File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

Federal Tax Extension

1040ez For 2010 Tax YearHow To Fill Out An Amended Tax FormIrs Form 1040ezFederal Amended Tax Return InstructionsHr Block Online TaxIrs Gov Vita1040 Ez 2010 Form1040ez Fillable Form 2012Irs Form 1040x Tax ReturnFree Taxes1040 Long Form1040 Ez DownloadAmending A ReturnMilitary TaxesAmending TaxTurbotax For Military1040ez Instructions 2013Hr Block Free E FileFiling An Amended Tax Return For 20131041ezNeed To File 2012 Tax ReturnHow Do I Amend My Tax ReturnMyfreetaxes Com BaltimorecashH&r Block Key Code Free State FilingFree State FilingAmended Us Tax Form 1040xWhere Mail 1040x Amended ReturnFile 2011 Tax Return Online For FreeFind State Tax FormsAmended Federal Tax ReturnH&r Block Tax Software1040ez Tax FormsSample 1040ezFile 2007 Tax Return FreeTax Table2010 Tax Return FormCan I File My 2011 Taxes On TurbotaxState Free Tax ReturnFiling Taxes 2010 Online2011 Irs Form 1040a

Federal Tax Extension

Federal tax extension Publication 939 - Main Content Table of Contents General Information Taxation of Periodic PaymentsInvestment in the Contract Expected Return Computation Under the General Rule How To Use Actuarial TablesUnisex Annuity Tables Special Elections Worksheets for Determining Taxable Annuity Actuarial Tables Requesting a Ruling on Taxation of Annuity How To Get Tax HelpLow Income Taxpayer Clinics General Information Some of the terms used in this publication are defined in the following paragraphs. Federal tax extension A pension is generally a series of payments made to you after you retire from work. Federal tax extension Pension payments are made regularly and are for past services with an employer. Federal tax extension An annuity is a series of payments under a contract. Federal tax extension You can buy the contract alone or you can buy it with the help of your employer. Federal tax extension Annuity payments are made regularly for more than one full year. Federal tax extension Note. Federal tax extension Distributions from pensions and annuities follow the same rules as outlined in this publication unless otherwise noted. Federal tax extension Types of pensions and annuities. Federal tax extension   Particular types of pensions and annuities include: Fixed period annuities. Federal tax extension You receive definite amounts at regular intervals for a definite length of time. Federal tax extension Annuities for a single life. Federal tax extension You receive definite amounts at regular intervals for life. Federal tax extension The payments end at death. Federal tax extension Joint and survivor annuities. Federal tax extension The first annuitant receives a definite amount at regular intervals for life. Federal tax extension After he or she dies, a second annuitant receives a definite amount at regular intervals for life. Federal tax extension The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant. Federal tax extension Variable annuities. Federal tax extension You receive payments that may vary in amount for a definite length of time or for life. Federal tax extension The amounts you receive may depend upon such variables as profits earned by the pension or annuity funds or cost-of-living indexes. Federal tax extension Disability pensions. Federal tax extension You are under minimum retirement age and receive payments because you retired on disability. Federal tax extension If, at the time of your retirement, you were permanently and totally disabled, you may be eligible for the credit for the elderly or the disabled discussed in Publication 524. Federal tax extension If your annuity starting date is after November 18, 1996, the General Rule cannot be used for the following qualified plans. Federal tax extension A qualified employee plan is an employer's stock bonus, pension, or profit-sharing plan that is for the exclusive benefit of employees or their beneficiaries. Federal tax extension This plan must meet Internal Revenue Code requirements. Federal tax extension It qualifies for special tax benefits, including tax deferral for employer contributions and rollover distributions. Federal tax extension However, you must use the General Rule if you were 75 or over and the annuity payments are guaranteed for more than 5 years. Federal tax extension A qualified employee annuity is a retirement annuity purchased by an employer for an employee under a plan that meets Internal Revenue Code requirements. Federal tax extension A tax-sheltered annuity is a special annuity plan or contract purchased for an employee of a public school or tax-exempt organization. Federal tax extension   The General Rule is used to figure the tax treatment of various types of pensions and annuities, including nonqualified employee plans. Federal tax extension A nonqualified employee plan is an employer's plan that does not meet Internal Revenue Code requirements. Federal tax extension It does not qualify for most of the tax benefits of a qualified plan. Federal tax extension Annuity worksheets. Federal tax extension   The worksheets found near the end of the text of this publication may be useful to you in figuring the taxable part of your annuity. Federal tax extension Request for a ruling. Federal tax extension   If you are unable to determine the income tax treatment of your pension or annuity, you may ask the Internal Revenue Service to figure the taxable part of your annuity payments. Federal tax extension This is treated as a request for a ruling. Federal tax extension See Requesting a Ruling on Taxation of Annuity near the end of this publication. Federal tax extension Withholding tax and estimated tax. Federal tax extension   Your pension or annuity is subject to federal income tax withholding unless you choose not to have tax withheld. Federal tax extension If you choose not to have tax withheld from your pension or annuity, or if you do not have enough income tax withheld, you may have to make estimated tax payments. Federal tax extension Taxation of Periodic Payments This section explains how the periodic payments you receive under a pension or annuity plan are taxed under the General Rule. Federal tax extension Periodic payments are amounts paid at regular intervals (such as weekly, monthly, or yearly) for a period of time greater than one year (such as for 15 years or for life). Federal tax extension These payments are also known as amounts received as an annuity. Federal tax extension If you receive an amount from your plan that is a nonperiodic payment (amount not received as an annuity), see Taxation of Nonperiodic Payments in Publication 575. Federal tax extension In general, you can recover your net cost of the pension or annuity tax free over the period you are to receive the payments. Federal tax extension The amount of each payment that is more than the part that represents your net cost is taxable. Federal tax extension Under the General Rule, the part of each annuity payment that represents your net cost is in the same proportion that your investment in the contract is to your expected return. Federal tax extension These terms are explained in the following discussions. Federal tax extension Investment in the Contract In figuring how much of your pension or annuity is taxable under the General Rule, you must figure your investment in the contract. Federal tax extension First, find your net cost of the contract as of the annuity starting date (defined later). Federal tax extension To find this amount, you must first figure the total premiums, contributions, or other amounts paid. Federal tax extension This includes the amounts your employer contributed if you were required to include these amounts in income. Federal tax extension It also includes amounts you actually contributed (except amounts for health and accident benefits and deductible voluntary employee contributions). Federal tax extension From this total cost you subtract: Any refunded premiums, rebates, dividends, or unrepaid loans (any of which were not included in your income) that you received by the later of the annuity starting date or the date on which you received your first payment. Federal tax extension Any additional premiums paid for double indemnity or disability benefits. Federal tax extension Any other tax-free amounts you received under the contract or plan before the later of the dates in (1). Federal tax extension The annuity starting date   is the later of the first day of the first period for which you receive payment under the contract or the date on which the obligation under the contract becomes fixed. Federal tax extension Example. Federal tax extension On January 1 you completed all your payments required under an annuity contract providing for monthly payments starting on August 1, for the period beginning July 1. Federal tax extension The annuity starting date is July 1. Federal tax extension This is the date you use in figuring your investment in the contract and your expected return (discussed later). Federal tax extension Adjustments If any of the following items apply, adjust (add or subtract) your total cost to find your net cost. Federal tax extension Foreign employment. Federal tax extension   If you worked abroad, your cost may include contributions by your employer to the retirement plan, but only if those contributions would be excludible from your gross income had they been paid directly to you as compensation. Federal tax extension The contributions that apply are: Contributions before 1963 by your employer, Contributions after 1962 by your employer if the contributions would be excludible from your gross income (without regard to the foreign earned income exclusion) had they been paid directly to you, or Contributions after 1996 by your employer on your behalf if you performed the services of a foreign missionary (a duly ordained, commissioned, or licensed minister of a church or a lay person) if the contributions would be excludible from your gross income had they been paid directly to you. Federal tax extension Foreign employment contributions while a nonresident alien. Federal tax extension   In determining your cost, special rules apply if you are a U. Federal tax extension S. Federal tax extension citizen or resident alien who received distributions from a plan to which contributions were made while you were a nonresident alien. Federal tax extension Your contributions and your employer's contributions are not included in your cost if the contributions: Were made based on compensation which was for services performed outside the United States which you were a nonresident alien, and Were not subject to income tax under the laws of the United States or any foreign country, but only if the contribution would have been subject to income tax if they had been paid as cash compensation when the services were performed. Federal tax extension Death benefit exclusion. Federal tax extension   If you are the beneficiary of a deceased employee (or former employee), who died before August 21, 1996, you may qualify for a death benefit exclusion of up to $5,000. Federal tax extension The beneficiary of a deceased employee who died after August 20, 1996, will not qualify for the death benefit exclusion. Federal tax extension How to adjust your total cost. Federal tax extension   If you are eligible, treat the amount of any allowable death benefit exclusion as additional cost paid by the employee. Federal tax extension Add it to the cost or unrecovered cost of the annuity at the annuity starting date. Federal tax extension See Example 3 under Computation Under General Rule for an illustration of the adjustment to the cost of the contract. Federal tax extension Net cost. Federal tax extension   Your total cost plus certain adjustments and minus other amounts already recovered before the annuity starting date is your net cost. Federal tax extension This is the unrecovered investment in the contract as of the annuity starting date. Federal tax extension If your annuity starting date is after 1986, this is the maximum amount that you may recover tax free under the contract. Federal tax extension Refund feature. Federal tax extension   Adjustment for the value of the refund feature is only applicable when you report your pension or annuity under the General Rule. Federal tax extension Your annuity contract has a refund feature if: The expected return ( discussed later) of an annuity depends entirely or partly on the life of one or more individuals, The contract provides that payments will be made to a beneficiary or the estate of an annuitant on or after the death of the annuitant if a stated amount or a stated number of payments has not been paid to the annuitant or annuitants before death, and The payments are a refund of the amount you paid for the annuity contract. Federal tax extension   If your annuity has a refund feature, you must reduce your net cost of the contract by the value of the refund feature (figured using Table III or VII at the end of this publication, also see How To Use Actuarial Tables , later) to find the investment in the contract. Federal tax extension Zero value of refund feature. Federal tax extension   For a joint and survivor annuity, the value of the refund feature is zero if: Both annuitants are age 74 or younger, The payments are guaranteed for less than 2½ years, and The survivor's annuity is at least 50% of the first annuitant's annuity. Federal tax extension   For a single-life annuity without survivor benefit, the value of the refund feature is zero if: The payments are guaranteed for less than 2½ years, and The annuitant is: Age 57 or younger (if using the new (unisex) annuity tables), Age 42 or younger (if male and using the old annuity tables), or Age 47 or younger (if female and using the old annuity tables). Federal tax extension   If you do not meet these requirements, you will have to figure the value of the refund feature, as explained in the following discussion. Federal tax extension Examples. Federal tax extension The first example shows how to figure the value of the refund feature when there is only one beneficiary. Federal tax extension Example 2 shows how to figure the value of the refund feature when the contract provides, in addition to a whole life annuity, one or more temporary life annuities for the lives of children. Federal tax extension In both examples, the taxpayer elects to use Tables V through VIII. Federal tax extension If you need the value of the refund feature for a joint and survivor annuity, write to the Internal Revenue Service as explained under Requesting a Ruling on Taxation of Annuity near the end of this publication. Federal tax extension Example 1. Federal tax extension At age 65, Barbara bought for $21,053 an annuity with a refund feature. Federal tax extension She will get $100 a month for life. Federal tax extension Barbara's contract provides that if she does not live long enough to recover the full $21,053, similar payments will be made to her surviving beneficiary until a total of $21,053 has been paid under the contract. Federal tax extension In this case, the contract cost and the total guaranteed return are the same ($21,053). Federal tax extension Barbara's investment in the contract is figured as follows: Net cost $21,053 Amount to be received annually $1,200   Number of years for which payment is guaranteed ($21,053 divided by $1,200) 17. Federal tax extension 54   Rounded to nearest whole number of years 18   Percentage from Actuarial Table VII for age 65 with 18 years of guaranteed payments 15%   Value of the refund feature (rounded to the nearest dollar)—15% of $21,053 3,158 Investment in the contract, adjusted for value of refund feature $17,895       If the total guaranteed return were less than the $21,053 net cost of the contract, Barbara would apply the appropriate percentage from the tables to the lesser amount. Federal tax extension For example, if the contract guaranteed the $100 monthly payments for 17 years to Barbara's estate or beneficiary if she were to die before receiving all the payments for that period, the total guaranteed return would be $20,400 ($100 × 12 × 17 years). Federal tax extension In this case, the value of the refund feature would be $2,856 (14% of $20,400) and Barbara's investment in the contract would be $18,197 ($21,053 minus $2,856) instead of $17,895. Federal tax extension Example 2. Federal tax extension John died while still employed. Federal tax extension His widow, Eleanor, age 48, receives $171 a month for the rest of her life. Federal tax extension John's son, Elmer, age 9, receives $50 a month until he reaches age 18. Federal tax extension John's contributions to the retirement fund totaled $7,559. Federal tax extension 45, with interest on those contributions of $1,602. Federal tax extension 53. Federal tax extension The guarantee or total refund feature of the contract is $9,161. Federal tax extension 98 ($7,559. Federal tax extension 45 plus $1,602. Federal tax extension 53). Federal tax extension The adjustment in the investment in the contract is figured as follows: A) Expected return:*       