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H&r block com Publication 571 - Introductory Material Table of Contents Future Developments What's New for 2013 What's New for 2014 Reminder IntroductionOrdering forms and publications. H&r block com Tax questions. H&r block com Useful Items - You may want to see: Future Developments For the latest information about developments related to Publication 571 and its instructions, such as legislation enacted after they were published, go to www. H&r block com irs. H&r block com gov/pub571. H&r block com What's New for 2013 Retirement savings contributions credit. H&r block com  For 2013, the adjusted gross income limitations have increased from $57,500 to $59,000 for married filing jointly filers, from $43,125 to $44,250 for head of household filers, and from $28,750 to $29,500 for single, married filing separately, or qualifying widow(er) with dependent child filers. H&r block com See chapter 10, Retirement Savings Contributions Credit (Saver's Credit), for additional information. H&r block com Limit on elective deferrals. H&r block com  For 2013, the limit on elective deferrals has increased from $17,000 to $17,500. H&r block com Limit on annual additions. H&r block com  For 2013, the limit on annual additions has increased from $50,000 to $51,000. H&r block com What's New for 2014 Retirement savings contributions credit. H&r block com  For 2014, the adjusted gross income limitations have increased from $59,000 to $60,000 for married filing jointly filers, from $44,250 to $45,000 for head of household filers, and from $29,500 to $30,000 for single, married filing separately, or qualifying widow(er) with dependent child filers. H&r block com See chapter 10, Retirement Savings Contributions Credit (Saver's Credit), for additional information. H&r block com Limit on elective deferrals. H&r block com  For 2014, the limit on elective deferrals remains unchanged at $17,500. H&r block com Limit on annual additions. H&r block com  For 2014, the limit on annual additions has increased from $51,000 to $52,000. H&r block com Reminder Photographs of missing children. H&r block com  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. H&r block com Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. H&r block com You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. H&r block com Introduction This publication can help you better understand the tax rules that apply to your 403(b) (tax-sheltered annuity) plan. H&r block com In this publication, you will find information to help you: Determine the maximum amount that can be contributed to your 403(b) account in 2014. H&r block com Determine the maximum amount that could have been contributed to your 403(b) account in 2013. H&r block com Identify excess contributions. H&r block com Understand the basic rules for claiming the retirement savings contributions credit. H&r block com Understand the basic rules for distributions and rollovers from 403(b) accounts. H&r block com This publication does not provide specific information on the following topics. H&r block com Distributions from 403(b) accounts. H&r block com This is covered in Publication 575, Pension and Annuity Income. H&r block com Rollovers. H&r block com This is covered in Publication 590, Individual Retirement Arrangements (IRAs). H&r block com How to use this publication. H&r block com   This publication is organized into chapters to help you find information easily. H&r block com    Chapter 1 answers questions frequently asked by 403(b) plan participants. H&r block com    Chapters 2 through 6 explain the rules and terms you need to know to figure the maximum amount that could have been contributed to your 403(b) account for 2013 and the maximum amount that can be contributed to your 403(b) account in 2014. H&r block com    Chapter 7 provides general information on the prevention and correction of excess contributions to your 403(b) account. H&r block com    Chapter 8 provides general information on distributions, transfers, and rollovers. H&r block com    Chapter 9 provides blank worksheets that you will need to accurately and actively participate in your 403(b) plan. H&r block com Filled-in samples of most of these worksheets can be found throughout this publication. H&r block com    Chapter 10 explains the rules for claiming the retirement savings contributions credit (saver's credit). H&r block com Comments and suggestions. H&r block com   We welcome your comments about this publication and your suggestions for future editions. H&r block com   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. H&r block com NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. H&r block com Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. H&r block com   You can send your comments from www. H&r block com irs. H&r block com gov/formspubs/. H&r block com Click on “More Information” and then on “Comment on Tax Forms and Publications. H&r block com ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. H&r block com Ordering forms and publications. H&r block com   Visit www. H&r block com irs. H&r block com gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. H&r block com  Internal Revenue Service 1201 N. H&r block com Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. H&r block com   If you have a tax question, check the information available on IRS. H&r block com gov or call 1-800-829-1040. H&r block com We cannot answer tax questions sent to either of the above addresses. H&r block com Useful Items - You may want to see: Publication 517 Social Security and Other Information for Members of the Clergy and Religious Workers 575 Pension and Annuity Income 590 Individual Retirement Arrangements (IRAs) Form (and Instructions) W-2 Wage and Tax Statement 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. H&r block com 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts 5330 Return of Excise Taxes Related to Employee Benefit Plans Prev  Up  Next   Home   More Online Publications
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H&r block com Publication 575 - Main Content Table of Contents General InformationPension. H&r block com Annuity. H&r block com Qualified employee plan. H&r block com Qualified employee annuity. H&r block com Designated Roth account. H&r block com Tax-sheltered annuity plan. H&r block com Fixed-period annuities. H&r block com Annuities for a single life. H&r block com Joint and survivor annuities. H&r block com Variable annuities. H&r block com Disability pensions. H&r block com Variable Annuities Section 457 Deferred Compensation Plans Disability Pensions Insurance Premiums for Retired Public Safety Officers Railroad Retirement Benefits Withholding Tax and Estimated Tax Cost (Investment in the Contract)Foreign employment contributions while a nonresident alien. H&r block com Taxation of Periodic PaymentsPeriod of participation. H&r block com Fully Taxable Payments Partly Taxable Payments Taxation of Nonperiodic PaymentsFiguring the Taxable Amount Loans Treated as Distributions Transfers of Annuity Contracts Lump-Sum Distributions RolloversExceptions. H&r block com No tax withheld. H&r block com Partial rollovers. H&r block com Frozen deposits. H&r block com Reasonable period of time. H&r block com 20% Mandatory withholding. H&r block com How to report. H&r block com How to report. H&r block com Special rule for Roth IRAs and designated Roth accounts. H&r block com Special Additional TaxesTax on Early Distributions Tax on Excess Accumulation Survivors and BeneficiariesGuaranteed payments. H&r block com How To Get Tax HelpLow Income Taxpayer Clinics General Information Definitions. H&r block com   Some of the terms used in this publication are defined in the following paragraphs. H&r block com Pension. H&r block com   A pension is generally a series of definitely determinable payments made to you after you retire from work. H&r block com Pension payments are made regularly and are based on such factors as years of service and prior compensation. H&r block com Annuity. H&r block com   An annuity is a series of payments under a contract made at regular intervals over a period of more than one full year. H&r block com They can be either fixed (under which you receive a definite amount) or variable (not fixed). H&r block com You can buy the contract alone or with the help of your employer. H&r block com Qualified employee plan. H&r block com   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 and that meets Internal Revenue Code requirements. H&r block com It qualifies for special tax benefits, such as tax deferral for employer contributions and capital gain treatment or the 10-year tax option for lump-sum distributions (if participants qualify). H&r block com To determine whether your plan is a qualified plan, check with your employer or the plan administrator. H&r block com Qualified employee annuity. H&r block com   A qualified employee annuity is a retirement annuity purchased by an employer for an employee under a plan that meets Internal Revenue Code requirements. H&r block com Designated Roth account. H&r block com   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. H&r block com Elective