirement plan, your Form 1099-R
should have the "Total distribution" box in box 2b checked. You may owe an additional tax if you received an early
distribution from a qualified retirement plan and the total amount was not rolled over. For
details, see the instructions for line 53 that
begin on page 36.
Enter the total distribution on line 16a and the taxable part on line 16b.
You may be able
to pay less tax on the distribution if you were at least age 59
1 /2 on the date of the distribution, you meet certain other
conditions, and you choose to use Form 4972
to figure the tax on any part of the distribution. You may also be able to use
Form 4972 if you are the beneficiary of a
deceased employee who was either age 59 1 /2 or older on
the date of death or was born before 1936. For details, see Form 4972.
Line 19 - Unemployment Compensation
You should receive a Form 1099-G showing
the total unemployment compensation paid to you in 1999.
If you received an overpayment of unemployment compensation in 1999 and you repaid any of it
in 1999, subtract the amount you repaid from the total amount you received. Enter the result
on line 19. Also, enter "Repaid" and the amount you repaid on the dotted line next to line 19.
If, in 1999, you repaid unemployment compensation that you included in gross income in an earlier
year, you may deduct the amount repaid on Schedule
A, line 22. But if you repaid more than $3,000, see Repayments in Pub. 525 for details on how
to report the repayment.
Lines 20a and 20b - Social Security Benefits
You should receive a Form SSA-1099 showing
in box 3 the total social security benefits paid to you. Box 4 will show the amount of
any benefits you repaid in 1999. If you received railroad retirement benefits treated as social
security, you should receive a Form RRB-1099.
Use the worksheet on page 25 to see if
any of your benefits are taxable.
Exceptions. Do not use the worksheet on
page 25 if any of the following apply.
You made contributions to a traditional IRA for 1999 and you were covered by a
retirement plan at work or through self-employment. Instead, use the worksheets in
Pub. 590 to see if any of your social
security benefits are taxable and to figure your IRA deduction.
You repaid any benefits in 1999 and your total repayments (box 4) were more
than your total benefits for 1999 (box 3). None of your benefits are taxable for 1999.
In addition, you may be able to take an itemized deduction for part of the excess
repayments if they were for benefits you included in gross income in an earlier year.
For more details, see Pub. 915.
You file Form 2555, 2555-EZ,
4563, or 8815,
or you exclude employer-provided adoption benefits or income from sources within Puerto
Rico. Instead, use the worksheet in Pub.
915.
Line 21 - Other Income
Use this line to report any other income not reported on your return or other schedules.
See examples that begin on page 25. List
the type and amount of income. If necessary, show the required information on an attached
statement. For more details, see Miscellaneous Taxable Income in Pub. 525.
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Do not report any nontaxable income on line 21, such as child support; money or property that was inherited, willed to you, or received as a gift; or life insurance proceeds received because of a person's death.
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Form 1040--Lines 20a Through 21 Do not report on this line any income from
self-employment or fees received as a notary public. Instead, you must use Schedule
C, C-EZ, or F, even if you do not have any
business expenses.
Examples of income to report on line 21 are:
- Prizes and awards.
- Gambling winnings, including lotteries, raffles, etc. For details on gambling losses, see the instructions for
Schedule A, line 27, on page A-6.
- Jury duty fees. Also, see the instructions
for line 32 on page 29.
- Alaska Permanent Fund dividends.
- Qualified state tuition program earnings.
- Reimbursements or other amounts received for items deducted in an earlier year, such as
medical expenses, real estate taxes, or home mortgage interest. See Recoveries in Pub.
525 for details on how to figure the amount to report.
- Income from the rental of personal property if you engaged in the rental for
profit but were not in the business of renting such property. Also, see the instructions for
line 32 on page 29.
- Income from an activity not engaged in for profit. See Pub. 535.
- Loss on certain corrective distributions of excess deferrals. See Pub. 575.
- Social Security Benefits Worksheet--Lines 20a and 20b
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