1) Widow's expected return:         Annual annuity ($171 × 12) $2,052       Multiplied by factor from Table V         (nearest age 48) 34. Federal tax extension 9 $71,614. Federal tax extension 80   2) Child's expected return:         Annual annuity ($50 × 12) $600       Multiplied by factor from         Table VIII (nearest age 9         for term of 9 years) 9. Federal tax extension 0 5,400. Federal tax extension 00   3) Total expected return   $77,014. Federal tax extension 80 B) Adjustment for refund feature:       1) Contributions (net cost) $7,559. Federal tax extension 45   2) Guaranteed amount (contributions of $7,559. Federal tax extension 45 plus interest of $1,602. Federal tax extension 53) $9,161. Federal tax extension 98   3) Minus: Expected return under child's (temporary life) annuity (A(2)) 5,400. Federal tax extension 00   4) Net guaranteed amount $3,761. Federal tax extension 98   5) Multiple from Table VII (nearest age 48 for 2 years duration (recovery of $3,761. Federal tax extension 98 at $171 a month to nearest whole year)) 0%   6) Adjustment required for value of refund feature rounded to the nearest whole dollar  (0% × $3,761. Federal tax extension 98, the smaller of B(3) or B(6)) 0 *Expected return is the total amount you and other eligible annuitants can expect to receive under the contract. Federal tax extension See the discussion of expected return, later in this publication. Federal tax extension Free IRS help. Federal tax extension   If you need to request assistance to figure the value of the refund feature, see Requesting a Ruling on Taxation of Annuity near the end of this publication. Federal tax extension Expected Return Your expected return is the total amount you and other eligible annuitants can expect to receive under the contract. Federal tax extension The following discussions explain how to figure the expected return with each type of annuity. Federal tax extension A person's age, for purposes of figuring the expected return, is the age at the birthday nearest to the annuity starting date. Federal tax extension Fixed period annuity. Federal tax extension   If you will get annuity payments for a fixed number of years, without regard to your life expectancy, you must figure your expected return based on that fixed number of years. Federal tax extension It is the total amount you will get beginning at the annuity starting date. Federal tax extension You will receive specific periodic payments for a definite period of time, such as a fixed number of months (but not less than 13). Federal tax extension To figure your expected return, multiply the fixed number of months for which payments are to be made by the amount of the payment specified for each period. Federal tax extension Single life annuity. Federal tax extension   If you are to get annuity payments for the rest of your life, find your expected return as follows. Federal tax extension You must multiply the amount of the annual payment by a multiple based on your life expectancy as of the annuity starting date. Federal tax extension These multiples are set out in actuarial Tables I and V near the end of this publication (see How To Use Actuarial Tables , later). Federal tax extension   You may need to adjust these multiples if the payments are made quarterly, semiannually, or annually. Federal tax extension See Adjustments to Tables I, II, V, VI, and VIA following Table I. Federal tax extension Example. Federal tax extension Henry bought an annuity contract that will give him an annuity of $500 a month for his life. Federal tax extension If at the annuity starting date Henry's nearest birthday is 66, the expected return is figured as follows: Annual payment ($500 × 12 months) $6,000 Multiple shown in Table V, age 66 × 19. Federal tax extension 2 Expected return $115,200 If the payments were to be made to Henry quarterly and the first payment was made one full month after the annuity starting date, Henry would adjust the 19. Federal tax extension 2 multiple by +. Federal tax extension 1. Federal tax extension His expected return would then be $115,800 ($6,000 × 19. Federal tax extension 3). Federal tax extension Annuity for shorter of life or specified period. Federal tax extension   With this type of annuity, you are to get annuity payments either for the rest of your life or until the end of a specified period, whichever period is shorter. Federal tax extension To figure your expected return, multiply the amount of your annual payment by a multiple in Table IV or VIII for temporary life annuities. Federal tax extension Find the proper multiple based on your sex (if using Table IV), your age at the annuity starting date, and the nearest whole number of years in the specified period. Federal tax extension Example. Federal tax extension Harriet purchased an annuity this year that will pay her $200 each month for five years or until she dies, whichever period is shorter. Federal tax extension She was age 65 at her birthday nearest the annuity starting date. Federal tax extension She figures the expected return as follows: Annual payment ($200 × 12 months) $2,400 Multiple shown in Table VIII, age 65, 5-year term × 4. Federal tax extension 9 Expected return $11,760 She uses Table VIII (not Table IV) because all her contributions were made after June 30, 1986. Federal tax extension See Special Elections, later. Federal tax extension Joint and survivor annuities. Federal tax extension   If you have an annuity that pays you a periodic income for life and after your death provides an identical lifetime periodic income to your spouse (or some other person), you figure the expected return based on your combined life expectancies. Federal tax extension To figure the expected return, multiply the annual payment by a multiple in Table II or VI based on your joint life expectancies. Federal tax extension If your payments are made quarterly, semiannually, or annually, you may need to adjust these multiples. Federal tax extension See Adjustments to Tables I, II, V, VI, and VIA following Table I near the end of this publication. Federal tax extension Example. Federal tax extension John bought a joint and survivor annuity providing payments of $500 a month for his life, and, after his death, $500 a month for the remainder of his wife's life. Federal tax extension At John's annuity starting date, his age at his nearest birthday is 70 and his wife's at her nearest birthday is 67. Federal tax extension The expected return is figured as follows: Annual payment ($500 × 12 months) $6,000 Multiple shown in Table VI, ages 67 and 70 × 22. Federal tax extension 0 Expected return $132,000 Different payments to survivor. Federal tax extension   If your contract provides that payments to a survivor annuitant will be different from the amount you receive, you must use a computation which accounts for both the joint lives of the annuitants and the life of the survivor. Federal tax extension Example 1. Federal tax extension Gerald bought a contract providing for payments to him of $500 a month for life and, after his death, payments to his wife, Mary, of $350 a month for life. Federal tax extension If, at the annuity starting date, Gerald's nearest birthday is 70 and Mary's is 67, the expected return under the contract is figured as follows: Combined multiple for Gerald and Mary, ages 70 and 67 (from Table VI)   22. Federal tax extension 0 Multiple for Gerald, age 70 (from Table V)   16. Federal tax extension 0 Difference: Multiple applicable to Mary   6. Federal tax extension 0 Gerald's annual payment ($500 × 12) $6,000   Gerald's multiple 16. Federal tax extension 0   Gerald's expected return   $96,000 Mary's annual payment ($350 × 12) $4,200   Mary's multiple 6. Federal tax extension 0   Mary's expected return   25,200 Total expected return under the contract   $121,200 Example 2. Federal tax extension Your husband died while still employed. Federal tax extension Under the terms of his employer's retirement plan, you are entitled to get an immediate annuity of $400 a month for the rest of your life or until you remarry. Federal tax extension Your daughters, Marie and Jean, are each entitled to immediate temporary life annuities of $150 a month until they reach age 18. Federal tax extension You were 50 years old at the annuity starting date. Federal tax extension Marie was 16 and Jean was 14. Federal tax extension Using the multiples shown in Tables V and VIII at the end of this publication, the total expected return on the annuity starting date is $169,680, figured as follows: Widow, age 50 (multiple from Table V—33. Federal tax extension 1 × $4,800 annual payment) $158,880 Marie, age 16 for 2 years duration (multiple from Table VIII—2. Federal tax extension 0 × $1,800 annual payment) 3,600 Jean, age 14 for 4 years duration (multiple from Table VIII—4. Federal tax extension 0 × $1,800 annual payment) 7,200 Total expected return $169,680 No computation of expected return is made based on your husband's age at the date of death because he died before the annuity starting date. Federal tax extension Computation Under the General Rule Note. Federal tax extension Variable annuities use a different computation for determining the exclusion amounts. Federal tax extension See Variable annuities later. Federal tax extension Under the General Rule, you figure the taxable part of your annuity by using the following steps: Step 1. Federal tax extension   Figure the amount of your investment in the contract, including any adjustments for the refund feature and the death benefit exclusion, if applicable. Federal tax extension See Death benefit exclusion , earlier. Federal tax extension Step 2. Federal tax extension   Figure your expected return. Federal tax extension Step 3. Federal tax extension   Divide Step 1 by Step 2 and round to three decimal places. Federal tax extension This will give you the exclusion percentage. Federal tax extension Step 4. Federal tax extension   Multiply the exclusion percentage by the first regular periodic payment. Federal tax extension The result is the tax-free part of each pension or annuity payment. Federal tax extension   The tax-free part remains the same even if the total payment increases due to variation in the annuity amount such as cost of living increases, or you outlive the life expectancy factor used. Federal tax extension However, if your annuity starting date is after 1986, the total amount of annuity income that is tax free over the years cannot exceed your net cost. Federal tax extension   Each annuitant applies the same exclusion percentage to his or her initial payment called for in the contract. Federal tax extension Step 5. Federal tax extension   Multiply the tax-free part of each payment (step 4) by the number of payments received during the year. Federal tax extension This will give you the tax-free part of the total payment for the year. Federal tax extension    In the first year of your annuity, your first payment or part of your first payment may be for a fraction of the payment period. Federal tax extension This fractional amount is multiplied by your exclusion percentage to get the tax-free part. Federal tax extension Step 6. Federal tax extension   Subtract the tax-free part from the total payment you received. Federal tax extension The rest is the taxable part of your pension or annuity. Federal tax extension Example 1. Federal tax extension You purchased an annuity with an investment in the contract of $10,800. Federal tax extension Under its terms, the annuity will pay you $100 a month for life. Federal tax extension The multiple for your age (age 65) is 20. Federal tax extension 0 as shown in Table V. Federal tax extension Your expected return is $24,000 (20 × 12 × $100). Federal tax extension Your cost of $10,800, divided by your expected return of $24,000, equals 45. Federal tax extension 0%. Federal tax extension This is the percentage you will not have to include in income. Federal tax extension Each year, until your net cost is recovered, $540 (45% of $1,200) will be tax free and you will include $660 ($1,200 − $540) in your income. Federal tax extension If you had received only six payments of $100 ($600) during the year, your exclusion would have been $270 (45% of $100 × 6 payments). Federal tax extension Example 2. Federal tax extension Gerald bought a joint and survivor annuity. Federal tax extension Gerald's investment in the contract is $62,712 and the expected return is $121,200. Federal tax extension The exclusion percentage is 51. Federal tax extension 7% ($62,712 ÷ $121,200). Federal tax extension Gerald will receive $500 a month ($6,000 a year). Federal tax extension Each year, until his net cost is recovered, $3,102 (51. Federal tax extension 7% of his total payments received of $6,000) will be tax free and $2,898 ($6,000 − $3,102) will be included in his income. Federal tax extension If Gerald dies, his wife will receive $350 a month ($4,200 a year). Federal tax extension If Gerald had not recovered all of his net cost before his death, his wife will use the same exclusion percentage (51. Federal tax extension 7%). Federal tax extension Each year, until the entire net cost is recovered, his wife will receive $2,171. Federal tax extension 40 (51. Federal tax extension 7% of her payments received of $4,200) tax free. Federal tax extension She will include $2,028. Federal tax extension 60 ($4,200 − $2,171. Federal tax extension 40) in her income tax return. Federal tax extension Example 3. Federal tax extension Using the same facts as Example 2 under Different payments to survivor, you are to receive an annual annuity of $4,800 until you die or remarry. Federal tax extension Your two daughters each receive annual annuities of $1,800 until they reach age 18. Federal tax extension Your husband contributed $25,576 to the plan. Federal tax extension You are eligible for the $5,000 death benefit exclusion because your husband died before August 21, 1996. Federal tax extension Adjusted Investment in the Contract Contributions $25,576 Plus: Death benefit exclusion 5,000 Adjusted investment in the contract $30,576 The total expected return, as previously figured (in Example 2 under Different payments to survivor), is $169,680. Federal tax extension The exclusion percentage of 18. Federal tax extension 0% ($30,576 ÷ $169,680) applies to the annuity payments you and each of your daughters receive. Federal tax extension Each full year $864 (18. Federal tax extension 0% × $4,800) will be tax free to you, and you must include $3,936 in your income tax return. Federal tax extension Each year, until age 18, $324 (18. Federal tax extension 0% × $1,800) of each of your daughters' payments will be tax free and each must include the balance, $1,476, as income on her own income tax return. Federal tax extension Part-year payments. Federal tax extension   If you receive payments for only part of a year, apply the exclusion percentage to the first regular periodic payment, and multiply the result by the number of payments received during the year. Federal tax extension   If you receive amounts during the year that represent 12 payments, one for each month in that year, and an amount that represents payments for months in a prior year, apply the exclusion percentage to the first regular periodic payment, and multiply the result by the number of payments the amounts received represent. Federal tax extension For instance, if you received amounts during the year that represent the 12 payments for that year plus an amount that represents three payments for a prior year, multiply that amount by the 15 (12 + 3) payments received that the year. Federal tax extension   If you received a fractional payment, follow Step 5, discussed earlier. Federal tax extension This gives you the tax-free part of your total payment. Federal tax extension Example. Federal tax extension On September 28, Mary bought an annuity contract for $22,050 that will give her $125 a month for life, beginning October 30. Federal tax extension The applicable multiple from Table V is 23. Federal tax extension 3 (age 61). Federal tax extension Her expected return is $34,950 ($125 × 12 × 23. Federal tax extension 3). Federal tax extension Mary's investment in the contract of $22,050, divided by her expected return of $34,950, equals 63. Federal tax extension 1%. Federal tax extension Each payment received will consist of 63. Federal tax extension 1% return of cost and 36. Federal tax extension 9% taxable income, until her net cost of the contract is fully recovered. Federal tax extension During the first year, Mary received three payments of $125, or $375, of which $236. Federal tax extension 63 (63. Federal tax extension 1% × $375) is a return of cost. Federal tax extension The remaining $138. Federal tax extension 37 is included in income. Federal tax extension Increase in annuity payments. Federal tax extension   The tax-free amount remains the same as the amount figured at the annuity starting date, even if the payment increases. Federal tax extension All increases in the installment payments are fully taxable. Federal tax extension   