deferrals that are designated as Roth contributions are included in your income. H&r block com However, qualified distributions (explained later) are not included in your income. H&r block com You should check with your plan administrator to determine if your plan will accept designated Roth contributions. H&r block com Tax-sheltered annuity plan. H&r block com   A tax-sheltered annuity plan (often referred to as a 403(b) plan or a tax-deferred annuity plan) is a retirement plan for employees of public schools and certain tax-exempt organizations. H&r block com Generally, a tax-sheltered annuity plan provides retirement benefits by purchasing annuity contracts for its participants. H&r block com Types of pensions and annuities. H&r block com   Pensions and annuities include the following types. H&r block com Fixed-period annuities. H&r block com   You receive definite amounts at regular intervals for a specified length of time. H&r block com Annuities for a single life. H&r block com   You receive definite amounts at regular intervals for life. H&r block com The payments end at death. H&r block com Joint and survivor annuities. H&r block com   The first annuitant receives a definite amount at regular intervals for life. H&r block com After he or she dies, a second annuitant receives a definite amount at regular intervals for life. H&r block com The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant. H&r block com Variable annuities. H&r block com   You receive payments that may vary in amount for a specified length of time or for life. H&r block com The amounts you receive may depend upon such variables as profits earned by the pension or annuity funds, cost-of-living indexes, or earnings from a mutual fund. H&r block com Disability pensions. H&r block com   You receive disability payments because you retired on disability and have not reached minimum retirement age. H&r block com More than one program. H&r block com   You may receive employee plan benefits from more than one program under a single trust or plan of your employer. H&r block com If you participate in more than one program, you may have to treat each as a separate pension or annuity contract, depending upon the facts in each case. H&r block com Also, you may be considered to have received more than one pension or annuity. H&r block com Your former employer or the plan administrator should be able to tell you if you have more than one contract. H&r block com Example. H&r block com Your employer set up a noncontributory profit-sharing plan for its employees. H&r block com The plan provides that the amount held in the account of each participant will be paid when that participant retires. H&r block com Your employer also set up a contributory defined benefit pension plan for its employees providing for the payment of a lifetime pension to each participant after retirement. H&r block com The amount of any distribution from the profit-sharing plan depends on the contributions (including allocated forfeitures) made for the participant and the earnings from those contributions. H&r block com Under the pension plan, however, a formula determines the amount of the pension benefits. H&r block com The amount of contributions is the amount necessary to provide that pension. H&r block com Each plan is a separate program and a separate contract. H&r block com If you get benefits from these plans, you must account for each separately, even though the benefits from both may be included in the same check. H&r block com Distributions from a designated Roth account are treated separately from other distributions from the plan. H&r block com Qualified domestic relations order (QDRO). H&r block com   A QDRO is a judgment, decree, or order relating to payment of child support, alimony, or marital property rights to a spouse, former spouse, child, or other dependent of a participant in a retirement plan. H&r block com The QDRO must contain certain specific information, such as the name and last known mailing address of the participant and each alternate payee, and the amount or percentage of the participant's benefits to be paid to each alternate payee. H&r block com A QDRO may not award an amount or form of benefit that is not available under the plan. H&r block com   A spouse or former spouse who receives part of the benefits from a retirement plan under a QDRO reports the payments received as if he or she were a plan participant. H&r block com The spouse or former spouse is allocated a share of the participant's cost (investment in the contract) equal to the cost times a fraction. H&r block com The numerator of the fraction is the present value of the benefits payable to the spouse or former spouse. H&r block com The denominator is the present value of all benefits payable to the participant. H&r block com   A distribution that is paid to a child or other dependent under a QDRO is taxed to the plan participant. H&r block com Variable Annuities The tax rules in this publication apply both to annuities that provide fixed payments and to annuities that provide payments that vary in amount based on investment results or other factors. H&r block com For example, they apply to commercial variable annuity contracts, whether bought by an employee retirement plan for its participants or bought directly from the issuer by an individual investor. H&r block com Under these contracts, the owner can generally allocate the purchase payments among several types of investment portfolios or mutual funds and the contract value is determined by the performance of those investments. H&r block com The earnings are not taxed until distributed either in a withdrawal or in annuity payments. H&r block com The taxable part of a distribution is treated as ordinary income. H&r block com Net investment income tax. H&r block com   Beginning in 2013, annuities under a nonqualified plan are included in calculating your net investment income for the net investment income tax (NIIT). H&r block com For information see the Instructions for Form 8960, Net Investment Income Tax — Individuals, Estates and Trusts. H&r block com For information on the tax treatment of a transfer or exchange of a variable annuity contract, see Transfers of Annuity Contracts under Taxation of Nonperiodic Payments, later. H&r block com Withdrawals. H&r block com   If you withdraw funds before your annuity starting date and your annuity is under a qualified retirement plan, a ratable part of the amount withdrawn is tax free. H&r block com The tax-free part is based on the ratio of your cost (investment in the contract) to your account balance under the plan. H&r block com   If your annuity is under a nonqualified plan (including a contract you bought directly from the issuer), the amount withdrawn is allocated first to earnings (the taxable part) and then to your cost (the tax-free part). H&r block com However, if you bought your annuity contract before August 14, 1982, a different allocation applies to the investment before that date and the earnings on that investment. H&r block com To the extent the amount withdrawn does not exceed that investment and earnings, it is allocated first to your cost (the tax-free part) and then to earnings (the taxable part). H&r block com   If you withdraw funds (other than as an annuity) on or after your annuity starting date, the entire amount withdrawn is generally taxable. H&r block com   The amount you receive in a full surrender of your annuity contract at any time is tax free to the extent of any cost that you have not previously recovered tax free. H&r block com The rest is taxable. H&r block com   For more information on the tax treatment of withdrawals, see Taxation of Nonperiodic Payments , later. H&r block com If you withdraw funds from your annuity before you reach age 59½, also see Tax on Early Distributions under Special Additional Taxes, later. H&r block com Annuity payments. H&r block com   If you receive annuity payments under a variable annuity plan or contract, you recover your cost tax free under either the Simplified Method or the General Rule, as explained under Taxation of Periodic Payments , later. H&r block com For a variable annuity paid under a qualified plan, you generally must use the Simplified Method. H&r block com For a variable annuity paid under a nonqualified plan (including a contract you bought directly from the issuer), you must use a special computation under the General Rule. H&r block com For more information, see Variable annuities in Publication 939 under Computation Under the General Rule. H&r block com Death benefits. H&r block com    If you receive a single-sum distribution from a variable annuity contract because of the death of the owner or annuitant, the distribution is generally taxable only to the extent it is more than the unrecovered cost of the contract. H&r block com If you choose to receive an annuity, the payments are subject to tax as described above. H&r block com If the contract provides a joint and survivor annuity and the primary annuitant had received annuity payments before death, you figure the tax-free part of annuity payments you receive as the survivor in the same way the primary annuitant did. H&r block com See Survivors and Beneficiaries , later. H&r block com Section 457 Deferred Compensation Plans 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. H&r block com 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. H&r block com You are generally taxed on amounts deferred in an eligible state or local government plan only when they are distributed from the plan. H&r block com You are taxed on amounts deferred in an eligible tax-exempt organization plan when they are distributed or otherwise made available to you. H&r block com Your 457(b) plan may have a designated Roth account option. H&r block com If so, you may be able to roll over amounts to the designated Roth account or make contributions. H&r block com Elective deferrals to a designated Roth account are included in your income. H&r block com Qualified distributions (explained later) are not included in your income. H&r block com See the Designated Roth accounts discussion under Taxation of Periodic Payments, later. H&r block com This publication covers the tax treatment of benefits under eligible section 457 plans, but it does not cover the treatment of deferrals. H&r block com For information on deferrals under section 457 plans, see Retirement Plan Contributions under Employee Compensation in Publication 525. H&r block com Is your plan eligible?   To find out if your plan is an eligible plan, check with your employer. H&r block com Plans that are not eligible section 457 plans include the following: Bona fide vacation leave, sick leave, compensatory time, severance pay, disability pay, or death benefit plans. H&r block com Nonelective deferred compensation plans for nonemployees (independent contractors). H&r block com Deferred compensation plans maintained by churches. H&r block com Length of service award plans for bona fide volunteer firefighters and emergency medical personnel. H&r block com An exception applies if the total amount paid to a volunteer exceeds $3,000 for any year of service. H&r block com Disability Pensions 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. H&r block com You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A or on line 8 of Form 1040NR until you reach minimum retirement age. H&r block com Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. H&r block com You may be entitled to a tax credit if you were permanently and totally disabled when you retired. H&r block com For information on this credit, see Publication 524. H&r block com Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. H&r block com Report the payments on Form 1040, lines 16a and 16b; Form 1040A, lines 12a and 12b; or on Form 1040NR, lines 17a and 17b. H&r block com 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. H&r block com For more information about payments to survivors of terrorist attacks, see Publication 3920, Tax Relief for Victims of Terrorist Attacks. H&r block com Insurance Premiums for Retired Public Safety Officers If you are an eligible retired public safety officer (law enforcement officer, firefighter, chaplain, or member of a rescue squad or ambulance crew), you can elect to exclude from income distributions made from your eligible retirement plan that are used to pay the premiums for accident or health insurance or long-term care insurance. H&r block com The premiums can be for coverage for you, your spouse, or dependents. H&r block com The distribution must be made directly from the plan to the insurance provider. H&r block com You can exclude from income the smaller of the amount of the insurance premiums or $3,000. H&r block com You can only make this election for amounts that would otherwise be included in your income. H&r block com The amount excluded from your income cannot be used to claim a medical expense deduction. H&r block com An eligible retirement plan is a governmental plan that is: a qualified trust, a section 403(a) plan, a section 403(b) annuity, or a section 457(b) plan. H&r block com If you make this election, reduce the otherwise taxable amount of your pension or annuity by the amount excluded. H&r block com The amount shown in box 2a of Form 1099-R does not reflect this exclusion. H&r block com Report your total distributions on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. H&r block com Report the taxable amount on Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. H&r block com Enter “PSO” next to the appropriate line on which you report the taxable amount. H&r block com If you are retired on disability and reporting your disability pension on line 7 of Form 1040 or Form 1040A, or line 8 of Form 1040NR, include only the taxable amount on that line and enter “PSO” and the amount excluded on the dotted line next to the applicable line. H&r block com Railroad Retirement Benefits Benefits paid under the Railroad Retirement Act fall into two categories. H&r block com These categories are treated differently for income tax purposes. H&r block com The first category is the amount of tier 1 railroad retirement benefits that equals the social security benefit that a railroad employee or beneficiary would have been entitled to receive under the social security system. H&r block com This part of the tier 1 benefit is the social security equivalent benefit (SSEB) and you treat it for tax purposes like social security benefits. H&r block com If you received, repaid, or had tax withheld from the SSEB portion of tier 1 benefits during 2013, you will receive Form RRB-1099, Payments by the Railroad Retirement Board (or Form RRB-1042S, Statement for Nonresident Alien Recipients of Payments by the Railroad Retirement Board, if you are a nonresident alien) from the U. H&r block com S. H&r block com Railroad Retirement Board (RRB). H&r block com For more information about the tax treatment of the SSEB portion of tier 1 benefits and Forms RRB-1099 and RRB-1042S, see Publication 915. H&r block com The second category contains the rest of the tier 1 railroad retirement benefits, called the non-social security equivalent benefit (NSSEB). H&r block com It also contains any tier 2 benefit, vested dual benefit (VDB), and supplemental annuity benefit. H&r block com Treat this category of benefits, shown on Form RRB-1099-R, as an amount received from a qualified employee plan. H&r block com This allows for the tax-free (nontaxable) recovery of employee contributions from the tier 2 benefits and the NSSEB part of the tier 1 benefits. H&r block com (The NSSEB and tier 2 benefits, less certain repayments, are combined into one amount called the Contributory Amount Paid on Form RRB-1099-R. H&r block com ) Vested dual benefits and supplemental annuity benefits are non-contributory pensions and are fully taxable. H&r block com See Taxation of Periodic Payments , later, for information on how to report your benefits and how to recover the employee contributions tax free. H&r block com Form RRB-1099-R is used for U. H&r block com S. H&r block com citizens, resident aliens, and nonresident aliens. H&r block com Nonresident aliens. H&r block com   A nonresident alien is an individual who is not a citizen or a resident alien of the United States. H&r block com Nonresident aliens are subject to mandatory U. H&r block com S. H&r block com tax withholding unless exempt under a tax treaty between the United States and their country of legal residency. H&r block com A tax treaty exemption may reduce or eliminate tax withholding from railroad retirement benefits. H&r block com See Tax withholding next for more information. H&r block com   If you are a nonresident alien and your tax withholding rate changed or your country of legal residence changed during the year, you may receive more than one Form RRB-1042S or Form RRB-1099-R. H&r block com To determine your total benefits paid or repaid and total tax withheld for the year, you should add the amounts shown on all forms you received for that year. H&r block com For information on filing requirements for aliens, see Publication 519, U. H&r block com S. H&r block com Tax Guide for Aliens. H&r block com For information on tax treaties between the United States and other countries that may reduce or eliminate U. H&r block com S. H&r block com tax on your benefits, see Publication 901, U. H&r block com S. H&r block com Tax Treaties. H&r block com Tax withholding. H&r block com   To request or change your income tax withholding from SSEB payments, U. H&r block com S. H&r block com citizens should contact the IRS for Form W-4V, Voluntary Withholding Request, and file it with the RRB. H&r block com To elect, revoke, or change your income tax withholding from NSSEB, tier 2, VDB, and supplemental annuity payments received, use Form RRB W-4P, Withholding Certificate for Railroad Retirement Payments. H&r block com If you are a nonresident alien or a U. H&r block com S. H&r block com citizen living abroad, you should provide Form RRB-1001, Nonresident Questionnaire, to the RRB to furnish citizenship and residency information and to claim any treaty exemption from U. H&r block com S. H&r block com tax withholding. H&r block com Nonresident U. H&r block com S. H&r block com citizens cannot elect to be exempt from withholding on payments delivered outside