However, if your annuity payments are scheduled to increase at a definite date in the future you must figure the expected return for that annuity using the method described in section 1. Federal tax extension 72-5(a)(5) of the regulations. Federal tax extension Example. Federal tax extension Joe's wife died while she was still employed and, as her beneficiary, he began receiving an annuity of $147 per month. Federal tax extension In figuring the taxable part, Joe elects to use Tables V through VIII. Federal tax extension The cost of the contract was $7,938, consisting of the sum of his wife's net contributions, adjusted for any refund feature. Federal tax extension His expected return as of the annuity starting date is $35,280 (age 65, multiple of 20. Federal tax extension 0 × $1,764 annual payment). Federal tax extension The exclusion percentage is $7,938 ÷ $35,280, or 22. Federal tax extension 5%. Federal tax extension During the year he received 11 monthly payments of $147, or $1,617. Federal tax extension Of this amount, 22. Federal tax extension 5% × $147 × 11 ($363. Federal tax extension 83) is tax free as a return of cost and the balance of $1,253. Federal tax extension 17 is taxable. Federal tax extension Later, because of a cost-of-living increase, his annuity payment was increased to $166 per month, or $1,992 a year (12 × $166). Federal tax extension The tax-free part is still only 22. Federal tax extension 5% of the annuity payments as of the annuity starting date (22. Federal tax extension 5% × $147 × 12 = $396. Federal tax extension 90 for a full year). Federal tax extension The increase of $228 ($1,992 − $1,764 (12 × $147)) is fully taxable. Federal tax extension Variable annuities. Federal tax extension   For variable annuity payments, figure the amount of each payment that is tax free by dividing your investment in the contract (adjusted for any refund feature) by the total number of periodic payments you expect to get under the contract. Federal tax extension   If the annuity is for a definite period, you determine the total number of payments by multiplying the number of payments to be made each year by the number of years you will receive payments. Federal tax extension If the annuity is for life, you determine the total number of payments by using a multiple from the appropriate actuarial table. Federal tax extension Example. Federal tax extension Frank purchased a variable annuity at age 65. Federal tax extension The total cost of the contract was $12,000. Federal tax extension The annuity starting date is January 1 of the year of purchase. Federal tax extension His annuity will be paid, starting July 1, in variable annual installments for his life. Federal tax extension The tax-free amount of each payment, until he has recovered his cost of his contract, is: Investment in the contract $12,000 Number of expected annual payments (multiple for age 65 from Table V) 20 Tax-free amount of each payment ($12,000 ÷ 20) $600 If Frank's first payment is $920, he includes only $320 ($920 − $600) in his gross income. Federal tax extension   If the tax-free amount for a year is more than the payments you receive in that year, you may choose, when you receive the next payment, to refigure the tax-free part. Federal tax extension Divide the amount of the periodic tax-free part that is more than the payment you received by the remaining number of payments you expect. Federal tax extension The result is added to the previously figured periodic tax-free part. Federal tax extension The sum is the amount of each future payment that will be tax free. Federal tax extension Example. Federal tax extension Using the facts of the previous example about Frank, assume that after Frank's $920 payment, he received $500 in the following year, and $1,200 in the year after that. Federal tax extension Frank does not pay tax on the $500 (second year) payment because $600 of each annual pension payment is tax free. Federal tax extension Since the $500 payment is less than the $600 annual tax-free amount, he may choose to refigure his tax-free part when he receives his $1,200 (third year) payment, as follows: Amount tax free in second year $600. Federal tax extension 00 Amount received in second year 500. Federal tax extension 00 Difference $100. Federal tax extension 00 Number of remaining payments after the first 2 payments (age 67, from Table V) 18. Federal tax extension 4 Amount to be added to previously determined annual tax-free part ($100 ÷ 18. Federal tax extension 4) $5. Federal tax extension 43 Revised annual tax-free part for third and later years ($600 + $5. Federal tax extension 43) $605. Federal tax extension 43 Amount taxable in third year ($1,200 − $605. Federal tax extension 43) $594. Federal tax extension 57 If you choose to refigure your tax-free amount,   you must file a statement with your income tax return stating that you are refiguring the tax-free amount in accordance with the rules of section 1. Federal tax extension 72–4(d)(3) of the Income Tax Regulations. Federal tax extension The statement must also show the following information: The annuity starting date and your age on that date. Federal tax extension The first day of the first period for which you received an annuity payment in the current year. Federal tax extension Your investment in the contract as originally figured. Federal tax extension The total of all amounts received tax free under the annuity from the annuity starting date through the first day of the first period for which you received an annuity payment in the current tax year. Federal tax extension Exclusion Limits Your annuity starting date determines the total amount of annuity income that you can exclude from income over the years. Federal tax extension Exclusion limited to net cost. Federal tax extension   If your annuity starting date is after 1986, the total amount of annuity income that you can exclude over the years as a return of your cost cannot exceed your net cost (figured without any reduction for a refund feature). Federal tax extension This is the unrecovered investment in the contract as of the annuity starting date. Federal tax extension   If your annuity starting date is after July 1, 1986, any unrecovered net cost at your (or last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. Federal tax extension This deduction is not subject to the 2%-of-adjusted-gross-income limit. Federal tax extension Example 1. Federal tax extension Your annuity starting date is after 1986. Federal tax extension Your total cost is $12,500, and your net cost is $10,000, taking into account certain adjustments. Federal tax extension There is no refund feature. Federal tax extension Your monthly annuity payment is $833. Federal tax extension 33. Federal tax extension Your exclusion ratio is 12% and you exclude $100 a month. Federal tax extension Your exclusion ends after 100 months, when you have excluded your net cost of $10,000. Federal tax extension Thereafter, your annuity payments are fully taxable. Federal tax extension Example 2. Federal tax extension The facts are the same as in Example 1, except that there is a refund feature, and you die after 5 years with no surviving annuitant. Federal tax extension The adjustment for the refund feature is $1,000, so the investment in the contract is $9,000. Federal tax extension The exclusion ratio is 10. Federal tax extension 8%, and your monthly exclusion is $90. Federal tax extension After 5 years (60 months), you have recovered tax free only $5,400 ($90 x 60). Federal tax extension An itemized deduction for the unrecovered net cost of $4,600 ($10,000 net cost minus $5,400) may be taken on your final income tax return. Federal tax extension Your unrecovered investment is determined without regard to the refund feature adjustment, discussed earlier, under Adjustments. Federal tax extension Exclusion not limited to net cost. Federal tax extension   If your annuity starting date was before 1987, you could continue to take your monthly exclusion for as long as you receive your annuity. Federal tax extension If you choose a joint and survivor annuity, your survivor continues to take the survivor's exclusion figured as of the annuity starting date. Federal tax extension The total exclusion may be more than your investment in the contract. Federal tax extension How To Use Actuarial Tables In figuring, under the General Rule, the taxable part of your annuity payments that you are to get for the rest of your life (rather than for a fixed number of years), you must use one or more of the actuarial tables in this publication. Federal tax extension Unisex Annuity Tables Effective July 1, 1986, the Internal Revenue Service adopted new annuity Tables V through VIII, in which your sex is not considered when determining the applicable factor. Federal tax extension These tables correspond to the old Tables I through IV. Federal tax extension In general, Tables V through VIII must be used if you made contributions to the retirement plan after June 30, 1986. Federal tax extension If you made no contributions to the plan after June 30, 1986, generally you must use only Tables I through IV. Federal tax extension However, if you received an annuity payment after June 30, 1986, you may elect to use Tables V through VIII (see Annuity received after June 30, 1986, later). Federal tax extension Special Elections Although you generally must use Tables V through VIII if you made contributions to the retirement plan after June 30, 1986, and Tables I through IV if you made no contributions after June 30, 1986, you can make the following special elections to select which tables to use. Federal tax extension Contributions made both before July 1986 and after June 1986. Federal tax extension   If you made contributions to the retirement plan both before July 1986 and after June 1986, you may elect to use Tables I through IV for the pre-July 1986 cost of the contract, and Tables V through VIII for the post-June 1986 cost. Federal tax extension (See the examples below. Federal tax extension )    Making the election. Federal tax extension Attach this statement to your income tax return for the first year in which you receive an annuity:    “I elect to apply the provisions of paragraph (d) of section 1. Federal tax extension 72–6 of the Income Tax Regulations. Federal tax extension ”   The statement must also include your name, address, social security number, and the amount of the pre-July 1986 investment in the contract. Federal tax extension   If your investment in the contract includes post-June 1986 contributions to the plan, and you do not make the election to use Tables I through IV and Tables V through VIII, then you can only use Tables V through VIII in figuring the taxable part of your annuity. Federal tax extension You must also use Tables V through VIII if you are unable or do not wish to determine the portions of your contributions which were made before July 1, 1986, and after June 30, 1986. Federal tax extension    Advantages of election. Federal tax extension In general, a lesser amount of each annual annuity payment is taxable if you separately figure your exclusion ratio for pre-July 1986 and post-June 1986 contributions. Federal tax extension    If you intend to make this election, save your records that substantiate your pre-July 1986 and post-June 1986 contributions. Federal tax extension If the death benefit exclusion applies (see discussion, earlier), you do not have to apportion it between the pre-July 1986 and the post-June 1986 investment in the contract. Federal tax extension   The following examples illustrate the separate computations required if you elect to use Tables I through IV for your pre-July 1986 investment in the contract and Tables V through VIII for your post-June 1986 investment in the contract. Federal tax extension Example 1. Federal tax extension Bill, who is single, contributed $42,000 to the retirement plan and will receive an annual annuity of $24,000 for life. Federal tax extension Payment of the $42,000 contribution is guaranteed under a refund feature. Federal tax extension Bill is 55 years old as of the annuity starting date. Federal tax extension For figuring the taxable part of Bill's annuity, he chose to make separate computations for his pre-July 1986 investment in the contract of $41,300, and for his post-June 1986 investment in the contract of $700. Federal tax extension       Pre- July 1986   Post- June 1986 A. Federal tax extension Adjustment for refund feature         1) Net cost $41,300   $700   2) Annual annuity—$24,000  ($41,300/$42,000 × $24,000) $23,600       ($700/$42,000 × $24,000)     $400   3) Guarantee under contract $41,300   $700   4) No. Federal tax extension of years payments  guaranteed (rounded), A(3) ÷ A(2) 2   2   5) Applicable percentage from  Tables III and VII 1%   0%   6) Adjustment for value of refund  feature, A(5) × smaller of A(1)  or A(3) $413   $0 B. Federal tax extension Investment in the contract         1) Net cost $41,300   $700   2) Minus: Amount in A(6) 413   0   3) Investment in the contract $40,887   $700 C. Federal tax extension Expected return         1) Annual annuity receivable $24,000   $24,000   2) Multiples from Tables I and V 21. Federal tax extension 7   28. Federal tax extension 6   3) Expected return, C(1) × C(2) $520,800   $686,400 D. Federal tax extension Tax-free part of annuity         1) Exclusion ratio as decimal,  B(3) ÷ C(3) . Federal tax extension 079   . Federal tax extension 001   2) Tax-free part, C(1) × D(1) $1,896   $24 The tax-free part of Bill's total annuity is $1,920 ($1,896 plus $24). Federal tax extension The taxable part of his annuity is $22,080 ($24,000 minus $1,920). Federal tax extension If the annuity starting date is after 1986, the exclusion over the years cannot exceed the net cost (figured without any reduction for a refund feature). Federal tax extension Example 2. Federal tax extension Al is age 62 at his nearest birthday to the annuity starting date. Federal tax extension Al's wife is age 60 at her nearest birthday to the annuity starting date. Federal tax extension The joint and survivor annuity pays $1,000 per month to Al for life, and $500 per month to Al's surviving wife after his death. Federal tax extension The pre-July 1986 investment in the contract is $53,100 and the post-June 1986 investment in the contract is $7,000. Federal tax extension Al makes the election described in Example 1 . Federal tax extension For purposes of this example, assume the refund feature adjustment is zero. Federal tax extension If an adjustment is required, IRS will figure the amount. Federal tax extension See Requesting a Ruling on Taxation of Annuity near the end of this publication. Federal tax extension       Pre-  July 1986   Post-  June 1986 A. Federal tax extension Adjustment for refund feature         1) Net cost $53,100   $7,000   2) Annual annuity—$12,000  ($53,100/$60,100 × $12,000) $10,602       ($7,000/$60,100 × $12,000)     $1,398   3) Guaranteed under the contract $53,100   $7,000   4) Number of years guaranteed,  rounded, A(3) ÷ A(2) 5   5   5) Applicable percentages 0%   0%   6) Refund feature adjustment, A(5) × smaller of A(1) or A(3) 0   0 B. Federal tax extension Investment in the contract         1) Net cost $53,100   $7,000   2) Refund feature adjustment 0   0   3) Investment in the contract adjusted for refund feature $53,100   $7,000 C. Federal tax extension Expected return         1) Multiple for both annuitants from Tables II and VI 25. Federal tax extension 4   28. Federal tax extension 8   2) Multiple for first annuitant from Tables I and V 16. Federal tax extension 9   22. Federal tax extension 5   3) Multiple applicable to surviving annuitant, subtract C(2) from C(1) 8. Federal tax extension 5   6. Federal tax extension 3   4) Annual annuity to surviving annuitant $6,000   $6,000   5) Portion of expected return for surviving annuitant, C(4) × C(3) $51,000   $37,800   6) Annual annuity to first annuitant $12,000   $12,000   7) Plus: Portion of expected return for first annuitant, C(6) × C(2) $202,800   $270,000   8) Expected return for both annuitants, C(5) + C(7) $253,800   $307,800 D. Federal tax extension Tax-free part of annuity         1) Exclusion ratio as a decimal, B(3) ÷ C(8) . Federal tax extension 209   . Federal tax extension 023   2) Retiree's tax-free part of annuity, C(6) × D(1) $2,508   $276   3) Survivor's tax-free part of annuity, C(4) × D(1) $1,254   $138 The tax-free part of Al's total annuity is $2,784 ($2,508 + $276). Federal tax extension The taxable part of his annuity is $9,216 ($12,000 − $2,784). Federal tax extension The exclusion over the years cannot exceed the net cost of the contract (figured without any reduction for a refund feature) if the annuity starting date is after 1986. Federal tax extension After Al's death, his widow will apply the same exclusion percentages (20. Federal tax extension 9% and 2. Federal tax extension 3%) to her annual annuity of $6,000 to figure the tax-free part of her annuity. Federal tax extension Annuity received after June 30, 1986. Federal tax extension   