of the U. H&r block com S. H&r block com Help from the RRB. H&r block com   To request an RRB form or to get help with questions about an RRB benefit, you should contact your nearest RRB field office if you reside in the United States (call 1-877-772-5772 for the nearest field office) or U. H&r block com S. H&r block com consulate/Embassy if you reside outside the United States. H&r block com You can visit the RRB on the Internet at www. H&r block com rrb. H&r block com gov. H&r block com Form RRB-1099-R. H&r block com   The following discussion explains the items shown on Form RRB-1099-R. H&r block com The amounts shown on this form are before any deduction for: Federal income tax withholding, Medicare premiums, Legal process garnishment payments, Recovery of a prior year overpayment of an NSSEB, tier 2 benefit, VDB, or supplemental annuity benefit, or Recovery of Railroad Unemployment Insurance Act benefits received while awaiting payment of your railroad retirement annuity. H&r block com   The amounts shown on this form are after any offset for: Social Security benefits, Age reduction, Public Service pensions or public disability benefits, Dual railroad retirement entitlement under another RRB claim number, Work deductions, Legal process partition deductions, Actuarial adjustment, Annuity waiver, or Recovery of a current-year overpayment of NSSEB, tier 2, VDB, or supplemental annuity benefits. H&r block com   The amounts shown on Form RRB-1099-R do not reflect any special rules, such as capital gain treatment or the special 10-year tax option for lump-sum payments, or tax-free rollovers. H&r block com To determine if any of these rules apply to your benefits, see the discussions about them later. H&r block com   Generally, amounts shown on your Form RRB-1099-R are considered a normal distribution. H&r block com Use distribution code “7” if you are asked for a distribution code. H&r block com Distribution codes are not shown on Form RRB-1099-R. H&r block com   There are three copies of this form. H&r block com Copy B is to be included with your income tax return if federal income tax is withheld. H&r block com Copy C is for your own records. H&r block com Copy 2 is filed with your state, city, or local income tax return, when required. H&r block com See the illustrated Copy B (Form RRB-1099-R) above. H&r block com       Each beneficiary will receive his or her own Form RRB-1099-R. H&r block com If you receive benefits on more than one railroad retirement record, you may get more than one Form RRB-1099-R. H&r block com So that you get your form timely, make sure the RRB always has your current mailing address. H&r block com Please click here for the text description of the image. H&r block com Form RRB-1099-R Box 1—Claim Number and Payee Code. H&r block com   Your claim number is a six- or nine-digit number preceded by an alphabetical prefix. H&r block com This is the number under which the RRB paid your benefits. H&r block com Your payee code follows your claim number and is the last number in this box. H&r block com It is used by the RRB to identify you under your claim number. H&r block com In all your correspondence with the RRB, be sure to use the claim number and payee code shown in this box. H&r block com Box 2—Recipient's Identification Number. H&r block com   This is the recipient's U. H&r block com S. H&r block com taxpayer identification number. H&r block com It is the social security number (SSN), individual taxpayer identification number (ITIN), or employer identification number (EIN), if known, for the person or estate listed as the recipient. H&r block com If you are a resident or nonresident alien who must furnish a taxpayer identification number to the IRS and are not eligible to obtain an SSN, use Form W-7, Application for IRS Individual Taxpayer Identification Number, to apply for an ITIN. H&r block com The Instructions for Form W-7 explain how and when to apply. H&r block com Box 3—Employee Contributions. H&r block com   This is the amount of taxes withheld from the railroad employee's earnings that exceeds the amount of taxes that would have been withheld had the earnings been covered under the social security system. H&r block com This amount is the employee's cost that you use to figure the tax-free part of the NSSEB and tier 2 benefit you received (the amount shown in box 4). H&r block com (For information on how to figure the tax-free part, see Partly Taxable Payments under Taxation of Periodic Payments, later. H&r block com ) The amount shown is the total employee contribution amount, not reduced by any amounts that the RRB calculated as previously recovered. H&r block com It is the latest amount reported for 2013 and may have increased or decreased from a previous Form RRB-1099-R. H&r block com If this amount has changed, the change is retroactive. H&r block com You may need to refigure the tax-free part of your NSSEB/tier 2 benefit for 2013 and prior tax years. H&r block com If this box is blank, it means that the amount of your NSSEB and tier 2 payments shown in box 4 is fully taxable. H&r block com    If you had a previous annuity entitlement that ended and you are figuring the tax-free part of your NSSEB/tier 2 benefit for your current annuity entitlement, you should contact the RRB for confirmation of your correct employee contribution amount. H&r block com Box 4—Contributory Amount Paid. H&r block com   This is the gross amount of the NSSEB and tier 2 benefit you received in 2013, less any 2013 benefits you repaid in 2013. H&r block com (Any benefits you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. H&r block com ) This amount is the total contributory pension paid in 2013. H&r block com It may be partly taxable and partly tax free or fully taxable. H&r block com If you determine you are eligible to compute a tax-free part as explained later in Partly Taxable Payments under Taxation of Periodic Payments, use the latest reported employee contribution amount shown in box 3 as the cost. H&r block com Box 5—Vested Dual Benefit. H&r block com   This is the gross amount of vested dual benefit (VDB) payments paid in 2013, less any 2013 VDB payments you repaid in 2013. H&r block com It is fully taxable. H&r block com VDB payments you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. H&r block com Note. H&r block com The amounts shown in boxes 4 and 5 may represent payments for 2013 and/or other years after 1983. H&r block com Box 6—Supplemental Annuity. H&r block com   This is the gross amount of supplemental annuity benefits paid in 2013, less any 2013 supplemental annuity benefits you repaid in 2013. H&r block com It is fully taxable. H&r block com Supplemental annuity benefits you repaid in 2013 for an earlier year or for an unknown year are shown in box 8. H&r block com Box 7—Total Gross Paid. H&r block com   This is the sum of boxes 4, 5, and 6. H&r block com The amount represents the total pension paid in 2013. H&r block com Include this amount on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. H&r block com Box 8—Repayments. H&r block com   This amount represents any NSSEB, tier 2 benefit, VDB, and supplemental annuity benefit you repaid to the RRB in 2013 for years before 2013 or for unknown years. H&r block com The amount shown in this box has not been deducted from the amounts shown in boxes 4, 5, and 6. H&r block com It only includes repayments of benefits that were taxable to you. H&r block com This means it only includes repayments in 2013 of NSSEB benefits paid after 1985, tier 2 and VDB benefits paid after 1983, and supplemental annuity benefits paid in any year. H&r block com If you included the benefits in your income in the year you received them, you may be able to deduct the repaid amount. H&r block com For more information about repayments, see Repayment of benefits received in an earlier year , later. H&r block com    You may have repaid an overpayment of benefits by returning a payment, by making a payment, or by having an amount withheld from your railroad retirement annuity payment. H&r block com Box 9—Federal Income Tax Withheld. H&r block com   This is the total federal income tax withheld from your NSSEB, tier 2 benefit, VDB, and supplemental annuity benefit. H&r block com Include this on your income tax return as tax withheld. H&r block com If you are a nonresident alien and your tax withholding rate and/or country of legal residence changed during 2013, you will receive more than one Form RRB-1099-R for 2013. H&r block com Determine the total amount of U. H&r block com S. H&r block com federal income tax withheld from your 2013 RRB NSSEB, tier 2, VDB, and supplemental annuity payments by adding the amounts in box 9 of all original 2013 Forms RRB-1099-R, or the latest corrected or duplicate Forms RRB-1099-R you receive. H&r block com Box 10—Rate of Tax. H&r block com   If you are taxed as a U. H&r block com S. H&r block com citizen or resident alien, this box does not apply to you. H&r block com If you are a nonresident alien, an entry in this box indicates the rate at which tax was withheld on the NSSEB, tier 2, VDB, and supplemental annuity payments that were paid to you in 2013. H&r block com If you are a nonresident alien whose tax was withheld at more than one rate during 2013, you will receive a separate Form RRB-1099-R for each rate change during 2013. H&r block com Box 11—Country. H&r block com   If you are taxed as a U. H&r block com S. H&r block com citizen or resident alien, this box does not apply to you. H&r block com If you are a nonresident alien, an entry in this box indicates the country of which you were a resident for tax purposes at the time you received railroad retirement payments in 2013. H&r block com If you are a nonresident alien who was a resident of more than one country during 2013, you will receive a separate Form RRB-1099-R for each country of residence during 2013. H&r block com Box 12—Medicare Premium Total. H&r block com   This is for information purposes only. H&r block com The amount shown in this box represents the total amount of Part B Medicare premiums deducted from your railroad retirement annuity payments in 2013. H&r block com Medicare premium refunds are not included in the Medicare total. H&r block com The Medicare total is normally shown on Form RRB-1099 (if you are a citizen or resident alien of the United States) or Form RRB-1042S (if you are a nonresident alien). H&r block com However, if Form RRB-1099 or Form RRB-1042S is not required for 2013, then this total will be shown on Form RRB-1099-R. H&r block com If your Medicare premiums were deducted from your social security benefits, paid by a third party, refunded to you, and/or you paid the premiums by direct billing, your Medicare total will not be shown in this box. H&r block com Repayment of benefits received in an earlier year. H&r block com   If you had to repay any railroad retirement benefits that you had included in your income in an earlier year because at that time you thought you had an unrestricted right to it, you can deduct the amount you repaid in the year in which you repaid it. H&r block com   If you repaid $3,000 or less in 2013, deduct it on Schedule A (Form 1040), line 23. H&r block com The 2%-of-adjusted-gross-income limit applies to this deduction. H&r block com You cannot take this deduction if you file Form 1040A. H&r block com    If you repaid more than $3,000 in 2013, you can either take a deduction for the amount repaid on Schedule A (Form 1040), line 28 or you can take a credit against your tax. H&r block com For more information, see Repayments in Publication 525. H&r block com Withholding Tax and Estimated Tax Your retirement plan distributions are subject to federal income tax withholding. H&r block com However, you can choose not to have tax withheld on payments you receive unless they are eligible rollover distributions. H&r block com (These are distributions, described later under Rollovers, that are eligible for rollover treatment but are not paid directly to another qualified retirement plan or to a traditional IRA. H&r block com ) If you choose not to have tax withheld or if you do not have enough tax withheld, you may have to make estimated tax payments. H&r block com See Estimated tax , later. H&r block com The withholding rules apply to the taxable part of payments you receive from: An employer pension, annuity, profit-sharing, or stock bonus plan, Any other deferred compensation plan, A traditional individual retirement arrangement (IRA), or A commercial annuity. H&r block com For this purpose, a commercial annuity means an annuity, endowment, or life insurance contract issued by an insurance company. H&r block com There will be no withholding on any part of a distribution where it is reasonable to believe that it will not be includible in gross income. H&r block com Choosing no withholding. H&r block com   You can choose not to have income tax withheld from retirement plan payments unless they are eligible rollover distributions. H&r block com You can make this choice on Form W-4P for periodic and nonperiodic payments. H&r block com This choice generally remains in effect until you revoke it. H&r block com   The payer will ignore your choice not to have tax withheld if: You do not give the payer your social security number (in the required manner), or The IRS notifies the payer, before the payment is made, that you gave an incorrect social security number. H&r block com   To choose not to have tax withheld, a U. H&r block com S. H&r block com citizen or resident alien must give the payer a home address in the United States or its possessions. H&r block com Without that address, the payer must withhold tax. H&r block com For example, the payer has to withhold tax if the recipient has provided a U. H&r block com S. H&r block com address for a nominee, trustee, or agent to whom the benefits are delivered, but has not provided his or her own U. H&r block com S. H&r block com home address. H&r block com   If you do not give the payer a home address in the United States or its possessions, you can choose not to have tax withheld only if you certify to the payer that you are not a U. H&r block com S. H&r block com citizen, a U. H&r block com S. H&r block com resident alien, or someone who left the country to avoid tax. H&r block com But if you so certify, you may be subject to the 30% flat rate withholding that applies to nonresident aliens. H&r block com This 30% rate will not apply if you are exempt or subject to a reduced rate by treaty. H&r block com For details, get Publication 519. H&r block com Periodic payments. H&r block com   Unless you choose no withholding, your annuity or similar periodic payments (other than eligible rollover distributions) will be treated like wages for withholding purposes. H&r block com 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). H&r block com You should give the payer a completed withholding certificate (Form W-4P or a similar form provided by the payer). H&r block com If you do not, tax will be withheld as if you were married and claiming three withholding allowances. H&r block com   Tax will be withheld as if you were single and were claiming no withholding allowances if: You do not give the payer your social security number (in the required manner), or The IRS notifies the payer (before any payment is made) that you gave an incorrect social security number. H&r block com   You must file a new withholding certificate to change the amount of withholding. H&r block com Nonperiodic distributions. H&r block com    Unless you choose no withholding, the withholding rate for a nonperiodic distribution (a payment other than a periodic payment) that is not an eligible rollover distribution is 10% of the distribution. H&r block com You can also ask the payer to withhold an additional amount using Form W-4P. H&r block com The part of any loan treated as a distribution (except an offset amount to repay the loan), explained later, is subject to withholding under this rule. H&r block com Eligible rollover distribution. H&r block com    If you receive an eligible rollover distribution, 20% of it generally will be withheld for income tax. H&r block com You cannot choose not to have tax withheld from an eligible rollover distribution. H&r block com However, tax will not be withheld if you have the plan administrator pay the eligible rollover distribution directly to another qualified plan or an IRA in a direct rollover. H&r block com For more information about eligible rollover distributions, see Rollovers , later. H&r block com Estimated tax. H&r block com   Your estimated tax is the total of your expected income tax, self-employment tax, and certain other taxes for the year, minus your expected credits and withheld tax. H&r block com Generally, you must make estimated tax payments for 2014 if you expect to owe at least $1,000 in tax (after subtracting your withholding and credits) and you expect your withholding and credits to be less than the smaller of: 90% of the tax to be shown on your 2014 return, or 100% of the tax shown on your 2013 return. H&r block com If your adjusted gross income for 2013 was more than $150,000 ($75,000 if your filing status for 2014 is married filing separately), substitute 110% for 100% in (2) above. H&r block com For more information, get Publication 505, Tax Withholding and Estimated Tax. H&r block com In figuring your withholding or estimated tax, remember that a part of your monthly social security or equivalent tier 1 railroad retirement benefits may be taxable. H&r block com See Publication 915. H&r block com You can choose to have income tax withheld from those benefits. H&r block com Use Form W-4V to make this choice. H&r block com Cost (Investment in the Contract) Distributions from your pension or annuity plan may include amounts treated as a recovery of your cost (investment in the contract). H&r block com If any part of a distribution is treated as a recovery of your cost under the rules explained in this publication, that part is tax free. H&r block com Therefore, the first step in figuring how much of a distribution is taxable is to determine the cost of your pension or annuity. H&r block com In general, your cost is your net investment in the contract as of the annuity starting date (or the date of the distribution, if earlier). H&r block com To find this amount, you must first