If you receive an annuity payment after June 30, 1986, (regardless of your annuity starting date), you may elect to treat the entire cost of the contract as post-June 1986 cost (even if you made no post-June 1986 contributions to the plan) and use Tables V through VIII. Federal tax extension Once made, you cannot revoke the election, which will apply to all payments during the year and in any later year. Federal tax extension    Make the election by attaching the following statement to your income tax return. Federal tax extension    “I elect, under section 1. Federal tax extension 72–9 of the Income Tax Regulations, to treat my entire cost of the contract as a post-June 1986 cost of the plan. Federal tax extension ”   The statement must also include your name, address, and social security number. Federal tax extension   You should also indicate you are making this election if you are unable or do not wish to determine the parts of your contributions which were made before July 1, 1986, and after June 30, 1986. Federal tax extension Disqualifying form of payment or settlement. Federal tax extension   If your annuity starting date is after June 30, 1986, and the contract provides for a disqualifying form of payment or settlement, such as an option to receive a lump sum in full discharge of the obligation under the contract, the entire investment in the contract is treated as post-June 1986 investment in the contract. Federal tax extension See regulations section 1. Federal tax extension 72–6(d)(3) for additional examples of disqualifying forms of payment or settlement. Federal tax extension You can find the Income Tax Regulations in many libraries and at Internal Revenue Service Offices. Federal tax extension Worksheets for Determining Taxable Annuity Worksheets I and II. Federal tax extension   Worksheets I and II follow for determining your taxable annuity under Regulations Section 1. Federal tax extension 72–6(d)(6) Election. Federal tax extension Worksheet I For Determining Taxable Annuity Under Regulations Section 1. Federal tax extension 72-6(d)(6) Election For Single Annuitant With No Survivor Annuity               Pre-July 1986   Post-June 1986 A. Federal tax extension   Refund Feature Adjustment             1)   Net cost (total cost less returned premiums, dividends, etc. Federal tax extension )             2)   Annual annuity allocation:                   Portion of net cost in A(1) x annual annuity                   Net cost             3)   Guaranteed under the contract             4)   Number of years guaranteed, rounded to whole years:                   A(3) divided by A(2)             5)   Applicable percentages* from Tables III and VII                   *If your annuity meets the three conditions listed in Zero value of refund feature in Investment in the Contract, earlier, both percentages are 0. Federal tax extension If not, the IRS will calculate the refund feature percentage. Federal tax extension             6)   Refund feature adjustment:                   A(5) times lesser of A(1) or A(3)                             B. Federal tax extension   Investment in the Contract             1)   Net cost:                   A(1)             2)   Refund feature adjustment:                   A(6)             3)   Investment in the contract adjusted for refund feature:                   B(1) minus B(2)                             C. Federal tax extension   Expected Return             1)   Annual Annuity:                   12 times monthly annuity**             2)   Expected return multiples from Tables I and V             3)     Expected return:                   C(1) times C(2)                             D. Federal tax extension   Tax-Free Part of Annuity             1)     Exclusion ratio, as a decimal rounded to 3 places:                   B(3) divided by C(3)             2)     Tax-free part of annuity:                   C(1) times D(1)             **If the annuity is not paid monthly, figure the amount to enter by using the total number of periodic payments for the year times the amount of the periodic payment. Federal tax extension     Worksheet II For Determining Taxable Annuity Under Regulations Section 1. Federal tax extension 72-6(d)(6) Election For Joint and Survivor Annuity               Pre-July 1986   Post-June 1986 A. Federal tax extension   Refund Feature Adjustment             1)   Net cost (total cost less returned premiums, dividends, etc. Federal tax extension )             2)   Annual annuity allocation:                   Portion of net cost in A(1) x annual annuity                   Net cost             3)   Guaranteed under the contract             4)     Number of years guaranteed, rounded to whole years:                   A(3) divided by A(2)             5)   Applicable percentages*                   *If your annuity meets the three conditions listed in Zero value of refund feature in Investment in the Contract, earlier, both percentages are 0. Federal tax extension If not, the IRS will calculate the refund feature percentage. Federal tax extension             6)   Refund feature adjustment:                   A(5) times lesser of A(1) or A(3)                             B. Federal tax extension   Investment in the Contract             1)   Net cost:                   A(1)             2)   Refund feature adjustment:                   A(6)             3)   Investment in the contract adjusted for refund future:                   B(1) minus B(2)                             C. Federal tax extension   Expected Return             1)   Multiples for both annuitants, Tables II and VI             2)   Multiple for retiree. Federal tax extension Tables I and VI             3)   Multiple for survivor:                   C(1) minus C(2)             4)   Annual annuity to survivor:                   12 times potential monthly rate for survivor**             5)   Expected return for survivor:                   C(3) times C(4)             6)   Annual annuity to retiree:                   12 times monthly rate for retiree**             7)   Expected return for retiree:                   C(2) times C(6)             8)   Total expected return:                   C(5) plus C(7)                             D. Federal tax extension   Tax-Free Part of Annuity             1)   Exclusion ratio, as a decimal rounded to 3 places:                   B(3) divided by C(8)             2)   Retiree's tax-free part of annuity:                   C(6) times D(1)             3)   Survivor's tax-free part of annuity, if surviving after death of retiree:                   C(4) times D(1)             **If the annuity is not paid monthly, figure the amount to enter by using the total number of periodic payments for the year times the amount of the periodic payment. Federal tax extension   Actuarial Tables Please click here for the text description of the image. Federal tax extension Actuarial Tables Please click here for the text description of the image. Federal tax extension Actuarial Tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Please click here for the text description of the image. Federal tax extension Actuarial tables Requesting a Ruling on Taxation of Annuity If you are a retiree, or the survivor of an employee or retiree, you may ask the Internal Revenue Service to help you determine the taxation of your annuity. Federal tax extension If you make this request, you are asking for a ruling. Federal tax extension User fee. Federal tax extension   Under the law in effect at the time this publication went to print, the IRS must charge a user fee for all ruling requests. Federal tax extension You should call the IRS for the proper fee. Federal tax extension A request solely for the value of the refund feature is not treated as a ruling request and requires no fee. Federal tax extension Send your request to:     Internal Revenue Service  Attention: EP Letter Rulings P. Federal tax extension O. Federal tax extension Box 27063 McPherson Station Washington, DC 20038 The user fee is allowed as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit. Federal tax extension When to make the request. Federal tax extension   Please note that requests sent between February 1 and April 15 may experience some delay. Federal tax extension We process requests in the order received, and we will reply to your request as soon as we can process it. Federal tax extension If you do not receive your ruling by the required filing date, you may use Form 4868, Application for Automatic Extension of Time To File U. Federal tax extension S. Federal tax extension Individual Income Tax Return, to get an extension of time to file. Federal tax extension Information you must furnish. Federal tax extension   You must furnish the information listed below so the IRS can comply with your request. Federal tax extension Failure to furnish the information will result in a delay in processing your request. Federal tax extension Please send only copies of the following documents, as the IRS retains all material sent for its records: A letter explaining the question(s) you wish to have resolved or the information you need from the ruling. Federal tax extension Copies of any documents showing distributions, annuity rates, and annuity options available to you. Federal tax extension A copy of any Form 1099–R you received since your annuity began. Federal tax extension A statement indicating whether you have filed your return for the year for which you are making the request. Federal tax extension If you have requested an extension of time to file that return, please indicate the extension date. Federal tax extension Your daytime phone number. Federal tax extension Your current mailing address. Federal tax extension A power of attorney if someone other than you, an attorney, a certified public accountant, or an enrolled agent is signing this request. Federal tax extension Form 2848, Power of Attorney and Declaration of Representative, may be used for this purpose. Federal tax extension A completed Tax Information Sheet (or facsimile) shown on the next page. Federal tax extension Sign and date the Disclosure and Perjury Statement (or facsimile) at the end of the tax information sheet. Federal tax extension This statement must be signed by the retiree or the survivor annuitant. Federal tax extension It cannot be signed by a representative. Federal tax extension Tax Information Sheet Please click here for the text description of the image. Federal tax extension Tax Information Sheet Please click here for the text description of the image. Federal tax extension Tax Information Sheet (continued) How To Get Tax Help Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. Federal tax extension Free help with your tax return. Federal tax extension   You can get free help preparing your return nationwide from IRS-certified volunteers. Federal tax extension The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. Federal tax extension The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Federal tax extension Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Federal tax extension In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. Federal tax extension To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. Federal tax extension gov, download the IRS2Go app, or call 1-800-906-9887. Federal tax extension   As part of the TCE program, AARP offers the Tax-Aide counseling program. Federal tax extension To find the nearest AARP Tax-Aide site, visit AARP's website at www. Federal tax extension aarp. Federal tax extension org/money/taxaide or call 1-888-227-7669. Federal tax extension For more information on these programs, go to IRS. Federal tax extension gov and enter “VITA” in the search box. Federal tax extension Internet. Federal tax extension    IRS. Federal tax extension gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. Federal tax extension Download the free IRS2Go app from the iTunes app store or from Google Play. Federal tax extension Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. Federal tax extension Check the status of your 2013 refund with the Where's My Refund? application on IRS. Federal tax extension gov or download the IRS2Go app and select the Refund Status option. Federal tax extension The IRS issues more than 9 out of 10 refunds in less than 21 days. Federal tax extension Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. Federal tax extension You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. Federal tax extension The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Federal tax extension Use the Interactive Tax Assistant (ITA) to research your tax questions. Federal tax extension No need to wait on the phone or stand in line. Federal tax extension The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. Federal tax extension When you reach the response screen, you can print the entire interview and the final response for your records. Federal tax extension New subject areas are added on a regular basis. Federal tax extension  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. Federal tax extension gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. Federal tax extension You can use the IRS Tax Map, to search publications and instructions by topic or keyword. Federal tax extension The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. Federal tax extension When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. Federal tax extension Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. Federal tax extension You can also ask the IRS to mail a return or an account transcript to you. Federal tax extension Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. Federal tax extension gov or by calling 1-800-908-9946. Federal tax extension Tax return and tax account transcripts are generally available for the current year and the past three years. Federal tax extension Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. Federal tax extension Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. Federal tax extension If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. Federal tax extension Check the status of your amended return using Where's My Amended Return? Go to IRS. Federal tax extension gov and enter Where's My Amended Return? in the search box. Federal tax extension You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. Federal tax extension It can take up to 3 weeks from the date you mailed it to show up in our system. Federal tax extension Make a payment using one of several safe and convenient electronic payment options available on IRS. Federal tax extension gov. Federal tax extension Select the Payment tab on the front page of IRS. Federal tax extension gov for more information. Federal tax extension Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. Federal tax extension Figure your income tax withholding with the IRS Withholding Calculator on IRS. Federal tax extension gov. Federal tax extension Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. Federal tax extension Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. Federal tax extension gov. Federal tax extension Request an Electronic Filing PIN by going to IRS. Federal tax extension gov and entering Electronic Filing PIN in the search box. Federal tax extension Download forms, instructions and publications, including accessible versions for people with disabilities. Federal tax extension Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. Federal tax extension gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. Federal tax extension An employee can answer questions about your tax account or help you set up a payment plan. Federal tax extension Before you visit, check the Office Locator on IRS. Federal tax extension gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. Federal tax extension If you have a special need, such as a disability, you can request an appointment. Federal tax extension Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. Federal tax extension Apply for an Employer Identification Number (EIN). Federal tax extension Go to IRS. Federal tax extension gov and enter Apply for an EIN in the search box. Federal tax extension Read the Internal Revenue Code, regulations, or other official guidance. Federal tax extension Read Internal Revenue Bulletins. Federal tax extension Sign up to receive local and national tax news and more by email. Federal tax extension Just click on “subscriptions” above the search box on IRS. Federal tax extension gov and choose from a variety of options. Federal tax extension    Phone. Federal tax extension You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. Federal tax extension Download the free IRS2Go app from the iTunes app store or from Google Play. Federal tax extension Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. Federal tax extension gov, or download the IRS2Go app. Federal tax extension Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Federal tax extension The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Federal tax extension Mos
Español

Foreign Policy and Service Abroad

Find information on foreign policy and services abroad.