figure the total premiums, contributions, or other amounts you paid. H&r block com This includes the amounts your employer contributed that were taxable to you when paid. H&r block com (However, see Foreign employment contributions , later. H&r block com ) It does not include amounts withheld from your pay on a tax-deferred basis (money that was taken out of your gross pay before taxes were deducted). H&r block com It also does not include amounts you contributed for health and accident benefits (including any additional premiums paid for double indemnity or disability benefits). H&r block com From this total cost you must subtract the following amounts. H&r block com Any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income and that you received by the later of the annuity starting date or the date on which you received your first payment. H&r block com Any other tax-free amounts you received under the contract or plan by the later of the dates in (1). H&r block com If you must use the Simplified Method for your annuity payments, the tax-free part of any single-sum payment received in connection with the start of the annuity payments, regardless of when you received it. H&r block com (See Simplified Method , later, for information on its required use. H&r block com ) If you use the General Rule for your annuity payments, the value of the refund feature in your annuity contract. H&r block com (See General Rule , later, for information on its use. H&r block com ) Your annuity contract has a refund feature if the annuity payments are for your life (or the lives of you and your survivor) and payments in the nature of a refund of the annuity's cost will be made to your beneficiary or estate if all annuitants die before a stated amount or a stated number of payments are made. H&r block com For more information, see Publication 939. H&r block com The tax treatment of the items described in (1) through (3) is discussed later under Taxation of Nonperiodic Payments . H&r block com Form 1099-R. H&r block com If you began receiving periodic payments of a life annuity in 2013, the payer should show your total contributions to the plan in box 9b of your 2013 Form 1099-R. H&r block com Annuity starting date defined. H&r block com   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. H&r block com Example. H&r block com 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. H&r block com The annuity starting date is July 1. H&r block com This is the date you use in figuring the cost of the contract and selecting the appropriate number from Table 1 for line 3 of the Simplified Method Worksheet. H&r block com Designated Roth accounts. H&r block com   Your cost in these accounts is your designated Roth contributions that were included in your income as wages subject to applicable withholding requirements. H&r block com Your cost will also include any in-plan Roth rollovers you included in income. H&r block com Foreign employment contributions. H&r block com   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. H&r block com 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 (not including the foreign earned income exclusion) had they been paid directly to you, or Contributions after 1996 by your employer if you performed the services of a foreign missionary (a duly ordained, commissioned, or licensed minister of a church or a lay person) but only if the contributions would be excludible from your gross income had they been paid directly to you. H&r block com Foreign employment contributions while a nonresident alien. H&r block com   In determining your cost, special rules apply if you are a U. H&r block com S. H&r block com citizen or resident alien who received distributions in 2013 from a plan to which contributions were made while you were a nonresident alien. H&r block com Your contributions and your employer's contributions are not included in your cost if the contribution: Was made based on compensation which was for services performed outside the United States while you were a nonresident alien, and Was 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 paid as cash compensation when the services were performed. H&r block com Taxation of Periodic Payments This section explains how the periodic payments you receive from a pension or annuity plan are taxed. H&r block com 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). H&r block com These payments are also known as amounts received as an annuity. H&r block com If you receive an amount from your plan that is not a periodic payment, see Taxation of Nonperiodic Payments , later. H&r block com In general, you can recover the cost of your pension or annuity tax free over the period you are to receive the payments. H&r block com The amount of each payment that is more than the part that represents your cost is taxable (however, see Insurance Premiums for Retired Public Safety Officers , earlier). H&r block com Designated Roth accounts. H&r block com   If you receive a qualified distribution from a designated Roth account, the distribution is not included in your gross income. H&r block com This applies to both your cost in the account and income earned on that account. H&r block com A qualified distribution is generally a distribution that is: Made after a 5-tax-year period of participation, and Made on or after the date you reach age 59½, made to a beneficiary or your estate on or after your death, or attributable to your being disabled. H&r block com   If the distribution is not a qualified distribution, the rules discussed in this section apply. H&r block com The designated Roth account is treated as a separate contract. H&r block com Period of participation. H&r block com   The 5-tax-year period of participation is the 5-tax-year period beginning with the first tax year for which the participant made a designated Roth contribution to the plan. H&r block com Therefore, for designated Roth contributions made for 2013, the first year for which a qualified distribution can be made is 2018. H&r block com   However, if a direct rollover is made to the plan from a designated Roth account under another plan, the 5-tax-year period for the recipient plan begins with the first tax year for which the participant first had designated Roth contributions made to the other plan. H&r block com   Your 401(k), 403(b), or 457(b) plan may permit you to roll over amounts from those plans to a designated Roth account within the same plan. H&r block com This is known as an in-plan Roth rollover. H&r block com For more details, see In-plan Roth rollovers , later. H&r block com Fully Taxable Payments The pension or annuity payments that you receive are fully taxable if you have no cost in the contract because any of the following situations applies to you (however, see Insurance Premiums for Retired Public Safety Officers , earlier). H&r block com You did not pay anything or are not considered to have paid anything for your pension or annuity. H&r block com Amounts withheld from your pay on a tax-deferred basis are not considered part of the cost of the pension or annuity payment. H&r block com Your employer did not withhold contributions from your salary. H&r block com You got back all of your contributions tax free in prior years (however, see Exclusion not limited to cost under Partly Taxable Payments, later). H&r block com Report the total amount you got on Form 1040, line 16b; Form 1040A, line 12b; or on Form 1040NR, line 17b. H&r block com You should make no entry on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. H&r block com Deductible voluntary employee contributions. H&r block com   Distributions you receive that are based on your accumulated deductible voluntary employee contributions are generally fully taxable in the year distributed to you. H&r block com Accumulated deductible voluntary employee contributions include net earnings on the contributions. H&r block com If distributed as part of a lump sum, they do not qualify for the 10-year tax option or capital gain treatment, explained later. H&r block com Partly Taxable Payments If you have a cost to recover from your pension or annuity plan (see Cost (Investment in the Contract) , earlier), you can exclude part of each annuity payment from income as a recovery of your cost. H&r block com This tax-free part of the payment is figured when your annuity starts and remains the same each year, even if the amount of the payment changes. H&r block com The rest of each payment is taxable (however, see Insurance Premiums for Retired Public Safety Officers , earlier). H&r block com You figure the tax-free part of the payment using one of the following methods. H&r block com Simplified Method. H&r block com You generally must use this method if your annuity is paid under a qualified plan (a qualified employee plan, a qualified employee annuity, or a tax-sheltered annuity plan or contract). H&r block com You cannot use this method if your annuity is paid under a nonqualified plan. H&r block com General Rule. H&r block com You must use this method if your annuity is paid under a nonqualified plan. H&r block com You generally cannot use this method if your annuity is paid under a qualified plan. H&r