The Federal Tax Extension

Federal tax extension 10. Federal tax extension   Retirement Plans, Pensions, and Annuities Table of Contents What's New Reminder IntroductionThe General Rule. Federal tax extension Individual retirement arrangements (IRAs). Federal tax extension Civil service retirement benefits. Federal tax extension Useful Items - You may want to see: General InformationIn-plan rollovers to designated Roth accounts. Federal tax extension How To Report Cost (Investment in the Contract) Taxation of Periodic PaymentsExclusion limited to cost. Federal tax extension Exclusion not limited to cost. Federal tax extension Simplified Method Taxation of Nonperiodic PaymentsLump-Sum Distributions RolloversIn-plan rollovers to designated Roth accounts. Federal tax extension Special Additional TaxesTax on Early Distributions Tax on Excess Accumulation Survivors and Beneficiaries What's New For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan (for example, 401(a), 403(a), 403(b), 408, 408A, or 457(b) plans). Federal tax extension However, these distributions are taken into account when determining the modified adjusted gross income threshold. Federal tax extension Distributions from a nonqualified retirement plan are included in net investment income. Federal tax extension See Form 8960, Net Investment Income Tax - Individuals, Estates, and Trusts, and its instructions for more information. Federal tax extension Reminder Starting in 2013, the American Taxpayer Relief Act of 2012 expanded the rules for in-plan Roth rollovers to include more taxpayers. Federal tax extension For more information, see Designated Roth accounts discussed later. Federal tax extension Introduction This chapter discusses the tax treatment of distributions you receive from: An employee pension or annuity from a qualified plan, A disability retirement, and A purchased commercial annuity. Federal tax extension What is not covered in this chapter. Federal tax extension   The following topics are not discussed in this chapter. Federal tax extension The General Rule. Federal tax extension   This is the method generally used to determine the tax treatment of pension and annuity income from nonqualified plans (including commercial annuities). Federal tax extension For a qualified plan, you generally cannot use the General Rule unless your annuity starting date is before November 19, 1996. Federal tax extension For more information about the General Rule, see Publication 939, General Rule for Pensions and Annuities. Federal tax extension Individual retirement arrangements (IRAs). Federal tax extension   Information on the tax treatment of amounts you receive from an IRA is in chapter 17. Federal tax extension Civil service retirement benefits. Federal tax extension    If you are retired from the federal government (regular, phased, or disability retirement), see Publication 721, Tax Guide to U. Federal tax extension S. Federal tax extension Civil Service Retirement Benefits. Federal tax extension Publication 721 also covers the information that you need if you are the survivor or beneficiary of a federal employee or retiree who died. Federal tax extension Useful Items - You may want to see: Publication 575 Pension and Annuity Income 721 Tax Guide to U. Federal tax extension S. Federal tax extension Civil Service Retirement Benefits 939 General Rule for Pensions and Annuities Form (and Instructions) W-4P Withholding Certificate for Pension or Annuity Payments 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Federal tax extension 4972 Tax on Lump-Sum Distributions 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts General Information Designated Roth accounts. Federal tax extension   A designated Roth account is a separate account created under a qualified Roth contribution program to which participants may elect to have part or all of their elective deferrals to a 401(k), 403(b), or 457(b) plan designated as Roth contributions. Federal tax extension Elective deferrals that are designated as Roth contributions are included in your income. Federal tax extension However, qualified distributions are not included in your income. Federal tax extension See Publication 575 for more information. Federal tax extension In-plan rollovers to designated Roth accounts. Federal tax extension   If you are a participant in a 401(k), 403(b), or 457(b) plan, your plan may permit you to roll over amounts in those plans to a designated Roth account within the same plan. Federal tax extension The rollover of any untaxed amounts must be included in income. Federal tax extension See Publication 575 for more information. Federal tax extension More than one program. Federal tax extension   If you receive benefits from more than one program under a single trust or plan of your employer, such as a pension plan and a profit-sharing plan, you may have to figure the taxable part of each pension or annuity contract separately. Federal tax extension Your former employer or the plan administrator should be able to tell you if you have more than one pension or annuity contract. Federal tax extension Section 457 deferred compensation plans. Federal tax extension    If you work for a state or local government or for a tax-exempt organization, you may be able to participate in a section 457 deferred compensation plan. Federal tax extension If your plan is an eligible plan, you are not taxed currently on pay that is deferred under the plan or on any earnings from the plan's investment of the deferred pay. Federal tax extension You are generally taxed on amounts deferred in an eligible state or local government plan only when they are distributed from the plan. Federal tax extension You are taxed on amounts deferred in an eligible tax-exempt organization plan when they are distributed or otherwise made available to you. Federal tax extension   Your 457(b) plan may have a designated Roth account option. Federal tax extension If so, you may be able to roll over amounts to the designated Roth account or make contributions. Federal tax extension Elective deferrals to a designated Roth account are included in your income. Federal tax extension Qualified distributions from a designated Roth account are not subject to tax. Federal tax extension   This chapter covers the tax treatment of benefits under eligible section 457 plans, but it does not cover the treatment of deferrals. Federal tax extension For information on deferrals under section 457 plans, see Retirement Plan Contributions under Employee Compensation in Publication 525, Taxable and Nontaxable Income. Federal tax extension   For general information on these deferred compensation plans, see Section 457 Deferred Compensation Plans in Publication 575. Federal tax extension Disability pensions. Federal tax extension   If you retired on disability, you generally must include in income any disability pension you receive under a plan that is paid for by your employer. Federal tax extension You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A until you reach minimum retirement age. Federal tax extension Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. Federal tax extension    You may be entitled to a tax credit if you were permanently and totally disabled when you retired. Federal tax extension For information on the credit for the elderly or the disabled, see chapter 33. Federal tax extension   Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. Federal tax extension Report the payments on Form 1040, lines 16a and 16b, or on Form 1040A, lines 12a and 12b. Federal tax extension    Disability payments for injuries incurred as a direct result of a terrorist attack directed against the United States (or its allies) are not included in income. Federal tax extension For more information about payments to survivors of terrorist attacks, see Publication 3920, Tax Relief for Victims of Terrorist Attacks. Federal tax extension   For more information on how to report disability pensions, including military and certain government disability pensions, see chapter 5. Federal tax extension Retired public safety officers. Federal tax extension   An eligible retired public safety officer can elect to exclude from income distributions of up to $3,000 made directly from a government retirement plan to the provider of accident, health, or long-term disability insurance. Federal tax extension See Insurance Premiums for Retired Public Safety Officers in Publication 575 for more information. Federal tax extension Railroad retirement benefits. Federal tax extension   Part of any railroad retirement benefits you receive is treated for tax purposes as social security benefits, and part is treated as an employee pension. Federal tax extension For information about railroad retirement benefits treated as social security benefits, see Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Federal tax extension For information about railroad retirement benefits treated as an employee pension, see Railroad Retirement Benefits in Publication 575. Federal tax extension Withholding and estimated tax. Federal tax extension   The payer of your pension, profit-sharing, stock bonus, annuity, or deferred compensation plan will withhold income tax on the taxable parts of amounts paid to you. Federal tax extension You can tell the payer how much to withhold, or not to withhold, by filing Form W-4P. Federal tax extension If you choose not to have tax withheld, or you do not have enough tax withheld, you may have to pay estimated tax. Federal tax extension   If you receive an eligible rollover distribution, you cannot choose not to have tax withheld. Federal tax extension Generally, 20% will be withheld, but no tax will be withheld on a direct rollover of an eligible rollover distribution. Federal tax extension See Direct rollover option under Rollovers, later. Federal tax extension   For more information, see Pensions and Annuities under Tax Withholding for 2014 in chapter 4. Federal tax extension Qualified plans for self-employed individuals. Federal tax extension   Qualified plans set up by self-employed individuals are sometimes called Keogh or H. Federal tax extension R. Federal tax extension 10 plans. Federal tax extension Qualified plans can be set up by sole proprietors, partnerships (but not a partner), and corporations. Federal tax extension They can cover self-employed persons, such as the sole proprietor or partners, as well as regular (common-law) employees. Federal tax extension    Distributions from a qualified plan are usually fully taxable because most recipients have no cost basis. Federal tax extension If you have an investment (cost) in the plan, however, your pension or annuity payments from a qualified plan are taxed under the Simplified Method. Federal tax extension For more information about qualified plans, see Publication 560, Retirement Plans for Small Business. Federal tax extension Purchased annuities. Federal tax extension   If you receive pension or annuity payments from a privately purchased annuity contract from a commercial organization, such as an insurance company, you generally must use the General Rule to figure the tax-free part of each annuity payment. Federal tax extension For more information about the General Rule, get Publication 939. Federal tax extension Also, see Variable Annuities in Publication 575 for the special provisions that apply to these annuity contracts. Federal tax extension Loans. Federal tax extension   If you borrow money from your retirement plan, you must treat the loan as a nonperiodic distribution from the plan unless certain exceptions apply. Federal tax extension This treatment also applies to any loan under a contract purchased under your retirement plan, and to the value of any part of your interest in the plan or contract that you pledge or assign. Federal tax extension This means that you must include in income all or part of the amount borrowed. Federal tax extension Even if you do not have to treat the loan as a nonperiodic distribution, you may not be able to deduct the interest on the loan in some situations. Federal tax extension For details, see Loans Treated as Distributions in Publication 575. Federal tax extension For information on the deductibility of interest, see chapter 23. Federal tax extension Tax-free exchange. Federal tax extension   No gain or loss is recognized on an exchange of an annuity contract for another annuity contract if the insured or annuitant remains the same. Federal tax extension However, if an annuity contract is exchanged for a life insurance or endowment contract, any gain due to interest accumulated on the contract is ordinary income. Federal tax extension See Transfers of Annuity Contracts in Publication 575 for more information about exchanges of annuity contracts. Federal tax extension How To Report If you file Form 1040, report your total annuity on line 16a and the taxable part on line 16b. Federal tax extension If your pension or annuity is fully taxable, enter it on line 16b; do not make an entry on line 16a. Federal tax extension If you file Form 1040A, report your total annuity on line 12a and the taxable part on line 12b. Federal tax extension If your pension or annuity is fully taxable, enter it on line 12b; do not make an entry on line 12a. Federal tax extension More than one annuity. Federal tax extension   If you receive more than one annuity and at least one of them is not fully taxable, enter the total amount received from all annuities on Form 1040, line 16a, or Form 1040A, line 12a, and enter the taxable part on Form 1040, line 16b, or Form 1040A, line 12b. Federal tax extension If all the annuities you receive are fully taxable, enter the total of all of them on Form 1040, line 16b, or Form 1040A, line 12b. Federal tax extension Joint return. Federal tax extension   If you file a joint return and you and your spouse each receive one or more pensions or annuities, report the total of the pensions and annuities on Form 1040, line 16a, or Form 1040A, line 12a, and report the taxable part on Form 1040, line 16b, or Form 1040A, line 12b. Federal tax extension Cost (Investment in the Contract) Before you can figure how much, if any, of a distribution from your pension or annuity plan is taxable, you must determine your cost (your investment in the contract) in the pension or annuity. Federal tax extension Your total cost in the plan includes the total premiums, contributions, or other amounts you paid. Federal tax extension This includes the amounts your employer contributed that were taxable to you when paid. Federal tax extension Cost does not include any amounts you deducted or were excluded from your income. Federal tax extension From this total cost, subtract any refunds of premiums, rebates, dividends, unrepaid loans that were not included in your income, or other tax-free amounts that you received by the later of the annuity starting date or the date on which you received your first payment. Federal tax extension 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. Federal tax extension Designated Roth accounts. Federal tax extension   Your cost in these accounts is your designated Roth contributions that were included in your income as wages subject to applicable withholding requirements. Federal tax extension Your cost will also include any in-plan Roth rollovers you included in income. Federal tax extension Foreign employment contributions. Federal tax extension   If you worked in a foreign country and contributions were made to your retirement plan, special rules apply in determining your cost. Federal tax extension See Foreign employment contributions under Cost (Investment in the Contract) in Publication 575. Federal tax extension Taxation of Periodic Payments Fully taxable payments. Federal tax extension   Generally, if you did not pay any part of the cost of your employee pension or annuity and your employer did not withhold part of the cost from your pay while you worked, the amounts you receive each year are fully taxable. Federal tax extension You must report them on your income tax return. Federal tax extension Partly taxable payments. Federal tax extension   If you paid part of the cost of your pension or annuity, you are not taxed on the part of the pension or annuity you receive that represents a return of your cost. Federal tax extension The rest of the amount you receive is generally taxable. Federal tax extension You figure the tax-free part of