block com You determine which method to use when you first begin receiving your annuity, and you continue using it each year that you recover part of your cost. H&r block com If you had more than one partly taxable pension or annuity, figure the tax-free part and the taxable part of each separately. H&r block com Qualified plan annuity starting before November 19, 1996. H&r block com   If your annuity is paid under a qualified plan and your annuity starting date (defined earlier under Cost (Investment in the Contract) ) is after July 1, 1986, and before November 19, 1996, you could have chosen to use either the Simplified Method or the General Rule. H&r block com If your annuity starting date is before July 2, 1986, you use the General Rule unless your annuity qualified for the Three-Year Rule. H&r block com If you used the Three-Year Rule (which was repealed for annuities starting after July 1, 1986), your annuity payments are generally now fully taxable. H&r block com Exclusion limit. H&r block com   Your annuity starting date determines the total amount of annuity payments that you can exclude from income over the years. H&r block com Once your annuity starting date is determined, it does not change. H&r block com 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. H&r block com That recovery period begins on your annuity starting date and is not affected by the date you first complete the worksheet. H&r block com Exclusion limited to cost. H&r block com   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. H&r block com 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. H&r block com This deduction is not subject to the 2%-of-adjusted-gross-income limit. H&r block com Example 1. H&r block com Your annuity starting date is after 1986, and you exclude $100 a month ($1,200 a year) under the Simplified Method. H&r block com The total cost of your annuity is $12,000. H&r block com Your exclusion ends when you have recovered your cost tax free, that is, after 10 years (120 months). H&r block com After that, your annuity payments are generally fully taxable. H&r block com Example 2. H&r block com The facts are the same as in Example 1, except you die (with no surviving annuitant) after the eighth year of retirement. H&r block com You have recovered tax free only $9,600 (8 × $1,200) of your cost. H&r block com An itemized deduction for your unrecovered cost of $2,400 ($12,000 – $9,600) can be taken on your final return. H&r block com Exclusion not limited to cost. H&r block com   If your annuity starting date is before 1987, you can continue to take your monthly exclusion for as long as you receive your annuity. H&r block com 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. H&r block com The total exclusion may be more than your cost. H&r block com 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. H&r block com 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. H&r block com For any other annuity, this number is the number of monthly annuity payments under the contract. H&r block com Who must use the Simplified Method. H&r block com   You must use the Simplified Method if your annuity starting date is after November 18, 1996, and you meet both of the following conditions. H&r block com You receive your pension or annuity payments from any of the following plans. H&r block com A qualified employee plan. H&r block com A qualified employee annuity. H&r block com A tax-sheltered annuity plan (403(b) plan). H&r block com On your annuity starting date, at least one of the following conditions applies to you. H&r block com You are under age 75. H&r block com You are entitled to less than 5 years of guaranteed payments. H&r block com Guaranteed payments. H&r block com   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. H&r block com 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. H&r block com Annuity starting before November 19, 1996. H&r block com   If your annuity starting date is after July 1, 1986, and before November 19, 1996, and you chose to use the Simplified Method, you must continue to use it each year that you recover part of your cost. H&r block com You could have chosen to use the Simplified Method if your annuity is payable for your life (or the lives of you and your survivor annuitant) and you met both of the conditions listed earlier under Who must use the Simplified Method . H&r block com Who cannot use the Simplified Method. H&r block com   You cannot use the Simplified Method if you receive your pension or annuity from a nonqualified plan or otherwise do not meet the conditions described in the preceding discussion. H&r block com See General Rule , later. H&r block com How to use the Simplified Method. H&r block com    Complete Worksheet A in the back of this publication to figure your taxable annuity for 2013. H&r block com Be sure to keep the completed worksheet; it will help you figure your taxable annuity next year. H&r block com   To complete line 3 of the worksheet, you must determine the total number of expected monthly payments for your annuity. H&r block com How you do this depends on whether the annuity is for a single life, multiple lives, or a fixed period. H&r block com For this purpose, treat an annuity that is payable over the life of an annuitant as payable for that annuitant's life even if the annuity has a fixed-period feature or also provides a temporary annuity payable to the annuitant's child under age 25. H&r block com    You do not need to complete line 3 of the worksheet or make the computation on line 4 if you received annuity payments last year and used last year's worksheet to figure your taxable annuity. H&r block com Instead, enter the amount from line 4 of last year's worksheet on line 4 of this year's worksheet. H&r block com Single-life annuity. H&r block com   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. H&r block com Enter on line 3 the number shown for your age on your annuity starting date. H&r block com This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. H&r block com Multiple-lives annuity. H&r block com   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. H&r block com Enter on line 3 the number shown for the annuitants' combined ages on the annuity starting date. H&r block com For an annuity payable to you as the primary annuitant and to more than one survivor annuitant, combine your age and the age of the youngest survivor annuitant. H&r block com For an annuity that has no primary annuitant and is payable to you and others as survivor annuitants, combine the ages of the oldest and youngest annuitants. H&r block com Do not treat as a survivor annuitant anyone whose entitlement to payments depends on an event other than the primary annuitant's death. H&r block com   However, if your annuity starting date is before 1998, do not use Table 2 and do not combine the annuitants' ages. H&r block com Instead, you must use Table 1 at the bottom of the worksheet and enter on line 3 the number shown for the primary annuitant's age on the annuity starting date. H&r block com This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. H&r block com Fixed-period annuity. H&r block com   If your annuity does not depend in whole or in part on anyone's life expectancy, the total number of expected monthly payments to enter on line 3 of the worksheet is the number of monthly annuity payments under the contract. H&r block com Line 6. H&r block com   The amount on line 6 should include all amounts that could have been recovered in prior years. H&r block com If you did not recover an amount in a prior year, you may be able to amend your returns for the affected years. H&r block com Example. H&r block com Bill Smith, age 65, began receiving retirement benefits in 2013 under a joint and survivor annuity. H&r block com Bill's annuity starting date is January 1, 2013. H&r block com The benefits are to be paid for the joint lives of Bill and his wife, Kathy, age 65. H&r block com Bill had contributed $31,000 to a qualified plan and had received no distributions before the annuity starting date. H&r block com 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. H&r block com 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. H&r block com 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 Worksheet A in completing line 3 of the worksheet. H&r block com His completed worksheet is shown later. H&r block com Bill's tax-free monthly amount is $100 ($31,000 ÷ 310) as shown on line 4 of the worksheet. H&r block com Upon Bill's death, if Bill has not recovered the full $31,000 investment, Kathy will also exclude $100 from her $600 monthly payment. H&r block com The full amount of any annuity payments received after 310 payments are paid must be included in gross income. H&r block com 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. H&r block com This deduction is not subject to the 2%-of-adjusted-gross-income limit. H&r block com Worksheet A. H&r block com Simplified Method Worksheet for Bill Smith 1. H&r block com Enter the total pension or annuity payments received this year. H&r block com Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a 1. H&r block com $14,400 2. H&r block com Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion. H&r block com * See Cost (Investment in the Contract) , earlier 2. H&r block com 31,000   Note. H&r block com 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). H&r block com Otherwise, go to line 3. H&r block com     3. H&r block com Enter the appropriate number from Table 1 below. H&r block com 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. H&r block com 310 4. H&r block com Divide line 2 by the number on line 3 4. H&r block com 100 5. H&r block com Multiply line 4 by the number of months for which this year's payments were made. H&r block com If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. H&r block com Otherwise, go to line 6 5. H&r block com 1,200 6. H&r block com Enter any amount previously recovered tax free in years after 1986. H&r block com This is the amount shown on line 10 of your worksheet for last year 6. H&r block com -0- 7. H&r block com Subtract line 6 from line 2 7. H&r block com 31,000 8. H&r block com Enter the smaller of line 5 or line 7 8. H&r block com 1,200 9. H&r block com Taxable amount for year. H&r block com Subtract line 8 from line 1. H&r block com Enter the result, but not less than zero. H&r block com Also, add this amount to the total for Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. H&r block com Note: If your Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. H&r block com If you are a retired public safety officer, see Insurance Premiums for Retired Public Safety Officers , earlier, before entering an amount on your tax return 9. H&r block com $13,200 10. H&r block com Was your annuity starting date before 1987? □ Yes. H&r block com STOP. H&r block com Do not complete the rest of this worksheet. H&r block com  ☑ No. H&r block com Add lines 6 and 8. H&r block com This is the amount you have recovered tax free through 2013. H&r block com You will need this number if you need to fill out this worksheet next year 10. H&r block com 1,200 11. H&r block com Balance of cost to be recovered. H&r block com Subtract line 10 from line 2. H&r block com If zero, you will not have to complete this worksheet next year. H&r block com The payments you receive next year will generally be fully taxable 11. H&r block com $29,800         * A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996. H&r block com           Table 1 for Line 3 Above       AND your annuity starting date was—     IF the age at annuity starting date was. H&r block com . H&r block com . H&r block com BEFORE November 19, 1996, enter on line 3. H&r block com . H&r block com . H&r block com AFTER November 18, 1996, enter on line 3. H&r block com . H&r block com . H&r block com     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. H&r block com . H&r block com . H&r block com THEN enter on line 3. H&r block com . H&r block com . H&r block com     110 or under   410     111-120   360     121-130   310     131-140   260     141 or older   210   Multiple annuitants. H&r block com   If you and one or more other annuitants receive payments at the same time, you exclude from each annuity payment a pro rata share of the monthly tax-free amount. H&r block com Figure your share by taking the following steps. H&r block com Complete your worksheet through line 4 to figure the monthly tax-free amount. H&r block com Divide the amount of your monthly payment by the total amount of the monthly payments to all annuitants. H&r block com Multiply the amount on line 4 of your worksheet by the amount figured in (2) above. H&r block com The result is your share of the monthly tax-free amount. H&r block com   Replace the amount on line 4 of the worksheet with the result in (3) above. H&r block com Enter that amount on line 4 of your worksheet each year. H&r block com General Rule Under the General Rule, you determine the tax-free part of each annuity payment based on the ratio of the cost of the contract to the total expected return. H&r block com Expected return is the total amount you and other eligible annuitants can expect to receive under the contract. H&r block com To figure it, you must use life expectancy (actuarial) tables prescribed by the IRS. H&r block com Who must use the General Rule. H&r block com   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. H&r block com Annuity starting before November 19, 1996. H&r block com   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. H&r block com You also had to use it for any fixed-period annuity. H&r block com If you did not have to use the General Rule, you could have chosen to use it. H&r block com 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. H&r block com   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. H&r block com Who cannot use the General Rule. H&r block com   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. H&r block com See Simplified Method , earlier. H&r block com More information. H&r block com   For complete information on using the General Rule, including the actuarial tables you need, see Publication 939. H&r block com Taxation of Nonperiodic Payments This section of the publication explains how any nonperiodic distributions you receive under a pension or annuity plan are taxed. H&r block com Nonperiodic distributions are also known as amounts not received as an annuity. H&r block com They include all payments other than periodic payments and corrective distributions. H&r block com For example, the following items are treated as nonperiodic distributions. H&r block com Cash withdrawals. H&r block com Distributions of current earnings (dividends) on your investment. H&r block com However, do not include these distributions in your income to the extent the insurer keeps them to pay premiums or other consideration for the contract. H&r block com Certain loans. H&r block com See Loans Treated as Distributions , later. H&r block com The value of annuity contracts transferred without full and adequate consideration. H&r block com See Transfers of Annuity Contracts , later. H&r block com Corrective distributions of excess plan contributions. H&r block com   Generally, if the contributions made for you during the year to certain retirement plans exceed certain limits, the excess is taxable to you. H&r block com To correct an excess, your plan may distribute it to you (along with any income earned on the excess). H&r block com Although the plan reports the corrective distributions on Form 1099-R, the distribution is not treated as a nonperiodic distribution from the plan. H&r block com It is not subject to the allocation rules explained in the following discussion, it cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. H&r block com    If your retirement plan made a corrective distribution of excess amounts (excess deferrals, excess contributions, or excess annual additions), your Form 1099-R should have the code “8,” “B,” “P,” or “E” in box 7. H&r block com   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. H&r block com Figuring the Taxable Amount 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. H&r block com 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. H&r block com 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. H&r block com You may be able to roll over the taxable amount of a nonperiodic distribution from a qualified retirement plan into another qualified retirement plan or a traditional IRA tax free. H&r block com See Rollovers, later. H&r block com If you do not make a tax-free rollover and the distribution qualifies as a lump-sum distribution, you may be able to elect an optional method of figuring the tax on the taxable amount. H&r block com See Lump-Sum Distributions, later. H&r block com Annuity starting date. H&r block com   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. H&r block com Distributions of employer securities. H&r block com    If you receive a distribution of employer securities from a qualified retirement plan, you may be able to defer the tax on the net unrealized appreciation (NUA) in the securities. H&r block com The NUA is the net increase in the securities' value while they were in the trust. H&r block com This tax deferral applies to distributions of the employer corporation's stocks, bonds, registered debentures, and debentures with interest coupons attached. H&r block com   If the distribution is a lump-sum distribution, tax is deferred on all of the NUA unless you choose to include it in your income for the year of the distribution. H&r block com    A lump-sum distribution for this purpose is the distribution or payment of a plan participant's entire balance (within a single tax year) from all of the employer's qualified plans of one kind (pension, profit-sharing, or stock bonus plans), but only if paid: Because of the plan participant's death, After the participant reaches age 59½, Because the participant, if an employee, separates from service, or After the participant, if a self-employed individual, becomes totally and permanently disabled. H&r block com    If you choose to include NUA in your income for the year of the distribution and the participant was born before January 2, 1936, you may be able to figure the tax on the NUA using the optional methods described und