the payment using either the Simplified Method or the General Rule. Federal tax extension Your annuity starting date and whether or not your plan is qualified determine which method you must or may use. Federal tax extension   If your annuity starting date is after November 18, 1996, and your payments are from a qualified plan, you must use the Simplified Method. Federal tax extension Generally, you must use the General Rule if your annuity is paid under a nonqualified plan, and you cannot use this method if your annuity is paid under a qualified plan. Federal tax extension   If you had more than one partly taxable pension or annuity, figure the tax-free part and the taxable part of each separately. Federal tax extension   If your annuity is paid under a qualified plan and your annuity starting date is after July 1, 1986, and before November 19, 1996, you could have chosen to use either the General Rule or the Simplified Method. Federal tax extension Exclusion limit. Federal tax extension   Your annuity starting date determines the total amount of annuity payments that you can exclude from your taxable income over the years. Federal tax extension Once your annuity starting date is determined, it does not change. Federal tax extension If you calculate the taxable portion of your annuity payments using the simplified method worksheet, the annuity starting date determines the recovery period for your cost. Federal tax extension That recovery period begins on your annuity starting date and is not affected by the date you first complete the worksheet. Federal tax extension Exclusion limited to cost. Federal tax extension   If your annuity starting date is after 1986, the total amount of annuity income that you can exclude over the years as a recovery of the cost cannot exceed your total cost. Federal tax extension Any unrecovered cost at your (or the last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. Federal tax extension This deduction is not subject to the 2%-of-adjusted-gross-income limit. Federal tax extension Exclusion not limited to cost. Federal tax extension   If your annuity starting date is before 1987, you can continue to take your monthly exclusion for as long as you receive your annuity. Federal tax extension If you chose a joint and survivor annuity, your survivor can continue to take the survivor's exclusion figured as of the annuity starting date. Federal tax extension The total exclusion may be more than your cost. Federal tax extension Simplified Method Under the Simplified Method, you figure the tax-free part of each annuity payment by dividing your cost by the total number of anticipated monthly payments. Federal tax extension For an annuity that is payable for the lives of the annuitants, this number is based on the annuitants' ages on the annuity starting date and is determined from a table. Federal tax extension For any other annuity, this number is the number of monthly annuity payments under the contract. Federal tax extension Who must use the Simplified Method. Federal tax extension   You must use the Simplified Method if your annuity starting date is after November 18, 1996, and you both: Receive pension or annuity payments from a qualified employee plan, qualified employee annuity, or a tax-sheltered annuity (403(b)) plan, and On your annuity starting date, you were either under age 75, or entitled to less than 5 years of guaranteed payments. Federal tax extension Guaranteed payments. Federal tax extension   Your annuity contract provides guaranteed payments if a minimum number of payments or a minimum amount (for example, the amount of your investment) is payable even if you and any survivor annuitant do not live to receive the minimum. Federal tax extension If the minimum amount is less than the total amount of the payments you are to receive, barring death, during the first 5 years after payments begin (figured by ignoring any payment increases), you are entitled to less than 5 years of guaranteed payments. Federal tax extension How to use the Simplified Method. Federal tax extension    Complete the Simplified Method Worksheet in Publication 575 to figure your taxable annuity for 2013. Federal tax extension Single-life annuity. Federal tax extension    If your annuity is payable for your life alone, use Table 1 at the bottom of the worksheet to determine the total number of expected monthly payments. Federal tax extension Enter on line 3 the number shown for your age at the annuity starting date. Federal tax extension Multiple-lives annuity. Federal tax extension   If your annuity is payable for the lives of more than one annuitant, use Table 2 at the bottom of the worksheet to determine the total number of expected monthly payments. Federal tax extension Enter on line 3 the number shown for the combined ages of you and the youngest survivor annuitant at the annuity starting date. Federal tax extension   However, if your annuity starting date is before 1998, do not use Table 2 and do not combine the annuitants' ages. Federal tax extension Instead you must use Table 1 and enter on line 3 the number shown for the primary annuitant's age on the annuity starting date. Federal tax extension    Be sure to keep a copy of the completed worksheet; it will help you figure your taxable annuity next year. Federal tax extension Example. Federal tax extension Bill Smith, age 65, began receiving retirement benefits in 2013, under a joint and survivor annuity. Federal tax extension Bill's annuity starting date is January 1, 2013. Federal tax extension The benefits are to be paid for the joint lives of Bill and his wife Kathy, age 65. Federal tax extension Bill had contributed $31,000 to a qualified plan and had received no distributions before the annuity starting date. Federal tax extension Bill is to receive a retirement benefit of $1,200 a month, and Kathy is to receive a monthly survivor benefit of $600 upon Bill's death. Federal tax extension Bill must use the Simplified Method to figure his taxable annuity because his payments are from a qualified plan and he is under age 75. Federal tax extension Because his annuity is payable over the lives of more than one annuitant, he uses his and Kathy's combined ages and Table 2 at the bottom of the worksheet in completing line 3 of the worksheet. Federal tax extension His completed worksheet is shown in Worksheet 10-A. Federal tax extension Bill's tax-free monthly amount is $100 ($31,000 ÷ 310) as shown on line 4 of the worksheet. Federal tax extension Upon Bill's death, if Bill has not recovered the full $31,000 investment, Kathy will also exclude $100 from her $600 monthly payment. Federal tax extension The full amount of any annuity payments received after 310 payments are paid must be included in gross income. Federal tax extension If Bill and Kathy die before 310 payments are made, a miscellaneous itemized deduction will be allowed for the unrecovered cost on the final income tax return of the last to die. Federal tax extension This deduction is not subject to the 2%-of-adjusted- gross-income limit. Federal tax extension Worksheet 10-A. Federal tax extension Simplified Method Worksheet for Bill Smith 1. Federal tax extension Enter the total pension or annuity payments received this year. Federal tax extension Also, add this amount to the total for Form 1040, line 16a, or Form 1040A, line 12a 1. Federal tax extension 14,400 2. Federal tax extension Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion*. Federal tax extension See Cost (Investment in the Contract) , earlier 2. Federal tax extension 31,000       Note: If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year's worksheet on line 4 below (even if the amount of your pension or annuity has changed). Federal tax extension Otherwise, go to line 3. Federal tax extension         3. Federal tax extension Enter the appropriate number from Table 1 below. Federal tax extension But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, enter the appropriate number from Table 2 below 3. Federal tax extension 310     4. Federal tax extension Divide line 2 by the number on line 3 4. Federal tax extension 100     5. Federal tax extension Multiply line 4 by the number of months for which this year's payments were made. Federal tax extension If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. Federal tax extension Otherwise, go to line 6 5. Federal tax extension 1,200     6. Federal tax extension Enter any amounts previously recovered tax free in years after 1986. Federal tax extension This is the amount shown on line 10 of your worksheet for last year 6. Federal tax extension -0-     7. Federal tax extension Subtract line 6 from line 2 7. Federal tax extension 31,000     8. Federal tax extension Enter the smaller of line 5 or line 7 8. Federal tax extension 1,200 9. Federal tax extension Taxable amount for year. Federal tax extension Subtract line 8 from line 1. Federal tax extension Enter the result, but not less than zero. Federal tax extension Also, add this amount to the total for Form 1040, line 16b, or Form 1040A, line 12b 9. Federal tax extension 13,200   Note: If your Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. Federal tax extension If you are a retired public safety officer, see Insurance Premiums for Retired Public Safety Officers in Publication 575 before entering an amount on your tax return. Federal tax extension     10. Federal tax extension Was your annuity starting date before 1987? □ Yes. Federal tax extension STOP. Federal tax extension Do not complete the rest of this worksheet. Federal tax extension  ☑ No. Federal tax extension Add lines 6 and 8. Federal tax extension This is the amount you have recovered tax free through 2013. Federal tax extension You will need this number if you need to fill out this worksheet next year 10. Federal tax extension 1,200 11. Federal tax extension Balance of cost to be recovered. Federal tax extension Subtract line 10 from line 2. Federal tax extension If zero, you will not have to complete this worksheet next year. Federal tax extension The payments you receive next year will generally be fully taxable 11. Federal tax extension 29,800 TABLE 1 FOR LINE 3 ABOVE   AND your annuity starting date was— IF the age at annuity starting date was. Federal tax extension . Federal tax extension . Federal tax extension before November 19, 1996, enter on line 3. Federal tax extension . Federal tax extension . Federal tax extension after November 18, 1996, enter on line 3. Federal tax extension . Federal tax extension . Federal tax extension 55 or under 300 360 56–60 260 310 61–65 240 260 66–70 170 210 71 or older 120 160 TABLE 2 FOR LINE 3 ABOVE IF the combined ages at annuity starting date were. Federal tax extension . Federal tax extension . Federal tax extension   THEN enter on line 3. Federal tax extension . Federal tax extension . Federal tax extension 110 or under   410 111–120   360 121–130   310 131–140   260 141 or older   210 * A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996. Federal tax extension Who must use the General Rule. Federal tax extension   You must use the General Rule if you receive pension or annuity payments from: A nonqualified plan (such as a private annuity, a purchased commercial annuity, or a nonqualified employee plan), or A qualified plan if you are age 75 or older on your annuity starting date and your annuity payments are guaranteed for at least 5 years. Federal tax extension Annuity starting before November 19, 1996. Federal tax extension   If your annuity starting date is after July 1, 1986, and before November 19, 1996, you had to use the General Rule for either circumstance just described. Federal tax extension You also had to use it for any fixed-period annuity. Federal tax extension If you did not have to use the General Rule, you could have chosen to use it. Federal tax extension If your annuity starting date is before July 2, 1986, you had to use the General Rule unless you could use the Three-Year Rule. Federal tax extension   If you had to use the General Rule (or chose to use it), you must continue to use it each year that you recover your cost. Federal tax extension Who cannot use the General Rule. Federal tax extension   You cannot use the General Rule if you receive your pension or annuity from a qualified plan and none of the circumstances described in the preceding discussions apply to you. Federal tax extension See Who must use the Simplified Method , earlier. Federal tax extension More information. Federal tax extension   For complete information on using the General Rule, including the actuarial tables you need, see Publication 939. Federal tax extension Taxation of Nonperiodic Payments Nonperiodic distributions are also known as amounts not received as an annuity. Federal tax extension They include all payments other than periodic payments and corrective distributions. Federal tax extension Examples of nonperiodic payments are cash withdrawals, distributions of current earnings, certain loans, and the value of annuity contracts transferred without full and adequate consideration. Federal tax extension Corrective distributions of excess plan contributions. Federal tax extension   Generally, if the contributions made for you during the year to certain retirement plans exceed certain limits, the excess is taxable to you. Federal tax extension To correct an excess, your plan may distribute it to you (along with any income earned on the excess). Federal tax extension For information on plan contribution limits and how to report corrective distributions of excess contributions, see Retirement Plan Contributions under Employee Compensation in Publication 525. Federal tax extension Figuring the taxable amount of nonperiodic payments. Federal tax extension   How you figure the taxable amount of a nonperiodic distribution depends on whether it is made before the annuity starting date, or on or after the annuity starting date. Federal tax extension If it is made before the annuity starting date, its tax treatment also depends on whether it is made under a qualified or nonqualified plan. Federal tax extension If it is made under a nonqualified plan, its tax treatment depends on whether it fully discharges the contract, is received under certain life insurance or endowment contracts, or is allocable to an investment you made before August 14, 1982. Federal tax extension Annuity starting date. Federal tax extension   The annuity starting date is either the first day of the first period for which you receive an annuity payment under the contract or the date on which the obligation under the contract becomes fixed, whichever is later. Federal tax extension Distribution on or after annuity starting date. Federal tax extension   If you receive a nonperiodic payment from your annuity contract on or after the annuity starting date, you generally must include all of the payment in gross income. Federal tax extension Distribution before annuity starting date. Federal tax extension   If you receive a nonperiodic distribution before the annuity starting date from a qualified retirement plan, you generally can allocate only part of it to the cost of the contract. Federal tax extension You exclude from your gross income the part that you allocate to the cost. Federal tax extension You include the remainder in your gross income. Federal tax extension   If you receive a nonperiodic distribution before the annuity starting date from a plan other than a qualified retirement plan (nonqualified plan), it is allocated first to earnings (the taxable part) and then to the cost of the contract (the tax-free part). Federal tax extension This allocation rule applies, for example, to a commercial annuity contract you bought directly from the issuer. Federal tax extension    Distributions from nonqualified plans are subject to the net investment income tax. Federal tax extension See the Instructions for Form 8960. Federal tax extension   For more information, see Figuring the Taxable Amount under Taxation of Nonperiodic Payments in Publication 575. Federal tax extension Lump-Sum Distributions This section on lump-sum distributions only applies if the plan participant was born before January 2, 1936. Federal tax extension If the plan participant was born after January 1, 1936, the taxable amount of this nonperiodic payment is reported as discussed earlier. Federal tax extension A lump-sum distribution is the distribution or payment in one tax year of a plan participant's entire balance from all of the employer's qualified plans of one kind (for example, pension, profit-sharing, or stock bonus plans). Federal tax extension A distribution from a nonqualified plan (such as a privately purchased commercial annuity or a section 457 deferred compensation plan of a state or local government or tax-exempt organization) cannot qualify as a lump-sum distribution. Federal tax extension The participant's entire balance from a plan does not include certain forfeited amounts. Federal tax extension It also does not include any deductible voluntary employee contributions allowed by the plan after 1981 and before 1987. Federal tax extension For more information about distributions that do not qualify as lump-sum distributions, see Distributions that do not qualify under Lump-Sum Distributions in Publication 575. Federal tax extension If you receive a lump-sum distribution from a qualified employee plan or qualified employee annuity and the plan participant was born before January 2, 1936, you may be able to elect optional methods of figuring the tax on the distribution. Federal tax extension The part from active participation in the plan before 1974 may qualify as capital gain subject to a 20% tax rate. Federal tax extension The part from participation after 1973 (and any part from participation before 1974 that you do not report as capital gain) is ordinary income. Federal tax extension You may be able to use the 10-year tax option, discussed later, to figure tax on the ordinary income part. Federal tax extension Use Form 4972 to figure the separate tax on a lump-sum distribution using the optional methods. Federal tax extension The tax figured on Form 4972 is added to the regular tax figured on your other income. Federal tax extension This may result in a smaller tax than you would pay by including the taxable amount of the distribution as ordinary income in figuring your regular tax. Federal tax extension How to treat the distribution. Federal tax extension   If you receive a lump-sum distribution, you may have the following options for how you treat the taxable part. Federal tax extension Report the part of the distribution from participation before 1974 as a capital gain (if you qualify) and the part from participation after 1973 as ordinary income. Federal tax extension Report the part of the distribution from participation before 1974 as a capital gain (if you qualify) and use the 10-year tax option to figure the tax on the part from participation after 1973 (if you qualify). Federal tax extension Use the 10-year tax option to figure the tax on the total taxable amount (if you qualify). Federal tax extension Roll over all or part of the distribution. Federal tax extension See Rollovers , later. Federal tax extension No tax is currently due on the part rolled over. Federal tax extension Report any part not rolled over as ordinary income. Federal tax extension Report the entire taxable part of the distribution as ordinary income on your tax return. Federal tax extension   The first three options are explained in the following discussions. Federal tax extension Electing optional lump-sum treatment. Federal tax extension   You can choose to use the 10-year tax option or capital gain treatment only once after 1986 for any plan participant. Federal tax extension If you make this choice, you cannot use either of these optional treatments for any future distributions for the participant. Federal tax extension Taxable and tax-free parts of the distribution. Federal tax extension    The taxable part of a lump-sum distribution is the employer's contributions and income earned on your account. Federal tax extension You may recover your cost in the lump sum and any net unrealized appreciation (NUA) in employer securities tax free. Federal tax extension Cost. Federal tax extension   In general, your cost is the total of: The plan participant's nondeductible contributions to the plan, The plan participant's taxable costs of any life insurance contract distributed, Any employer contributions that were taxable to the plan participant, and Repayments of any loans that were taxable to the plan participant. Federal tax extension You must reduce this cost by amounts previously distributed tax free. Federal tax extension Net unrealized appreciation (NUA). Federal tax extension   The NUA in employer securities (box 6 of Form 1099-R) received as part of a lump-sum distribution is generally tax free until you sell or exchange the securities. Federal tax extension (For more information, see Distributions of employer securities under Taxation of Nonperiodic Payments in Publication 575. Federal tax extension ) Capital Gain Treatment Capital gain treatment applies only to the taxable part of a lump-sum distribution resulting from participation in the plan before 1974. Federal tax extension The amount treated as capital gain is taxed at a 20% rate. Federal tax extension You can elect this treatment only once for any plan participant, and only if the plan participant was born before January 2, 1936. Federal tax extension Complete Part II of Form 4972 to choose the 20% capital gain election. Federal tax extension For more information, see Capital Gain Treatment under Lump-Sum Distributions in Publication 575. Federal tax extension 10-Year Tax Option The 10-year tax option is a special formula used to figure a separate tax on the ordinary income part of a lump-sum distribution. Federal tax extension You pay the tax only once, for the year in which you receive the distribution, not over the next 10 years. Federal tax extension You can elect this treatment only once for any plan participant, and only if the plan participant was born before January 2, 1936. Federal tax extension The ordinary income part of the distribution is the amount shown in box 2a of the Form 1099-R given to you by the payer, minus the amount, if any, shown in box 3. Federal tax extension You also can treat the capital gain part of the distribution (box 3 of Form 1099-R) as ordinary income for the 10-year tax option if you do not choose capital gain treatment for that part. Federal tax extension Complete Part III of Form 4972 to choose the 10-year tax option. Federal tax extension You must use the special Tax Rate Schedule shown in the instructions for Part III to figure the tax. Federal tax extension Publication 575 illustrates how to complete Form 4972 to figure the separate tax. Federal tax extension Rollovers If you withdraw cash or other assets from a qualified retirement plan in an eligible rollover distribution, you can defer tax on the distribution by rolling it over to another qualified retirement plan or a traditional IRA. Federal tax extension For this purpose, the following plans are qualified retirement plans. Federal tax extension A qualified employee plan. Federal tax extension A qualified employee annuity. Federal tax extension A tax-sheltered annuity plan (403(b) plan). Federal tax extension An eligible state or local government section 457 deferred compensation plan. Federal tax extension Eligible rollover distributions. Federal tax extension   Generally, an eligible rollover distribution is any distribution of all or any part of the balance to your credit in a qualified retirement plan. Federal tax extension For information about exceptions to eligible rollover distributions, see Publication 575. Federal tax extension Rollover of nontaxable amounts. Federal tax extension   You may be able to roll over the nontaxable part of a distribution (such as your after-tax contributions) made to another qualified retirement plan that is a qualified employee plan or a 403(b) plan, or to a traditional or Roth IRA. Federal tax extension The transfer must be made either through a direct rollover to a qualified plan or 403(b) plan that separately accounts for the taxable and nontaxable parts of the rollover or through a rollover to a traditional or Roth IRA. Federal tax extension   If you roll over only part of a distribution that includes both taxable and nontaxable amounts, the amount you roll over is treated as coming first from the taxable part of the distribution. Federal tax extension   Any after-tax contributions that you roll over into your traditional IRA become part of your basis (cost) in your IRAs. Federal tax extension To recover your basis when you take distributions from your IRA, you must complete Form 8606 for the year of the distribution. Federal tax extension For more information, see the Form 8606 instructions. Federal tax extension Direct rollover option. Federal tax extension   You can choose to have any part or all of an eligible rollover distribution paid directly to another qualified retirement plan that accepts rollover distributions or to a traditional or Roth IRA. Federal tax extension If you choose the direct rollover option, or have an automatic rollover, no tax will be withheld from any part of the distribution that is directly paid to the trustee of the other plan. Federal tax extension Payment to you option. Federal tax extension   If an eligible rollover distribution is paid to you, 20% generally will be withheld for income tax. Federal tax extension However, the full amount is treated as distributed to you even though you actually receive only 80%. Federal tax extension You generally must include in income any part (including the part withheld) that you do not roll over within 60 days to another qualified retirement plan or to a traditional or Roth IRA. Federal tax extension (See Pensions and Annuities under Tax Withholding for 2014 in chapter 4. Federal tax extension )    If you decide to roll over an amount equal to the distribution before withholding, your contribution to the new plan or IRA must include other money (for example, from savings or amounts borrowed) to replace the amount withheld. Federal tax extension Time for making rollover. Federal tax extension   You generally must complete the rollover of an eligible rollover distribution paid to you by the 60th day following the day on which you receive the distribution from your employer's plan. Federal tax extension (If an amount distributed to you becomes a frozen deposit in a financial institution during the 60-day period after you receive it, the rollover period is extended for the period during which the distribution is in a frozen deposit in a financial institution. Federal tax extension )   The IRS may waive the 60-day requirement where the failure to do so would be against equity or good conscience, such as in the event of a casualty, disaster, or other event beyond your reasonable control. Federal tax extension   The administrator of a qualified plan must give you a written explanation of your distribution options within a reasonable period of time before making an eligible rollover distribution. Federal tax extension Qualified domestic relations order (QDRO). Federal tax extension   You may be able to roll over tax free all or part of a distribution from a qualified retirement plan that you receive under a QDRO. Federal tax extension If you receive the distribution as an employee's spouse or former spouse (not as a nonspousal beneficiary), the rollover rules apply to you as if you were the employee. Federal tax extension You can roll over the distribution from the plan into a traditional IRA or to another eligible retirement plan. Federal tax extension See Rollovers in Publication 575 for more information on benefits received under a QDRO. Federal tax extension Rollover by surviving spouse. Federal tax extension   You may be able to roll over tax free all or part of a distribution from a qualified retirement plan you receive as the surviving spouse of a deceased employee. Federal tax extension The rollover rules apply to you as if you were the employee. Federal tax extension You can roll over a distribution into a qualified retirement plan or a traditional or Roth IRA. Federal tax extension For a rollover to a Roth IRA, see Rollovers to Roth IRAs , later. Federal tax extension    A distribution paid to a beneficiary other than the employee's surviving spouse is generally not an eligible rollover distribution. Federal tax extension However, see Rollovers by nonspouse beneficiary next. Federal tax extension Rollovers by nonspouse beneficiary. Federal tax extension   If you are a designated beneficiary (other than a surviving spouse) of a deceased employee, you may be able to roll over tax free all or a portion of a distribution you receive from an eligible retirement plan of the employee. Federal tax extension The distribution must be a direct trustee-to-trustee transfer to your traditional or Roth IRA that was set up to receive the distribution. Federal tax extension The transfer will be treated as an eligible rollover distribution and the receiving plan will be treated as an inherited IRA. Federal tax extension For information on inherited IRAs, see What if You Inherit an IRA? in chapter 1 of Publication 590, Individual Retirement Arrangements (IRAs). Federal tax extension Retirement bonds. Federal tax extension   If you redeem retirement bonds purchased under a qualified bond purchase plan, you can roll over the proceeds that exceed your basis tax free into an IRA (as discussed in Publication 590) or a qualified employer plan. Federal tax extension Designated Roth accounts. Federal tax extension   You can roll over an eligible rollover distribution from a designated Roth account into another designated Roth account or a Roth IRA. Federal tax extension If you want to roll over the part of the distribution that is not included in income, you must make a direct rollover of the entire distribution or you can roll over the entire amount (or any portion) to a Roth IRA. Federal tax extension For more information on rollovers from designated Roth accounts, see Rollovers in Publication 575. Federal tax extension In-plan rollovers to designated Roth accounts. Federal tax extension   If you are a plan participant in a 401(k), 403(b), or 457(b) plan, your plan may permit you to roll over amounts in those plans to a designated Roth account within the same plan. Federal tax extension The rollover of any untaxed amounts must be included in income. Federal tax extension See Designated Roth accounts under Rollovers in Publication 575 for more information. Federal tax extension Rollovers to Roth IRAs. Federal tax extension   You can roll over distributions directly from a qualified retirement plan (other than a designated Roth account) to a Roth IRA. Federal tax extension   You must include in your gross income distributions from a qualified retirement plan (other than a designated Roth account) that you would have had to include in income if you had not rolled them over into a Roth IRA. Federal tax extension You do not include in gross income any part of a distribution from a qualified retirement plan that is a return of contributions to the plan that were taxable to you when paid. Federal tax extension In addition, the 10% tax on early distributions does not apply. Federal tax extension More information. Federal tax extension   For more information on the rules for rolling over distributions, see Rollovers in Publication 575. Federal tax extension Special Additional Taxes To discourage the use of pension funds for purposes other than normal retirement, the law imposes additional taxes on early distributions of those funds and on failures to withdraw the funds timely. Federal tax extension Ordinarily, you will not be subject to these taxes if you roll over all early distributions you receive, as explained earlier, and begin drawing out the funds at a normal retirement age, in reasonable amounts over your life expectancy. Federal tax extension These special additional taxes are the taxes on: Early distributions, and Excess accumulation (not receiving minimum distributions). Federal tax extension These taxes are discussed in the following sections. Federal tax extension If you must pay either of these taxes, report them on Form 5329. Federal tax extension However, you do not have to file Form 5329 if you owe only the tax on early distributions and your Form 1099-R correctly shows a “1” in box 7. Federal tax extension Instead, enter 10% of the taxable part of the distribution on Form 1040, line 58 and write “No” under the heading “Other Taxes” to the left of line 58. Federal tax extension Even if you do not owe any of these taxes, you may have to complete Form 5329 and attach it to your Form 1040. Federal tax extension This applies if you meet an exception to the tax on early distributions but box 7 of your Form 1099-R does not indicate an exception. Federal tax extension Tax on Early Distributions Most distributions (both periodic and nonperiodic) from qualified retirement plans and nonqualified annuity contracts made to you before you reach age 59½ are subject to an additional tax of 10%. Federal tax extension This tax applies to the part of the distribution that you must include in gross income. Federal tax extension For this purpose, a qualified retirement plan is: A qualified employee plan, A qualified employee annuity plan, A tax-sheltered annuity plan, or An eligible state or local government section 457 deferred compensation plan (to the extent that any distribution is attributable to amounts the plan received in a direct transfer or rollover from one of the other plans listed here or an IRA). Federal tax extension 5% rate on certain early distributions from deferred annuity contracts. Federal tax extension   If an early withdrawal from a deferred annuity is otherwise subject to the 10% additional tax, a 5% rate may apply instead. Federal tax extension A 5% rate applies to distributions under a written election providing a specific schedule for the distribution of your interest in the contract if, as of March 1, 1986, you had begun receiving payments under the election. Federal tax extension On line 4 of Form 5329, multiply the line 3 amount by 5% instead of 10%. Federal tax extension Attach an explanation to your return. Federal tax extension Distributions from Roth IRAs allocable to a rollover from an eligible retirement plan within the 5-year period. Federal tax extension   If, within the 5-year period starting with the first day of your tax year in which you rolled over an amount from an eligible retirement plan to a Roth IRA, you take a distribution from the Roth IRA, you may have to pay the additional 10% tax on early distributions. Federal tax extension You generally must pay the 10% additional tax on any amount attributable to the part of the rollover that you had to include in income. Federal tax extension The additional tax is figured on Form 5329. Federal tax extension For more information, see Form 5329 and its instructions. Federal tax extension For information on qualified distributions from Roth IRAs, see Additional Tax on Early Distributions in chapter 2 of Publication 590. Federal tax extension Distributions from designated Roth accounts allocable to in-plan Roth rollovers within the 5-year period. Federal tax extension   If, within the 5-year period starting with the first day of your tax year in which you rolled over an amount from a 401(k), 403(b), or 457(b) plan to a designated Roth account, you take a distribution from the designated Roth account, you may have to pay the additional 10% tax on early distributions. Federal tax extension You generally must pay the 10% additional tax on any amount attributable to the part of the in-plan rollover that you had to include in income. Federal tax extension The additional tax is figured on Form 5329. Federal tax extension For more information, see Form 5329 and its instructions. Federal tax extension For information on qualified distributions from designated Roth accounts, see Designated Roth accounts under Taxation of Periodic Payments in Publication 575. Federal tax extension Exceptions to tax. Federal tax extension    Certain early distributions are excepted from the early distribution tax. Federal tax extension If the payer knows that an exception applies to your early distribution, distribution code “2,” “3,” or “4” should be shown in box 7 of your Form 1099-R and you do not have to report the distribution on Form 5329. Federal tax extension If an exception applies but distribution code “1” (early distribution, no known exception) is shown in box 7, you must file Form 5329. Federal tax extension Enter the taxable amount of the distribution shown in box 2a of your Form 1099-R on line 1 of Form 5329. Federal tax extension On line 2, enter the amount that can be excluded and the exception number shown in the Form 5329 instructions. Federal tax extension    If distribution code “1” is incorrectly shown on your Form 1099-R for a distribution received when you were age 59½ or older, include that distribution on Form 5329. Federal tax extension Enter exception number “12” on line 2. Federal tax extension General exceptions. Federal tax extension   The tax does not apply to distributions that are: Made as part of a series of substantially equal periodic payments (made at least annually) for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary (if from a qualified retirement plan, the payments must begin after your separation from service), Made because you are totally and permanently disabled, or Made on or after the death of the plan participant or contract holder. Federal tax extension Additional exceptions for qualified retirement plans. Federal tax extension   The tax does not apply to distributions that are: From a qualified retirement plan (other than an IRA) after your separation from service in or after the year you reached age 55 (age 50 for qualified public safety employees), From a qualified retirement plan (other than an IRA) to an alternate payee under a qualified domestic relations order, From a qualified retirement plan to the extent you have deductible medical expenses that exceed 10% (or 7. Federal tax extension 5% if you or your spouse are age 65 or older) of your adjusted gross income, whether or not you itemize your deductions for the year, From an employer plan under a written election that provides a specific schedule for distribution of your entire interest if, as of March 1, 1986, you had separated from service and had begun receiving payments under the election, From an employee stock ownership plan for dividends on employer securities held by the plan, From a qualified retirement plan due to an IRS levy of the plan, From elective deferral accounts under 401(k) or 403(b) plans or similar arrangements that are qualified reservist distributions, or Phased retirement annuity payments made to federal employees. Federal tax extension See Pub. Federal tax extension 721 for more information on the phased retirement program. Federal tax extension Qualified public safety employees. Federal tax extension   If you are a qualified public safety employee, distributions made from a governmental defined benefit pension plan are not subject to the additional tax on early distributions. Federal tax extension You are a qualified public safety employee if you provide police protection, firefighting services, or emergency medical services for a state or municipality, and you separated from service in or after the year you attained age 50. Federal tax extension Qualified reservist distributions. Federal tax extension   A qualified reservist distribution is not subject to the additional tax on early distributions. Federal tax extension A qualified reservist distribution is a distribution (a) from elective deferrals under a section 401(k) or 403(b) plan, or a similar arrangement, (b) to an individual ordered or called to active duty (because he or she is a member of a reserve component) for a period of more than 179 days or for an indefinite period, and (c) made during the period beginning on the date of the order or call and ending at the close of the active duty period. Federal tax extension You must have been ordered or called to active duty after September 11, 2001. Federal tax extension For more information, see Qualified reservist distributions under Special Additional Taxes in Publication 575. Federal tax extension Additional exceptions for nonqualified annuity contracts. Federal tax extension   The tax does not apply to distributions from: A deferred annuity contract to the extent allocable to investment in the contract before August 14, 1982, A deferred annuity contract under a qualified personal injury settlement, A deferred annuity contract purchased by your employer upon termination of a qualified employee plan or qualified employee annuity plan and held by your employer until your separation from service, or An immediate annuity contract (a single premium contract providing substantially equal annuity payments that start within 1 year from the date of purchase and are paid at least annually). Federal tax extension Tax on Excess Accumulation To make sure that most of your retirement benefits are paid to you during your lifetime, rather than to your beneficiaries after your death, the payments that you receive from qualified retirement plans must begin no later than your required beginning date (defined later). Federal tax extension The payments each year cannot be less than the required minimum distribution. Federal tax extension Required distributions not made. Federal tax extension   If the actual distributions to you in any year are less than the minimum required distribution for that year, you are subject to an additional tax. Federal tax extension The tax equals 50% of the part of the required minimum distribution that was not distributed. Federal tax extension   For this purpose, a qualified retirement plan includes: A qualified employee plan, A qualified employee annuity plan, An eligible section 457 deferred compensation plan, or A tax-sheltered annuity plan (403(b) plan)(for benefits accruing after 1986). Federal tax extension Waiver. Federal tax extension   The tax may be waived if you establish that the shortfall in distributions was due to reasonable error and that reasonable steps are being taken to remedy the shortfall. Federal tax extension See the Instructions for Form 5329 for the procedure to follow if you believe you qualify for a waiver of this tax. Federal tax extension State insurer delinquency proceedings. Federal tax extension   You might not receive the minimum distribution because assets are invested in a contract issued by an insurance company in state insurer delinquency proceedings. Federal tax extension If your payments are reduced below the minimum due to these proceedings, you should contact your plan administrator. Federal tax extension Under certain conditions, you will not have to pay the 50% excise tax. Federal tax extension Required beginning date. Federal tax extension   Unless the rule for 5% owners applies, you generally must begin to receive distributions from your qualified retirement plan by April 1 of the year that follows the later of: The calendar year in which you reach age 70½, or The calendar year in which you retire from employment with the employer maintaining the plan. Federal tax extension However, your plan may require you to begin to receive distributions by April 1 of the year that follows the year in which you reach age 70½, even if you have not retired. Federal tax extension   If you reached age 70½ in 2013, you may be required to receive your first distribution by April 1, 2014. Federal tax extension Your required distribution then must be made for 2014 by December 31, 2014. Federal tax extension 5% owners. Federal tax extension   If you are a 5% owner, you must begin to receive distributions by April 1 of the year that follows the calendar year in which you reach age 70½. Federal tax extension   You are a 5% owner if, for the plan year ending in the calendar year in which you reach age 70½, you own (or are considered to own under section 318 of the Internal Revenue Code) more than 5% of the outstanding stock (or more than 5% of the total voting power of all stock) of the employer, or more than 5% of the capital or profits interest in the employer. Federal tax extension Age 70½. Federal tax extension   You reach age 70½ on the date that is 6 calendar months after the date of your 70th birthday. Federal tax extension   For example, if you are retired and your 70th birthday was on June 30, 2013, you were age 70½ on December 30, 2013. Federal tax extension If your 70th birthday was on July 1, 2013, you reached age 70½ on January 1, 2014. Federal tax extension Required distributions. Federal tax extension   By the required beginning date, as explained earlier, you must either: Receive your entire interest in the plan (for a tax-sheltered annuity, your entire benefit accruing after 1986), or Begin receiving periodic distributions in annual amounts calculated to distribute your entire interest (for a tax-sheltered annuity, your entire benefit accruing after 1986) over your life or life expectancy or over the joint lives or joint life expectancies of you and a designated beneficiary (or over a shorter period). Federal tax extension Additional information. Federal tax extension   For more information on this rule, see Tax on Excess Accumulation in Publication 575. Federal tax extension Form 5329. Federal tax extension   You must file Form 5329 if you owe tax because you did not receive a minimum required distribution from your qualified retirement plan. Federal tax extension Survivors and Beneficiaries Generally, a survivor or beneficiary reports pension or annuity income in the same way the plan participant would have. Federal tax extension However, some special rules apply. Federal tax extension See Publication 575 for more information. Federal tax extension Survivors of employees. Federal tax extension   If you are entitled to receive a survivor annuity on the death of an employee who died, you can exclude part of each annuity payment as a tax-free recovery of the employee's investment in the contract. Federal tax extension You must figure the taxable and tax-free parts of your annuity payments using the method that applies as if you were the employee. Federal tax extension Survivors of retirees. Federal tax extension   If you receive benefits as a survivor under a joint and survivor annuity, include those benefits in income in the same way the retiree would have included them in income. Federal tax extension If you receive a survivor annuity because of the death of a retiree who had reported the annuity under the Three-Year Rule and recovered all of the cost tax free, your survivor payments are fully taxable. Federal tax extension    If the retiree was reporting the annuity payments under the General Rule, you must apply the same exclusion percentage to your initial survivor annuity payment called for in the contract. Federal tax extension The resulting tax-free amount will then remain fixed. Federal tax extension Any increases in the survivor annuity are fully taxable. Federal tax extension    If the retiree was reporting the annuity payments under the Simplified Method, the part of each payment that is tax free is the same as the tax-free amount figured by the retiree at the annuity starting date. Federal tax extension This amount remains fixed even if the annuity payments are increased or decreased. Federal tax extension See Simplified Method , earlier. Federal tax extension   In any case, if the annuity starting date is after 1986, the total exclusion over the years cannot be more than the cost. Federal tax extension Estate tax deduction. Federal tax extension   If your annuity was a joint and survivor annuity that was included in the decedent's estate, an estate tax may have been paid on it. Federal tax extension You can deduct the part of the total estate tax that was based on the annuity. Federal tax extension The deceased annuitant must have died after the annuity starting date. Federal tax extension (For details, see section 1. Federal tax extension 691(d)-1 of the regulations. Federal tax extension ) Deduct it in equal amounts over your remaining life expectancy. Federal tax extension   If the decedent died before the annuity starting date of a deferred annuity contract and you receive a death benefit under that contract, the amount you receive (either in a lump sum or as periodic payments) in excess of the decedent's cost is included in your gross income as income in respect of a decedent for which you may be able to claim an estate tax deduction. Federal tax extension   You can take the estate tax deduction as an itemized deduction on Schedule A, Form 1040. Federal tax extension This deduction is not subject to the 2%-of-adjusted-gross-income limit on miscellaneous deductions. Federal tax extension See Publication 559, Survivors, Executors, and Administrators, for more information on the estate tax deduction. Federal tax extension Prev  Up  Next   Home   More Online Publications